Indiana Law Review


Remedies for Employer's Wrongful Discharge of an
Employee from Employment of an Indefinite Duration

I. Introduction

For nearly a century the employment at will rule' remained one of

the most well established rules in the law.^ That is no longer true.

Discharged employees in virtually every state have asked courts to rec-

ognize tort exceptions or contract limits to the rule, and most courts

have agreed to do so. Although the rule still has force, no longer can

an employer be sure that he will successfully defend a wrongful discharge

action by filing a motion to dismiss for failure to state a claim.

Under the rule, if (1) the employment contract does not bind both

the employer and the employee for a definite period or (2) the employee

does not give consideration other than his services or his promise to

serve, then an employee cannot enforce an employer's promise that the

employer will discharge the employee only if the employer has good

cause. Even if the employer makes such a promise, he has the right to

discharge the employee at any time for any or no reason. The employer
is not Hable to the employee even if the employer discharges the employee

for a '^morally wrong" reason.^ An at will employee has no legally
protected interest in job security."^

^See infra text accompanying note 2 for definition.

2"Few legal principles have been better settled than the at-will concept, whose roots

date back to the 19th century laissez-faire policy of protecting freedom to contract."

Annotation, Right to Discharge Allegedly "At-Will" Employee as Affected by Employer's

Promulgation of Employment Policies As to Discharge, 33 A.L.R.4th 120, 123 (1984).
Most commentators trace the rule to Horace G. Wood's 1877 treatise Master and Servant,
on the law pertaining to the relationship of master and servant. See generally Feinman,

The Development of the Employment at Will Rule, 20 Am. J. Legal Hist. 118, 125-27

(1976). Feinman's article discusses at length the historical development of the rule. For

other discussions of the historical development of the rule, see Murg & Scharman,
Employment At Will: Do the Exceptions Overwhelm the Rule?, 23 B.C.L. Rev. 329, 332-
35 (1982); Note, Implied Contract Rights to Job Security, 26 Stan. L. Rev. 335, 340-

45 (1974) [hereinafter Implied Contract Rights].

^Payne v. Western & Atl. R.R., 81 Tenn. 507, 519-20 (1884), overruled on other
grounds, Hutton v. Watters, 132 Tenn. 527, 179 S.W. 134 (1915), cited in Note, Protecting

At Will Employees Against Wrongful Discharge: The Duty to Terminate in Good Faith,
93 Harv. L. Rev. 1816, 1819 (1980) [hereinafter Good Faith Duty]. "The general rule
is that an employment contract at will may be terminated by either party with or without
cause or justification. This means a good reason, a wrong reason, or no reason.'' Hinrichs

V. Tranquilaire Hosp., 352 So.2d 1130, 1131 (Ala. 1977) (citations omitted).

''In this Note "job security" means fredom from arbitrary discharge. A "promise
of job security" is a promise to discharge an employee only for good or just cause. If

an employee has a legally protected interest in job security, the employer cannot terminate

the employment at will.

547



548 INDIANA LAW REVIEW [Vol. 21:547

The employment at will rule is relatively new. Before the Industrial

Revolution, the English common law courts presumed that the employ-
ment period was one year unless the parties agreed to a different period.^

The rule developed in the United States near the end of the nineteenth

century, and it is, at least in part, the product of laissez-faire economics

and nineteenth century views of freedom of contract.^ The rule protected

the emerging class of industriahsts by permitting labor costs to vary

according to economic conditions, and it shifted the risk of reduced

demand for labor from the employer to the employee.^

The legal and philosophical foundations of the employment at will

rule have probably never been stronger than they were during the Lochner

era (1900 to the mid-1930s).^ During that period the Supreme Court

held that an employer's right to discharge an at will employee was a

fundamental property or contract right that the fifth^ and fourteenth'^

^See generally Feinman, supra note 2, at 119-22; Murg & Scharman, supra note 1,
at 332-33.

*Murg & Scharman, supra note 1, at 335-38.
Ud. at 335-36. Unemployment compensation absorbs some of the employee's risk

and shifts some of the cost back to the employer.

^See generally L. Tribe, American Constitutional Law §§ 8-1 to -7 (1978). During
the period the Court strictly scrutinized legislation that limited economic freedom. See,

e.g., Lochner v. New York, 198 U.S. 45 (1905).
'Adair v. United States, 208 U.S. 161 (1908). In Adair the Court said:

While, as already suggested, the rights of liberty and property guaranteed by

the Constitution against deprivation without due process of law, is [sic] subject

to such reasonable restraints as the common good or the general welfare may
require, it is not within the functions of government—at least in the absence
of contract between the parties—to compel any person in the course of his
business and against his will to accept or retain the personal services of another,

or to compel any person, against his will, to perform personal services for

another. ... It was the legal right of the [employer] ... to discharge [the

employee] because of his being a member of a labor organization .... In all
such particulars the employer and the employee have equality of right, and any

legislation that disturbs that equality is an arbitrary interference with the liberty

of contract which no government can legally justify in a free land.

Id. 174-75.

'"Coppage V. Kansas, 236 U.S. 1 (1915). In Coppage the Court held unconstitutional

a state law that made an employer who discharged an employee because of his association
with a labor organization guilty of a misdemeanor. It rejected the argument that the law

served the purpose of neutralizing the employer's unequal bargaining power. The court

reasoned:

No doubt, wherever the right of private property exists, there must and will be
inequalities of fortune; and thus it naturally happens that parties negotiating

about a contract are not equally unhampered by circumstances. This applies to

all contracts, and not merely to that between employer and employee. . . . And,

since it is self-evident that, unless all things are held in common, some persons
must have more property than others, it is from the nature of things impossible



1988] WRONGFUL DISCHARGE 549

amendments protected from federal and state regulation. Eventually the

Court abandoned this view;" however, long after the courts conceded

that the legislative branches have the power to limit an employer's right

to discharge an employee,'^ the courts continued to reject employees'

arguments that the common law also ought to Hmit the employer's right
to discharge an employee. ^^ Most states now recognize common law
limits on an employer's right to discharge an employee even if the

employment period is indefinite.'"^ Discharged employees are now pre-
vailing on both tort and contract theories.

to uphold freedom of contract and the right of private property without at the

same time recognizing as legitimate those inequalities of fortune that are the

necessary result of the exercise of those rights.

Id. at 17.

''See NLRB v. Jones & Laughlin Steel Corp., 301 U.S. I (1937). In Jones c& Laughlin,
the Court upheld the National Labor Relations Act and said:

[T]he cases of Adair v. United States and Coppage v. Kansas are inapplicable

to [the Act]. The Act does not interfere with the normal exercise of the right

of the employer to select its employees or to discharge them. The employer

may not, under cover of that right, intimidate or coerce employees with respect
to their self-organization and representation ....

Id. at 45-46 (citations omitted).

Recall the quotation from Coppage, supra note 10, and compare the following excerpt

from the National Labor Relations Act:

The inequality of bargaining power between employees who do not possess
full freedom of association or actual liberty of contract, and employers who
are organized in the corporate or other forms of ownership association sub-

stantially burdens and affects the flow of commerce, and tends to aggravate

the recurrent business depressions, by depressing wage rates and the purchasing

power of wage earners in industry and by preventing the stabilization of com-

petitive wage rates and working conditions within and between industries.

National Labor Relations Act, ch. 323, § 1, 49 Stat. 449, 449 (1935) (codified at 29

U.S.C. § 151 (1982)).

'^Both federal and state statutes limit an employer's right to discharge an employee.

See 29 U.S.C. § 623 (1982) (unlawful for an employer to discriminate against an employee

because of age); 29 U.S.C. § 158(a)(3) (1982) (unlawful for an employer to discriminate

against an employee in way that encourages or discourages membership in a labor or-

ganization); Ind. Code § 22-2-2-11 (1982) (a class C infraction for an employer to discharge
or discriminate against an employee because the employee asserts rights under the state's

minimum wage statute); id. § 22-8-1.1-38.1 (1982) (unlawful to discharge or discriminate
against an employee because he or she filed a complaint or exercised rights under the

Indiana Occupational Safety & Health Act); id. § 24-4.5-5-106 (1982) (unlawful to discharge
an employee because of garnishment action against employee); id. § 35-44-3-10 (1982) (a

class B misdemeanor for an employer to knowingly and intentionally dismiss or threaten
to dismiss an employee because the employee served on a jury).

''See Christy v. Petrus, 365 Mo. 1187, 295 S.W.2d 122 (1956) (employee has no
cause of action against employer for damages if he alleges that he was discharged because

he filed a workers' compensation claim); accord Raley v. Darling Shop of Greenville,

Inc., 216 S.C. 536, 59 S.E.2d 148 (1950).

'*See cases cited infra at notes 66 & 70 "To date, the common law of three-fifths



550 INDIANA LAW REVIEW [Vol. 21:547

A substantial number of recent cases and commentaries discuss the
employment at will rule.'^ Most are concerned primarily with whether

the common law should limit the rule and, if so, under what conditions
it should do so. Few have discussed the remedies issues that arise if
courts recognize the employee's cause of action. ^^ Among the few cases
that have explicitly dealt with the remedies issues no single view prevails.

Nevertheless, remedies issues have been important. In at least one case,

one reason the court cited for its refusal to recognize the employee's

action was its inability to fashion an appropriate remedy if it allowed

the action. ^^ In another case, the court explicitly stated that it would

allow a cause of action in contract but not in tort because, the court

reasoned, a tort theory generally allows the plaintiff a more expansive

measure of damages.'^

A remedy ought to be as broad as, but no broader than, its cor-
responding substantive right, the underlying legally protected interest.

of the states has recognized ... a cause of action for wrongful discharge in one form

or another." Lopatka, The Emerging Law of Wrongful Discharge—A Quadrennial As-
sessment of the Labor Law Issue of the 80s, 40 Bus. Law. 1, 1 (1984) (referring to cases
reported through May 21, 1984).

^^See Blades, Employment At Will vs. Individual Freedom: On Limiting the Abusive
Exercise of Employer Power, 67 Colum. L. Rev. 1404 (1967); Summers, Individual

Protections Against Unfair Dismissal: Time for a Statute, 62 Va. L. Rev. 481 (1976);

Good Faith Duty, supra note 3; Note, Protecting Employees At Will Against Wrongful
Discharge: The Public Policy Exception, 96 Harv. L. Rev. 1931 (1983) [hereinafter Public

Policy Exception]; Comment, Protecting the Private Sector At Will Employee Who "Blows
the Whistle": A Cause of Action Based Upon Determinants of Public Policy, 1977 Wis.
L. Rev. 777 [hereinafter Protecting Whistleblowers]; Murg & Scharman, supra note 2;
Feinman, supra note 2; Comment, Employment At Will and the Law of Contracts, 23
Buffalo L. Rev. 211 (1973).

'^See Smith v. Atlas Off-Shore Boat Serv. Inc., 653 F.2d 1057 (5th Cir. Unit A
Aug. 1981); Harless v. First Nat'l Bank in Fairmont, 289 S.E.2d 692 (W. Va. 1982);
Moniodis v. Cook, 64 Md. App. 1, 494 A.2d 212 (1984), cert, denied, 304 Md. 631, 500
A.2d 649 (1985); Coins v. Ford Motor Co., 131 Mich. App. 185, 347 N.W.2d 184 (1983);
Vigil v. Arzola, 102 N.M. 682, 699 P.2d 613 (Ct. App. 1983), modified on another issue,
101 N.M. 687, 687 P.2d 1038 (1984). See also Mallor, Punitive Damages for Wrongful
Discharge of At Will Employees, 26 Wm. & Mary L. Rev. 449 (1985).

'^Martin v. Piatt, 179 Ind. App. 688, 386 N.E.2d 1026 (1979).

Even if we were to exercise our power [to recognize the cause of action], what
would be the measure of actual damages? If the employment could be truly

terminated at any time for no reason at all, how would one carry the burden
of proving more than nominal damages? It appears to us that the practical

remedy would come, then, from recovering punitive damages. Such damages

are allowable for reasons of public policy. We would thus create an action
based upon an undeclared public policy where the measure of damages was

governed only by the same source.

Id. at 692-93, 386 N.E.2d at 1028.

'^Brockmeyer v. Dun & Bradstreet, 113 Wis. 2d 561, 576, 335 N.W.2d 834, 841
(1983).



1988] WRONGFUL DISCHARGE 551

Because a fundamental principle of the law of remedies is that the nature

and measure of the remedy should be congruent with the underlying

legally protected interest,'^ it is necessary to identify that legally protected

interest. One must remember that tort and contract theories protect
different kinds of legal interests. Contract law protects the plaintiff's

interest in a promise the defendant freely gave to him.^^ On the other
hand, tort law protects the plaintiff from the defendant's invasion of

an interest the law recognizes as worthy of legal protection apart from

and despite what the defendant may have promised. ^^ Because tort and
contract laws protect different kinds of interests, the tort remedy will

often differ from the contract remedy even if the underlying facts are

similar.22

The purposes of this note are to identify the interests the law is

protecting under the major contract and tort theories that now limit the
employer's right to discharge an employee who is hired for an indefinite
period and to suggest remedies theories that are consistent with these

interests.

Part II discusses the traditional application of the employment at

will rule. Part III discusses the predominant contract and tort theories

that give an at will employee legally protected interests and limit an

employer's right to discharge the employee. Part IV deals with the

remedies issues and the problems raised in applying the contract and

tort theories.

II. The Traditional Employment at will Rule.

In 1877 Horace G. Wood, a New York attorney and author of
several legal treatises,^^ stated the American employment at will doctrine

in unequivocal terms. Wood's statement of the rule is:

'^D. DoBBS, Handbook on the Law of Remedies, § 1.2, at 3 (1973).
^°W. Prosser, The Law of Torts, § 92, at 614 (4th ed. 1971).
^7fi?.; Restatement (Second) of Torts § 1 comment d (1965).
^^See W. Prosser, P. Keeton, D. Dobbs, R. Keeton, &. D. Owen, Prosser and

Keeton on Torts § 92, at 656-57 (5th ed. 1984) [hereinafter Prosser «& Keeton]. One
difference between tort and contract remedies is the extent to which the courts will allow

the plaintiff to recover consequential damages. In contract, the "foreseeability" rule limits

the recovery; in tort, proximate cause limits it. Dobbs, supra note 19, § 3.3, at 157-58.

Generally, the foreseeability standard is more restrictive than the proximate cause standard.

See id. § 12.3, at 803-10. Another difference between tort and contract is that courts

sometimes permit punitive damages in tort; however, the courts rarely allow them in

contract. See Pierce v. Ortho Pharmaceutical Corp., 84 N.J. 58, 72, 417 A.2d 505, 512

(1980); Brockmeyer v. Dun & Bradstreet, 113 Wis. 2d 561, 575, 335 N.W.2d 834, 841
(1983).

^^See Feinman, supra note 2, at 125-26.



552 INDIANA LAW REVIEW [Vol. 21:547

With US the rule is inflexible, that a general or indefinite hiring

is prima facie a hiring at will, and if the servant seeks to make
it out a yearly hiring, the burden is upon him to establish it

by proof. A hiring at so much a day, week, month, or year,
no time being specified, is an indefinite hiring, and no pre-

sumption attaches that it was for a day even, but only at the

rate fixed for whatever time the party may serve. ^"^

Although the authorities Wood cited to bolster his assertions apparently
did not support them,^^ American courts universally accepted his rule.^^

A. The Definite Duration Requirement

The rule adopted by American courts applies only if the employer

and employee do not agree that the employment period will be for a

definite period. If the parties specify a definite period, each party is

bound for that period, and the employer has no right to discharge the

employee without good cause. ^^ Because the employer does not have the

right to discharge the employee without good cause, the employee has

a legally protected interest in his job during the specified period. If the

employer wrongfully discharges the employee, the employee is entitled

to damages for breach.

On the other hand, if the parties do not specify that the employment
will be for a definite duration, the employee has no legally protected

interest in his job. The employer may discharge the employee at any
time for any or no reason, and the discharged employee generally cannot

succeed if he sues for wrongful discharge^^ and the contract is too vague

for the courts to enforce. ^^

Unless the parties expressly agree that the employment will be for

a definite period, the courts presume that the parties intended employment

for an indefinite period. ^° For example, in Buian v. /. L. Jacobs &
Co.,^^ the court held that the employer's written statement that the

^H. Wood, A Treatise on the Law of Master and Servant § 136, at 283 (2d
ed. 1886) restating the rule first put forth in the 1877 editions in substantially the same

language. See Toussaint v. Blue Cross & Blue Shield of Mich., 408 Mich. 579, 601, 292
N.W.2d 880, 886 (1980).

^'Toussaint, 408 Mich, at 602-03, 292 N.W.2d at 886-87; Implied Contract Rights,
supra note 2, at 341-42.

^^Feinman, supra note 2, at 126-27.

^'See Pepsi-Cola Gen. Bottlers v. Woods, 440 N.E.2d 696 (Ind. Ct. App. 1982).

"^See id. at 697.

^'Id. at 699.

'°See Martin v. Piatt, 179 Ind. App. 688, 386 N.E.2d 1026 (1979); Jackson v.

Minidoka Irrigation Dist., 98 Idaho 330, 563 P. 2d 54 (1977); Kelly v. Mississippi Valley

Gas Co., 397 So. 2d 874 (Miss. 1981).
3'428 F.2d 531 (7th Cir. 1970).



1988] WRONGFUL DISCHARGE 553

employee's "assignment in Saudi Arabia will continue for a period of

eighteen (18) months" was merely a statement of expectations and was

not sufficient to create employment for a definite period. ^^ In a few

cases courts have found that the facts were sufficient to rebut the

presumption." Generally, however, courts construe a promise of "per-

manent" employment to be nothing more than a promise of "steady"
employment. ^"^ That the employee's compensation is proportioned to units

of time is not, by itself, sufficient to rebut the presumption that the

employment period is indefinite. ^^

Frequently the reason the courts give for refusing to enforce an

employer's promise of job security is that there is no "mutuality of

obligation. "3^ That is, the employer is bound to retain the employee,

but the employee remains free to quit at any time.

B. The Independent Consideration Requirement

Even if the parties do not specify a definite employment period,

courts will enforce an employer's promise of job security if the employee

gives independent consideration to support the promise. ^^ Independent

consideration is consideration other than the employee's services or his

promise to serve. ^^ The compensation the employee receives for his

services completes the exchange between the employer and the employee

respecting the services, and nothing remains to support a promise of

job security. ^^

'^Id. at 533.

"5ee generally Annotation, Comment Note— Validity and Duration of Contract
Purporting to be for Permanent Employment, 60 A.L.R.3d 226 (1974) [hereinafter Contract

for Permanent Employment].

''Id. at 232-33.

^^Martin v. New York Life Ins. Co., 148 N.Y. 117, 42 N.E. 416 (1895); see also
Restatement (Second) of Agency § 442 comment b (1957).

'''See Shaw v. S.S. Kresge Co., 167 Ind. App. 1, 328 N.E.2d 775 (1975); see also
Buian v. J. L. Jacobs & Co., 428 F.2d 531 (7th Cir. 1970) (a term in an employment
agreement that allows the employee to quit at any time but requires the employer to

retain the employee for 18 months is unenforceable because there is no mutuality of

obligation). See generally Contract for Permanent Employment, supra note 33, lA Corbin,

Contracts § 152, at 13-17 (1963).

''See Ohio Table Pad Co. of Ind. v. Hogan, 424 N.E.2d 144, 146 (Ind. Ct. App.

1981); see also Pearson v. Youngstown Sheet & Tube Co., 332 F.2d 439, 440-41 (7th
Cir, 1964). See generally Contract for Permanent Employment, supra note 33, at 237-49.

'^See Hamblen v. Danners, Inc., 478 N.E.2d 926 (Ind. Ct. App. 1985) (to constitute

independent consideration there must be a detriment to the employee and a corresponding

benefit to the employer; a covenant not to compete is not independent consideration if

not given in exchange for the alleged oral promise of permanent employment). See generally

Contract for Permanent Employment, supra note 33, at 232-36.

'^Good Faith Duty, supra note 3, at 1819.



554 INDIANA LAW REVIEW [Vol. 21:547

Courts have found independent consideration where a prospective

employee surrendered a personal liability claim against the employer/^

conveyed an interest in land to the employer/' or abandoned his own
competing business in exchange for the employer's promise of job se-

curity /^ Generally, the employee's detrimental reliance on a promise of

job security will not support the promise/^ It is not enough that the

employee has served the employer for several years, has foregone other

opportunities, and has become virtually unemployable."^ It is also not

enough that an employee who rehed on the employer's promise of job
security quit her previous job and relocated in order to accept the

employer's job/^ Even if what the employee has given in exchange for

the promise of job security is otherwise adequate, it is not adequate

unless both parties clearly understand that the employee is giving it in

exchange for the employer's promise of job security. '^^

C. Two Illustrative Cases

In Shaw v. S.S. Kresge Co.,'^^ a. discharged employee sued his former
employer for wrongful discharge and the trial court granted summary
judgment in favor of the employer. The employee alleged that the terms

in an employee handbook became part of the employment contract at

the time the employer hired the plaintiff. The handbook specified the

grounds and procedures for discharging an employee, and the plaintiff

alleged that the employer breached the contract because it did not act

according to the handbook when it discharged the plaintiff. The appellate
court rejected the employee's claim that the handbook terms became

part of the employment contract. "^^ Furthermore, the court stated, even

if the handbook terms did become part of the contract:

[I]n the absence of a promise on the part of the employer that

the employment should continue for a period of time that is

either definite or capable of determination, the employment

^""See cases cited in Ohio Table Pad Co. of Ind. v. Hogan, 424 N.E.2d 144, 146

(Ind. Ct. App. 1981). See generally Restatement (Second) of Agency § 442 comment
a (1957); Contract for Permanent Employment, supra note 33, at 249-50.

^'Mount Pleasant Coal Co. v. Watts, 91 Ind. App. 501, 151 N.E. 7 (1926).

''See Kravetz v. Merchants Distribs., Inc., 387 Mass. 457, 440 N.E.2d 1278 (1982).

''See Pearson v. Youngstown Sheet & Tube Co., 332 F.2d 439 (7th Cir. 1964);
Pepsi-Cola Gen. Bottlers v. Woods, 440 N.E.2d 696 (Ind. Ct. App. 1982).

"^Pearson, 332 F.2d at 441.

"'Ohio Table Pad Co. of Ind. v. Hogan, 424 N.E.2d 144 (Ind. Ct. App. 1981)
(merely puts the employee in a position to accept the employment).

"^Lynas v. Maxwell Farms, 279 Mich. 684, 687, 273 N.W. 315, 316 (1937).
"^67 Ind. App. 1, 328 N.E.2d 775 (1975).

''Id. at 6-7, 328 N.E.2d at 778.



1988] WRONGFUL DISCHARGE 555

relationship is terminable at the will of the employer. There

being no binding promise on the part of the employee that he

would continue in the employment, it must also be regarded as

terminable at his discretion as well. For want of mutuality of

obligation or consideration, such a contract would be unen-

forc[ea]ble in respect of that which remains executory."^^

According to the Shaw court, because there is no mutuality of obligation
and no independent consideration, an employer's promise of job security

is unenforceable even if the court assumes that the employer actually

made the promise. ^^

'^Id. at 7, 328 N.E.2d at 779 (citations omitted).

'"Shaw V. S.S. Kresge Co., 167 Ind. App. 1, 328 N.E.2d 775 (1975).

In Streckfus v. Gardenside Terrace Cooperative, Inc., 504 N.E.2d 273 (Ind. 1987),

the Supreme Court of Indiana apparently overruled this holding. In Streckfus the defendant

Gardenside owned a housing development. Defendant Triangle managed it, and Triangle's

management duties included hiring and firing employees. According to the management

agreement between Triangle and Gardenside, Triangle could discharge the resident manager

(1) with prior approval from Gardenside after showing a sufficient reason for discharging

the manager or (2) without prior approval from Gardenside, if Triangle had good cause

to immediately discharge the manager, subject to Gardenside's later approval. Triangle

hired Streckfus as resident manager. Later, Triangle recommended that Streckfus be fired,

and Gardenside approved. Streckfus sued both Triangle and Gardenside alleging that she

could be fired only for just cause and that the defendants had no just cause to fire her.

The trial court granted the defendant's motion for summary judgment, and the Indiana

Court of Appeals affirmed. Streckfus v. Gardenside Terrace Cooperative, Inc., 481 N.E.2d

423 (Ind. Ct. App. 1985).

The court of appeals did not consider whether the agreement contained a promise

that the defendants would not fire Streckfus without just cause. Instead the court stated:

Even if Streckfus were promised that she would only be discharged for cause,

she remained an employee at will. To convert employment at will to employment
requiring good cause for termination, independent consideration supplied by the

employee, which results in detriment to her and a corresponding benefit to the

employer, must be given in return for permanent employment.

Id. at 425 (citation omitted).

The supreme court affirmed the summary judgment but vacated the court of appeals

decision. Streckfus, 504 N.E.2d at 276. The court said:

Under the employment at will doctrine, an employment contract of indefinite

duration is presumptively terminable at the will of either party. . . . Nevertheless,

we are cognizant that the employment at will doctrine is a rule of contract

construction, not a rule imposing substantive limitations on the formation of a

contract. Therefore, should parties to an employment contract choose to include

a job security provision in the contract, enforcement of such a provision would

not necessarily conflict with the employment at will doctrine.

Id. at 275 (citations omitted, emphasis added). The court scrutinized the agreement and

held that, as a matter of law, the agreement did not include a job security provision; it

merely required "sufficient reason" to discharge, that is, "information upon which a

decision could be made." Id. at 276. Therefore, the court said, "[I]t is presently inap-



556 INDIANA LAW REVIEW [Vol. 21:547

In Pearson v. Youngstown Sheet & Tube Co.,^^ the employee claimed
that the employer breached an implied contract for permanent employ-

ment. The employee argued that the consideration for the promise of

permanent employment was the detriment he suffered as a consequence

of his twenty-eight years of service for the employer and the employee's

unemployability resulting from this service. The court called this claim

"a novel theory, unknown to the law so far as we are aware, "^^ and
added,

This contention is a tacit admission that there was no consid-

eration in the beginning but that at some point over the years

there emerged a consideration sufficient to support the contract

for permanent employment. This theory overlooks the important

fact that at any time during those years either of the parties

had a right to terminate the plaintiff's employment, and that

he received all the compensation which defendant promised to

pay."

Because the employee "received all the compensation which the [em-

ployer] promised to pay," there was no consideration remaining to

support an implied contract for permanent employment even if the

employee did suffer a detriment.

III. Contract Law Limits on an Employer's Right to Terminate
Employment of Indefinite Duration

Through the 1950's the employment at will rule remained almost

entirely immune from attack unless the legislature expressly limited the
employer's right to discharge an employee.^"* For example, in Raley v.

propriate for us to address the question concerning whether separate and independent

consideration should continue to be a prerequisite to the enforceability of an express job

security provision." Id. Nevertheless, what the court did in Streckfus, as well as what

the court said, indicates that in Indiana it is no longer true that no matter what the

employer promises, a promise of job security is unenforceable as a matter of law. Apparently

it does matter what the employer promises; if that is not true, there would have been

no reason for the court to scrutinize the agreement to see what, if anything, the employer

had promised.

"332 F.2d 439 (7th Cir. 1964).

"/c?. at 440.

"/d/. at 441.

'^In Kouff V. Bethlehem-Alemeda Shipyard, 90 Cal. App. 2d 322, 202 P.2d 1059

(1949), the court recognized a cause of action for wrongful discharge where an employer

discharged an employee for serving as an election officer. There was, however, a statute

that made such a discharge unlawful. Id. at 323, 202 P.2d at 1060. This note focuses
on cases where the court recognizes a discharged employee's common law cause of action
even though no statute expressly makes the discharge unlawful.



1988] WRONGFUL DISCHARGE 557

Darling Shop of Greenville, Inc.,^^ the court refused to recognize that

an employee stated a cause of action when she alleged that the employer

discharged her because she had filed a workers' compensation claim. ^^

Even though the court acknowledged that the employer's conduct "might

be considered reprehensible,"^^ the court refused to recognize the claim.

The court reasoned: (1) because the employer could discharge the em-

ployee at any time, there was no breach of contract, and (2) because

the employer was unable to prevent the employee from filing her workers'

compensation claim, she suffered no legal injury. ^^

In 1959 the CaHfornia District Court of Appeals held that courts

could find that important public policies limit an employer's right to

discharge an at will employee even if the legislature has not expressly

created such a limit. ^^ In Petermann v. International Brotherhood of
Teamsters, Local 396, the court held that an at will employee stated a

cause of action if he alleged that he had been discharged because he

refused to obey his employer's order to give perjured testimony and

instead testified truthfully. ^° The Petermann court reasoned that allowing

an employer to discharge an employee because he refused to commit

perjury would seriously jeopardize the legislative policy against perjury. ^^

Even though the legislature did not expressly make the discharge unlawful,
the court reasoned that it must recognize the employee's cause of action

"in order to more fully effectuate the state's declared policy against

perjury. . . ."^^ ji^jg ^^g ^j^g beginning of the pubUc policy tort exception

to the employment at will rule.^^

In Frampton v. Central Indiana Gas Co.,^'^ the Supreme Court of

Indiana became the first state court of final appeal to hold that a

discharged at will employee stated a cause of action against her former

employer when she alleged that the discharge interfered with an important

public policy interest, i.e., she was fired because she filed a workers'

compensation claim. ^^ Several other courts have followed the lead of

the Petermann and Frampton courts. These courts have indicated that

"216 S.C. 536, 59 S.E.2d 148 (1950).

''Id.

''Id. at 538, 59 S.E.2d at 149.

''Raley, 216 S.C. 536, 595 S.E.2d 148; accord Petrus v. Christy, 365 Mo. 1187,
295 S.W.2d 122 (1956).

'^Petermann v. International Bhd. of Teamsters, Local 396, 174 Cal. App. 2d 184,

344 P.2d 25 (1959).

"^Id.

''Id. at 188, 344 P.2d at 27.

'Ud. at 189, 344 P.2d at 27.

'^See infra text accompanying notes 183-242.

"260 Ind. 249, 297 N.E.2d 425 (1973).

"Frampton v. Central Indiana Gas Co., 260 Ind. 249, 297 N.E.2d 425 (1973).



558 INDIANA LAW REVIEW [Vol. 21:547

a discharged employee has a cause of action in tort if the employer

discharged the employee in a way that interferes with an important
public policy interest. ^^

Courts have also recognized contract law limits on an employer's

right to discharge an employee hired for an indefinite period. For

example, in Toussaint v. Blue Cross & Blue Shield of Michigan, ^'^ the
Supreme Court of Michigan held that an employee who is hired for an
indefinite period can bargain for an enforceable promise of job security

even if there is no "mutuality of obligation" and no independent con-

sideration.^^ In addition, the Toussaint court declared that an employee

who reasonably reHes on the employer's promises of job security in an

^In at least the following cases the courts have held, or have indicated that they

are willing to hold, that an employee has a cause of action in tort if he alleges that the

employer discharged him in a way that interferes with an important public policy interest:

Smith V. Atlas Off-Shore Boat Serv., Inc., 653 F.2d 1057 (5th Cir. Unit A Aug., 1981)
(federal maritime tort); Knight v. American Guard & Alert, 714 P.2d 788 (Alaska 1986);
Wagenseller v. Scottsdale Memorial Hosp., 147 Ariz. 370, 710 P.2d 1025 (1985); Tameny
v. Atlantic Richfield Co., 27 Cal. 3d 167, 610 P.2d 1330, 164 Cal. Rptr. 839 (1980);

Sheets v. Teddy's Frosted Foods, Inc., 179 Conn. 471, 427 A.2d 385 (1980); Parner v.

Americana Hotels, Inc., 65 Haw. 370, 652 P.2d 625 (1982); Jackson v. Minidoka Irrigation

Dist., 98 Idaho 330, 563 P.2d 54 (1977); Kelsay v. Motorola, Inc., 74 111. 2d 172, 384

N.E.2d 353 (1978); Frampton v. Central Ind. Gas Co., 260 Ind. 249, 297 N.E.2d 425

(1973); Murphy v. City of Topeka-Shawnee County Dep't of Labor Servs., 6 Kan. App.
2d 488, 630 P.2d 186 (1981); Firestone Textile Co. v. Meadows, 666 S.W.2d 730 (Ky.

1983); Larrabee v. Penobscot Frozen Foods, 486 A.2d 97 (Me. 1984); Adler v. American

Standard Corp., 290 Md. 615, 432 A.2d 464 (1981); DeRose v. Putnam Management Co.,
398 Mass. 205, 496 N.E.2d 428 (1986); Suchodolski v. Michigan Consol. Gas Co., 412

Mich. 692, 316 N.W.2d 710 (1982); Keneally v. Orgain, 186 Mont. 1, 606 P.2d 127 (1980);
Hansen v. Harrah's, 100 Nev. 60, 675 P.2d 394 (1984); Pierce v. Ortho Pharmaceutical

Corp., 84 N.J. 58, 417 A.2d 505 (1980); Vigil v. Arzola, 102 N.M. 682, 699 P.2d 613
(Ct. App. 1983), modified on other issue, 101 N.M. 687, 687 P.2d 1038 (1984); Sides v.

Duke Hosp., 74 N.C. App. 331, 335 S.E.2d 818, petition for review denied, 314 N.C.

331, 335 S.E.2d 13 (1985); Nees v. Hocks, 272 Or. 210, 536 P.2d 512 (1975); Geary v.

United States Steel Corp., 465 Pa. 171, 319 A.2d 119 (1978); Reuther v. Fowler & Williams,
Inc., 255 Pa. Super. 28, 386 A.2d 119 (1978); Ludwick v. This Minute of Carolina, Inc.,

287 S.C. 219, 337 S.E.2d 213 (1985); Clanton v. Cain-Sloan Co., 677 S.W.2d 733 (Tenn.

1984); Sabine Pilot Serv., Inc. v. Hauck, 687 S.W.2d 733 (Tex. 1985); Thompson v. St.
Regis Paper Co., 102 Wash. 2d 219, 685 P.2d 1081 (1984); Harless v. First Nat'l Bank

in Fairmont, 162 W. Va. 116, 246 S.E.2d 270 (1978).
In Brockmeyer v. Dun & Bradstreet, 113 Wis. 2d 561, 335 N.W.2d 834 (1983), the

court indicated that it was willing to recognize the cause of action in contract but not

in tort.

Some courts have explicitly refused to recognize the tort: Hinrichs v. Tranquillaire
Hosp., 352 So. 2d 1130 (Ala. 1977); Kelly v. Mississippi Valley Gas Co., 397 So. 2d 874

(Miss. 1981); Murphy v. American Home Prods. Corp., 58 N.Y.2d 293, 448 N.E.2d 86,
461 N.Y.S.2d 232 (1983).

^^08 Mich. 579, 292 N.W.2d 880 (1980).



1988] WRONGFUL DISCHARGE 559

employee handbook can enforce those promises. ^^ Most states have held,

or have indicated that they may hold, that an employee can enforce an
employer's promise of job security even if the employment period is

indefinite and if the employee gives no independent consideration for

the promise. ^^

A. Contract Law Limits on an Employer's Right to Discharge
an Employee

Generally, a promisee can enforce a promise if the promisee gives

consideration for the promise,^' and the courts do not demand * 'mutuality
of obligation. "^^ In addition, the same consideration can support more
than one promise^^ Under the traditional application of the employment

at will rule (discussed in Section II of this Note), the courts refused

Mn at least the following cases the courts have held, or have indicated that they
are willing to hold, that an employee may enforce an employer's promise of job security
even if the employment period is indefinite and the employee gives no independent

consideration for the promise: Peters v. Alabama Power Co., 440 So. 2d 1028 (Ala.

1983); Bales v. Xanana Valley Medical-Surgical Group, Inc., 663 P.2d 958 (Alaska 1983);

Leikvold v. Valley View Community Hosp., 147 Ariz. 370, 710 P.2d 1025 (1985); Griffin

V. Erickson, 277 Ark. 433, 642 S.W.2d 308 (1982); Pugh v. See's Candies, Inc., 116 Cal.

App. 3d 311, 171 Cal. Rptr. 917 (1981); Continental Air Lines, Inc. v. Keenan, 731 P.2d

708 (Colo. 1987); Finley v. Aetna Life & Casualty Co., 5 Conn. App. 394, 499 A.2d 64
(1985); Watson v. Idaho Falls Consol. Hosps., Inc., Ill Idaho 44, 720 P.2d 632 (1986);
Duldulao V. Saint Mary of Nazareth, 115 111. 2d 482, 505 N.E.2d 314 (1987); Romack
V. Public Serv. Co. of Ind., 511 N.E.2d 1024 (Ind. 1987); Streckfus v. Gardenside Terrace

Cooperative, Inc., 504 N.E.2d 273 (Ind. 1987); Shah v. American Synthetic Rubber Corp.,

655 S.W.2d 489 (Ky. 1983); Larrabee v. Penobscot Frozen Foods, 486 A.2d 97 (Me.

1984); Staggs v. Blue Cross of Md., Inc., 61 Md. App. 381, 486 A.2d 798 (1985); Toussaint
V. Blue Cross & Blue Shield of Mich., 408 Mich. 579, 292 N.W.2d 880 (1980); Pine River
State Bank v. Mettille, 333 N.W.2d 622 (Minn. 1983); Arie v. Intertherm, Inc., 648

S.W.2d 142 (Mo. Ct. App. 1983); Morris v. Lutheran Medical Center, 215 Neb. 677, 340

N.W.2d 388 (1983); Southwest Gas Corp. v. Ahmad, 99 Nev. 594, 668 P.2d 261 (1983);
Woolley V. Hoffmann-LaRoche, Inc., 99 N.J. 284, 491 A.2d 1257 (1985); Forrester v.

Parker, 93 N.M. 781, 606 P.2d 191 (1980); Weiner v. McGraw-Hill, Inc., 57 N.Y.2d 458,
443 N.E.2d 441, 457 N.Y.S.2d 193 (1982); Trought v. Richardson, 78 N.C. App. 758,

338 S.E.2d 617, petition for review denied, 316 N.C. 557, 344 S.E.2d 18 (1986); Mers

V. Dispatch Printing Co., 19 Ohio St. 3d 100, 443 N.E.2d 150 (1985); Yartzoff v. Democrat-

Herald Publishing Co., 281 Or. 651, 576 P.2d 356 (1978); Osterkamp v. Alkota Mfg.,

Inc., 332 N.W.2d 275 (S.D. 1983); Ramos v. Henry C. Beck Co., 711 S.W.2d (Tex. Ct.
App. 1986); Piacitelli v. Southern Utah State College, 636 P.2d 1063 (Utah 1981); Thompson
V. St. Regis Paper Co., 102 Wash. 2d 219, 685 P.2d 1081 (1984); Ferraro v. Koelsch,

124 Wis. 2d 154, 368 N.W.2d 666 (1985); Mobil Coal Producing, Inc. v. Parks, 704 P.2d
702 (Wyo. 1985).

^'Restatement (Second) of Contracts § 71 (1979).

'Hd.

^^Id. § 80 comment a.



560 INDIANA LAW REVIEW [Vol. 21:547

to apply these basic contract principles to the employment relationship.

Instead the courts demanded mutuality of obhgation or independent
consideration in order to permit an employee to enforce a promise of

job security. If the employee proved that the employer made the promise
and that the employee detrimentally relied on the promise, the employee

might recover reliance damages, but he could not enforce the promise. '^'^

Despite the harsh results, ^^ the rule remained so firmly established

that Professor Blades, in his often cited article on employer abuse of

the rule, declared that it was unlikely the courts would recognize contract

law limits. ^^ Professor Blades was incorrect; most states will now enforce
an employer's promise of job security even where the traditional employment

at will doctrine would apply. Consequently, an employer who promises
job security may be liable in contract if he discharges an employee
without good cause. As one might expect, the two theories the courts
most frequently rely on are (1) promise plus consideration and (2) promise

plus the employee's reasonable reliance on the promise.

7. Consideration Plus Promise: Bargained-For Exchange as a Basis

for Enforcing an Employer's Promise of Job Security.—In Toussaint v.
Blue Cross & Blue Shield of Michigan, ^'^ the court held that a discharged
employee could enforce the employer's promise of job security if the

employee had bargained for it, even though the only consideration the

employee gave for the promise was his promise to serve the employer. ^^

The Toussaint court rejected the employer's argument that the promise

was unenforceable because there was no mutuality of obligation and

because the employee had given no independent consideration for the

promise.^^ The court declared that the employment at will rule is merely

a rule of contract construction^^ and "[t]he enforceability of a contract

depends ... on consideration and not mutuality of obligation."^* Fur-

thermore, the court declared the employee has presented enough evidence

''See Pepsi-Cola Gen. Bottlers, Inc. v. Woods, 440 N.E.2d 696, 699 (Ind. Ct. App.

1982).

""An employer might use a threat of discharge, for example, to impair an employee's
freedom against self-incrimination, his political free choice or his right to speak out on

the issues of the day. A threat to an employee's job might also secure his unwilling
participation in almost any kind of immoral or unlawful activity." Blades, supra note

15, at 1407-08 (footnotes omitted).

''Id. at 1421.

^H08 Mich. 579, 292 N.W.2d 880 (1980).
''Id.

''Id. at 600, 292 N.W.2d at 885.
^"See also Streckfus v. Gardenside Terrace Coop., Inc., 504 N.E.2d 273 (Ind. 1987)

"[T]he employment at will doctrine is a rule of contract construction, not a rule imposing

substantive Hmitations on the formation of a contract." Id. at 275.

''Toussaint, 408 Mich, at 600, 292 N.W.2d at 885.



1988] WRONGFUL DISCHARGE 561

to overcome a directed verdict if the employee testifies that he and the

employer understood, at the time they formed the contract, that the

employer would not discharge the employee without just cause. ^^

Similarly, in Weiner v. McGraw-Hill, Inc.^^ the New York Court
of Appeals rejected the employer's argument that the employer's promise

of job security is unenforceable unless there is mutuality of obligation

or independent consideration. In Weiner the employee claimed that

McGraw-Hill agents had assured him that it was company policy not
to discharge an employee without just cause. Weiner claimed that he

relied on this promise and gave up accrued fringe benefits and a promised

salary increase from his previous employer in order to accept the McGraw-
Hill offer. Weiner also claimed (1) an employee handbook also contained

the promise not to discharge him without good cause, (2) the parties

expressly incorporated the handbook in Weiner's job application that

he and two McGraw-Hill agents signed, and (3) the employment ap-

plication was part of his employment contract. In addition, Weiner

claimed that McGraw-Hill required him to follow the handbook pro-

cedures when disciplining and discharging his subordinates and that he
had rejected other job offers because he was relying on the McGraw-
Hill promise. After McGraw-Hill fired him, Weiner sued for breach of

contract alleging, in the court's words, that "he was discharged without

the 'just and sufficient cause' or the rehabilitative efforts specified in

the employer's personnel handbook and allegedly promised at the time

he accepted the employment. "^"^

The court held that Weiner had a cause of action in contract and

said

[t]hat [the fact that the discharged employee] was free to quit

his employment at will, standing by itself, was not entitled to

conclusory effect. Such a position proceeds on the oversimpHfied

premise that, since the [employee] was not bound to stay on,

the agreement for his employment lacked "mutuality", thus

leaving the [employer] free to terminate at its pleasure. But this

would lead to the not uncommon analytical error of engaging
in a search for "mutuality", which is not always essential to a

binding contract, rather than of seeking to determine the presence

of consideration, which is a fundamental requisite. For, while

coextensive promises may constitute consideration for each other,
"mutuality", in the sense of requiring reciprocity, is not necessary

when a promisor receives other valid consideration.

"57 N.Y.2d 458, 443 N.E.2d 441, 457 N.Y.S.2d 193 (1982).

^'Id. at 460, 443 N.E.2d at 443, 457 N.Y.S.2d at 194.



562 INDIANA LAW REVIEW [Vol. 21:547

Far from consideration needing to be coextensive or even

proportionate, the value or measurability of the thing forborne

or promised is not crucial so long as it is acceptable to the

promisee. ^^

In Romack v. Public Service Co. of Indiana,^^ the Indiana Supreme
Court also found that the traditional employment at will, independent

consideration and mutuality of obligation doctrines do not always apply.

The court, adopting Judge Conover's dissenting opinion in the court of

appeals decision, held that an employee has given independent consid-

eration if (1) the employee is uniquely qualified for the job, (2) he gave

up "Hfetime employment" with the state police to take the job, (3) the

employer recruited the employee, (4) the employee agreed to accept the

job only if the employer offered the same permanency, and (5) the

employer agreed that he would have permanent employment.^^

In both Toussaint and Weiner the courts found the employer's offers

of job security were part of the bargained-for exchanges that formed

the employment contracts. ^^ In Pine River State Bank v. Mettille,^^ the
Supreme Court of Minnesota went a step further and held that an

employee may enforce the employer's promise of job security even if
the employer offers it and the employee accepts it after the parties have

established an at will employment relationship. ^° In Mettille the employer

had distributed an employee handbook several months after the employee

began working for the employer. The handbook included sections on

job security and discipHnary procedures.^' The court said that, although

"general statements of policy ... do not meet the contractual require-

ments for an offer, "^^ specific language in an employee handbook could

be an offer of a unilateral contract. ^^ The employee accepts the offer

«'M at 463-64, 443 N.E.2d at 444-45, 457 N.Y.S.2d at 196-97.
«^511 N.E.2d 1024 (Ind. 1987), vacating 449 N.E.2d 776 (Ind. Ct. App. 1986) (adopting

dissenting opinion of the appellate court).

''Romack, 511 N.E.2d at 1026 (incorporating by reference 449 N.E.2d at 776-78

(dissenting opinion)).

*^In both Toussaint and Weiner the plaintiff had specifically asked about job security

during the pre-employment negotiations. In each case the employer's agent indicated that

it was company policy not to discharge an employee without just cause.
«^333 N.W.2d 622 (Minn. 1983).
^Id.

^'For the text of the handbook provisions, see id. at 626 nn. 2 & 3.
^^Id.

^Ud. at 630. The court found that a "Job Security" provision was "no more than

a general statement of policy." Id. A "Disciplinary Pohcy" provision did have sufficiently
specified language to indicate an offer of a unilateral contract. Id. It provided for detailed

pre-discharge procedures—oral reprimand, written reprimand, meeting with manager, sus-
pension, and review by the Executive Officer. Id. at 626 n. 3.



1988] WRONGFUL DISCHARGE 563

if he remains on the job,^"* and "by continuing to stay on the job,

although free to leave, the employee supplies the necessary consideration

for the offer. "95

2. Employee Reliance as a Basis for Enforcing the Employer's Prom-

ise of Job Security.—The contract doctrines of offer, acceptance, and
bargained-for exchange explain the holdings in Toussaint, Weiner, and

Mettille. The employee can enforce the employer's promise of job security

because the employee has given consideration for the promise. Although

generally a promise that is not supported by consideration is not en-

forceable, the courts will sometimes enforce a promise even if there is

no consideration to support it.^^ For example, the court may enforce a
promise if the promisee's justifiable reliance on the promise induces him

to act on the promise, if the promisor should have expected the promise

to induce the action and the court can avoid injustice only by enforcing

the promise.9^ Several courts have applied this principle to the employment

relationship and have enforced the employer's promise of job security. ^^

In Toussaint the court declared that a promise of job security "may
become part of the contract either by express agreement, oral or written,

or as a result of an employee's legitimate expectations grounded in an

employer's policy statements. "^^ Thus, promises in an employee handbook

may be enforceable. The Toussaint court stated:

While an employer need not establish personnel poHcies or prac-

tices, where an employer chooses to estabhsh such poUcies and

practices and makes them known to its employees, the employ-
ment relationship is presumably enhanced. The employer secures

an orderly, cooperative and loyal work force, and the employee

the peace of mind associated with job security and the conviction

that he will be treated fairly. No pre-employment negotiations
need take place and the parties' minds need not meet on the

subject; nor does it matter that the employee knows nothing of

the particulars of the employer's poHcies and practices or that

the employer may change them unilaterally. It is enough that
the employer chooses, presumably in its own interest, to create
an environment in which the employee believes that, whatever

"'Id. at 627.

"'Id.

^^Restatement (Second) of Contracts §§ 82-90 (1979).

"'Id. § 90.

"^See Leikvold v. Valley View Community Hosp., 141 Ariz. 544, 688 P.2d 170 (1984);
Pugh V. See's Candies, Inc., 116 Cal. App. 3d 311, 171 Cal. Rptr. 917 (1981); Forrester

V. Parker, 93 N.M. 781, 601 P.2d 191 (1980); Thompson v. St. Regis Paper Co., 102
Wash. 2d 219, 685 P.2d 1081 (1984).

^408 Mich, at 598, 292 N.W.2d at 885.



564 INDIANA LAW REVIEW [Vol. 21:547

the personnel policies and practices, they are established and

official at any given time, purport to be fair, and are applied

consistently and uniformly to each employee. The employer has

then created a situation "instinct with an obhgation."^^^

The employee handbook statements are enforceable because the

"employees could justifiably rely on those expressions and conduct them-

selves accordingly, "'°' and because the employer hopes to "benefit [from]

improved employee attitudes and behavior and improved quality of the

work force. "^°2 Under such conditions "the employer may not treat its
promise as illusory. "'^^ Several other courts have followed Toussaint

and have held that an employee may enforce an employer's promise of
job security if the employee justifiably relies on the promise. '°^

In Pugh V. See's Candies, Inc.,^^^ the California Court of Appeals

declared, "the totality of the [employment] relationship" may give "rise
to an implied promise [that the employer] would not act arbitrarily in

deaHng with its employees. "'°^ Among the circumstances that may justify
a jury finding that the employer made such a promise are longevity of
service, promotions and commendations, employer assurances of job

security, and employer practices. ^^"^ In Cleary v. American Airlines, Inc.^^^

a different division of the California Court of Appeals held "that the

longevity of the employee's service, together with the expressed policy

of the employer, operate as a form of estoppel, precluding any discharge

of such an employee by the employer without good cause. "*°^ The Cleary

'°^Id. at 613, 292 N.W.2d at 892, (citing Wood v. Lucy, Lady Duff-Gordon, 222
N.Y. 88, 91, 118 N.E. 214, 214 (1917)).

'"'Id. at 617, 292 N.W.2d at 893.
'°^M at 619, 292 N.W.2d at 895.
'"''Id.

'"'See Leikvold v. Valley View Community Hosp., 141 Ariz. 544, 688 P. 2d 170 (1984).
[I]f an employer does choose to issue a policy statement, in a manual or otherwise,

and, by its language or by the employer's actions, encourages reliance thereon,

the employer cannot be free to only selectively abide by it. Having announced

a policy, the employer may not treat it as illusory.
Id. at 548, 688 P.2d at 174. See also Thompson v. St. Regis Paper Co., 102 Wash. 2d
219, 685 P.2d 1081 (1984).

[I]f an employer, for whatever reason, creates an atmosphere of job security

and fair treatment with promises of specific treatment in specific situations and

an employee is induced thereby to remain on the job and not actively seek

other employment, these promises are enforceable components of the employment

relationship.

Id. at 230, 685 P.2d at 1088.

'oni6 Cal. App. 3d 31, 171 Cal. Rptr. 917 (1981).

''^Id. at 329, 171 Cal. Rptr. at 927.

'°nil Cal. App. 3d 443, 168 Cal. Rptr. 722 (1980).

'"^Id. at 456, 168 Cal. Rptr. at 729.



1988] WRONGFUL DISCHARGE 565

court went further than most other courts and also held that there is

an implied-in-law covenant of good faith and fair dealing in every

employment contract. ^'^ Nevertheless, the Cleary decision seems to rest

primarily on the principle of employee reliance on the employer's promise.

In both Pugh and Cleary the courts found that the employee reasonably

relied on an implied promise that the employer would not discharge the

employee arbitrarily. '''

B. The Public Policy Exception: The Tort of Abusive Discharge

Several jurisdictions have recognized that tort law limits an employer's

right to discharge an at will employee. ''^ Most have adopted what is

known as the "public policy exception. "'^^ In general, the courts allow
the discharged employee's tort claim if the employee alleges that the

discharge interferes substantially with an important public policy in-

terest. '^'^ To prevail, the employee must allege and prove (1) that he

^^°Cleary may stand for the proposition that there is an impUed-in-law covenant of
good faith and fair deaUng in employment contracts that Umits the right of the employer

to terminate the employment. See the court's discussion of the Cleary decision in Pugh

V. See's Candies, Inc., 116 Cal. App. 3d 311, 328-29, 171 Cal. Rptr. 917, 926-27 (1981);

Wagenseller v. Scottsdale Memorial Hosp., 147 Ariz. 370, 384-86, 710 P.2d 1025, 1039-

40 (1985); see also Murg & Scharman, supra note 2, at 361-67,
The Cleary court certainly used broad language: Termination of employment

without legal cause after such a period [eighteen years of continuous employment]

offends the implied-in-law covenant of good faith and fair dealing contained in

all contracts, including employment contracts. As a result of this covenant, a

duty arose on the part of the employer ... to do nothing which would deprive

plaintiff, the employee, of the benefits of the employment bargain—benefits
described in the complaint as having accrued during plaintiff's 18 years of

employment.

Ill Cal. App. 3d at 455, 168 Cal. Rptr. at 729.

'"In Cleary the employee had worked for the employer continuously for eighteen

years, and he had received several minor promotions. He also had a substantial interest
in retirement benefits which depended on his continued employment. Additionally, the

employee handbook indicated that the employer would discharge employees only for just

cause. Clearly, 111 Cal. App. 3d 443, 168 Cal. Rptr. 722 (1980).
In Pugh the employee had been employed for thirty-two years. He started as a pots-

and-pans washer and had been promoted to vice-president in charge of production. A former
general manager had assured the employee that his future was secure if he did a good

job. The employee also presented evidence that indicated that the employer had fired the

employee because he actively resisted the employer's "sweetheart" deal with a union. 116

Cal. App. 3d 311, 171 Cal. Rptr. 917 (1981).

"^See cases cited supra note 66.

'''See Wagenseller v. Scottsdale Memorial Hosp., 147 Ariz. 370, 710 P.2d 1025

(1985); see also Public Policy Exception, supra note 15.

'''See Palmateer v. International Harvester Co., 85 111. 2d 124, 421 N.E.2d 876 (1981).

Courts and judges disagree whether a particular public policy interest is sufficiently

important. Compare, for example, the majority and dissenting opinions in Palmateer.



566 INDIANA LAW REVIEW [Vol. 21:547

sought to or did exercise a personal right or a public obligation or

refused to commit an unlawful act (2) that arises out of a sufficiently

important public policy interest, and (3) that the employer discharged

the employee (4) because the employee sought to or did exercise the

personal right or public obhgation or refused to do the unlawful act.''^

The abusive discharge''^ cases fall into one of three broad classes.

The first class includes cases where the important public policy interest

is one involving the employee's personal right and where there is either

a connection between the right and the employee's status as an employee''^

or the personal right is so important that it supersedes the employer's

right to discharge an at will employee.''^ The second class includes those

cases where the public policy interest imposes an important pubHc ob-

hgation on the employee that supersedes the employer's right to discharge

an at will employee.''^ In the third class are those cases where the

employer discharged the employee because he refused to perform an

"^C/. Love, Retaliatory Discharge for Filing a Workers' Compensation Claim: The

Development of a Modern Tort Action, 37 Hastings L.J. 551, 566-67 (1986) (the three
elements of the plaintiff's prima facie case are: (1) plaintiff exercised a statutory or

constitutional duty, (2) plaintiff was discharged, and (3) there is a causal link between

the exercise of the right and the discharge).

"^Courts and commentators also use the terms "retaliatory discharge" and "wrongful

discharge." See Harless v. First Nat'l Bank in Fairmont, 289 S.E.2d 692, 694 n.2 (W.

Va. 1982). In this note, "retaliatory discharge" and "abusive discharge" are synonyms

and apply where the employer discharged an employee because the employer wanted to

retaliate against the employee who has exercised a public policy right or obligation. The
term "abusive discharge" emphasizes that the employer has abused his common law right
to terminate the employment. "Wrongful discharge" refers to any discharge for which

the employer is or may be Hable.
'''See Frampton v. Central Ind. Gas Co., 260 Ind. 249, 297 N.E.2d 425 (1973)

(employee fired for filing a worker's compensation claim); accord Kelsay v. Motorola,

Inc., 74 111. 2d 172, 384 N.E.2d 353 (1978); cf. Campbell v. Ford Indus., 266 Or. 479,

513 P.2d 1153 (1973) (plaintiff had no cause of action because there was no connection

between the statutory public policy interest, protection of minority shareholder's interests,

and the plaintiff's status as an employee). See generally Protecting Whistleblowers, supra

note 15, at 803-05.

'''See Cordle v. General Hugh Mercer Corp., 325 S.E.2d 111 (W.Va. 1984) (right
of privacy; employee fired for refusing to take a lie detector test).

'"See Palmateer v. International Harvester Co., 85 111. 2d 124, 421 N.E.2d 876 (1981)

(obligation to report crimes); Nees v. Hocks, 272 Or. 210, 536 P.2d 512 (1975) (obligation

to serve on a jury). But cf Campbell v. Eli Lilly & Co., 413 N.E.2d 1054 (Ind. Ct.
App. 1980), transfer denied 421 Ind. 1099 (1981) (FDA violations). In the following cases
the courts found that the public policy obligation did not supersede the employment-at-

will rule but the courts indicated that some public policy interests might supersede the

rule: Pierce v. Ortho Pharmaceutical Corp., 84 N.J. 58, 417 A.2d 505 (1980) (medical

ethics); Geary v. United States Steel Corp., 456 Pa. 171, 319 A.2d 174 (1974) (product

safety).



1988] WRONGFUL DISCHARGE 567

unlawful actJ^^ In each class of cases, the essence of the employee's

claim is that the employer's motive for discharging the employee was

to thwart an important public policy interest, and the effect of the

discharge, if the courts do not intervene, will be to thwart the public

poHcy interest.

1. Protecting the Employee's Personal Rights.—Frampton v. Central
Indiana Gas Co.^^^ is typical of cases in the first class. In Frampton

the discharged employee alleged that the employer discharged her because

she had filed a workers' compensation claim. The court reviewed the

purpose of the workers' compensation statutes and noted that a fun-

damental purpose of the legislation is to avoid the difficulties employees

encountered at common law in actions to recover damages for job related
injuries. ^22 The court found that '*[t]he basic policy behind such legislation

is to shift the economic burden for employment connected injuries from

the employee to the employer, "'^^ and that the statutes give the employee

a right to receive compensation for those injuries and obligate the

employer to pay for them.^^"* In order to effect the legislative policies,

the court reasoned:

[T]he employee must be able to exercise his right in an unfettered

fashion without being subject to reprisal. If employers are per-

mitted to penalize employees for filing workmen's compensation

claims, a most important pubUc policy will be undermined. The

fear of being discharged would have a deleterious effect on the

exercise of a statutory right. Employees will not file claims for

justly deserved compensation—opting, instead, to continue their
employment without incident. The end result, of course, is that

the employer is effectively relieved of his obligation. '^^

The court found that this particular discharge was the kind of "device"

the statute prohibited^^^ and reasoned that refusing to recognize the

'^°See Tameny v. Atlantic Richfield Co., 27 Cal. 3d 167, 610 P.2d 1330, 164 Cal.
Rptr. 839 (1980) (price fixing); McClanahan v. Remington Freight Lines, Inc., 517 N.E.2d

390 (Ind. 1988) (truck weight limits).

'2'260 Ind. 249, 297 N.E.2d 425 (1973).
'"/£/. at 251-52, 297 N.E.2d at 427.

'"M at 252, 297 N.E.2d at 427.

'^'Id. at 252-53, 297 N.E.2d at 427.
i26<«\Ye believe the threat of discharge to be a 'device' within the framework of the

[statute], and hence, in clear contravention of public policy." Id. at 252, 297 N.E.2d at

428. The statute provided, "No contract or agreement, ... no rule, regulation, or other
device shall, in any manner, operate to relieve any employer ... of any obligation created

by this act." Ind. Code § 22-3-2-15 (1971) quoted in Frampton, 260 Ind. at 252, 297
N.E.2d at 427-28.



568 INDIANA LAW REVIEW [Vol. 21:547

employee's claim would not only discourage employees from asserting

their rights but would also permit "coercion and other duress-provoking

acts" on the part of some employers. '^^

There are two major themes in Frampton. First, some public policy

interests supersede the employment at will rule: "[W]hen an employee

is discharged solely for exercising a statutorily conferred right an exception

to the [employment at will rule] must be recognized. "'^^ Second, an

employer abuses his right to discharge at will employees if he uses such

right to discharge in a way that thwarts those public policy interests:
"If employers are permitted to penalize employees for filing workmen's

compensation claims, a most important public policy will be under-

mined."'29

These themes are typical in abusive discharge cases. Several other

courts have echoed these themes and have held that despite the em-

ployment at will rule, an employer does not have the right to fire an

employee because he files a workers' compensation claim. '^^ Other courts

have recognized a discharged employee's cause of action where the

employee alleged that he had been discharged because he asked to be

transferred from a job that he believed was hazardous or unhealthful,^^'

because the employee refused to take a polygraph test,^^^ and because

the employee filed a personal injury claim against the employer.'"

2. Protecting Public Obligations.—In Nees v. Hocks, ^^"^ the Oregon
Supreme Court held that an employer was liable in tort because he

discharged an employee who agreed to serve on a jury after the employer
had instructed her to avoid jury duty.'^^ According to the Nees

'^^260 Ind. at 252, 297 N.E.2d at 428.

2«M at 253, 297 N.E.2d at 428.
'^^M at 251, 297 N.E.2d 427; cf. NLRB v. Jones & Laughlin Steel Corp., 301 U.S.

1, 45-46 (1937) ("The [National Labor Relations] Act does not interfere with the normal

exercise of the right of the employers to select its employees or to discharge them. The

employer may not, under cover of that right, intimidate or coerce its employees . . . .").

"«See Kelsay v. Motorola, Inc., 74 111. 2d 172, 384 N.E.2d 353 (1978); Murphy v.

City of Topeka-Shawnee Labor Servs., 6 Kan. App. 488, 630 P.2d 186 (1981); Firestone

Tire & Rubber Co. v. Meadows, 666 S.W.2d 730 (Ky. 1983); Sventko v. Kroger Co., 69
Mich. App. 644, 265 N.W.2d 385 (1978); Hansen v. Harrah's, 100 Nev. 60, 675 P.2d
394 (1984); Lally v. Copygraphics, 85 N.J. 668, 428 A.2d 1317 (1981); Brown v. Transcom

Lines, 284 Or. 597, 588 P.2d 1087 (1978); Clanton v. Cain-Sloan Co., 677 S.W.2d 441

(Tenn. 1984).

'^'Hentzel v. Singer Co., 138 Cal. App. 3d 290, 188 Cal. Rptr. 159 (1982); Wheeler

V. Caterpillar Tractor Co., 108 111. 2d 502, 485 N.E.2d 372 (1985).

•^^Cordle v. General Hugh Mercer Corp., 325 S.E.2d 111 (W. Va. 1984).
'"Smith V. Atlas Off-Shore Boat Serv., Inc., 653 F.2d 1057 (5th Cir. Unit A Aug.

1981).

'^^272 Or. 210, 536 P.2d 512 (1975).

'''Id.



1988] WRONGFUL DISCHARGE 569

court, the question is whether ''there [are] instances in which the em-

ployer's reason or motive for discharging harms or interferes with an

important interest of the community, and, therefore, justifies compen-

sation to the employee? "'^^ The court answered by stating that such
instances do exist and found that the state's constitution and statutes and

the common law of other jurisdictions supported the court's conclusion
that the duty to serve on a jury is one of those important interests. '^^

The court reasoned:

These [authorities] clearly indicate that the jury system and jury

duty are regarded as high on the scale of American institutions

and citizen obligations. If an employer were permitted with

impunity to discharge an employee for fulfilling her obligation

of jury duty, the jury system would be adversely affected. The

will of the community would be thwarted. ^^^

Because the court found that the public policy that created the duty to

serve on a jury supersedes the pubhc pohcy embodied in the employment

at will rule, the court affirmed the trial court's judgment that the employer

was liable in tort.'^^

Using similar reasoning, the Supreme Court of Appeals of West

Virginia held that a discharged employee stated a cause of action in

tort by alleging that he was discharged because he reported the employer's

violations of state and federal consumer credit statutes.'"^ In Harless v.

First National Bank in Fairmont^"^^ the court said:

We conceive that the rule giving the employer the absolute right
to discharge an at will employee must be tempered by the further

principle that where the employer's motivation for the discharge

contravenes some substantial public policy principle, then the

employer may be liable to the employee for damages occasioned
by the discharge. ^^^

In Romack v. Public Service Co. of Indiana, ^"^^ the Indiana Supreme
Court held that an employee who was hired as the Operation Security

''"Id. at 216, 536 P.2d at 515.

'''Nees, 212 Or. 210, 536 P.2d 512.

'3«/c?. at 219, 536 P.2d at 516.

"Wee^, 272 Or, 210, 536 P. 2d 512. The court reversed the trial court's punitive

damages award. Id.

'^°Harless v. First Nat'l Bank in Fairmont, 246 S.E.2d 270 (W. Va. 1978).
"*'246 S.E.2d 270 (W. Va. 1978).

'^^Id. at 275 (footnote omitted).

'^^511 N.E.2d 1024 (Ind. 1987), affg in part and rev'g in part, 499 N.E.2d 768, 776

(Ind. Ct. App. 1986) (adopting the dissenting opinion of J. Conover from the appellate

court decision urging modification of prior case law on issue of breach of employment

contract).



570 INDIANA LAW REVIEW [Vol. 21:547

Manager at a nuclear power plant construction site could sue his employer

who fired him because he refused to ignore safety problems. '"^ In Romack
the court found that the public policy in the Atomic Energy Act^"^^

justified the cause of action. '"^^

5. Protecting the Public Interest in Discouraging Unlawful Acts.—
In Tameny v. Atlantic Richfield Co.,^"^^ the discharged employee alleged
that he was discharged because he refused to participate in the employer's

gasoline price fixing scheme. In Tameny, the Supreme Court of California

stated, '*To hold that one's continued employment could be made con-
tingent upon his commission of a felonious act at the instance of his

employer would be to encourage criminal conduct upon the part of both
the employee and the employer and serve to contaminate the honest

administration of pubhc affairs.'"'"*^ Therefore, the court concluded,

"[F]undamental principles of public poHcy and adherence to the objectives

underlying the state's penal statutes require the recognition of a rule

barring an employer from discharging an employee who has simply
complied with his legal duty and has refused to commit an illegal act."'"*^

In McClanahan v. Remington Freight Lines, Inc.,^^° the Indiana
Supreme Court expressly stated no state "statute states that public policy

is violated by committing an illegal act or requiring an employee to do

so at the risk of his job . . . ."'^^ However, the court held that a former

truck driver who alleged that he was fired because he refused to drive
across another state in violation of that state's weight limit laws stated

a cause of action.*" It reasoned:

Depriving tthe employee] of any legal recourse under these

circumstances would encourage criminal conduct by both the

employee and the employer. Employees faced with the choice

of losing their jobs or committing an illegal act for which they

might not be caught would feel pressure to break the law simply

out of financial necessity. Employers, knowing the employee's

'^511 N.E.2d at 1026, adopting dissenting opinion in 499 N.E.2d at 779-80.
•^'42 U.S.C. §§ 2011-84 (1982).

'^Romack, 511 N.E.2d at 1026 adopting dissenting opinion in 499 N.E.2d at 779-

80. See supra note 144.

'^^27 Cal. 3d 167, 610 P.2d 1330, 164 Cal. Rptr. 839 (1980).

'^»M at 173, 610 P.2d at 1333, 164 Cal. Rptr. at 842, (quoting Petermann v.

International Bhd. of Teamsters, Local 396, 174 Cal. App. 2d 184, 189, 344 P.2d 25,
27 (1959)).

'^^27 Cal. 3d at 174, 610 P.2d at 1333-34, 164 Cal. Rptr. at 843 (footnote omitted).

'5«517 N.E.2d 390 (Ind. 1988).

'''Id. at 393.

'"McClanahan v. Remington Freight Lines, Inc., 517 N.E.2d 390, 392-94 (Ind. 1988).



1988] WRONGFUL DISCHARGE 571

susceptibility to such threats and the absence of civil retribution,

would be prompted to present such an ultimatum.'"

IV. Remedies for an Employee Wrongfully Discharged from
Employment Having an Indefinite Duration.

A. Contract Remedies

L Damages.—Generally, contract law protects the promisee's interest
in the benefit of the promisor's broken promise; courts usually allow

the promisee to recover damages measured by his expectation interest,

that is, the actual benefit the promisee would have received had the

promisor fully performed the promise. '^"^ Courts often allow the promisor

to show that the promisee avoided, or could have avoided, some of the
harm he suffered as a result of the breach. '^^ Thus the promisee's damages
award is usually his expectation interest minus the loss he avoided or

could have avoided. '^^

Damages for an employer's breach of an employment contract follows
this same general pattern. In most states, when an employer breaches
an employment contract that has a definite duration, the wronged em-

ployee is entitled to receive damages measured by the value of the

unfulfilled portion of the contract minus the amount the employee
received or could have received from substitute employment. '^"^ In most

states, substitute employment is any employment the wrongfully dis-

charged employee actually accepts or, if the employee has not accepted

other employment, substitute employment is defined as any available

employment with similar conditions and rank and in the same locality

as the employment from which the employee was wrongfully discharged. '^^

The employee should also be allowed a credit for his reasonable expenses

incurred in finding, or attempting to find, substitute employment. '^^ Thus

the employee's damages is the value of the unfulfilled portion of the

contract minus what the employee earned or could have earned from

substitute employment plus the employee's reasonable expenses in finding

or attempting to find a new job.

'''Id. at 393.

"^''Restatement (Second) of Contracts § 347 (1979).
'^'Id. § 350. See generally Dobbs, supra note 19, § 3.7.

'^^See generally Farnsworth, Contracts § 12.9 (1982).

'"Dobbs, supra note 19, § 12.25.

'''Id. § 12.25.

'5^C. McCoRMiCK, Handbook on the Law of Damages § 163, at 636 (1935); cf.
Smith V. Atlas Off-Shore Boat Serv., Inc., 653 F.2d 1057 (5th Cir. Unit A Aug. 1981)
(tort action).



572 INDIANA LAW REVIEW [Vol. 21:547

If the employment agreement has a definite duration, determining

the value of the unfulfilled portion of the contract is relatively simple.

It is only necessary to determine the amount of time remaining on the

contract and the rate at which the employee would have been paid and

would have received other benefits had the employer not breached the

contract. ^^° Even if the rate of pay and benefits depends, for example,

on future profits or sales rather than being fixed, there are usually some

concrete facts from which the jury can calculate the value of the un-

fulfilled portion of the contract. In any event, the duration of the

contract limits the contract's value.

If the court enforces an employer's promise not to discharge the

employee without good cause and if the employment was for an indefinite

period, there is no such limit on the employee's damages award. By its
terms the contract will continue until the employee quits, retires, or

dies, or until the employer discharges the employee for good cause. In

order to determine the unfulfilled portion of the contract, the jury must

determine the earliest time that one of these events would have occurred

had the employer not breached the contract. In addition, the jury must

determine the rate of pay and the value of other benefits the employee

would have received during this period.

The employee need not present mathematically precise evidence on
either of these issues as long as the employee does present evidence to

support the jury's award. '^^ The employee's past employment history,

his age, his prospects for promotion, his stake in retirement benefits

that depend upon continued employment and other factors may provide
an adequate basis for an award. Perhaps the employee can show that

but for the employer's breach the employee would have received pay

raises or would have been promoted. ^^^

Although courts should allow an employer to show that the employee

could have obtained substitute employment, it may not be clear what
"substitute employment" means when the employer has discharged an
employee from employment offering both job security and an indefinite

duration. If substitute employment is defined as employment with similar

'^DoBBS, supra note 19, § 12.25. It is not always easy to determine the remaining

unfulfilled period. In Dixie Glass Co. v. Pollak, 341 S.W.2d 530 (Tex. Civ. App. 1960),

aff'd per curiam 162 Tex. 440, 347 S.W.2d 596 (1961), the court held that it was proper

for the trial court to allow the jury to find that the wrongfully discharged employee

would have exercised options to renew his employment contract for additional definite

periods.

'*' Restatement (Second) of Contracts § 352 comment a (1981).

'^^Cf. Coins V. Ford Motor Co., 131 Mich. App. 185, 347 N.W.2d 184 (1983) (abusive
discharge tort action).



1988] WRONGFUL DISCHARGE 573

conditions, is an at will job substitute employment? •" If it is, should

the courts allow the employee to show that his new employer may
discharge him long before the unfulfilled period of the original em-

ployment would have expired? '^"^

If the court decides that at will employment is not substitute em-

ployment, then the law gives the wrongfully discharged employee no

incentive to accept at will employment, ^^^ thus encouraging social and

economic waste. '^^ The courts should, therefore, decide that the defen-

dant-employer may show that acceptable at will employment was available
to the discharged employee; the court would then allow a reduction of

employee's damages by the amount that the employer shows the employee

could have earned from the at will employment. On the other hand,
the wrongfully discharged employee is entitled to the value of the em-

ployer's broken promise of job security. Thus, courts should allow the

employee to show that the value of the at will employment he accepted

or could have accepted is less than the value of the employment the

defendant-employer promised to give. Courts should allow the jury to

discount the value of the at will employment when the jury calculates
the employee's damages. If the employer shows that the employee ac-

cepted or could have accepted at will employment, then the employee's

damages award should be (1) the value of the unfulfilled portion of the

original contract plus (2) the expenses the employee incurred while seeking

other employment minus (3) the value of the other employment the

'"C/. Crabtree v. Elizabeth Arden Sales Corp., 105 N.Y.S.2d 40 (N.Y. Sup. Ct.

1951), affd, 279 A.D. 992, 112 N.Y.S.2d 494 (1952), affd, 305 N.Y. 48, 110 N.E.2d

551 (1953) (plaintiff wrongfully discharged from employment of definite duration permitted

to reject alternate at-will employment, in part, because plaintiff could be discharged from

such employment arbitrarily).

'^The employee may find that he is in a delicate position. In order to prove that
his tenure with the former employer would have been relatively long-lasting but for the

wrongful discharge, the employee will probably emphasize his qualities as a good employee.

If he does this, he may undermine his argument that the substitute employment is likely
to be short Hved, especially if the jury perceives that employers do not, as a rule, arbitrarily

discharge good employees even though the specific employer may do so.
There is some support for the view that an employee cannot reject employment solely

because the employment period is or may be shorter than the unfulfilled portion of the
original employment contract. See generally Annotation, Nature of Alternative Employment

Which Employee Must Accept to Minimize Damages for Wrongful Discharge, 44 A.L.R.3d

629, 653 (1972).

'"As a practical matter, there are probably few wrongfully discharged employees who
have the financial resources to remain unemployed. Financial pressures are more likely

to influence the unemployed, wrongfully discharged employee than are legal pressures.

'^For an article presenting an economic argument against the common law substitute
employment rules because, according to the author, the rules encourage economic waste,

see Harrison, Wrongful Discharge: Toward a More Efficient Remedy. 56 Ind. L.J. 207

(1981).



574 INDIANA LAW REVIEW [Vol. 21:547

employee accepted or should have accepted (4) discounted to account

for the risk that it is less valuable than the unfulfilled portion of the

original employment.

This measure of damages will be appropriate if the court is enforcing

a bargained-for promise of job security as in Weiner or Romack. If the

court is enforcing the promise of job security because the employee

justifiably relied on an unbargained-for promise, then the employee may
not be entitled to such an expansive remedy. There is less reason to

give the promisee his expectation interest when the promise the court
is enforcing is not one that both parties freely bargained for. According

to the Restatement, if the court enforces an unbargained-for promise,

*'[t]he remedy . . . may be limited as justice requires. "^^"^ The Restatement
comment indicates that the same factors creating the employee's right
to a remedy are also important when determining the nature and the
measure of the remedy. ^^^

A full contract remedy may be appropriate if the employee cannot
readily obtain other employment or if he had a significant stake in

benefits that depended upon continued employment in the original job
and induced the employee to rely on the employer's promise of job

security. '^^ In many other cases the employee's loss due to reliance on
the employer's promise is little more than the opportunity or the will

to seek other seemingly less secure employment. In those cases the courts

should hmit damages to the amount the employee lost up to the time

he obtains or could have obtained other suitable employment, whether

it is at will or otherwise, plus the cost of finding the other employment.

The courts should not allow the employee to show that any at will

employment he accepted or could have accepted is less valuable than

the original employment. By the time the employee accepts or coufd
have accepted other comparable employment, even if it is at will em-

ployment, the employee has suffered all the loss he will suffer as a

consequence of his reliance on the employer's promise. '^° In essence.

'^'Restatement (Second) of Contracts § 90 (1979).

'**/c?. comment d.
'^^Compare:

[T]he employee who has enough mobUity to avoid the consequences of his
discharge will also have enough mobility to make him an unlikely target for
oppression by the employer. But where the employee's experience is of special

value only in his present employment or where his advanced age makes it

doubtful that he can readily obtain comparable employment, he is more sus-
ceptible to improper exertion of the employer's power and less likely to succeed
in mitigating damages.

Blades, supra note 15, at 1426.

''°C/. Restatement (Second) of Contracts § 349 (1981) (the promisee's reliance
interest may be a more just measure of damages than is his expectation interest).



1988] WRONGFUL DISCHARGE 575

this measure of damages merely shifts the risks of a low demand for
labor from the employee to the employer. That is all that justice requires

in these cases.

2. Reinstatement.—When courts enforce promises of job security
in employment contracts having no definite duration, damage awards are

likely to be both substantial and inaccurate because they may be based
on imprecise, almost speculative, evidence in order to establish the value

of the promised employment minus the value of the substitute employ-

ment. Therefore, the courts reconsider their traditional dislike for specific

performance—reinstatement—and give thought to it as a remedy for an
employer's breach of an employment contract. If, as some believe, juries

may favor the wrongfully discharged employee,*^' then damages are not
only likely to be imprecise but also substantial.'"^^ Of course, the damages
award may also be too small. That damages cannot be measured with
a reasonable degree of accuracy is one reason for the courts to grant

an equitable remedy such as reinstatement. '^^

Courts probably have refused to order reinstatement'^"* because they

did not want to supervise a long term relationship that depends upon

cooperation between hostile parties. '"^^ In addition, if the employment

contract has a definite duration and a well defined value, the courts

most likely believe that damages are adequate, or at least are not so

inadequate that the court ought to become entangled in the parties'

relationship. Even if that view is correct, it is far less correct if the

employment contract has no definite duration. Damages may not be
adequate. There is a substantial risk that courts will either under-com-

pensate or over-compensate the employee, and once the court determines

that the employer is liable, both the employer and the employee may
prefer reinstatement over the risk that the jury will award damages that

are either too high or too low. Even if the court has additur and

remittitur authority, some risk remains. The employee might also prefer

reinstatement over damages because other employers may be reluctant

'^'"[Tjhere is the danger that the average jury will identify with, and therefore believe,

the employee." Blades, supra note 15, at 1428.

'"5^6 Brewster v. Martin Marietta Aluminum Sales, Inc., 145 Mich. App. 641, 378
N.W.2d 558 (1985) (economic damages for breach of an employment contract $750,000);
see also McGrath v. Zenith Radio Corp., 651 F.2d 458 (7th Cir. 1981) (jury verdict of

$1,000,000 not supported by the evidence).

'^^See DoBBS, supra note 19, § 2.5, at 57-58.

''""Reinstatement" in this note means ordering the employer to return the wrongfully

discharged employee to the same or similar employment from which the employee was

discharged and ordering the employer to pay backpay and restore the employee's benefits

and seniority, if any.

'"See DoBBS, supra note 19, § 12.25, at 929-31; Restatement (Second) of Contracts

§ 367 comment b (1981).



576 INDIANA LAW REVIEW [Vol. 21:547

to hire a "trouble-maker" who is suing his former employer. ^^^ The
employer might also prefer reinstatement; at least the employer will

receive the benefit of the services that the court will otherwise force

him to pay. Finally, society will benefit if reinstatement avoids social

and economic waste. '^^

That reinstatement will not work in many, or even most, cases is

no reason to refuse to grant it in every case. Statutes often include

reinstatement with backpay as a remedy for wrongful discharge, ^^^ and

the courts enforce the remedy. '^^ There is no reason to believe that

reinstatement will be more difficult to administer and enforce if it is a

contract remedy than it is if it is a statutory remedy. The courts can

apply the same standards in either case.

If a statute gives courts the discretionary authority to reinstate an

employee, the courts often focus on two factors: (1) the Ukelihood that

the parties will cooperate and (2) the degree of trust and cooperation

the job requires. ^^° Any hostile feelings between the parties is significant
even if no objective basis exists for those feelings. ^^' That the feelings

exist at all is reason to doubt that the parties will cooperate. On the
other hand, not all jobs require cooperation, trust, or close supervision, ^^^

and the situation itself may induce the parties to attempt to cooperate.
An employee who seeks reinstatement probably prefers the job from
which he was discharged over vengeance. Prudent, self-interested em-

ployers may decide that cooperation is better than lost profits. Rein-

""Cf. Wiskotoni v. Michigan Nat'l Bank-West, 716 F.2d 378 (6th Cir. 1983) (discharged

employee unable to find work in the banking industry after employer wrongfully discharged

him from his position in a bank).

"''Cf. DeFranco, Modification of the Employee At Will Doctrine—Balancing Judicial
Development of the Common Law with the Legislative Prerogative to Declare Public
Policy, St. Louis U.L.J. 65, 85 (1985) stating: "[T]he remedy of reinstatement, although

difficult to implement in many situations if a union is not available to oversee imple-
mentation and protect the worker against harassment, nevertheless prevents the employee

from obtaining a 'windfall' by getting paid for work never performed." (footnotes omitted).

Reinstatement is sometimes an ineffective remedy under the National Labor Relations

Act. See Chaney, The Reinstatement Remedy Revisited, 32 Lab. L.J. 357 (1981). According
to Chaney, nearly 90% of the employees in his study who were awarded reinstatement
for the employer's violation of section 8(a)(3) of the National Labor Relations Act had

left within one year. Id. at 360. According to Chaney, one of the reasons the remedy is

not effective is that the NLRB does not effectively enforce its reinstatement orders. Id.
at 363-64.

^''^See, e.g., Ind. Code § 34-4-29-1 (1982) (employee discharged because he served
on a jury may bring a civil action for reinstatement, lost wages, and attorney's fees).

'^^S^e Restatement (Second) of Contracts § 367 comment b (1981); Dobbs, supra
note 19, § 12.25, at 929-31.

''°See, e.g.. Combs v. Griffin Television, Inc., 421 F. Supp. 841 (W.D. Okla.
•«'/d/. at 846.

'^^DoBBS, supra note 19 § 12.25.



1988] WRONGFUL DISCHARGE 577

Statement will be an effective remedy in some cases; in those cases the

courts ought to allow the employee to have that remedy. If the court

finds that enforcing the remedy is too difficult in particular cases, the

court can always dissolve the order and grant damages. In cases where

one party has been particularly uncooperative, the court might reduce

or increase the award.

B. An Employee's Tort Remedies for Abusive Discharge

1. A Survey of the Cases.—In his treatise on damages, Professor
McCormick said this about abuse of process awards: "[T]he courts will
give compensation, within limits not yet definable. "'^^ We can say the
same about abusive discharge awards. The courts have approved com-

pensatory damages awards as small as a few hundred dollars and as

large as several hundred thousand dollars. '^"^

Because courts have been concerned primarily with substantive issues,

there are relatively few opinions deahng with remedies issues. Those

courts that have dealt with remedies issues generally agree that economic

harm, such as lost wages, is a proper element of the plaintiff's measure

of damages, '^^ but they do not agree whether emotional harm, loss of

reputation, or humiUation are proper elements, '^^ and they do not agree

whether to allow punitive damages. ^^^

In Smith v. Atlas Off-Shore Boat Service, Inc.^^^ the Fifth Circuit
Court of Appeals characterized abusive discharge "as an intentional tort,

entitling the [plaintiff] to compensatory damages . . . including the [plain-

tiff's] expenses of finding new employment, lost earnings while the
[plaintiff] seeks another position, and lost future earnings. ... In ad-

dition to these economic losses, the [plaintiff] may be entitled to recover

'"McCormick, supra note 159, § 109, at 384.

'^'Compare Kelsay v. Motorola, Inc., 74 I11.2d 172, 384 N.E.2d 353 (1978) ($749)

and Nees v. Hocks, 272 Or. 210, 536 P.2d 512 (1975) ($650) with Coins v. Ford Motor

Co., 131 Mich. App. 185, 347 N.W.2d 184 (1983) ($270,000).
'^'See Smith v. Atlas Off-Shore Boat Serv., Inc., 653 F.2d 1057 (5th Cir. Unit A

Aug. 1981); Kelsay v. Motorola, Inc., 74 111. 2d 172, 384 N.E.2d 353 (1978); Moniodis

V. Cook, 64 Md. App. 1, 494 A.2d 212, cert, denied, 304 Md. 631, 500 A.2d 649 (1985);
Coins V. Ford Motor Co., 131 Mich. App. 185, 347 N.W.2d 184 (1983); Vigil v. Arzola,
102 N.M. 682, 699 P.2d 613 (Ct. App. 1983), modified on other issue, 101 N.M. 687,
687 P.2d 1038 (1984); Nees v. Hocks, 272 Or. 210, 536 P. 2d 512 (1975).

'^"Compare Smith v. Atlas Off-Shore Boat Serv., Inc., 653 F.2d 1057 (5th Cir. Unit

A Aug., 1981) (emotional loss is a proper element of damages) with Vigil v. Arzola, 102
N.M. 682, 699 P.2d 613 (N.M. Ct. App. 1983), modified on other issue, 101 N.M. 687,
687 P. 2d 1038 (1984) (emotional loss is not a proper element of damages).

^^''Compare Vigil, 102 N.M. 682, 699 P. 2d 613 (punitive damages permitted) with
Smith V. Atlas Off-Shore Boat Serv., Inc., 653 F.2d 1057 (punitive damages not permitted).

'%53 F.2d 1057 (5th Cir. Unit A Aug. 1981).



578 INDIANA LAW REVIEW [Vol. 21:547

compensatory damages for mental anguish . . . ."'^^ Because the court

determined that a punitive damage award would unduly restrict an

employer's ability to operate his business, it held that the plaintiff could

not recover punitive damages. '^^

In Harless v. First National Bank in Fairmont, ^'^^ the West Virginia
Supreme Court of Appeals held that a discharged employee could recover

damages for emotional harm by showing that he was unable to eat or sleep

and that he became depressed and withdrawn as a result of the wrongful

discharge. ^^2 The court reasoned ''that the tort of retaliatory discharge

carries with it a sufficient indicia of intent" to justify including emotional

harm as an element of the plaintiff's damages. '^^ The court also indicated

that the employee may recover punitive damages if "the employer's
conduct is wanton, willful or malicious." ^^'^ The plaintiff does not have

an automatic right to receive punitive damages; '^^ instead, "the plaintiff

must prove further egregious conduct on the part of the employer. "^^^

The court indicated that punitive damages will be proper "where the

employer circulates false or malicious rumors about the employee before

or after the discharge or engages in a concerted action of harassment

to induce the employee to quit or actively interferes with the employee's

ability to find other employment. "'^^

In Vigil V. Arzola,^^^ the Court of Appeals of New Mexico declared
that the objective of the tort is to encourage job security and said,

"[T]he damages might include lost wages while unemployed, the cost

and inconvenience of searching for a new job, moving costs for relocating,
and possible punitive damages. . . . [I]n order to prevent any chilling

effect on the employer's freedom in hiring . . . mental suffering and

similar damages of a non-pecuniary nature will not be allowed. "'^^

In Wiskotoni v. Michigan National Bank-West,^^ the Sixth Circuit

Court of Appeals applied Michigan law and held that generally the

'«^Id. at 1064.

'^'289 S.E.2d 692 (W. Va. 1982).

'"'Id. at 702; see also Perry v. Hartz Mountain Corp., 537 F. Supp. 1387 (S.D. Ind.

1982) (damages for emotional loss are permitted in Indiana if a legal right is invaded in

a way that provokes emotional disturbance even if there is no physical injury; damages
for emotional harm are appropriate in abusive discharge cases).

'"'Harless, 289 S.E.2d at 703.

'"'Id.

'""•Id.

'"'Id. n.l9.

'"nOl N.M. 682, 699 P.2d 613 (N.M. Ct. App. 1983), modified on other issue, 101
N.M. 687, P. 2d 1038 (1984).

'""Id. at 689, 699 P. 2d at 620-21.

^««716 F.2d 378 (6th Cir. 1983).



1988] WRONGFUL DISCHARGE 579

employee may recover damages for emotional harm; however, if the
employee presents no "specific and definite evidence of his own mental
anguish, anxiety or distress," he cannot, as a matter of law, recover

damages for emotional harm.^^' The court also held that the employee

presents sufficient evidence to justify an award for loss of reputation

if he shows that because of the discharge he was unable to find work

in his field. 202

Several courts that have recognized an action in abusive discharge

have stated that punitive damages may be proper in such cases, but
have refused to approve an award for punitive damages when the case
before the court was the first case in which the court had recognized

the cause of action. ^^^ These courts reasoned that it would be improper

to grant punitive damages because the defendant could not have antic-

ipated that he would be liable for discharging the employee. The courts
relied on this rationale in both Nees v. Hocks^^^ and in Kelsay v.

Motorola, Inc.^^^ Although the Kelsay court refused to approve the

punitive damages award in the case then before it, the court indicated

that generally the plaintiff would be able to recover punitive damages:

In the absence of the deterrent effect of punitive damages

there would be little to dissuade an employer from engaging in

the practice of discharging an employee for fihng a workmen's

compensation claim. For example in this case, the plaintiff was

entitled to only $749 compensatory damages .... The imposition

on the employer of the small additional obligation to pay a

wrongfully discharged employee compensation would do little to

discourage the practice of retaliatory discharge, which mocks the

public policy of this state . . . .^^^

2. Compensatory Damages.—It is easy to state that the primary
purpose of compensatory damages in tort is to provide a monetary award

that will restore the plaintiff to a position that is substantially equivalent

to the position he enjoyed immediately before the defendant committed

^o'/of. at 389.

^°^Id. at 390.

^''See Kelsay v. Motorola, Inc., 74 111. 2d 172, 384 N.E.2d 353 (1978); Murphy v.
City of Topeka-Shawnee County Dep't of Labor Servs., 6 Kan. App. 2d 488, 630 P.2d

186 (1984); Hansen v. Harrah's, 100 Nev. 60, 675 P.2d 394 (1984); Vigil v. Arzola, 102

N.M. 682, 699 P.2d 613 (N.M. Ct. App. 1983), modified on other issue, 101 N.M. 687,
687 P.2d 1038 (1984); Nees v. Hocks, 272 Or. 210, 536 P.2d 512 (1975); Clanton v.

Cain-Sloan Co., 677 S.W.2d 441 (Tenn. 1984).
^'^272 Or. 210, 536 P.2d 512 (1975).
^"'74 111. 2d 172, 384 N.E.2d 353 (1978).

^'^Id. at 186-87, 384 N.E.2d at 359.



580 INDIANA LAW REVIEW [Vol. 21:547

the tort.^^^ It is much more difficult to give those words concrete meaning
particularly when the harm the plaintiff suffers is not economic. The
new^ contract exceptions to the traditional employment at will rule rec-

ognize and protect an employee's legally protected interest in his job.

For the most part the harm the wrongfully discharged employee suffers

is the economic value of his lost job. The discharged employee who
prevails on one of these contract theories is not an at will employee;

the law recognizes that he has a legally protected interest in his job.

On the other hand, the public policy tort exception to the rule does
not provide legal protection for the employee's interest in job security

as such; it protects other interests. The tort is an exception to the rule

only in the sense that an employer may be liable for discharging an at
will employee. The employee remains an at will employee who has no
legally protected interest in his job.^^ Some courts have recognized that
the employee does not have a legally protected interest in his job; some

of these courts have reasoned that, therefore, the employee has suffered

little or no harm.^^^ These courts have confused substantive issues with

remedies issue^^ and have failed to identify the interests the tort remedy

seeks to protect.

In order to properly analyze the remedies problems, one must first

distinguish "injury" from "harm." According to the Restatement, an

"injury" is "the invasion of any legally protected interest of another. "^'^

Substantive tort law protects an interest if it is of such social importance

that "imposing hability on those who thwart its realization" is justified.^'

•

To say that the defendant has injured the plaintiff is to assert both that
the plaintiff has a substantive right and that he is entitled to a remedy.

"Harm" is "the existence of loss or detriment in fact of any kind
to a person resulting from any cause. "^^^ It includes "impair[ment of

one's] physical, emotional, or aesthetic well-being, his pecuniary advan-

tage, his intangible rights, his reputation, or his other legally recognized

interests. "^'^ Unless the plaintiff suffers an injury, he is not entitled to

a remedy for the harm he suffers;^'"^ however, if the defendant causes
an injury—an invasion of a legally protected interest—then harm has

^"^Restatement (Second) of Torts § 901 comment a (1977).
208Because tort liability exists apart from contract, the tort may also protect employees

other than at will employees. See Prosser & Keeton, supra note 22, § 92, at 656-57.
"^See, e.g., Martin v. Piatt, 179 Ind. App. 688, 692-93, 386 N.E.2d 1026, 1028

(1979) (because the employer could have discharged the employee at any time the employee

could suffer no more than nominal damages).

2'°Restatement (Second) of Torts § 7(1) (1964).

^"M § 1 comment a.
^'^Id. § 7(2).

^^^Id. comment b. _^
^'"/c?. comment d.



1988] WRONGFUL DISCHARGE 581

legal significance. The plaintiff's measure of damages depends, in part,

upon the amount of harm the defendant caused.^^^ If the defendant

injures the plaintiff, the plaintiff may receive damages for harm he
suffers even if the harm suffered would not independently amount to

a legal injury. For example, states recognizing intentional or neghgent

infliction of emotional distress as an independent tort only in limited

circumstances will nevertheless permit the plaintiff to recover for emo-

tional harm in many circumstances.^'^
Even if the plaintiff suffers a legal injury that results in harm,

determining the plaintiff's damages is not simply a matter of measuring

and valuing the amount of harm. The plaintiff's damages will also

depend upon what are essentially legal policy issues.^'^ These policy issues

determine whether the defendant is liable and, if he is, the extent of

the plaintiff's measure of damages, that is, the kinds of harms the court

will allow the jury to consider when it calculates the plaintiff's damages.

One way the courts limit the plaintiff's damages is through the concept
of proximate cause. The rule that the defendant will be liable only for

the harm his tort proximately causes often merely states a legal policy

conclusion that the court will allow the plaintiff to recover damages for

certain kinds of harms but not for others. ^'^ How far the courts will
go depends primarily upon two factors: (1) how culpable the defendant
is and (2) the nature of the legally protected interest. Courts are more

likely to expand the plaintiff's measure of damages if the defendant

committed an intentional tort rather than if the defendant was merely

negligent. 219 One almost intuitively expects that courts will be more likely
to allow the plaintiff a broader measure of damages for redress of an

invasion of a personal interest than for redress of an invasion of a

property interest. ^^^

An at will employee certainly has an interest in job security, but
he does not have a legally protected interest in job security. The tort

of abusive discharge does not protect that interest. Instead, the tort

protects important public policy interests: 'The foundation of the tort

^'^M § 903. Not all harms suffered by the plaintiff are elements of his measure of

damages. The plaintiff must also show that the defendant's tortious conduct was the cause
in fact of the harm. In addition, rules concerning certainty of proof of damages and the

concept of proximate cause also limit the plaintiff's recovery. See Dobbs, supra note 19,

§ 3.3; see also McCormick, supra note 159, § 72, at 260 (discussing the limiting effect
of proximate cause).

^^^See generally Prosser & Keeton, supra note 22, § 12.
^''See Dobbs, supra note 19, § 3.3, at 157 & n.36.
2'^Prosser & Keeton, supra note 22, § 42, at 274-75.
^^"^See Dobbs, supra note 19, § 6.4, at 461.

^^°Cf. Dobbs, supra note 19, § 3.2, at 142 (stating that one function of general

damages rules is to conform to substantive policy).



582 INDIANA LAW REVIEW [Vol. 21:547

of retaliatory discharge lies in the protection of pubHc policy. "^^^ The

courts recognize the cause of action because allowing an employer to

discharge an employee without being liable for doing so would jeopardize

an important public pohcy interest. ^^^

The employer is not liable because he discharged an at will employee;

he is liable because the discharge was the means by which the employer

committed the tort.^^^ The discharge is merely the means by which the

employer interferes with the workers' compensation statutes, the penal

statutes, an employee's obligation to serve on a jury, the duty to report

nuclear safety violations, or any one of a number of other important

public pohcy interests.

In addition to the important public policy interests that the tort of

abusive discharge protects, the courts ought to consider the policies

implicit in the employment at will rule: the belief that an employer

should have considerable freedom to make business judgments and to
select and retain his employees. Society has an interest in productivity

as well as in protecting its public pohcy interests. If the plaintiff's

measure of damages is too large, the courts may hamper an employer's
legitimate hiring and firing decisions. Consequently, an employer may
decide not to discharge an unproductive employee. If the measure of

damages is too small, the tort will not adequately protect the important

public pohcy interests.

Abusive discharge is an intentional tort.^^"^ In order to establish a

prima facie case, the employee must show that the employer desired to

interfere with an important public policy interest or that the employer

believed that it was substantially certain that his conduct would interfere

22>Palmateer v. International Harvester Co., 85 111. 2d 124, 133, 421 N.E.2d 876, 880

(1981).

^^^See supra text accompanying notes 113-154. Courts often emphasize the significance

of the pubhc policy interest at stake. See Wagenseller v. Scottsdale Memorial Hosp., 147

Ariz. 370, 380, 710 P.2d 1025, 1035 (1985) ("important public policy interests embodied

in the law"); Palmateer v. International Harvester Co., 85 111. 2d 124, 134, 421 N.E.2d

876, 881 (1981) ("clearly mandated public policy"); Hansen v. Harrah's, 100 Nev. 60, 63,

675 P.2d 394, 396 (1984) ("strong public policy"); see also Blackburn, Restricted Employer

Discharge Rights: A Changing Concept of Employment at Will, 17 Am. Bus. L.J. 467,
479 (1980) ("In Nees and Sventko the courts protected the underlying activity for which

the employee was discharged. The jury system and the workmen's compensation system

were the legislatively expressed social interests to be protected, not society's interest in a

stable economy.").

^^^C/. Agis V. Howard Johnson Co., 371 Mass. 140, 355 N.E.2d 315 (1976) (court
sustained discharged employee's action for intentional infliction of emotional distress when
the employer, suspecting that an unidentified employee was stealing, threatened to and

did fire employees in alphabetical order because the thief did not confess).

^"^See Smith v. Atlas Off-Shore Boat Serv., Inc., 653 F.2d 1057 (5th Cir. Unit A
Aug. 1981); Frampton v. Central Ind. Gas Co., 260 Ind. 249, 297 N.E.2d 425 (1973).



1988] WRONGFUL DISCHARGE 583

with the pubUc pohcy interest. ^^^ An employer who has committed abusive
discharge is in no position to complain that a damages award might

interfere with his legitimate business decisions. Courts should not be too

concerned that a substantial damages remedy will interfere with the

employer's right to discharge at will employees. The employer's right

to discharge at will employees is not the issue; it is the employer's abuse

of that right. ^^^ The courts should interfere with that kind of conduct

and should provide the injured employee with a substantial remedy so

that he is "fully compensated in damages. "^^^

If the courts allow the plaintiff to recover substantial compensatory

damages, certainly some innocent employers might be affected. That an

at will employee can now allege an action at all increases the chances
that a discharged employee will sue. It also decreases the chances that

the employer will win at the pleadings stage. Consequently, an employer,

who fears a lawsuit may decide not to fire an unproductive employee.
Courts may also be tempted to sharply limit the plaintiff's measure of
damages. The courts should avoid this temptation; the proper way to
screen meritless claims and to protect innocent defendants is through

the use of substantive law, not through the law of remedies. Any time
the law recognizes a cause of action there is some risk that plaintiffs

will file frivolous lawsuits and that an innocent defendant will lose.^^^

This is part of the price paid for living in an organized society. Legal

truth is not always the same as absolute truth. That some innocent

employers may be liable is a poor reason to limit an abusively discharged
employee's damages. It is, however, a good reason for the courts to

define the tort of abusive discharge as precisely as possible and to

recognize the cause of action only when the important public policy

^^^"Intent" is defined as "denot[ing] that the actor desires to cause the consequences

of his act, or that he believes that the consequences are substantially certain to result

from it." Restatement (Second) of Torts § 8A (1964).
^^^Sorne commentators have noted some general similarities between abuse of process

and abusive discharge:

[I]t thus appears that there are some situations in which a tort will be committed

by the unjustifiable use of legal and economic pressure to accomplish a collateral

objective necessarily involving harm to others. . . . [Courts have] begun to limit

the right of employers to discharge employees at will . . . where the exercise

of [the employer's] traditional rights is contaminated by motives that are strongly

inconsistent with public pohcy.

1 Harper, James & Gray, The Law of Torts § 4.9, at 484-86 (2d ed. 1986). "Just as
the use of legal processes as a means of extortion gives rise to a damage remedy, so too
should the oppressive use of the right of discharge." Blades, supra note 15, at 1424.

^^Trampton v. Central Ind. Gas Co., 260 Ind. 249, 253, 297 N.E.2d 425, 428 (1973).

^^«C/. Hinrichs v. Tranquilaire Hosp., 352 So. 2d 1130, 1131 (Ala. 1977) ("The

possible inundation of suits [in abusive discharge] is, of course, no reason to prevent the

redress of a legal wrong.").



584 INDIANA LAW REVIEW [Vol. 21:547

interest at stake outweighs the extra burden on the employer's legitimate

business interests. If the public policy interest is important enough that

the court ought to recognize the employee's cause of action, then it is

important enough to justify a substantial damages award. If the public

policy interest is not that important, the courts should not recognize

the cause of action at all.^^^

A discharged employee may suffer virtually any kind of harm pos-
sible. The loss of employment affects a person economically; moreover,

"deprivation of a job, if more than a casual one, not only affects

usually a man's reputation and prestige, but ordinarily may so shake
his sense of security as to inspire, even in men of firmness, deep fear
and distress. "23° Some discharged employees may suffer emotional trauma
that is almost as severe as the trauma one experiences when a close relative
dies. In some cases the employee's emotional distress may affect his
family. An employee who prevails in an abusive discharge action should
receive substantial damages for harm the employee can show resulted
from the discharge including at least economic harm, emotional harm,

humiliation, and loss of reputation.

3. Punitive Damages.—The primary purposes of punitive damages
are to punish wrongdoers, deter wrongful conduct, and prevent self-

help. ^^^ A punitive damages award takes tort law beyond its primary
purpose by also compensating the injured plaintiff for injuries he has

suffered. 232

One difference between punitive damages and compensatory damages
is the manner in which they are measured. Even though many kinds of
harm for which the courts allow compensatory damages cannot be
measured in terms of money, the purpose of compensatory damages is

to provide a monetary substitute for the harm the plaintiff suffered. 2"

The focus is on the plaintiff's harm; the award is proportioned according

to the amount of harm. When the jury awards punitive damages, it
focuses on the defendant and his conduct,2^4 and may also consider

229Whether a particular public policy interest is important enough to justify recognizing

the employee's cause of action is a hotly debated issue. Compare the majority and dissenting
opinions in Wiskotoni v. Michigan National Bank-West, 716 F.2d 378 (6th Cir. 1983);

Palmateer v. International Harvester Co., 85 111. 2d 124, 421 N.E.2d 876 (1981); Kelsay

V. Motorola, Inc., 74 111. 2d 172, 384 N.E.2d 353 (1978); Pierce v. Ortho Pharmaceutical

Corp., 84 N.J. 58, 417 A.2d 505 (1980); Geary v. United States Steel Corp., 456 Pa.

171, 319 A.2d 174 (1974); and Cordle v. General Hugh Mercer Corp., 325 S.E.2d 111
(W. Va. 1984).

2^°McCoRMiCK, supra note 159, § 163, at 639.
23 'Restatement (Second) of Torts §§901 comment c & 908 (1977).
^^^Id. comment b.
2"/c/. § 901 comment a.
^''Id. § 908 comment e.



1988] WRONGFUL DISCHARGE 585

the defendant's wealth. ^^^ Consequently, punitive damages should provide

the plaintiff with a total damages award that is greater than the value

of the harm he suffered. An award of punitive damages is, or should
be, an extraordinary remedy that courts should reserve for extraordinary

cases. 2^^

In some of the abusive discharge cases, courts have severely Hmited

the plaintiff's measure of compensatory damages, but they have allowed

the plaintiff to recover punitive damages."^ These courts are probably

allowing the plaintiff to recover punitive damages as a substitute for

the substantial compensatory damages the plaintiff deserves but does

not receive. ^^^ The plaintiff does not receive adequate compensatory

damages primarily because these courts have not distinguished injury

from harm. That an at will employee has no legally protected interest

in his job prevents these courts from recognizing that the legal injury

is only tangentially related to the employee's interest in his job and that

the employee is entitled to compensatory damages for the harm the
employer's tort proximately causes, even though that harm deserves no
independent legal protection. If the courts allowed the abusively dis-

charged employee to recover adequate compensatory damages, courts

would have no reason, except in extraordinary cases, to allow the plaintiff

to also receive punitive damages.

An abusively discharged employee who receives adequate compen-
satory damages is not automatically entitled to receive punitive damages.

Unless the employer has an improper motive, the discharged employee

has no cause of action; legal "malice" is an essential element of the

tort. Courts should not permit the jury to award punitive damages unless

the employee has shown that the employer acted with * 'actual malice, "^^^

that is, conduct or a degree of culpability that goes far beyond what

is necessary to estabhsh the employee's prima facie case. For example,

courts should allow punitive damages if the employer consciously violates

a statute that protects personal rights of the employee,^'^^ or if he

'''See Harless v. First Nat'l Bank in Fairmont, 289 S.E.2d 692 (W. Va. 1982) (punitive
damages in abusive discharge action is not available unless the defendant's conduct is

wanton, willful, or malicious); see also Mallor, supra note 16, at 492-95.

'''See Kelsay v. Motorola, Inc., 74 111. 2d 172, 384 N.E.2d 353 (1978); Nees v. Hocks,

272 Or. 210, 536 P.2d 512 (1975).

"^C/". DoBBS, supra note 19, § 3.9, at 205 (stating that courts allow punitive damages

where the tort is a dignitary invasion because there is little or no pecuniary loss but the

courts recognize that the plaintiff is entitled to substantial damages).

"'See Moniodis v. Cook, 64 Md. App. 1, 494 A.2d 212, cert, denied, 304 Md. 631,
500 A.2d 649 (1985).

^°5ee id. (punitive damages will have a deterrent effect if imposed on an employer

who consciously and deliberately disregards a statute prohibiting the employer from requiring
employees to take a lie detector test as a condition of employment).



586 INDIANA LAW REVIEW [Vol. 21:547

aggravates the employee's harm by harassing him or actively interfering

with the employee's ability to find a new job.^"*' Punitive damages are

also proper if the employer fired the employee because the employee

refused to violate the law.^"^^ The courts ought to allow the jury to fully

compensate the employee for the harm he has suffered, but only when

the employer's conduct is particularly egregious is it proper for the courts

to allow the jury to award damages based on the defendant's wealth

instead of the plaintiff's harm.

V. Conclusion

Now that courts are recognizing that tort and contract law should
limit the employment at will rule, they must also grant remedies that

correspond to the substantive interests these new causes of action protect.
When the courts face these remedies issues, they should give at least as
much thought to these issues as they have given to the substantive issues.
It is always tempting to apply an amorphous calculus of fairness to

remedies problems or to forget that a substantive right is worth little

more than the remedy the court permits for that right. When courts
consider the remedies issues that are certain to arise, one hopes that

they will have the courage to be creative and, above all, will focus on

the fundamental principles of remedies law that have guided the courts

for centuries. Among these is the principle that the remedy should
correspond to the substantive interest the law is trying to protect. In

order to determine the appropriate remedy, it is first necessary to identify

that legally protected interest.

Ronald Weisenberger

^'Harless v. First Nat'l Bank in Fairmont, 289 S.E.2d 692, 703 n.l9 (W. Va. 1982).
^^Mallor, supra note 16, at 495.