Soderlun v. Public Service Co. of Colorado, 95CA0458

• Citation: 944 P.2d 616
• Decision Date: 06 February 1997
• Docket Number: No. 95CA0458,95CA0458
• Parties: 133 Lab.Cas. P 58,240, 12 IER Cases 874, 21 Colorado Journal 175 Linda SODERLUN, Charles A. Rodgers, Paul Blecha, Howard Brooks, Theron Carlson, James Cole, William Durica, Richard Fugier, Robert Hayes, Francis Mathie, Roger Maxwell, William Toomey, Theresa Wise, Calvin Hulsey, Gary D. Reeves, Beverly DeMoss, and Richard Smith, Plaintiffs-Appellants, and Joseph Carbone and Jeanette Richey, Plaintiffs-Appellants and Cross-Appellees, v. PUBLIC SERVICE COMPANY OF COLORADO, Defendant-Appellee and Cross-Appellant. . II
• Court: Court of Appeals of Colorado

Page 616

944 P.2d 616

133 Lab.Cas. P 58,240, 12 IER Cases 874,

21 Colorado Journal 175

Linda SODERLUN, Charles A. Rodgers, Paul Blecha, Howard Brooks, Theron Carlson, James Cole, William Durica, Richard Fugier, Robert Hayes, Francis Mathie, Roger Maxwell, William Toomey, Theresa Wise, Calvin Hulsey, Gary D. Reeves, Beverly DeMoss, and Richard Smith, Plaintiffs-Appellants and Joseph Carbone and Jeanette Richey, Plaintiffs-Appellants and Cross-Appellees, v. PUBLIC SERVICE COMPANY OF COLORADO, Defendant-Appellee and Cross-Appellant.

No. 95CA0458.

Colorado Court of Appeals Div. II.

Feb. 6, 1997.

Rehearing Denied March 6, 1997.

Certiorari Denied Oct. 20, 1997.

Feiger, Collison & King, P.C., Lynn D. Feiger, Diane S. King, Joan M. Bechtold, Denver, for Plaintiffs-Appellants and Cross-Appellees.

Sherman & Howard, L.L.C., James E. Hautzinger, Wendi J. Delmendo, Denver, for Defendant-Appellee and Cross-Appellant.

Opinion by Judge CRISWELL.

Plaintiffs, who are 19 former employees of defendant, Public Service Company (PSC), commenced this action complaining of the termination of their employment with PSC. Each plaintiff asserted that such termination violated the terms of a contract each had with PSC, as well as an express covenant of good faith and fair dealing, and that their reliance upon statements made to them by PSC supervisors gave rise to a promissory estoppel claim. The trial court dismissed the claims of all but two plaintiffs--Joseph Carbone and Jeanette Richey--and it submitted only their claims for breach of contract to a jury which returned verdicts in favor of both. Plaintiffs appeal from the judgments dismissing the other claims asserted, and PSC cross-appeals from the judgments entered on the jury verdicts. We affirm the judgments of dismissal and reverse the judgments entered on the two breach of contract claims.

Prior to plaintiffs' terminations in 1991, PSC had a long history of not laying off employees for economic reasons, and of terminating employees only for inadequate performance. Even during difficult economic times, PSC historically had reduced employee hours or instituted voluntary lay-off programs, rather than involuntarily laying off employees.

However, in mid-1991, PSC established a task force to recommend ways to improve the company's efficiency and profitability. Thereafter, in July 1991, the president of PSC sent a letter to every employee, explaining some of the economic challenges PSC was facing and warning employees that, in order to reduce costs, there was a "very real possibility of a reduction in work force."

Because of the task force's later conclusion that many managers at PSC were supervising relatively few employees, PSC undertook an organizational analysis beginning in the fall of 1991. As a result of that analysis, 100 employees, who were performing functions deemed to be "nonessential," including all but two of the plaintiffs, were laid off. The other two plaintiffs were laid off when two divisions were later consolidated. PSC makes no claim that the services of any plaintiff were unsatisfactory, and plaintiffs do not assert that their lay-offs were discriminatory or otherwise not undertaken out of legitimate economic considerations.

Each plaintiff received at least two weeks' pay upon termination and was allowed to seek other jobs with PSC. In addition, each plaintiff received a severance payment ranging from $10,000 to $37,000.

Each of plaintiffs' claims for wrongful termination was based on three types of evidence: (1) PSC's long-term practice of not laying off employees; (2) PSC's Corporate Code of Business Conduct; and (3) oral statements made by various supervisors from time to time to each plaintiff.

PSC's Corporate Code of Business Conduct, a document every employee was required to read, stated that PSC was committed to "high ethical and moral standards in all we do" and to acting in "honesty, decency, fairness, openness, and trustworthiness." This document also stated that, to uphold confidence in PSC's reputation for integrity, "it is essential that employees, at all times demonstrate the highest ethical conduct when conducting business with fellow employees...."

In addition, each of the plaintiffs testified that the various oral statements made by PSC supervisors related to their job security. The nature of these remarks varied somewhat, but they consisted, primarily, of references to PSC's history of not engaging in layoffs and of assurances that plaintiffs could continue to work for PSC so long as they were adequately performing their jobs.

In dismissing all of plaintiffs' promissory estoppel and breach of good faith covenant claims, the trial court concluded that the oral and written statements upon which plaintiffs relied as the foundation for these claims were either too indefinite and unspecific to support the claims asserted or that plaintiffs could not reasonably have relied upon those statements as guaranteeing lifetime employment without the possibility of a layoff for economic reasons.

Further, the trial court concluded that, to recover on their breach of contract claims, plaintiffs were obligated to prove that they had provided "special consideration" to PSC to establish these claims. It also concluded that none of the plaintiffs, save Carbone and Richey, had furnished any such special consideration. With respect to these two plaintiffs, the court concluded that their testimony that they each had left higher-paying jobs to work for PSC was sufficient to allow the jury to determine that they had provided special consideration. It was on this basis that the contract claims of these two defendants were submitted for jury determination.

Our review of this record, however, convinces us that the single, significant issue, the resolution of which will be determinative of both plaintiffs' appeal and PSC's cross-appeal, is whether the statements relied upon by plaintiffs as the basis for all of their claims are, as a matter of law, of such a nature as to constitute a legally binding promise upon which plaintiffs could reasonably rely. We conclude that none of the pertinent statements evidence a promissory intent and that none of them was sufficiently definite and specific as to be judicially enforceable.

Absent an explicit understanding to the contrary, every employment relationship is presumed to be "at-will," meaning that either the employer or the employee may terminate the relationship at any time, without notice and without cause. Martin Marietta Corp. v. Lorenz, 823 P.2d 100 (Colo.1992).

In Continental Air Lines, Inc. v. Keenan, 731 P.2d 708 (Colo.1987), however, our supreme court determined that, under certain circumstances, the existence of such an at-will relationship may be rebutted, and the employee may demonstrate that the termination of the employment relationship is subject to certain restrictions. Such demonstration must consist of proof that the employer made statements to the employee (there, written statements in an employee handbook that the employer had distributed), and that those statements, the circumstances under which they were made, and the employee's reaction thereto, met the requirements of Restatement (Second) of Contracts § 24 (1981) for an offer by the employer and the acceptance of that offer by the employee. Alternatively, even if the requirements for the formation of a contract under Restatement § 24 cannot be shown, the employee may demonstrate that conditions have been imposed upon the at-will relationship, based upon statements made by the employer, by proving the prerequisites for application of doctrine of promissory estoppel under Restatement (Second) of Contracts § 2 and § 90 (1981). See also Churchey v. Adolph Coors Co., 759 P.2d 1336 (Colo.1988).

Aside from the specific principles adopted by the supreme court in this prior jurisprudence, its significance lies in that court's consideration of the employment relationship pursuant to concepts developed by traditional approaches to the common law of contracts. The supreme court has not purported to create any special rules to deal with employee claims of contract breaches. Hence, our analysis of the issues presented here must comport with those traditional contract precepts.

We start that analysis by noting that the contracts that plaintiffs assert were agreed to by PSC are extraordinary. They do not claim only that PSC agreed to limit its authority to terminate their employment to circumstances constituting just cause. Were plaintiffs' claims based upon an alleged just cause agreement, they would be faced with the fact that the courts are in general agreement that a good faith management decision to lay off employees for economic reasons, if that layoff is not pretextual, discriminatory, or in violation of some applicable procedural requirement, constitutes just cause for an employee's termination, even under a contract requiring such cause. See Taylor v. National Life Insurance Co., 161 Vt. 457, 652 A.2d 466 (1993); Stull v. Combustion Engineering, Inc., 72 Ohio App.3d 553, 595 N.E.2d 504 (1991); Ewers v. Stroh Brewery Co., 178 Mich.App. 371, 443 N.W.2d 504 (1989).

However, plaintiffs assert that, in addition to agreeing not to discharge them for other than just cause, PSC also agreed never to engage in an involuntary layoff. They argue, in essence, that PSC agreed never to reduce its labor costs by reducing the size of its workforce, even if it were facing substantial monetary losses.

There is, of course, no legal barrier to an employer agreeing to restrict its right to terminate employees in such a manner. However, because of the extraordinary limitation that would be created by such an agreement, some courts have insisted that any enforceable promise of this type be "clear and specific." Taylor v. National Life Insurance Co., supra, 161 Vt. at 468, 652 A.2d at 473.

Moreover, quite irrespective of the nature of the promise, the common...