Lewis v. Oregon Beauty Supply Co.

• Decision Date: 28 March 1986
• Citation: 77 Or.App. 663,714 P.2d 618
• Parties: Karen LEWIS, Appellant-Cross-Respondent, v. OREGON BEAUTY SUPPLY CO. and Lawrence Stebbeds, Respondents, and Scott Stebbeds, Cross-Appellant. A8206-03404, CA A32019.
• Court: Oregon Court of Appeals

Page 618

714 P.2d 618

77 Or.App. 663

Karen LEWIS, Appellant-Cross-Respondent, v. OREGON BEAUTY SUPPLY CO. and Lawrence Stebbeds, Respondents and Scott Stebbeds, Cross-Appellant.

A8206-03404, CA A32019.

Court of Appeals of Oregon.

Argued and Submitted Oct. 21, 1985.

Decided Feb. 12, 1986.

Reconsideration Denied March 28, 1986.

Richard C. Baldwin, Portland, argued the cause for appellant-cross-respondent. With him on the briefs was Baldwin & Brischetto, Portland.

Thomas L. Sauberli, Portland, argued the cause for respondents. With him on the brief was Vergeer, Roehr & Sweek, Portland.

Lloyd Weisensee, Portland, argued the cause for cross-appellant. With him on the brief were Barry L. Adamson, Portland, and Williams, Fredrickson, Stark, Norville & Weisensee, Portland.

Before GILLETTE, P.J., and VAN HOOMISSEN and YOUNG, JJ.

VAN HOOMISSEN, Judge.

Plaintiff appeals the trial court's orders in favor of defendants Oregon Beauty Supply Company (OBSC) and Lawrence Stebbeds on her claims of intentional interference with economic relations and outrageous conduct. Defendant Scott Stebbeds cross-appeals the trial court's denial of his motion for a judgment notwithstanding the verdict or a new trial on plaintiff's interference claim.

Viewing the evidence in the light most favorable to plaintiff, it shows that she was an employe of OBSC. She worked directly for Lawrence Stebbeds, OBSC's principal owner and manager. Lawrence's son Scott supervised OBSC's warehouse. Plaintiff began dating Scott. Later, when she wanted to date other men, he became jealous. On one occasion, he became intoxicated and refused to allow her to leave a tavern. When she asked for help, a fight ensued. After that, she refused to date Scott. Thereafter, he began treating her in a hostile manner at work. ¹ Several times daily, he stood outside her office and "glared" at her. He told coworkers that she was a drug addict and that she had given him a venereal disease. He cursed her, called her a whore, searched her personal belongings and threw things at her. He intentionally slammed a door into her. He refused to cooperate with her when she needed information from him about shipping and receiving to do her job. There also was evidence that Scott would "fling" paperwork and sample merchandise into her office. He told other employes that she would not be working at OBSC much longer.

Plaintiff complained to Lawrence. He agreed to talk to his son about the problem. When the harassment continued, plaintiff complained to another supervisor. That supervisor was already aware of the problem. She also agreed to talk to Scott. After doing so, the supervisor was "in tears." The next week, she quit her job. Plaintiff met with Lawrence again. He informed her that Scott was going to continue working at OBSC and that, if she did not like it, she could quit. Still, he discouraged her from quitting and, again, said that he would talk to his son. Nevertheless, the harassment continued. About six months after the harassment began, plaintiff asked Lawrence for time off to look for another job. She also asked him to keep Scott away from her. Lawrence told her that it would be best if she quit. She did so and then brought this action against OBSC, Scott and Lawrence for interference with her employment relationship and outrageous conduct.

The trial court granted OBSC a directed verdict on both of plaintiff's claims. ORCP 60. The court also granted Lawrence a directed verdict on plaintiff's outrageous conduct claim. The jury was instructed that, if it found in favor of plaintiff on her interference claim, it should not consider her outrageous conduct claim against Scott. Plaintiff did not object to that instruction.

The jury found against Lawrence and Scott on the interference claim and awarded $65,000 general damages. Additionally, it awarded $75,000 punitive damages against Lawrence and $25,000 punitive damages against Scott. Thereafter, the trial court granted Lawrence's motion for a judgment notwithstanding the verdict and denied Scott's similar motion.

Because the issues on appeal involve vicarious liability for conduct involved in the cross-appeal, we address some of the cross-appeal issues first. On cross-appeal, Scott contends, in what amounts to a jury argument, that the trial court erred in denying his motion for a judgment notwithstanding the verdict or a new trial on plaintiff's interference claim. He argues that plaintiff voluntarily quit her at will employment and that, thus, he did not interfere with her employment relationship with OBSC. Plaintiff argues that the jury was entitled to find that she did not voluntarily quit and that Scott materially interfered with her employment relationship with OBSC.

Oregon law recognizes a cause of action for intentional interference with economic relations. Straube v. Larson, 287 Or. 357, 600 P.2d 371 (1979); Top Service Body Shop v. Allstate Ins. Co., 283 Or. 201, 582 P.2d 1365 (1978); Ron Tonkin Gran Turismo v. Wakehouse Motors, 46 Or.App. 199, 611 P.2d 658, rev. den. 289 Or. 373 (1980). Those cases rely on Restatement (Second) Torts § 766et seq (1979). Section 766B provides:

"One who intentionally and improperly interferes with another's prospective contractual relation (except a contract to marry) is subject to liability to the other for the pecuniary harm resulting from the loss of benefits of the relation, whether the interference consists of

"(a) inducing or otherwise causing a third person not to enter into or continue the prospective relation or

"(b) preventing the other from acquiring or continuing the prospective relation."

The first question is whether an at will employment relationship can form the basis for a claim of intentional interference with an employment relationship. Comment g to section 766, the general section on interference with contractual relations, states that a contract terminable at will may form the basis for an interference claim. Although a party to an at will contract may have a right to terminate the contract, "[u]ntil he has so terminated it, a contract is valid and subsisting, and the defendant may not properly interfere with it." We conclude that an at will employment relationship may form the basis for an interference claim.

The next question is whether a cause of action for intentional interference with an employment relationship can exist if an employe quits. Restatement (Second) Torts § 766B supra, provides for recovery when the defendant induces or otherwise causes a third person to discontinue an employment relationship or prevents that person from continuing an employment relationship. Scott argues that OBSC did not discontinue its relationship with plaintiff but that she voluntarily quit. ² Plaintiff argues that to characterize her quitting as voluntary totally ignores the fact found by the jury that Scott's conduct prevented her from working, thereby forcing her to quit.

In this context, to state a claim for interference with an employment relationship plaintiff first must show that OBSC terminated its employment relationship with her. Normally, an employe's resignation is not regarded as a discharge. However, some jurisdictions recognize an exception when the employe is forced to resign.

"The law is not entirely blind, however. It is able, in most instances, to discard form for substance, to reject sham for reality. It therefore recognizes the concept of 'constructive discharge'; in a proper case, it will overlook the fact that a termination was formally effected by a resignation if the record shows that the resignation was indeed an involuntary one, coerced by the employer." Beye v. Bureau of National Affairs, 59 Md.App. 642, 649, 477 A.2d 1197, rev. den. 301 Md. 639, 484 A.2d 274 (1984).

The concept of constructive discharge arose in federal labor and discrimination cases. The theory developed in recognition of the fact that employers who did not want to risk discharging an employe when there was potential liability could simply force an employe to quit by making working conditions intolerable.

"If an employer directly discharges an at-will employee in such a manner as to make the discharge [wrongful] it would defy both reason and fairness to immunize him from liability simply because he has been clever enough to effect the abusive separation by forcing a resignation. That would, in effect, reward him for the extra measure of malefaction--of not only acting in contravention of some clearly mandated public policy but of making things so intolerable that the employee is forced to initiate his own unlawful termination." Beye v. Bureau of National Affairs, supra, 59 Md.App. at 653, 477 A.2d 1197.

Although this is not a wrongful discharge case, we find that analysis of the constructive discharge issue persuasive. We conclude that the concept of constructive discharge is recognized in Oregon.

Jurisdictions that recognize the concept of constructive discharge have established different elements that the plaintiff must prove. Some hold that the employe must show that the employer's actions were deliberate and taken with the intention of forcing a resignation. See Johnson v. Bunny Bread Co., 646 F.2d 1250 (8th Cir.1981); Muller v. United States Steel Corp., 509 F.2d 923 (10th Cir), cert. den. 423 U.S. 825, 96 S.Ct. 39, 46 L.Ed.2d 41 (1975). Others require only that the employe show that a reasonable person in the employe's position would feel compelled to resign.

"An employer's activities may be deemed to amount to a constructive discharge only if 'the employer made conditions so intolerable that the employee reasonably felt compelled to resign.' * * * The effect on the employee of the conditions imposed, not the employer's intentions, governs the outcome." Kelleher v. Flawn, 761 F.2d 1079, 1086 (5th Cir 1985). (Emphasis in original.)

See also Shawgo v. Spradlin, 701 F.2d 470 (5th Cir), cert den sub nom Whisenhunt v. Spradlin, 464 U.S. 965, 104...