Johnson v. Morton Thiokol, Inc., 890315

CourtSupreme Court of Utah
Citation818 P.2d 997
Docket NumberNo. 890315,890315
Parties124 Lab.Cas. P 57,309, 10 IER Cases 1871 Billy JOHNSON, Plaintiff and Appellant, v. MORTON THIOKOL, INC., Defendant and Appellee.
Decision Date05 September 1991

Page 997

818 P.2d 997
124 Lab.Cas. P 57,309, 10 IER Cases 1871
Billy JOHNSON, Plaintiff and Appellant,
MORTON THIOKOL, INC., Defendant and Appellee.
No. 890315.
Supreme Court of Utah.
Sept. 5, 1991.

Page 998

Philip C. Patterson, Ogden, for Johnson.

Mary Anne Q. Wood, Salt Lake City, for Morton Thiokol Co.

HALL, Chief Justice:

Plaintiff Billy Johnson sought to recover damages resulting from the involuntary termination of his employment. From an entry of summary judgment in favor of defendant Morton Thiokol, Inc. ("Thiokol"), Johnson appeals. When reviewing an order granting summary judgment, the facts and all reasonable inferences that can be drawn from the facts are viewed in a light most favorable to the party opposing the motion. 1

Johnson was hired by Thiokol on February 12, 1979, as a process inspector and was continuously employed at Thiokol until the date of his termination, July 20, 1988. At no time during his employment did he enter into an express contract with Thiokol which restricted Thiokol's ability to terminate his employment. Throughout Johnson's tenure, Thiokol published and distributed an employee handbook. The text of the handbook contains several pages prescribing Thiokol's policy concerning employee disciplinary, appraisal, and grievance procedures. 2 In administering Johnson's

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nine employee appraisals, Thiokol complied with the procedures set out in the handbook. However, the introduction of the handbook contains clear and conspicuous language stating that the provisions of the manual are not intended to operate as terms of an employment contract.

In the beginning of July 1988, Thiokol implemented a leak check test procedure for verifying the proper placement and seal of Thiokol's redesigned O-rings, which are used in space shuttle rocket motors. Johnson, although he had not received adequate training regarding the new process, was assigned to inspect the leak check test procedure. For the three weeks prior to the date of the incident which resulted in his termination, Johnson and all members of the inspection crews worked mandatory overtime in order to meet Air Force-imposed deadlines. In connection with these deadlines, the inspectors were urged by upper management to avoid shut-down orders because such orders would result in unacceptable scheduling pressure.

When Johnson arrived at work on July 8, 1988, the technicians were involved in setting up five simultaneous operations. It had become common practice to perform numerous operations simultaneously even though there was only one inspector assigned to the building. An inspector was required to witness each operation, but due to the simultaneous "setups," it was impossible for one inspector to observe each procedure. Johnson therefore prioritized those areas where actual observations were made. At one point, he was notified that a setup had been completed. He glanced at the setup but did not complete the thirty-nine-step breakdown required to verify the procedure. However, he verified that he had completed the appropriate inspection. Due to the inadequate inspection, Johnson failed to notice that certain hoses had been improperly installed.

The next day, during a routine test operation, excess pressure caused by the improperly installed hoses forced the O-rings out of their groove and damaged some insulation lining on the motor. The damage required that the test motor be disassembled to make repairs, causing a twenty-day delay in the test firing of the rocket motor. The incident resulted in an investigation by NASA officials and was highly publicized in both the local and national news media. Johnson and the employee who installed the hoses were terminated.

Johnson was terminated pursuant to the procedures set out in the employee handbook. After his termination, he initiated grievance procedures which were also conducted in accordance with the handbook. The grievance was denied on the ground that Johnson was terminated for "careless or inefficient performance of duty," a ground which, according to the handbook, can result in termination.

On February 22, 1989, Johnson commenced this action, claiming that Thiokol, by terminating his employment without good cause, breached an implied-in-fact contract provision. Thiokol filed a motion to dismiss pursuant to Utah Rule of Civil Procedure 12(b)(6). At the hearing, the motion was treated as a motion for summary judgment under Utah Rule of Civil Procedure 56. The trial court dismissed Johnson's case on the grounds that no implied-in-fact contract existed between Johnson and Thiokol and, alternatively, that Johnson was fired for good cause. Johnson appeals from these rulings.

Summary judgment is proper when there is no genuine issue of material fact and the moving party is entitled to a judgment

Page 1000

as a matter of law. 3 Therefore, when reviewing an order granting summary judgment, the evidence and all inferences that may be reasonably drawn from the evidence must be liberally construed in favor of the party opposing the motion. 4 The determination of whether, given this view of the evidence, the moving party is entitled to a judgment is a question of law, which is reviewed for correctness. 5 The first issue presented on appeal, therefore, is whether the trial court erred in ruling that there was no implied contract provision limiting Thiokol's ability to terminate Johnson. If the trial court was correct in this ruling, it will not be necessary to reach the second issue, whether Johnson was fired for cause.

Johnson argues that although he did not have an express contract with Thiokol and was hired for an indefinite term, he is entitled to damages resulting from the termination of his employment under our recent case of Berube v. Fashion Centre, Ltd. 6 Berube modified Utah's position on the doctrine of employment at will. In Utah, an employee hired for an indefinite period is presumed to be an employee at will who can be terminated for any reason whatsoever so long as the termination does not violate a state or federal statute. 7 Prior to Berube, in order for indefinite-term employees to establish that their employment was not at will, it was necessary to show an express or implied stipulation as to the duration of the employment or consideration beyond the rendering of services under the employment contract. 8 Berube modified this position by holding that the terms of an employee manual can operate as implied-in-fact contract terms rebutting the presumption of at-will employment and fixing the terms of the employee relationship. 9 In addition,

Page 1001

Berube established that the continued performance of the employee's duties is adequate consideration for such an implied contract provision. 10

There are issues concerning the implied-in-fact employee contracts recognized in Berube that have yet to be addressed. However, Berube and its progeny have established several principles regarding these relationships. It is clear that the employee has the burden of establishing the existence of an implied-in-fact contract provision, 11 that is, the employee must show that although there was no express contract provision to this effect, the parties nevertheless agreed that the employment would not be at will. 12 If the parties actually intended such an agreement and the agreement is of such a nature that it is possible to operate as a contract term, a court will give effect to the parties' intentions by enforcing the agreement as an implied-in-fact contract provision. 13 The existence of such an agreement is a question of fact which turns on the objective manifestations of the parties' intent. 14 As a question of fact, the intent of the parties is primarily a jury question. 15 However, if the evidence presented is such that no reasonable jury could conclude that the parties agreed to limit the employer's right to terminate the employee, it is appropriate for a court to decide the issue as a matter of law. 16

We have also addressed the nature of indefinite-term employment relationships with implied-in-fact contract provisions which limit an employer's right to terminate an employee. In Brehany v. Nordstrom, Inc., we stated that if an employee manual is to be considered part of an employment contract, the terms should be considered terms of a unilateral contract. 17 Several jurisdictions have taken such an approach. 18 Under a unilateral contract

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analysis, an employer's promise of employment under certain terms and for an indefinite period constitutes both the terms of the employment contract and the employer's consideration for the employment contract. The employee's performance of service pursuant to the employer's offer constitutes both the employee's acceptance of the offer and the employee's consideration for the contract. 19 Therefore, for an implied-in-fact contract term to exist, it must meet the requirements for an offer of a unilateral contract. There must be a manifestation of the employer's intent that is communicated to the employee 20 and sufficiently definite to operate as a contract provision. 21 Furthermore, the manifestation of the employer's intent must be of such a nature that the employee can reasonably believe that the employer is making an offer of employment other than employment at will. 22 The unilateral nature of such an employment contract is important because it affects the flexibility of the employment relationship.

In the case of unilateral contract for employment, where an at-will employee retains employment with knowledge of new or changed conditions, the new or changed conditions may become a contractual obligation. In this manner, an original employment contract may be modified or replaced by a subsequent unilateral contract. The employee's retention of employment constitutes acceptance of the offer of a unilateral contract; by continuing to stay on the job, although free to leave, the employment supplies the...

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