MARK R. COMAN v. THOMAS MANUFACTURING CO., INC.
No. 491A88
IN THE SUPREME COURT OF NORTH CAROLINA
Filed 26 July 1989
325 N.C. 172 (1989)
Heard in the Supreme Court 15 March 1989.
Master and Servant § 10.2 — wrongful discharge — employment at will — bad faith and public policy exceptions
The trial court erred by dismissing plaintiff‘s action for wrongful termination of his at-will employment as a truck driver after plaintiff refused to violate U. S. Department of Transportation regulations by driving excessive hours and falsifying records. This case comes within the reasoning of Sides v. Duke University, 74 N.C. App. 331, and, although plaintiff specifically alleges that defendant‘s acts violated the regulations of the Federal Department of Transportation, this conduct also violated the public policy of North Carolina as established by
Am Jur 2d, Master and Servant §§ 48.3, 54.
Justice MEYER dissenting.
APPEAL by plaintiff pursuant to
Larry L. Eubanks, David F. Tamer, and J. Wilson Parker for plaintiff-appellant.
Petree Stockton & Robinson, by W. R. Loftis, Jr., Penni P. Bradshaw, Kenneth S. Broun, and Robin E. Shea, for defendant-appellee.
J. Michael McGuinness for North Carolina Civil Liberties Union Legal Foundation, amicus curiae.
J. Wilson Parker and Deborah Leonard Parker for North Carolina Academy of Trial Lawyers, Lacy H. Thornburg, Attorney General, by Jane P. Gray, Special Deputy Attorney General, for North Carolina Department of Justice, Ralf F. Haskell, Special Deputy Attorney General, for John C. Brooks, North Carolina Commissioner of Labor, amicus curiae.
Weinstein & Sturges, P.A., by John J. Doyle, Jr. and Joyce W. Wheeler, for North Carolina Trucking Association, amicus curiae.
Maupin Taylor Ellis & Adams, P.A., by Robert A. Valois, Thomas A. Farr, and Elizabeth D. Scott, for Capital Associated Industries, Inc., amici curiae.
MARTIN, Justice.
Plaintiff seeks to recover damages from defendant fоr wrongfully terminating his at-will employment. The trial judge dismissed the action upon defendant‘s motion pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil Procedure for failure to state a claim upon which relief may be granted. The North Carolina Court of Appeals affirmed, and upon appeal to this Court, we reverse.
This being a dismissal pursuant to Rule 12(b)(6), we look to the allegations of plaintiff‘s complaint. Essentially, the complaint alleges that plaintiff began working for defendant, a North Carolina corporation, in 1978. He became a full-time employee in 1984 as a long-distance truck driver, hauling goоds in defendant‘s vehicles to various points in the United States and Canada. Plaintiff was based at defendant‘s plant in
Rule 12(b)(6) and its application are now familiar learning to the bench and bar. See generally Sutton v. Duke, 277 N.C. 94, 176 S.E. 2d 161 (1970); W. Shuford, N. C. Civil Practice and Procedure § 12-10 (3d ed. 1988). It would serve no useful purpose to again repeat the rules applicable to such decisions. Although plaintiff may have some additional remedy in the federal courts,1 the courts of North Carolina cannot fail to provide a forum to determine a valid cause of action.
A brief look at the history of the employee-at-will doctrine is appropriate. The English rule prior to our revolution was that an employment without a particular time limitation was presumed to be a hiring for a year. 1 W. Blackstone, Commentaries *425. Reasonable notice was required before an employer or employee could terminate the employment. This was said to be in response to the shortage of laborers resulting from the Black Death.
After the revolution, American courts followed the English rule with respect to agricultural and domestic workers, but with the industrial revolution and the development of freedom of contract, our courts moved towards the at-will doctrine. The formulation of the rule was principally the work of Horace Wood, who published in 1877 a work on master-servant rеlations stating the rule. Subsequent adoption of the rule by the courts greatly facilitated the development of the American economy at the end of the nineteenth century. See generally A. Hill, “Wrongful Discharge” and the Derogation of the At-Will Employment Doctrine, 31 Labor Relations and Public Policy Series, University of Pennsylvania (1987).
Ordinarily, an employee without a definite term of employment is an employee at will and may be discharged without reason. Still v. Lance, 279 N.C. 254, 182 S.E. 2d 403 (1971). However, the employee-at-will rule is subject to certain exceptions. Statutes may proscribe the discharge of an at-will employee in retaliation for certain protected activities, e.g., filing workers’ compensation claims,
We approve and adopt the following language from Sides:
[W]hile there may be a right to terminate a contract at will for no reason, or for an arbitrary or irrational reason, there can be no right to terminate such a contract for an unlawful reason or purpose that contravenes public policy. A different interpretation would encourage and sanction lawlessness, which law by its very nature is designed to discourage and prevent.
Sides v. Duke University, 74 N.C. App. at 342, 328 S.E. 2d at 826 (1985).
We hold that the case at bar comes within the reasoning of Sides and that the complaint states a cause of action for wrongful discharge. Certainly perjury and subornation of perjury differ from operating a truck in violation of federal law and falsifying federal records. However, both offend the public policy of North Carolina.
Although plaintiff specifically alleges that defendant‘s acts violated the regulations of the federal Department of Transportation, this conduct also violated the public policy of North Carolina.
Moreover, it is the public policy in this jurisdiction that the safety of persons and property on or near the public highways be protected. See
The state public policy implications in the case at bar are compelling. Our legislature has enacted numerous statutes regulating almost every aspect of transportation and travel on the highways in an effort to promote safety. The actions of defendant, as alleged, impair and violate this public policy. Plaintiff allegedly was faced with the dilemma of violating that public рolicy and risking imprisonment,
This Court has never held that an employee at will could be discharged in bad faith. To the contrary, in Haskins v. Royster,
70 N.C. 601 (1874), this Court recognized the principle that a master could not discharge his servant in bad faith. Thereafter, this Court stated the issue to be whether an agreement to give the plaintiff a regular permanent job was anything more than an indefinite general hiring terminable in good faith at the will of either party. Malever v. Jewelry Co., 223 N.C. 148, 25 S.E. 2d 436 (1943) (emphasis added).3
Numerous courts have recognized wrongful discharge theories characterized either as the bad faith exception to the at-will doctrine or under the implied covenant of good faith and fair dealing. See Mitford v. LaSala, 666 P. 2d 1000 (Alaska 1983); Cleary v. American Airlines, Inc., 111 Cal. App. 3d 443, 168 Cal. Rptr. 722 (1980); Fortune v. National Cash Register Co., 373 Mass. 96, 364 N.E. 2d 1251 (1977); Kerr v. Gibson‘s Products Co. of Bozeman, 733 P. 2d 1292 (Mont. 1987); Monge v. Beebe Rubber Co., 114 N.H. 130, 316 A. 2d 549 (1974); 1 L. Larson, Unjust Dismissal § 3.05 (1989); H. Perritt, Employee Dismissal Law and Practice §§ 1.2, 4.11, 4.23 (2d ed. 1987); Note, Protecting At Will Employees Against Wrongful Discharge: The Duty To Terminate Only In Good Faith, 93 Harv. L. Rev. 1816 (1980). Bad faith conduct should not be tolerated in employment relations, just as it is not accepted in other cоmmercial relationships.
Our decision today is in accord with the holdings of most jurisdictions. About four-fifths of the states now recognize some form of cause of action for wrongful discharge. McGuinness, The Doctrine of Wrongful Discharge in North Carolina: The Confusing Path from Sides to Guy and the Need for Reform, 10 Campbell L. Rev. 217 (1988). The case of McClanahan v. Remington Freight Lines, 517 N.E. 2d 390 (Ind. 1988), is on all fours with the present appeal. There, the employee refused to drive his employer‘s truck in violation of law. The Indiana Supreme Court held plaintiff had stated a cause of action for wrongful discharge for refusing to commit an unlawful act. Otherwise, the court held, illegal conduct
by employers and employees would be encouraged. See also Shaw v. Russell Trucking Line, Inc., 542 F. Supp. 776 (W.D. Pa. 1982) (public policy exception allowed where employee refused to drive overweight truck); Palmer v. Brown, 242 Kan. 893, 752 P. 2d 685 (1988) (employee fired for disclosing medicaid fraud); Phipps v. Clark Oil & Refining Corp., 408 N.W. 2d 569 (Minn. 1987) (employee fired for refusal to violate Clean Air Act); Schriner v. Meginnis Ford Co., 228 Neb. 85, 421 N.W. 2d 755 (1988) (employee reporting illegal activities of employer); Ludwick v. This Minute of Carolina, Inc., 287 S.C. 219, 337 S.E. 2d 213 (1985) (South Carolina Supreme Court followed Sides in allowing public policy exception to terminable-at-will doctrine).
Academic scholars also support our action today. See, e.g., 1 L. Larson, Unjust Dismissal §§ 6.01-7.09 (1989); RIA Guide to the Law of Wrongful Termination, ¶¶ 110,201-110,273 (1989); A. Hill, “Wrongful Discharge” and the Derogation of the At Will Employment Doctrine, 31 Labor Relations and Public Policy Series, University of Pennsylvania (1987); McGuinness, The Doctrine of Wrongful Discharge in North Carolina: The Confusing Path from Sides to Guy and the Need for Reform, 10 Campbell L. Rev. 217 (1988); Note, Sides v. Duke Hospital: A Public Policy Exception to the Employment-at-Will Rule, 64 N.C. L. Rev. 840 (1986).
In reaching our decision, we have not turned a deaf ear to the warning that we may have spawned a deluge of spurious claims. Our courts have abundant authority to protect employers from frivolous claims, particularly by the imposition of sanctions against attorneys and parties pursuant to Rule 11 of the Rules of Civil Procedure.
The decision of the Court of Appeals is reversed.
Reversed.
Justice MEYER dissenting.
I wish to express at the outset of this dissenting opinion my view that the alleged conduct of the emplоyer in this case cannot be condoned and that if the allegations of the complaint can be proved, the employee should have a remedy and a recovery for his losses and damages in the federal courts. If, in addition to his federal remedy, a state remedy should be provided, it should be provided by our General Assembly and not by judicial legislation of this Court.
Plaintiff has not attempted to pursue any remedies which might be available to him under the federal Surface Transportation Assistance Act of 1982 § 405,
North Carolina strictly adheres to the common law doctrine that employment contracts of indefinite duration are terminable at will. Presnell v. Pell, 298 N.C. 715, 260 S.E. 2d 611 (1979); Still v. Lance, 279 N.C. 254, 182 S.E. 2d 403 (1971). The core of the doctrine, which has consistently been reaffirmed, is the mutual privilege of employers and employees to terminate an employment relationship at either party‘s election.
We have consistently acknowledged the wisdom of the employment-at-will doctrine. See, e.g., Smith v. Ford Motor Co., 289 N.C. 71, 221 S.E. 2d 282 (1976) (employee fired for “no just cause” had no recourse against emрloyer); Still v. Lance, 279 N.C. 254, 182 S.E. 2d 403 (schoolteacher failed to state an action for wrongful discharge when she alleged her discharge was arbitrary and without cause); Dockery v. Table Co., 36 N.C. App. 293, 244 S.E. 2d 272, disc. rev. denied, 295 N.C. 415, 246 S.E. 2d 215 (1978) (prior to enactment of the remedial statute, employee did not state a wrongful discharge action when he alleged he was fired in retaliation for filing a workers’ compensation claim).
I find the majority‘s characterizations of Haskins v. Royster, 70 N.C. 600 (1874), and Malever v. Jewelry Co., 223 N.C. 148, 25 S.E. 2d 436 (1943), misleading. Haskins, an 1874 case, does not, as the majority implies, stand for the proposition that the discharge of an at-will employee must be in good faith. Haskins was not even an employee discharge case — it involved a suit by one employer
against another for maliciously enticing away sharecroppers who were employed for the crop year to be paid with a portion of the crop. The only mention of bad faith appears in a discussion of a case involving the discharge of contractors employed to build a road “after the contractors had duly performed all or a part of the work, [where] the plaintiff had [discharged them] mala fide, or without lawful cause,” and the issue was whether the contractors could recover on the contract. Haskins, 70 N.C. at 610. It is misleading to cite Haskins for the proposition that “this Court recognized the principle that a master could not discharge his servant in bad faith.”
The majority‘s citation of Malever is equally misleading. In Malever, the plaintiff was working in Fayetteville for $75.00 a week. The defendant offered him employment in a new store in Charlotte at $50.00 a week. Plaintiff agreed to accept
The general rule is, that “permanent employment” means steady employment, a steady job, a position of some permanence, as contrasted with a temporary employment or a temporary job. Ordinarily, where there is no additional expression as to duration, a contract for permanent employment implies an indefinite general hiring, terminable at will. McKelvy v. Oil Co., 52 Okla., 81, 152 P., 414. Here, the plaintiff shows a promise of permanent employment, simpliciter, and no more. Anno., 135 A.L.R., 646.
We find nothing on the record to take the case out of the general rule.
Id. at 149, 25 S.E. 2d at 437. There was not the slightest discussion of whether the discharge was required to be “in good faith.”
The courts of North Carolina have judicially created but one exception to the employment-at-will doctrine. That exception was established by the Court of Appeals in Sides v. Duke University, 74 N.C. App. 331, 328 S.E. 2d 818, disc. rev. denied, 314 N.C. 331, 333 S.E. 2d 490 (1985). The plaintiff, Sides, was a nurse anesthetist at Duke University Medical Center. Sides alleged that she had been discharged after she had refused to testify falsely at a medical malpractice trial in which the University was a defendant. The Court of Appeals ruled that Sides had stated a claim for wrongful discharge under theories of both tort and breach of contract. The central principle established by Sides is “that no employer in this State, notwithstanding that an employment is at will, has the right to discharge an employee and deprive him of his livelihood without civil liability because he refuses to testify untruthfully or incompletely in a court case.” Id. at 342, 328 S.E. 2d at 826.
The decision in Sides has been strictly construed. “Though the Sides court spoke in the broad terms of ‘public policy,’ its holding was actually very narrow.” Hogan v. Forsyth Country Club Co., 79 N.C. App. 483, 497-98, 340 S.E. 2d 116, 125, disc. rev. denied, 317 N.C. 334, 346 S.E. 2d 140 (1986). The only other reported decision in which a plaintiff has been found to have alleged a valid claim under the Sides exception is Williams v. Hillhaven Corp., 91 N.C. App. 35, 370 S.E. 2d 423 (1988). The plaintiff, Williams, testified under subpoena at an unemployment compensation hearing on behalf of a nurse assistant who had been fired by plaintiff‘s employer. Williams alleged that she was discharged after the hearing because of her truthful testimony in support of the claimant. The Court of Appeals found that Williams’ claim fell within the “same narrow exception” created by Sides that prohibits employers from discharging employees who refuse to perjure themselves. Id. at 39, 370 S.E. 2d at 425. Thus, the only judicially recognized exception to the employment-at-will doctrine involves the refusal or failure to perjure oneself.
The North Carolina General Assembly has created at least five exceptions to the rule that an employer may discharge an at-will employee for any reason or for no reason. Under the Wage and Hour Act, employers are prohibited from discharging an employee for filing a complaint, and employees are entitled to pursue a remedy in state court for such a discharge.
employee for filing a complaint under that statute and provides a remedy for the discharged emрloyee in the form of reinstatement and back pay.
With the exception of employers demanding perjury, North Carolina courts have deferred to the General Assembly in the creation of exceptions to the at-will doctrine. Two Court of Appeals cases and two federal court cases serve to bear this out. In Trought v. Richardson, 78 N.C. App. 758, 338 S.E. 2d 617, disc. rev. denied, 316 N.C. 557, 344 S.E. 2d 18 (1986), the plaintiff, Trought, was hired by Pitt County Memorial Hospital to serve as vice president for nursing services. Trought alleged that she was discharged because of pеrsonnel assignments she implemented to comply with the North Carolina Nursing Practice Act. Trought, unlike Coman, alleged that her discharge violated state law (as opposed to federal regulations). Even though Trought‘s allegations created a disputed factual issue of whether her discharge violated state public policy, the court refused to extend the Sides exception to recognize Trought‘s claim for wrongful discharge.
In Burrow v. Westinghouse Electric Corp., 88 N.C. App. 347, 363 S.E. 2d 215, disc. rev. denied, 322 N.C. 111, 367 S.E. 2d 910 (1988), the plaintiff, Burrow, was employed as a tractor-trailer driver. Burrow alleged that he was terminated after he refused to violate federal regulations that prоhibit drivers from operating their trucks when they are physically impaired. The Court of Appeals dismissed Burrow‘s claim of wrongful discharge and stated: “[W]e find no authority for, and decline to adopt, plaintiff‘s argument that violation of a federal regulation creates an exception to the employment at will doctrine in North Carolina.” Burrow v. Westinghouse Elec. Corp., 88 N.C. App. at 354, 363 S.E. 2d at 220. The regulations alleged by Burrow and Coman are both contained in subchapter B of
the Federal Motor Carrier Safety regulations.
In Guy v. Travenol Laboratories, Inc., 812 F. 2d 911 (4th Cir. 1987), the Fourth Circuit Court of Appeals, applying North Carolina law, held that a former supervisor at a drug manufacturing plant did not state a claim for wrongful discharge by alleging that he wаs terminated for refusing to falsify records required by federal regulations promulgated by the United States Food and Drug Administration. In Rupinsky v. Miller Brewing Co., 627 F. Supp. 1181 (W.D. Pa. 1986), a United States District Court in Pennsylvania, applying North Carolina law, also refused to recognize a cause of action for wrongful discharge despite plaintiff‘s argument that his termination was designed to prevent union organization.
The state public policy that gave rise to the Sides exception was the threat to our state‘s judicial system if witnesses could be fired from their employment for refusing to perjure themselves. The compelling reasons that influenced the Court of Appeals to open the courts to a plaintiff disсharged for refusing to commit perjury do not exist to justify opening the courts to this plaintiff. No violation of state law is alleged. A federal forum already exists for redress of violations of federal regulations. With the labyrinth of federal regulations which attempt to govern every aspect of commercial life, we can justifiably fear a proliferation of lawsuits under this new exception created by the majority. It will most certainly create an “unwarranted source of trouble in the workplace,” if employers must fear a civil action every time an employee at will is terminated. Burrow v. Westinghouse Electric Corp., 88 N.C. App. at 354, 363 S.E. 2d at 220.
plicant if termination is made difficult. Employers will be less likely to discharge economically unnecessary employees.
In Whittaker v. Care-More, Inc., 621 S.W. 2d 395 (Tenn. App. 1981), the Tennessee court said this:
[B]ased upon our review of this area of the law we are compelled to note that any substantial change in the “employee-at-will” rule should first be miсroscopically analyzed regarding its effect on the commerce of this state. There must be protection from substantial impairment of the very legitimate interests of an employer in hiring and retaining the most qualified personnel available or the very foundation of the free enterprise system could be jeopardized.
. . . Tennessee has made enormous strides in recent years in its attraction of new industry of high quality designed to increase the average per capita income of its citizens and thus, better the quality of their lives. The impact on the continuation of such influx of new businеsses should be carefully considered before any substantial modification is made in the employee-at-will rule.
Id. at 396-97. The decision of the majority may indeed have an effect on the economic vitality of our state, particularly on the recruitment of new industry.
The legislature, and not this Court, is the proper body to make the appropriate analysis and strike a proper balance. Any abrogation of the at-will doctrine will necessarily require “line-drawing.” As the appellee‘s brief points out, a large corporation such as IBM should probably be treated differently from the cоrner grocery store. And what should be done with the great bulk of employers who fall in between? Should arbitration be required in all or some cases? Should employees be treated differently depending on their longevity or their level of employment within the company? Should punitive damages be allowed? The commentators are in almost universal agreement that juries are unduly sympathetic to employees and unable to understand the management considerations necessary in terminating an employee. See Comment, Employment at Will: Just Cause Protection Through Mandatory Arbitration, 62 Wash. L. Rev. 151 (1987); Harrison, The Price of the Public Policy Modification of the Terminable-at-Will Rule, 34 Lab. L.J. 581 (1983).
While the source of the rule may be questionable, a number of our cases have stated the doctrine in this manner: Where a contract of employment does not fix a definite term, it is terminable at the will of either party, with or without cause, except in those instances in which the employee is protected from discharge by statute. This precise language appears in each of the following cases: Smith v. Ford Motor Co., 289 N.C. 71, 80, 221 S.E. 2d 282, 288; Buffaloe v. United Carolina Bank, 89 N.C. App. 693, 695, 366 S.E. 2d 918, 920 (1988); Harris v. Duke Power Co., 83 N.C. App. 195, 197, 349 S.E. 2d 394, 395 (1986), aff‘d, 319 N.C. 627, 356 S.E. 2d 357 (1987); Hogan v. Forsyth Country Club Co., 79 N.C. App. 483, 497, 340 S.E. 2d 116, 125, disc. rev. denied, 317 N.C. 334, 346 S.E. 2d 140 (1986). See also 8 Strong‘s N.C. Index 3d Master and Servant § 10 (1977).
While it may legitimately be argued that the employment-at-will doctrine was judicially created and thus may be judicially altered for sound legal reasons, it should not be altered by the courts for reasons of “public policy.” Courts are ill-equipped to
The California courts played a leading role in the recognition and development of the tort action for breach of an implied covenant of good faith as an exception to the employment-at-will doctrine. As could be expected, a trend of high verdicts and expensive settlements developed because of jury sympathy for plaintiffs who have been discharged from their jobs. This climate existed in California for a number of years. However, the Supreme Court of Cali-
fornia, disapproving of long lines of court of appeals cases, has recently held that a tort claim for wrongful discharge alleging an implied covenant of good faith would no longer be recognized. Therefore, the tort action for wrongful discharge and the рossibility of punitive damages was put to rest in California. Foley v. Interactive Data Corp., 47 Cal. 3d 654, 765 P. 2d 373, 254 Cal. Rptr. 211 (1988). In that same case, the California court refused to extend any exception to the employment-at-will doctrine to employment contracts on public policy grounds, even in breach of contract actions (where punitive damages are not available) alleging a breach of good faith. As one writer has noted, “Concern for maintaining the predictability of contract costs and the stability of the business community supported the majority‘s decision to defer the problem to the legislature.” Bushman, Wrongful Discharge, Case and Com., May-June 1989, 3, at 6.
With regard to the statement of the majority that “our decision today is in accord with the holding of most jurisdictions,” I note that the California court in Foley said this:
In fact, although Justice Broussard asserts that the weight of authority is in favor of granting a tort remedy, the clear majority of jursidictions [sic] have either expressly rejected the notion of tort damages for breach of the implied covenant in employment cases or impliedly done so by rejecting any application of the covenant in such a context.
Foley, 47 Cal. 3d at 686, 765 P. 2d at 391, 254 Cal. Rptr. at 229 (citation omitted).
It seems that the majority has outraced even the California court.
I vote to affirm the decision of the Court of Appeals.