866 S.E.2d 337
S.C.2021Background
- Curt Hall, a UBS branch manager, hosted a work-related happy hour; co-worker Mary Lucy Reid attended and later reported Hall’s conduct to UBS HR (including a consolatory cheek kiss and alleged advances).
- UBS investigated Hall’s account, concluded Reid’s report warranted action, and terminated Hall a few weeks later.
- Hall sued UBS (claiming breach of the implied covenant of good faith and fair dealing) and Reid (claiming tortious interference with contractual relations); the U.S. District Court certified three legal questions to the South Carolina Supreme Court.
- Certified questions: (1) whether at-will employment relationships are contractual as a matter of law; (2) whether the implied covenant of good faith and fair dealing exists in at-will employment and whether termination can breach it; (3) whether a third-party employee’s report-induced termination can support a tortious interference claim against that third party.
- The Court assumed no exception to at-will employment applied and answered the questions based on general contract and tort principles.
Issues
| Issue | Plaintiff's Argument (Hall) | Defendant's Argument (UBS/Reid) | Held |
|---|---|---|---|
| 1. Are at-will employment relationships contractual as a matter of law? | At-will relationships are contracts because employer offers pay in exchange for work; employee’s performance forms consideration. | At-will employment does not create a contractual relationship that supports contract-based claims arising from termination. | Yes. At-will employment is contractual in nature, but the employer’s right to terminate at will is an integral contract term. |
| 2A. Does the implied covenant of good faith and fair dealing arise in at-will employment contracts? | The covenant is implied in every contract, so it exists in at-will employment. | The covenant does not apply where no enforceable contract exists (pure at-will). | Yes. The covenant is implied in at-will employment contracts. |
| 2B. Can an employer’s termination of an at-will employee constitute a breach of the implied covenant? | Termination may be an abuse of contractual duties and thus breach the covenant. | Employers may terminate at-will employees for any reason; termination cannot breach the covenant because the right to fire is an express contract term. | No. Although the covenant exists, termination under the at-will term cannot constitute a breach of that covenant. |
| 3. Can a third party’s report-induced termination of an at-will employee give rise to tortious interference with contractual relations? | A third party who intentionally and unjustifiably procures termination can be liable despite the employer’s at-will right. | No—because termination of an at-will employee is not a breach, there is no procurement of a breach and thus no tort. | Yes (as modified): A third party may be liable for intentional, unjustified interference that induces termination of an at-will employee; absence of an employer breach does not bar the claim. |
Key Cases Cited
- Orsini v. Trojan Steel Corp., 219 S.C. 272 (1951) (discusses unenforceability of indefinite-duration employment agreements but recognizes contractual nature)
- Prescott v. Farmers Tel. Coop., Inc., 335 S.C. 330 (1999) (explains at-will doctrine and unilateral contract elements in employment)
- Spriggs v. Diamond Auto Glass, 165 F.3d 1015 (4th Cir. 1999) (at-will employment is contractual under ordinary contract principles)
- Hishon v. King & Spalding, 467 U.S. 69 (1984) (employment contracts may be informal; contract can arise by employment relationship)
- Todd v. S.C. Farm Bureau Mut. Ins. Co., 283 S.C. 155 (Ct. App. 1984) (court of appeals recognized viability of interference claim against third party in at-will context)
- Bochnowski v. Peoples Fed. Sav. & Loan Ass'n, 571 N.E.2d 282 (Ind. 1991) (adopts rule that tortious interference claim can lie for at-will employment when intentional and unjustified)
- Eldeco, Inc. v. Charleston Cty. Sch. Dist., 372 S.C. 470 (2007) (elements of tortious interference with contractual relations)
- Adams v. G.J. Creel & Sons, Inc., 320 S.C. 274 (1995) (recognizes implied covenant of good faith and fair dealing in every contract)
- Truax v. Raich, 239 U.S. 33 (1915) (early recognition that unjustified third-party interference with employment may be actionable)