Ford v. Trendwest Resorts, Inc.

• Citation: 43 P.3d 1223,146 Wash.2d 146,146 Wn.2d 146
• Decision Date: 11 April 2002
• Docket Number: No. 70699-9.,70699-9.
• Court: United States State Supreme Court of Washington
• Parties: Bobby FORD, Respondent, v. TRENDWEST RESORTS, INC., a corporation, Petitioner.

43 P.3d 1223

146 Wash.2d 146

146 Wn.2d 146

Bobby FORD, Respondent, v. TRENDWEST RESORTS, INC., a corporation, Petitioner.

No. 70699-9.

Supreme Court of Washington, En Banc.

Argued September 20, 2001.

Decided April 11, 2002.

Daniel J. Gunter, Barbara Joan Van Ess, Seattle, Amicus Curiae on Behalf of Washington Defense Trial Lawyers.

Jeffrey Lowell Needle, Maria C. Fox, Seattle, Amicus Curiae on Behalf of Washington Employment Lawyers Assoc.

Cairncross & Hempleman, J. Tate London, J. Thomas Richardson & Rosemary Daszkiewicz, Seattle, for Petitioner.

Kimberly Ann Marsh, Portland, Or., Strong & Konat, Sidney J. Strong, Seattle, for Respondent.

JOHNSON, J.

This case involves a lawsuit for breach of an employment at-will contract. A jury found Trendwest Resorts, Inc. breached its promise to rehire Bobby Ford as an at-will employee in a specific position. A jury awarded Ford $235,000 in damages based on his anticipated lost earnings. At issue is whether lost earnings are the measure of damages in a breach of an agreement to hire for employment at-will. The Court of Appeals affirmed the jury award, reasoning there was no relevant difference between discriminatory discharge cases, where lost earnings are the measure of damages, and a breach of an employment at-will contract. Trendwest Resorts, Inc. v. Ford, 103 Wash. App. 380, 12 P.3d 613 (2000). We reverse.

FACTS

Ford began working for Trendwest in 1991 as an at-will employee. Trendwest sells vacation time at a network of resorts in North America. On April 30, 1997, the assistant manager of the "Upgrades" department fired Ford after he arrived at work smelling of alcohol for a second time. Shortly thereafter, Ford's wife called several management contacts at Trendwest attempting to help her husband regain his job. The Trendwest sales director asked Ford if he was willing to complete an alcohol counseling program. Ford agreed to participate in the program and signed an employee assistance agreement. In exchange, Trendwest agreed to rehire him as an at-will employee in "a position equal to that which [he] held." Pl.'s Ex. 1. Trendwest changed Ford's employment status from terminated to "approved leave of absence." Def.'s Ex. 30.

After establishing a treatment schedule, Ford called Trendwest to establish a new work schedule. The manager of the "Upgrades" department told Ford he could not return to "Upgrades," but offered Ford a position as a telemarketer in the "Discovery Program," a far less lucrative position than Ford had previously held. Ford declined the telemarketing position and told Trendwest he did not intend to return to work. Trendwest terminated Ford's employment on July 31, 1997.

Ford filed a lawsuit against Trendwest alleging breach of contract, retaliatory discharge, intentional interference with employment, and defamation. The trial court granted partial summary judgment in favor of Trendwest on the intentional interference with employment and defamation claims, and Ford voluntarily dismissed his retaliation claim. A jury trial was held on the breach of contract claim.

The jury was given instruction 15, offered by Ford, which allowed the jury to award damages based on future lost earnings.¹ Trendwest specifically objected to using future lost earnings as a measure of Ford's damages.²

The jury found Trendwest had breached its contract to rehire Ford and awarded Ford $235,000 in damages: $85,000 as "past economic damages" and $150,000 as "future economic damages."³ Trendwest sought a new trial, arguing the trial court erred by refusing to instruct the jury on the contract formation element of mutual assent and by allowing it to calculate damages with reference to future lost earnings. The trial court denied the motion, and Trendwest timely appealed.

The Court of Appeals affirmed, relying primarily on a wrongful discharge case holding that lost earnings were an appropriate measure of damages flowing from the breach of an employment at-will contract to hire. Ford, 103 Wash.App. at 390-91,12 P.3d 613 (citing Lords v. N. Auto. Corp., 75 Wash.App. 589, 604-07, 881 P.2d 256 (1994) (allowing damages based on lost earnings in discrimination suit brought by discharged at-will employee)). The court also distinguished a Court of Appeals decision that affirmed the exclusion of lost earnings evidence when an employer breached an employment at-will contract to hire. Ford, 103 Wash.App. at 390-91,12 P.3d 613 (citing Bakotich v. Swanson, 91 Wash.App. 311, 957 P.2d 275 (1998)). The Bakotich court concluded the employee bargained for at-will employment and the amount of lost earnings was too speculative for the jury to consider. Bakotich, 91 Wash. App. at 316-17,957 P.2d 275.

We granted Trendwest's petition for review to resolve the apparent conflict and determine whether lost earnings are an appropriate measure of damages when an employer breaches a contract to hire an at-will employee.

ANALYSIS

The issue presented on appeal is a question of law which we review de novo. Wilson Court Ltd. P'ship v. Tony Maroni's, Inc., 134 Wash.2d 692, 698, 952 P.2d 590 (1998).

In Washington, the general rule is that an employer can discharge an at-will employee for "no cause, good cause or even cause morally wrong without fear of liability." Thompson v. St. Regis Paper Co., 102 Wash.2d 219, 226, 685 P.2d 1081 (1984). Conversely, in the absence of a contract stating otherwise, an employee has the absolute right to abandon his or her employment at-will. This common law at-will employment doctrine has been the background employment rule in Washington since at least 1928. See Davidson v. Mackall-Paine Veneer Co., 149 Wash. 685, 688, 271 P. 878 (1928); see also Prescott v. Puget Sound Bridge & Dredging Co., 40 Wash. 354, 357, 82 P. 606 (1905) (Mount, C.J., dissenting) ("where [an employment] contract is general and for an indefinite time, it is terminable at will."). As a device of the common law, the doctrine is subject to modification by the legislature, the courts, and the parties themselves. However, absent statutory, judicial, or contractual modifications to the employment relationship, the at-will employment doctrine limits an employee's reasonable expectations to compensation for work performed. Thompson, 102 Wash.2d at 228-29, 685 P.2d 1081.

There are three recognized exceptions to the general at-will employment rule. First, both Congress and the Washington State Legislature have modified the employment at-will doctrine by limiting employers' rights to discharge employees. See National Labor Relations Act, 29 U.S.C. § 158(a)(1) (1994); Civil Rights Act of 1964, 42 U.S.C. § 2000e-2(a)(1) (1994); chapter 49.60 RCW (Washington's law against discrimination); see also chapter 49.12 RCW (prohibiting discharge of employees for testifying in investigations regarding labor conditions, worker earnings, or sex discrimination); RCW 49.44.090 (prohibiting discharge of employee for being age 40 and over). These laws create an exception to an employer's right to discharge an employee by establishing and protecting the employee's rights in those specific situations.

The Legislature has specifically authorized lost earnings as damages when an employer wrongfully discriminates against an employee. See RCW 49.60.030(2) (creating cause of action allowing discrimination victims to sue for "actual damages"); Xieng v. Peoples Nat'l Bank of Wash., 63 Wash.App. 572, 583, 821 P.2d 520 (1991) ("Actual damages include `damages for injury in fact, as distinguished from exemplary, nominal or punitive damages.'" (quoting Ellingson v. Spokane Mortgage Co., 19 Wash.App. 48, 58, 573 P.2d 389 (1978))), aff'd, 120 Wash.2d 512, 844 P.2d 389 (1993). The Xieng court noted that lost earnings are "a type of actual damages awarded in Title 7 employment discrimination suits which compensates victims `for the continuing future effects of discrimination[.]'" Xieng, 63 Wash.App. at 583, 821 P.2d 520 (quoting Pitre v. W. Elec. Co., 843 F.2d 1262, 1278 (10th Cir.1988)).

Second, we have recognized a narrow public policy exception to an employer's right to discharge an employee. See Smith v. Bates Technical Coll., 139 Wash.2d 793, 991 P.2d 1135 (2000) (public policy exception to "for-cause" employees); Gardner v. Loomis Armored, Inc., 128 Wash.2d 931, 913 P.2d 377 (1996) (discharge of armored truck driver who abandoned post to prevent murder violated public policy). Under this exception, an employer does not have the right to discharge an employee when the termination would frustrate a clear manifestation of public policy. Smith, 139 Wash.2d at 804-08,991 P.2d 1135; Gardner, 128 Wash.2d at 949-50,913 P.2d 377. By recognizing this public policy exception, this court expressed its unwillingness to "shield an employer's action which otherwise frustrates a clear manifestation of public policy." Thompson, 102 Wash.2d at 231,685 P.2d 1081. Absent reinstatement, awarding a wrongfully terminated employee his or her lost earnings is the only reliable method of remedying the employee's injury.

Lost earnings are available in these claims because an action for discharge in violation of public policy sounds in tort. "Damages" is a term used in torts to denote "an award made to a person by a competent judicial tribunal ... because of a legal wrong done to him by another." Restatement (Second) of Torts § 902 cmt. a (1979). Tort actions are maintainable for a variety of reasons: to compensate injured parties; to determine parties' rights; to punish wrongdoers and deter wrongful conduct; and to vindicate parties and deter retaliation. Restatement (Second) of Torts § 901. The "measure of damages in tort [is] based upon the purposes for which actions of tort are maintainable." Restatement (Second) of Torts § 901. Awarding lost earnings to an employee discharged in violation of public policy compensates the employee's pecuniary loss, punishes the employer and deters future wrongful discharges, and vindicates the employee's...