On appeal from the Superior Court of New Jersey, Law Division, Essex County.
Bilder, Ashbey and Arnold M. Stein. The opinion of the court was delivered by Bilder, J.A.D. Arnold M. Stein, J.A.D., concurring.
This is a suit for wrongful discharge. The essential question on appeal is whether tort damages can be recovered for an employer's breach of an implied covenant of good faith contained in an employment contract.
Plaintiff Robert Noye was employed by defendant Hoffmann-La Roche, Inc. as a food services manager. In February 1983, after more than 14 years service, he was terminated. There was no written agreement; plaintiff's rights arose from a company manual entitled "Employee Policies & Procedures." See Woolley v. Hoffmann-La Roche, Inc., 99 N.J. 284, 297, 491 A.2d 1257 (1985).
The parties strongly contest the circumstances of the termination. Defendant contends it resulted from allegations of sexual harassment which were discussed with plaintiff without denial. Plaintiff contends he was terminated without reason or an opportunity to meet any charges -- in violation of defendant's disciplinary policies. He admitted a relationship existed with a subordinate female employee but denied any harassment. The jury accepted the plaintiff's version. Following a six-week trial the jury found defendant had breached its contract, both by
terminating plaintiff without good cause and failing to follow its own procedures for disciplinary discharge. Although defendant argues at some length that these findings should be set aside, the issues are moot because the jury also found that the plaintiff suffered no damage from the breach of contract.*fn1 Plaintiff does not contest this finding on appeal.*fn2 Moreover, we are satisfied from an examination of the record that there was sufficient evidence to support the jury verdict and that the trial judge's appraisal at the motion for a new trial was appropriate. See Dolson v. Anastasia, 55 N.J. 2, 6-7, 258 A.2d 706 (1969).
In its deliberations, in answer to a special interrogatory, the jury also found that defendant breached an implied covenant of good faith and fair dealing. It is undoubted that a Woolley contract, like any other contract, contains an implied covenant of good faith and fair dealing. See Bak-A-Lum Corp. v. Alcoa Building Prod., 69 N.J. 123, 129-130, 351 A.2d 349 (1976). The Woolley contract is no more than the ordinary result of an acceptance by plaintiff, by continuing to work, of the terms of employment offered by defendant's handbook. See McQuitty v. General Dynamics Corp., 204 N.J. Super. 514, 519-520, 499 A.2d 526 (App.Div.1985). Obligations of good faith and fair dealing inhere in the arrangement.
Defendant does not contest this principle but contends that the finding was not supported by the evidence, was flawed by a refusal to instruct the jury that the covenant was not breached if defendant acted reasonably in good faith, and was improperly used as a basis for the imposition of tort damages. Because we are satisfied tort damages do not lie for the breach of contract, it is not necessary to examine all of defendant's contentions. We note, however, that a lack of good faith is implicit in a violation of a covenant of good faith and fair dealing. A finding that defendant reasonably believed the plaintiff had sexually harassed his female subordinate would necessarily bar a finding that the covenant had been violated. Defendant's good faith was not dependent upon an ultimate jury finding as to whether or not the harassment existed.
As we have already noted, the critical element in this appeal is the application of tort damages to this breach of contract. Allowance of such recovery would be an extension of the principle that a discharge is wrongful and tortious when it is motivated by antisocial considerations. Thus, a tort action for wrongful discharge has been recognized, even in the absence of any contract, when the discharge was caused by the employee's opposition to the development of a drug which she believed contained unacceptable levels of saccharin. See Pierce v. Ortho Pharmaceutical Corp., 84 N.J. 58, 62-63, 417 A.2d 505 (1980). Although a cause of action lay in contract, the employee had a right to maintain an action in tort "based on the duty of [the] employer not to discharge an employee who refused to perform an act that is a violation of a clear mandate of public policy." Id. at 72, 417 A.2d 505. It was not the breach of contract with the employee that gave rise to the tort but the underlying motivation of the employer which involved antisocial conduct detrimental to society in general. The tort lay not in the breach of contract but in the violation of valuable social norms -- denominated by the court as clear mandates of public policy. See Velantzas v. Colgate-Palmolive Co., 109 N.J. 189, 191-192, 536 A.2d 237 (1988); also discussion Schwartz v.
The principles underlying the enforcement of a Woolley contract are quite different. See Schwartz v. Leasametric, Inc., supra at 31, 539 A.2d 744. Unlike Ortho, it is not an exception to the doctrine governing employment at-will, but is a recognition of long established contract principles that an offer may be accepted by performance. See Schwartz v. Leasametric, Inc., supra. In the absence of a contract, there can be no breach of an implied covenant of good faith and fair dealing. See McQuitty v. General Dynamics Corp., supra 204 N.J. Super. at 520, 499 A.2d 526; Brunner v. Abex Corp., 661 F. Supp. 1351, 1356 (D.N.J.1986). Thus, the tort recovery referred to in Ortho, supra 84 N.J. at 72, 417 A.2d 505, arises not from the breach of contract but from the violation of public policy. As previously noted, an Ortho tort claim would lie even in the absence of the employer manual. See Velantzas v. Colgate-Palmolive Co., supra 109 N.J. at 191-192, 536 A.2d 237 (firing in retaliation for seeking information relevant to employment discrimination); Lally v. Copygraphics, 85 N.J. 668, 670, 428 A.2d 1317 (1981) (firing in retaliation for filing workers' compensation claim); Lepore v. National Tool and Mfg. Co., 224 N.J. Super. 463, 468-474, 540 A.2d 1296 (App.Div.1988), aff'd 115 N.J. 226, 557 A.2d 1371 (1989) (firing in retaliation for reporting work place safety violations to OSHA); Kalman v. Grand Union Co., 183 N.J. Super. 153, 159, 443 A.2d 728 (App.Div.1982) (firing in retaliation for refusal to violate rules and ethical practices regulating practice of pharmacy);*fn3 cf. Schwartz v. Leasametric, Inc., supra 224 N.J. Super. at 30, 539 A.2d 744 (tort damages do not lie where employee is fired to
avoid paying him commissions).*fn4
A nationwide examination of the question shows a split of authority. Some states have accepted the view that an implied covenant of good faith and fair dealing exists in employment contracts, but have refused to permit tort damages. See Arco Alaska, Inc. v. Akers, 753 P. 2d 1150 (Alaska 1988); Wagenseller v. Scottsdale Memorial Hospital, 147 Ariz. 370, 710 P. 2d 1025 (1985); Foley v. Interactive Data Corp., 47 Cal. 3d 654, 254 Cal.Rptr. 211, 765 P. 2d 373 (1988); Metcalf v. Intermountain Gas Co., 116 Idaho 622, 778 P. 2d 744 (1989); Martin v. Federal Life Ins. Co., 109 Ill.App. 3d 596, 65 Ill.Dec. 143, 440 N.E. 2d 998 (1982); Maddaloni v. Western Mass. Bus Lines, Inc., 386 Mass. 877, 438 N.E. 2d 351 (1982); Wild v. Rarig, 302 Minn. 419, 234 N.W. 2d 775 (1975), cert. den. 424 U.S. 902, 96 S. Ct. 1093, 47 L. Ed. 2d 307 (1976); Murphy v. American Home Products Corp., 58 N.Y. 2d 293, 448 N.E. 2d 86, 89-91, 461 N.Y.S. 2d 232 (1983); 0 Berube v. Fashion Centre Ltd., 771 P. 2d 1033 (Utah 1989). Others have totally rejected any application of an implied covenant in an employment contract. See Magnan v. Anaconda Industries, Inc., 193 Conn. 558, 479 A.2d 781 (1984); Parnar v. Americana Hotels, Inc., 65 Haw. 370, 652 P. 2d 625, 629 (1982); Fletcher v. Wesley Medical Center, 585 F. Supp. 1260, 1263 (D.Kan.1984) (applying Kansas law); also Morriss v. Coleman Co., Inc., 241 Kan. 501, 738 P. 2d 841 (1987); Hillesland v. Federal Land Bank Association, 407 N.W. 2d 206, 214 (N.D.1987); Satterfield v. Lockheed Missiles & Space Co., Inc., 617 F. Supp. 1359, 1363-1364 (D.S.C.1985); Thompson v. St. Regis Paper Co., 102 Wash. 2d 219, 685 P. 2d 1081, 1086 (1984); Brockmeyer v. Dun & Bradstreet, 113 Wis. 2d 561, 335 N.W. 2d 834, 838 (1983). A minority of the states have extended tort liability to encompass a breach of the implied covenants. See 1 Prout v. Sears Roebuck and Co., 772 P. 2d 288 (Mont.1988); K Mart Corp. v. Ponsock, 103 Nev. 39,
732 P. 2d 1364 (1987). The arguments pro and con are parsed in some detail by the majority and dissenting opinions in Foley. See also Note, Tort Remedies for Breach of Contract: The Expansion of Tortious Breach of the Implied Covenant of Good Faith and Fair Dealing in the Commercial Realm, 86 Colum.L.Rev. 377 (1986); Note, " Contort": Tortious Breach of the Implied Covenant of Good Faith and Fair Dealing in Noninsurance, Commercial Contracts -- Its Existence and Desirability, 60 Notre Dame L.Rev. 510 (1985).
It is useful to note that those courts that have treated this breach of contract as a tort have relied on the now generally recognized rule holding insurance companies liable to their insureds for the consequential losses resulting from the carrier's failure to deal in good faith. See, e.g., Rova Farms Resort v. Investors Ins. Co., 65 N.J. 474, 492-493, 323 A.2d 495 (1974); also Note, Defining Public Policy Torts in 2 At-Will Dismissals, 34 Stan.L.Rev 153, 161-167 (1981). The analogy is ill-taken. The rule in insurance cases reflect, indeed depend upon, the fiduciary nature of the relationship.
In our view, the underlying problem in the line of cases relied on by plaintiff lies in the decisions' uncritical incorporation of the insurance model into the employment context, without careful consideration of the fundamental policies underlying the development of tort and contract law in general or of significant differences between the insurer/insured and employer/employee relationships. [ Foley v. Interactive Data Corp., 47 Cal. 3d 654, 689, 254 Cal.Rptr. 211, 231-232, 765 P. 2d 373, 393 (1988)]
We conclude that tort damages do not lie for breach of an implied covenant of good faith and fair dealing found in an employment contract. Our courts have provided an adequate remedy for employer conduct that violates public policy. See, Note, Tort Remedies for Breach of Contract, supra at 397. We are unpersuaded that there is a need to depart from the ordinary rules of contract law applied in other cases. See Spring Motors Distributors, Inc. v. Ford Motor Co., 98 N.J. 555, 579-580, 489 A.2d 660 (1985). 3 Nor do we see a ...