Stiles v. American General Life Ins. Co.

• Decision Date: 24 May 1999
• Docket Number: No. 24945.,24945.
• Citation: 516 S.E.2d 449,335 S.C. 222
• Parties: C. Kenneth STILES, Plaintiff, v. AMERICAN GENERAL LIFE INSURANCE COMPANY, Defendant.
• Court: South Carolina Supreme Court

335 S.C. 222

516 S.E.2d 449

C. Kenneth STILES, Plaintiff, v. AMERICAN GENERAL LIFE INSURANCE COMPANY, Defendant.

No. 24945.

Supreme Court of South Carolina.

Heard October 7, 1998.

Decided May 24, 1999.

Herbert W. Louthian, Sr. and Deborah R.J. Shupe, both of Louthian & Louthian, of Columbia, for Plaintiff.

Leigh M. Nason, Scott T. Justice, and Janis W. Johnson, all of Haynsworth Baldwin Johnson & Greaves, of Columbia, for Defendant.

FINNEY, Chief Justice:

This Court accepted the following question certified by the U.S. District Court:

May an employee who is employed under an employment contract which provides that either party may terminate the agreement "for any reason" with 30-days' notice—i.e., an at-will contract with a notice provision—maintain a tort action for wrongful discharge in violation of public policy under Ludwick v. This Minute of Carolina, Inc.?¹

FACTS

Plaintiff C. Kenneth Stiles signed two employment agreements with defendant in 1985. Both agreements, which became effective on January 1 1986, contained termination provisions which, inter alia, allowed either party to terminate "for any reason" by giving 30-days' written notice to the other party. On October 14, 1993, defendant informed plaintiff that it was terminating these agreements effective November 14, 1993.

Plaintiff thereafter brought this action in circuit court asserting causes of action for breach of contract and wrongful discharge in violation of public policy based on defendant's termination of the agency agreements. Defendant removed the matter to federal court. After discovery, defendant moved for summary judgment on both causes of action. The District Court granted the motion as to the breach of contract claim. The District Court reserved ruling on the motion as to the wrongful discharge claim in order to certify the question of law set forth above.

Plaintiffs wrongful discharge claim, which was brought pursuant to Ludwick v. This Minute of Carolina, Inc., and its progeny, is based on his allegation that defendant terminated the agreements in a retaliatory manner because he had protested and reported what he contends to be an illegal practice by defendant. Defendant denies this contention and asserts that it terminated the agreements for proper reasons.

ISSUE

Does the public policy exception under Ludwick apply to an at-will employment contract with a notice provision?

DISCUSSION

This Court established in Ludwick a public policy exception to the termination at-will doctrine by holding that "[w]here the retaliatory discharge of an at-will employee constitutes violation of a clear mandate of public policy, a cause of action in tort for wrongful discharge arises." The public policy exception is invoked when an employer requires an at-will employee, as a condition of retaining employment, to violate the law.

Generally, an at-will employee may be terminated at any time for any reason or for no reason, with or without cause. Small v. Springs Industries, Inc., 300 S.C. 481, 388 S.E.2d 808 (1990). An employment contract containing a notice provision is a contract for a definite term. Shivers v. John H. Harland Co., Inc., 310 S.C. 217, 423 S.E.2d 105 (1992). An employment contract containing a notice provision does not provide for a specific termination date, but is continually in force until notice is given. Id. Once notice is given the employment contract assumes a definite term which is the last day of the notice period. Id. A person hired under an employment contract for a definite term may not be discharged before the completion of the term without just cause. Id. The measure of damages when an employee is wrongfully discharged under a contract for a definite term generally is the wages for the unexpired portion of the term. Id.²

The District Court concluded that plaintiff was an at-will employee. The ultimate question before us is whether the notice provision precludes application of the public policy exception to an otherwise at-will employment. Plaintiff asserts there is no logical basis upon which to argue that an employee terminated in violation of public policy has any less right to bring an action for a public policy tort than if the at-will employment contract required no notice. He reasons that an at-will employee with a notice provision still faces termination for any reason and is vulnerable to the possibly illegal motives and/or conduct of his employer. Accordingly, if the public policy does not apply to at-will contracts with notice provisions, employers will be able to avoid the potential liability associated with a public policy tort by giving the employee a contract with a stated notice period, of any duration, before termination.

Defendant urges the Court to continue to limit the Ludwick exception to at-will employees who have no alternative remedy. Defendant contends that an employee employed under a contract for a definite term is in a different position than an at-will employee because the employee has a protection from wrongful discharge that is unavailable to at-will employees: a contractual remedy for termination for cause without notice and the right to retain employment for the notice period after receiving notice of termination without cause. Essentially, defendant contends the contract notice provision protects the employee from wrongful discharge. We disagree. The at-will employee with a notice provision does not have an alternative remedy for wrongful discharge, but merely is entitled to notice of termination.

In this case, the employee does not have an alternate remedy based on an allegation of wrongful discharge. The employee with a notice provision is in the same position as an at-will employee with the only difference being that the employer is required to give the employee notice prior to terminating employment. In considering the purpose behind the public policy exception, the "mere encouragement that one violate the law is unsavory; the threat of retaliation for refusing to do so is intolerable and impermissible." Ludwick, supra. To hold that because an at-will employee is employed under a termination notice provision, the employee is not entitled to bring an action for retaliatory discharge in violation of public policy violates the spirit of the public policy exception. Accordingly, the public policy exception is extended to at-will employees under notice provisions.

The certified question is answered in the affirmative: an employee under an at-will contract with a 30 day notice provision may maintain an action for wrongful discharge in violation of public policy under Ludwick. Whether the specific facts of this case present an applicable claim under Ludwick should be determined based upon the evidence presented to the district court.

CERTIFIED QUESTION ANSWERED.

MOORE, WALLER, and BURNETT, JJ., concur.

TOAL, J., concurring in a separate opinion.

TOAL, Justice (concurring):

In his majority opinion, the Chief Justice holds that the Ludwick public policy exception should be available to the plaintiff in the present case. I agree completely with this result. Moreover, I believe that the opinion correctly anchors its conclusion on the finding that the plaintiff was without an alternate remedy. I write separately because I believe to fully understand when and why the exception will apply in future situations, it is necessary to outline the policy considerations behind the Ludwick exception as well as its history. Because it is important to view any application of the doctrine in the context of its historical development and policy considerations, I concur with the majority opinion and add to it the following analysis.

Employment in South Carolina has been classified as either for a definite term or at-will. Young v. McKelvey, 286 S.C. 119, 333 S.E.2d 566 (1985). Employment for a definite term has two important characteristics: (1) it exists for a fixed period of time; and (2) the employment may only be terminated before the end of that term by just cause. Id. If an employee is wrongfully terminated under a definite contract, the measure of damages is determined by the contract and is generally the wages for the unexpired portion of the term. Shivers v. John H. Harland Co., Inc., 310 S.C. 217, 423 S.E.2d 105 (1992). This measure of damages allows an employee to receive the benefit of the bargain by placing the employee in as good a position as if the contract had been performed. Id.

At-will employment differs from employment for a definite term in two important respects: (1) there is no fixed period of time; and (2) employers can discharge employees for good cause, no cause, or even cause that is morally wrong. Ludwick, 287 S.C. at 221-222, 337 S.E.2d at 214. In employment at-will, the employee is also free to terminate the employment relationship at any time. Shealy v. Fowler, 182 S.C. 81, 188 S.E. 499 (1936).

Although, in South Carolina, an at-will employee may be discharged for any reason, this Court has recognized two important exceptions to that rule. First, employee's at-will status can be altered by the promulgation of an employee handbook. See Small v....