A terminable-at-will employee brought an action in contract and tort against her employer for breach of the implied covenant of good faith and fair dealing in her employment contract. Both causes of action were brought in reliance on this Court's recent decision in Hall v. Farmers Insurance Exchange, 713 P.2d 1027 (Okla. 1985). The employee argued the employer's agents harassed her, prevented her from performing her duties and by so doing constructively discharged her from her job. She further asserts that the employer's agent told her he would not recommend her for promotion because of her sex. She seeks lost wages, damages for alleged injury to her reputation and punitive damages for breach of the implied covenant.
The employer denied the purported existence of a claim in tort for a breach of an implied covenant of good faith, and also asserted the contract action did not exist because the employee's termination resulted in no violation of the employee's constitutional rights.
The United States District Court for the Northern District of Oklahoma certified for this Court's answer pursuant to the Uniform Certification of Questions of Law Act, 20 O.S. 1981 §§ 1601 through 1612, six questions of law:
We reject the implication of an obligation of good faith and fair dealing in every employment-at-will contract. Because we answer the first question in the negative it is unnecessary for us to address the remaining questions.
This Court has long recognized the basic principle that an employment contract of indefinite duration may be terminated without cause at any time without incurring liability for breach of contract.
This Court has observed the terminable-at-will doctrine is "not absolute however, and the interests of the people of Oklahoma are not best served by a marketplace of cut-throat business dealings where the law of the jungle is thinly clad in contractual lace." Hall, 713 P.2d at 1029. The Oklahoma Legislature, not unlike Congress and other state legislatures, has enacted various statutory exceptions to the doctrine.
The employment-at-will doctrine has been judicially limited in a few jurisdictions by the imposition of an implied covenant of good faith and fair dealing into the employment contract. The implied covenant which has been viewed as restricting the employer's ability to discharge purportedly protects the right of the parties to receive the benefits of the employment agreement which they willingly entered. The wrongful denial of the party's right to those benefits will breach the duty of good faith implicit in the employment contract. This Court has been asked to consider whether such implied covenant exists in Oklahoma. We find that it does not.
In Hall, supra, this Court held a terminable-at-will contract between an insurance agent and insurance company does include an implied covenant of good faith in reference to the termination of an agency relationship. In so holding we quoted with approval from Wright v. Fidelity and Deposit Co. of Maryland, 176 Okla. 274, 54 P.2d 1084, 1087 (1936): "`A contract consists not only of the agreements which the parties have expressed in words, but also
Subsequent to the Hall pronouncement we rendered our opinion in Hinson v. Cameron, 742 P.2d 549 (Okla. 1987). In Hinson we observed that the Hall holding has come to be perceived as creating a new cause of action in favor of an at-will employee discharged in bad faith. This Court construed the Hall decision as standing "for the rule that an agent may recover from the principal when the latter has, in bad faith, deprived him of the fruits of his own labor." Hinson, 742 P.2d at 552. The plaintiff's tort claim for wrongful discharge in Hinson failed because the plaintiff was suing her employer for damages other than earned income and the legal relationship dealt with that of master and servant, not principal and agent as in Hall. As the case was factually distinguishable from Hall, the plaintiff was denied a cause of action for wrongful discharge from employment.
In Hall, this Court expressly recognized this implied covenant in the context of an agency contract. In dictum contained in the Hinson opinion we addressed the applicability of the covenant with regard to employment-at-will contracts and left for another day that decision.
Variant approaches have developed in those jurisdictions which have adopted the implication of a covenant of good faith and fair dealing in employment contracts. The most expansive view subjects the employer to liability whenever the employee is discharged without just cause in all employment-at-will contracts.
In Hinson, this Court explicitly declined to impose upon the employer a legal duty not to terminate an at-will employee in bad faith. Today we hold there is no implied covenant of good faith and fair dealing that governs the employer's decision to terminate in an employment-at-will contract.
Our view is consistent with that of the Supreme Court of Kansas. In Morriss v. Coleman Co., 241 Kan. 501, 738 P.2d 841 (1987), the court surveyed the various jurisdictions concerning this question and concluded "the principle of law stated in Restatement (Second) of Contracts § 205, that every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement, is overly broad and should not be applicable to employment-at-will contracts."
Similarly, the New Mexico courts have declined to recognize either a tort or contract action for breach of the covenant of good faith and fair dealing, in the context of discharging an at-will employee.
The Minnesota courts likewise have rejected the implication of a covenant of good faith and fair dealing into every employment contract.
Those jurisdictions which have adopted the public policy exception have done so to accommodate the competing interests of society, the employee and the employer. As aptly stated by the Illinois Court of Appeals in Palmateer v. International Harvester Co., 85 Ill.2d 124, 129, 52 Ill.Dec. 13, 15, 421 N.E.2d 876, 878 (1981):
We thus follow the modern trend and adopt today the public policy exception to the at-will termination rule in a narrow class of cases in which the discharge is contrary to a clear mandate of public policy as articulated by constitutional, statutory or decisional law. We recognize this new cause of action in tort.
In Hinson, this Court identified various actionable public policy grounds recognized by other jurisdictions under our discussion concerning the nationally recognized public policy exception. In light of the vague meaning of the term public policy we believe
Accordingly, we believe the circumstances which present an actionable tort claim under Oklahoma law is where an employee is discharged for refusing to act in violation of an established and well-defined public policy or for performing an act consistent with a clear and compelling public policy.
We note that where the employee's discharge is motivated by the employer's desire to avoid payment of benefits already earned by the employee, such as future commissions based on past service as in the Hall case, the discharge has been characterized "as a reason contrary to public purpose."
We think the public policy exception to the at-will employment doctrine adopted today "serves the cause of equity as well as the interests of the marketplace." Hall, 713 P.2d at 1031. In Brockmeyer, supra, the court described the practical effect of the narrowly circumscribed public policy exception:
In sum, we hold there is no implied obligation of good faith and fair dealing in reference to termination in any employment-at-will contract. We do recognize today a limited public policy exception to the terminable-at-will rule as an actionable tort claim in cases in which the discharge is contrary to a clear mandate of public policy.
CERTIFIED QUESTIONS ANSWERED.
HARGRAVE, C.J., and HODGES, DOOLIN, ALMA WILSON and SUMMERS, JJ., concur.
KAUGER, J., concurs in result.
OPALA, V.C.J., and LAVENDER, J., concur in part, dissent in part.
SIMMS, J., dissents.
OPALA, Vice Chief Justice, with whom LAVENDER, Justice, joins, concurring in part and dissenting in part.
In today's opinion the court declares there is no implied obligation of good faith and fair dealing in any employment-at-will contract. The court additionally pronounces that an at-will employee may have an actionable tort claim if his discharge is "contrary to a clear mandate of public policy as articulated by constitutional, statutory
Although I concur insofar as the court holds that there should be no contract or tort action for breach of good faith or fair dealing arising from dismissals of at-will employees, I cannot accede to the view that all terminations in breach of public policy should be actionable in tort. I would hold that an action for termination in breach of public policy lies in contract
BREACH OF IMPLIED CONTRACTUAL COVENANT NOT TO DISCHARGE FOR REASONS CONTRAVENING PUBLIC POLICY
I recede from the notion that at-will employees, dismissed in violation of a constitutional, statutory or decisional law, are entitled to tort remedies, which would include punitive damages. Rather, contractual remedies would appear far more appropriate.
This view is currently espoused by the Wisconsin Supreme Court, whose opinion in Brockmeyer v. Dun & Bradstreet
Although implied convenantsc
This court has declared that "[a]n action is one ex contractu [not ex delicto] when it arises from a breach of a promise implied in law."
EMPLOYEE ACTIONS FOR TORTIOUS BREACH OF CONTRACT
I would not hold that an employer is liable in tort for all terminations in breach of public policy. Rather, in my view, a claim may be actionable in tort only when an aggrieved employee is able to show far more than mere dismissal in breach of some public policy.
A commercial lender's gross recklessness may constitute a tortious breach of contract.
SIMMS, Justice, dissenting:
I embrace the majority's initial statement that "we reject the implication of an obligation of good faith and fair dealing in every employment-at-will contract", and that "it is therefore unnecessary for us to address the remaining issues in this matter". However, I am at a loss to understand why the majority circuitously adopts a new cause of action in tort for that which it initially rejects.
The plaintiff's reliance on Hall v. Farmers insurance Exchange, Okl., 713 P.2d 1027 (1985), as a basis for her cause of action is misplaced. Crucial to our resolution in Hall, was the fact that there was a
The defendant in Hall exercised his right to terminate an at-will employee. The facts showed that the termination right was exercised as an effort to deprive Hall of future income from insurance policies Hall had sold as an agent for his employer/principal, the defendant. The defendant was liable to Hall for contract damages arising from its wrongful denial of a vested contract right.
The wrongful termination, standing alone, did not give the employee, Hall, a right to recover damages. The amount of and right to damages in Hall was determined by the terms of the written contract between the agent and the principal. Hall had vested contractual rights to future commissions which he had already earned, as per the terms of the agency agreement.
More recently, we stated that Hall "stands for the rule that an agent may recover from the principal when the latter has, in bad faith, deprived him of the fruit of his own labor." See: Hinson v. Cameron, Okl., 742 P.2d 549, 554 (1987). In that case, this Court rejected the precise cause of action it now adopts. Today's pronouncement appears to overrule Hinson without stating as much.
Like this case, Hinson came to us with very few facts that could be used to fashion a meaningful and narrow rule of law. Unlike this case, however, because Hinson was an appeal from a grant of summary judgment, we did have certain presumptions of fact upon which to base our holding. In that case, this Court first considered the various "public policy" underpinnings for the alleged tort of bad faith discharge from employment. There, as here, there were no facts suggesting: (a) that the plaintiff had been ordered to do an illegal act; (b) that she was denied an opportunity to exercise any legal right; (c) that she was prevented from performing an important public obligation; or (d), that she was terminated for expressing concerns about her employer's legal or ethical misconduct. Finding none of the public policy exceptions in the facts of that case, we were "compelled to conclude that [Hinson] has no actionable tort claim for wrongful discharge." 742 P.2d at 552, 553.
Similarly, we refused to accept Hinson's suggestion that we recognize an implied covenant of good faith and fair dealing in employment-at-will contracts. To the contrary, we determined that, even assuming such a covenant existed, that covenant would "not operate to forbid employment severance except for good cause", and that adoption of a contrary rule "would subject each discharge to judicial incursions into the amorphous concept of bad faith." Hinson v. Cameron, supra., at 554. (citation omitted). We quite specifically "decline[d] to impose upon the employer a legal duty not to terminate an at-will employee in bad faith." Id.
The questions certified are broadly stated. This is presumably so because the Federal Court had only
Since the majority appears to be intractibly committed to "this new cause of action in tort", some guidelines for its application should be plainly stated. The majority states that: "[i]n light of the vague meaning of the term public policy we believe the public policy exception must be tightly circumscribed". This is wholly insufficient as a guide to trial courts. The majority cites Parnar v. Americana Hotels, Inc., 65 Haw. 370, 652 P.2d 625, 631 (1982), but does not explicitly adopt the limiting language therein as the guidelines to be used in Oklahoma.
I perceive the creation of this new tort of "bad faith" as a transparent attempt to avoid the necessity of overruling Hinson while achieving a contrary result. In so doing, the majority fails to distinguish between Hinson's refusal to adopt a "bad faith breach of contract" theory, from the "tort" of bad faith, by any means other than the available remedies. I see no public policy being served by subjecting employers to the spectre of punitive damages for termination of an
I would prefer to see this Court remain loyal to our existing rules for at-will employment relations. However, if we are to recognize a form of recovery for a terminated at-will employee, we should adopt the more reasonable approach used by the Supreme Court of Arizona:
If it is inevitable that Oklahoma recognize a "public policy" exception to the at-will termination rules previously applied,
The majority avoids any mention of mutuality. What of the
The majority overrules Hinson without specifically stating such. Further, today's pronouncement creates a broad new cause of action which destroys Oklahoma's employment-at-will
Additionally, actions based on a breach of a contract implied in law are subject to the three-year statute of limitations imposed on certain ex contractu actions by 12 O.S. 1981 § 95. See T & S Inv. Co. v. Coury, Okl., 593 P.2d 503, 505 .