Ryan v. Dan's Food Stores, Inc.

• Citation: 972 P.2d 395,350 Utah Adv. Rep. 3
• Decision Date: 18 August 1998
• Docket Number: No. 970213,970213
• Parties: 136 Lab.Cas. P 58,458, 14 IER Cases 512, 350 Utah Adv. Rep. 3 James RYAN, Plaintiff and Appellant, v. DAN'S FOOD STORES, INC., a Utah corporation, Ted D. Gardiner, and Debra Hall aka Debra Scott, Defendants and Appellees.
• Court: Supreme Court of Utah

Page 395

972 P.2d 395

136 Lab.Cas. P 58,458, 14 IER Cases 512,

350 Utah Adv. Rep. 3

James RYAN, Plaintiff and Appellant, v. DAN'S FOOD STORES, INC., a Utah corporation, Ted D Gardiner, and Debra Hall aka Debra Scott Defendants and Appellees.

No. 970213.

Supreme Court of Utah.

Aug. 18, 1998.

Leonard E. McGee, Salt Lake City, and Bruce W. Shand, Heber City, for plaintiff.

John S. Chindlund, Thomas J. Erbin, Salt Lake City, for Dan's Food Stores, Inc.

ZIMMERMAN, Justice:

James Ryan asks this court to overturn a trial court's grant of summary judgment in favor of his former employer, Dan's Foods, Inc. ("Dan's"). Ryan argues that summary judgment is improper because a material issue of fact exists as to whether Dan's terminated him in breach of an express or implied employment contract or in violation of public policy. We affirm.

We first turn to a review of the facts. Because this is an appeal from a grant of summary judgment, "we view the facts and all reasonable inferences drawn therefrom in the light most favorable to the nonmoving party." Higgins v. Salt Lake County, 855 P.2d 231, 233 (Utah 1993). We recite the facts accordingly.

Ryan began employment with Dan's as a part-time pharmacist in 1992. In September of 1993, Ryan met with Ted D. Gardiner, president of Dan's, to interview for a full-time pharmacy position. During this meeting, Ryan told Gardiner that his previous employer, Harmon's, had fired him from one of its pharmacies; Ryan also told Gardiner that he believed Harmon's fired him because he reported that another Harmon's employee was taking narcotics from the pharmacy. In response, Gardiner stated, "I've got no problem with that.... I'll never reprimand a pharmacist for following the law.... That's one thing I demand of all my pharmacists that work for me, that they do everything by the book." Following this meeting, Gardiner made Ryan a full-time pharmacist at Dan's Sandy, Utah, store.

On September 7, 1993, a manager at Dan's gave Ryan a copy of Dan's employee handbook. The manager told Ryan that he needed to read the handbook and return a signed acknowledgment form before he could receive his paycheck. Ryan read the handbook and signed and returned the acknowledgment form. In reviewing the handbook, Ryan had concerns about its statement: "Your employment at Dan's is at will and may be terminated without cause or prior notice by either you or Dan's." He spoke to his supervisor, Melissa Hong, about his concerns. Although he told her he could not believe that that was Dan's policy, he also acknowledged that he understood it.

During the eighteen months that Ryan worked full-time for Dan's, many customers complained about Ryan's treatment of them: the store director, Ray Carter, received at least 30 customer complaints about Ryan, and Ryan's direct supervisor, Melissa Hong, received at least two complaints every month. Most of the customers who complained said that Ryan was rude to them or treated them poorly. When Ryan worked part-time for Dan's, Scott Buchanan, head pharmacist overseeing all Dan's pharmacies, received dozens of reports from pharmacy managers relaying customers' complaints about Ryan.

Dan's management repeatedly counseled and warned Ryan about these complaints and his treatment of customers: Ryan's direct supervisor, the store manager, and Buchanan counseled Ryan on a monthly basis about the customer complaints. Ryan told them he would try to change and promised to do better. On the other hand, Ryan received at least five letters, two from Gardiner and three from area law enforcement officers, complimenting him on his thoroughness in detecting fraudulent prescriptions.

On April 21, 1995, Buchanan asked Gardiner for permission to terminate Ryan because of the numerous customer complaints. Gardiner gave his permission, and on April 26th, Ryan was given notice that Dan's was terminating him for his treatment of customers. At this time, Ryan received and signed an employee separation report, a report in which Dan's explained its reasons for terminating Ryan.

Ryan filed an action in state court on October 23, 1995, alleging that Dan's wrongfully terminated him in violation of public policy. Ryan later amended his complaint, adding a claim for wrongful termination based on a breach of an implied-in-fact contract of employment. Dan's moved for summary judgment on both claims. Pursuant to rule 56(c) of the Utah Rules of Civil Procedure, the trial court granted summary judgment in Dan's favor. The court ruled: (i) Ryan was an at-will employee, and therefore Dan's did not terminate him in violation of any employment contract, and (ii) Dan's did not terminate Ryan in violation of public policy; rather, it terminated him for the way he treated Dan's customers.

On appeal, Ryan argues that the court erred in granting summary judgment. We begin by setting forth the standard of review and then proceed with our analysis. "Summary judgment is appropriate only when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law." V-1 Oil Co. v. Utah State Tax Comm'n, 942 P.2d 906, 910 (Utah 1996). Because "a challenge to summary judgment presents only a question of law," we review it for correctness. West v. Thomson Newspapers, 872 P.2d 999, 1004 (Utah 1994). In reviewing a grant of summary judgment, "[w]e determine only whether the trial court erred in applying the governing law and whether the trial court correctly held that there were no disputed issues of material fact." Ferree v. State, 784 P.2d 149, 151 (Utah 1989).

On the merits, Ryan argues that Dan's breached an express or implied contract of employment and terminated him in violation of public policy. Because both issues involve the at-will employment doctrine, we begin with an overview of that doctrine before proceeding to our analysis.

Utah law presumes that an employment arrangement that does not have a specified term of duration is at-will. See Fox v. MCI Communications Corp., 931 P.2d 857, 859 (Utah 1997). An at-will employment arrangement allows either the employer or the employee to terminate the employment for any reason, or no reason at all, at any time; moreover, the employer may "do so without extending any procedural safeguards to an employee, except as required by law." Id. However, the at-will presumption is only that--a presumption. See id. An employee may overcome that presumption by showing that (i) an express or implied employment agreement existed that prohibited an employer from terminating an employee without cause or without satisfying other agreed-upon conditions; (ii) a statute or regulation restricts the employer's right to terminate; (iii) the termination "constitutes a violation of a clear and substantial public policy." Id. (internal footnote omitted). In this case, Ryan attempts to overcome the at-will presumption by arguing that Dan's breached an express or implied contract and that it terminated him in violation of public policy. We address each argument in turn.

Ryan first asserts that Gardiner created an express or implied-in-fact employment contract when he told Ryan that Dan's would not reprimand him for following the law. "A wrongful termination case based on a violation of an express or implied term of the employment agreement rests on a duty that an employer voluntarily undertakes as a consequence of the employment agreement itself, whether express or implied." Id. at 860. Although the existence of an implied contract is a factual question, "the court retains the power to decide whether, as a matter of law, a reasonable jury could find that an implied contract exists." Sanderson v. First Sec. Leasing Co., 844 P.2d 303, 306 (Utah 1992). If we conclude that a reasonable jury could not find an implied contract, we will affirm the summary judgment. See id.

We conclude that even if Gardiner's statement that Dan's would not terminate Ryan for following the law created an express or implied contract, as a matter of contract law, ¹ Ryan's receipt of the Dan's employee handbook and his signing of the acknowledgment form modified and superseded any previous conditions of that contract. On this point, we adopt the reasoning of the court of appeals in Trembly v. Mrs. Fields Cookies, 884 P.2d 1306 (Utah Ct.App.1994). In Trembly, an employee claimed that a supervisor's verbal statements created an implied-in-fact employment contract requiring certain disciplinary procedures before termination. See id. at 1312. The court of appeals found the supervisor's statements were not controlling because even if those statements were sufficient to operate as a contract provision, the employee received an employee handbook specifying that all employment was at-will, after the supervisor made the verbal representations about a progressive discipline policy. See id. at 1312-13. The court of appeals stated that "if an employee has knowledge of a distributed handbook that changes a condition of the employee's employment, and the employee remains in the company's employ, the modified conditions become part of the employee's employment contract." Id. at 1312.

The Trembly reasoning comports with our decision in Johnson v. Morton Thiokol, Inc., 818 P.2d 997 (Utah 1991). There we stated:

"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 necessary consideration for the offer."

Id. at 1002 (quoting Pine River State Bank v. Mettille, 333 N.W.2d 622, 627 (Minn.1983)). In many circumstances, a fact question will exist as...