After 32 years of employment with See's Candies, Inc., in which he worked his way up the corporate ladder from dishwasher to vice president in charge of production and member of the board of directors, Wayne Pugh was fired. Asserting that he had been fired in breach of contract and for reasons which offend public policy he sued his former employer seeking compensatory and punitive damages for wrongful termination, and joined as a defendant a labor organization which, he alleged, had conspired in or induced the wrongful conduct. The case went to trial before a jury, and upon conclusion of the plaintiff's case-in-chief the trial court granted defendants' motions for nonsuit, and this appeal followed.
Standard of Review on Nonsuit
Under established principles, a nonsuit may be granted "`only where, disregarding conflicting evidence on behalf of the defendants and giving to plaintiff's evidence all the value to which it is legally entitled, therein indulging in every legitimate inference which may be drawn from that evidence, the result is a determination that there is no evidence of sufficient substantiality to support a verdict in favor of the plaintiff.'" (O'Keefe v. South End Rowing Club (1966) 64 Cal.2d 729, 733 [51 Cal.Rptr. 534, 414 P.2d 830, 16 A.L.R.3d 1]; see also Dailey v. Los Angeles Unified Sch. Dist. (1970) 2 Cal.3d 741, 745 [87 Cal.Rptr. 376, 470 P.2d 360].) Applying these principles, we conclude that the trial court erred in granting the nonsuit motions, and reverse.
SUMMARY OF THE EVIDENCE
We summarize the evidence presented to the jury. The defendant employer is in the business of manufacturing fresh candy at its plants in
Pugh began working for See's at its Bay Area plant (then in San Francisco) in January 1941 washing pots and pans. From there he was promoted to candy maker, and held that position until the early part of 1942, when he entered the Air Corps. Upon his discharge in 1946 he returned to See's and his former position. After a year he was promoted to the position of production manager in charge of personnel, ordering raw materials, and supervising the production of candy. When, in 1950, See's moved into a larger plant in San Francisco, Pugh had responsibility for laying out the design of the plant, taking bids, and assisting in the construction. While working at this plant, Pugh sought to increase his value to the company by taking three years of night classes in plant layout, economics, and business law. When See's moved its San Francisco plant to its present location in South San Francisco in 1957, Pugh was given responsibilities for the new location similar to those which he undertook in 1950. By this time See's business and its number of production employees had increased substantially, and a new position of assistant production manager was created under Pugh's supervision.
In 1971 Pugh was again promoted, this time as vice president in charge of production and was placed upon the board of directors of See's northern California subsidiary, "in recognition of his accomplishments." In 1972 he received a gold watch from See's "in appreciation of 31 years of loyal service."
In May 1973 Pugh travelled with Charles Huggins, then president of See's, and their respective families to Europe on a business trip to visit candy manufacturers and to inspect new equipment. Mr. Huggins returned in early June to attend a board of director's meeting while Pugh and his family remained in Europe on a planned vacation.
Upon Pugh's return from Europe on Sunday, June 25, 1973, he received a message directing him to fly to Los Angeles the next day and meet with Mr. Huggins.
Instead, upon Pugh's arrival at Mr. Huggin's office, the latter said, "Wayne, come in and sit down. We might as well get right to the point. I have decided your services are no longer required by See's Candies. Read this and sign it." Huggins handed him a letter confirming his termination and directing him to remove that day "only personal papers and possessions from your office," but "absolutely no records, formulas or other material"; and to turn in and account for "all keys, credit cards, et cetera." The letter advised that Pugh would receive unpaid salary, bonuses and accrued vacation through that date, and the full amount of his profit sharing account, but "No severance pay will be granted." Finally, Pugh was directed "not to visit or contact Production Department employees while they are on the job."
The letter contained no reason for Pugh's termination. When Pugh asked Huggins for a reason, he was told only that he should "look deep within [him]self" to find the answer, that "Things were said by people in the trade that have come back to us." Pugh's termination was subsequently announced to the industry in a letter which, again, stated no reasons.
When Pugh first went to work for See's, Ed Peck, then president and general manager, frequently told him: "if you are loyal to [See's] and do a good job, your future is secure." Laurance See, who became president of the company in 1951 and served in that capacity until his death in 1969, had a practice of not terminating administrative personnel except for good cause, and this practice was carried on by his brother, Charles B. See, who succeeded Laurance as president.
During the entire period of his employment, there had been no formal or written criticism of Pugh's work.
Pugh's theory as to why he was terminated relates to a contract which See's at that time had with the defendant union.
In 1968 the supplemental agreement contained a new rate classification which permitted See's to pay its seasonal employees at a lower rate. At a company meeting prior to the 1968 negotiations, Pugh had objected to the proposed new seasonal classification on the grounds that it might make it more difficult to recruit seasonal workers, and create unrest among See's regular seasonal workers who had worked previously for other manufacturers at higher rates. Huggins overruled Pugh's objection and (unknown to Pugh) recommended his termination for "lack of cooperation" as to which Pugh's objection formed "part of the reason." His recommendation was not accepted.
The 1968 association and supplemental agreements expired in 1971. Thereafter See's negotiated with the union separately, and not as a part of any employer association.
The 1971 agreement expired in 1973. In April of that year, Huggins asked Pugh to be part of the negotiating team for the new union contract. Pugh responded that he would like to, but he was bothered by the possibility that See's had a "sweetheart contract" with the union. In response, someone banged on the table and said, "`You don't know what the hell you are talking about.'" Pugh said, "Well, I think I know what I am talking about. I don't know whether you have a sweetheart contract, but I am telling you if you do, I don't want to be involved because they are immoral, illegal and not in the best interests of my employees."
The union's alleged participation in Pugh's termination was in the form of a statement attributed to Mr. Button (the individual who succeeded Pugh as production manager) at a negotiating meeting between the company and the union in June 1973. According to one witness, Mr. Button stated at the commencement of the meeting, "Now we've taken care of Mr. Pugh. What are you going to do for us."
A. Historical Background.
The law of the employment relationship has been, and perhaps still is, in the process of continuing evolution. The old law of master and servant, which held sway through the 18th century and to some extent beyond, viewed the relationship as primarily one of status rather than of contract. While agreement gave rise to the relationship and might establish certain of its terms, it was "custom and public policy, not the will of the parties, [which] defined the implicit framework of mutual rights and obligations." (Selznick, Law, Society and Industrial Justice (1969) p. 123.)
The essence of the relationship as so defined drew its contours from the model of the household — in which, typically, the servant worked, the master had general authority to discipline the servant, and it was the servant's duty to obey. (Id., at pp. 124-125.) At the same time, the master had certain responsibilities for the servant's general welfare. (Id., at p. 128.) The relationship was thus in a sense paternalistic. And it was not terminable at will; rather, there existed a presumption (in the absence of contrary agreement) that employment was for a period of one year. (Id., at p. 125.)
With the industrial revolution in the 19th century the law of master and servant underwent a gradual remodeling, primarily at the hands of
In light of the generally superior bargaining power of the employer, "the employment contract became [by the end of the nineteenth century] a very special sort of contract — in large part a device for guaranteeing to management unilateral power to make rules and exercise discretion." (Ibid.) And management's unilateral power extended, generally, to the term of the relationship as well. The new emphasis brought with it a gradual weakening of the traditional presumption that a general hiring (i.e., one without a specific term) was for a year, and its replacement by the converse presumption that "a general or indefinite hiring is prima facie a hiring at will." (Wood, A Treatise on the Law of Master and Servant (1877) § 134, fn. 49.)
The recognized inequality in bargaining power between employer and individual employee undergirded the rise of the labor unions and the institutionalization of collective bargaining.
Even apart from statute or constitutional protection, however, the employer's right to terminate employees is not absolute. "The mere fact that a contract is terminable at will does not give the employer the absolute right to terminate it in all cases." (Patterson v. Philco Corp.
Public Policy Limitation.
Appellant contends that his evidence established a prima facie case of retaliatory termination for reasons which offend public policy in three respects. First, he contends that the evidence tended to show he was terminated because he refused to participate in negotiations for a union contract which would have violated state and federal public policy against restraint of trade; second, that he was terminated because he refused to participate in negotiations for a union contract which violated declared public policy against discrimination based on sex; and third, that he was terminated for reasons which violate the state's policy favoring the exercise of a company director's duty of inquiry.
The first contention finds doctrinal support in the Supreme Court decision in Tameny v. Atlantic Richfield Co., supra.
Appellant's evidence, however, fails to support application of that doctrine. The trial court, in granting the nonsuit, reasoned that there was no evidence that appellant in fact refused or indicated he would refuse to participate in negotiations for a new agreement, or that the terms for which he would be expected to negotiate would pose the same legal problems as those which appellant claimed to inhere in the prior agreement. Assuming, however, that there was sufficient evidence from
Appellant's second theory is that the supplemental agreement in effect at the time of his termination discriminated against women in violation of the state's Fair Employment Practices Act (now Fair Employment and Housing Act, Gov. Code, § 12900 et seq.), by allowing payment of a lower wage rate to seasonal employees who were, in fact, women. In support of that theory, an attorney with the California Fair Employment Practices Commission testified that on the basis of certain factual assumptions the contract as applied would violate state law.
Assuming, for purposes of analysis, that there was sufficient evidence to establish the prima facie illegality of the supplemental agreement under the Fair Employment Practices Act, appellant's theory again fails for lack of evidentiary support. In addition to the gaps noted in connection with appellant's antitrust theory, there was no evidence that appellant ever communicated to See's his belief or opinion that the existing contract discriminated on the basis of sex.
We conclude that appellant did not establish a prima facie and cognizable case of wrongful termination based upon the public policy theories which he advanced.
C. Contract Limitations.
Moreover, while it has sometimes been said that a promise for continued employment subject to limitation upon the employer's power of termination must be supported by some "independent consideration," i.e., consideration other than the services to be rendered,
The most likely explanation for the "independent consideration" requirement is that it serves an evidentiary function: it is more probable that the parties intended a continuing relationship, with limitations upon the employer's dismissal authority, when the employee has provided some benefit to the employer, or suffers some detriment, beyond the usual rendition of service. (See Employment at Will and the Law of Contracts (1973) 23 Buffalo L.Rev. 211, 221-226.) This functional view of "independent consideration" in the employment context has acquired judicial recognition in other states (see Littell v. Evening Star Newspaper Co. (D.C. Cir.1941) 120 F.2d 36, 37; Bussard v. College of Saint Thomas, Inc. (1972) 294 Minn. 215 [200 N.W.2d 155, 161]; Eilen v. Tappin's, Inc. (1951) 16 N.J.Super. 53, 56-68 [83 A.2d 817, 818-819]; cf. Farmer v. Arabian American Oil Co. (2d Cir.1960) 277 F.2d 46 (applying New York law); Stevens v. G.L. Rugo & Sons (1st Cir.1953) 209 F.2d 135 (applying Massachusetts law); Garrett v. American Family Mutual Insurance Co. (Mo. App. 1974) 520 S.W.2d 102, 110-112), and has been accepted in several recent cases by the California courts. "It is fundamental that when construing contracts involving substantial employment rights, courts should avoid mechanical and arbitrary tests if at all possible; employment contracts, like other agreements, should be construed to give effect to the intention of the parties as demonstrated by the language used, the purpose to be accomplished and the circumstances under which the agreement was made. [Citations.] [¶] We embrace the prevailing viewpoint that the general rule [requiring independent consideration] is a rule of construction, not of substance, and that a contract for permanent employment, whether or not it is based upon some consideration other than the employee's services, cannot be terminated at the will of the employer if it contains an express or implied condition to the contrary." (Drzewiecki v. H & R Block, Inc., supra, 24 Cal.App.3d 695, 703-704, italics added.)
A related doctrinal development exists in the application to the employment relationship of the "implied-in-law covenant of good faith and fair dealing inherent in every contract." (Tameny v. Atlantic Richfield Co., supra, 27 Cal.3d 167, 179, fn. 12.) The Supreme Court in Tameny took note of authorities in other jurisdictions which have found an employer's discharge of an at-will employee violative of that covenant,
If "[t]ermination of employment without legal cause [after 18 years of service] offends the implied-in-law covenant of good faith and fair dealing contained in all contracts, including employment contracts," as the court said in the above-quoted portion of Cleary, then a fortiori that covenant would provide protection to Pugh, whose employment is nearly twice that duration. Indeed, it seems difficult to defend termination of such a long-time employee arbitrarily, i.e., without some legitimate reason, as compatible with either good faith or fair dealing.
Since this litigation may proceed toward yet uncharted waters, we consider it appropriate to provide some guidance as to the questions which the trial court may confront on remand.
By what standard that burden is to be measured will depend, in part, upon what conclusions the jury draws as to the nature of the contract between the parties. The terms "just cause" and "good cause," "as used in a variety of contexts ... have been found to be difficult to define with precision and to be largely relative in their connotation, depending upon the particular circumstances of each case." (R.J. Cardinal Co. v. Ritchie (1963) 218 Cal.App.2d 124, 144 [32 Cal.Rptr. 545].) Essentially, they connote "a fair and honest cause or reason, regulated by good faith on the part of the party exercising the power." (Id., at p. 145.) Care must be taken, however, not to interfere with the legitimate exercise of managerial discretion.
The Case Against the Union.
Racanelli, P.J., and Newsom, J., concurred.
On March 27, 1981, the opinion was modified to read as printed above.
It may be that there is a public policy which favors protection of employees against dismissal for voicing concerns, within an enterprise, concerning the legality or morality of enterprise conduct. (Cf. Givhan v. Western Line Consol. School Dist. (1979) 439 U.S. 410 [58 L.Ed.2d 619, 99 S.Ct. 693]; Geary v. United States Steel Corporation (1974) 456 Pa. 171, 185 [319 A.2d 174, 180] (dis. opn.).) Appellant did not invoke such a theory in the trial court, and our disposition of the case on other grounds makes it unnecessary for us to consider the existence of such a limitation or its possible application to appellant's termination.