Wagenseller v. Scottsdale Memorial Hosp., 17646-PR

• Citation: 710 P.2d 1025,147 Ariz. 370
• Decision Date: 17 June 1985
• Docket Number: No. 17646-PR,17646-PR
• Parties: , 119 L.R.R.M. (BNA) 3166, 54 USLW 2017, 103 Lab.Cas. P 55,511, 1 IER Cases 526 Catherine Sue WAGENSELLER, Plaintiff-Appellant, v. SCOTTSDALE MEMORIAL HOSPITAL; Donald A. Andrews and Jane Doe Andrews, his wife; Neal Brown and Jane Doe Brown, his wife; John W. Holmes and Jane Doe Holmes, his wife; and Kay Smith, a single person, Defendants-Appellees.
• Court: Supreme Court of Arizona

Page 1025

710 P.2d 1025

147 Ariz. 370, 119 L.R.R.M. (BNA) 3166, 54 USLW 2017,

103 Lab.Cas. P 55,511, 1 IER Cases 526

Catherine Sue WAGENSELLER, Plaintiff-Appellant, v. SCOTTSDALE MEMORIAL HOSPITAL; Donald A. Andrews and Jane Doe Andrews, his wife; Neal Brown and Jane Doe Brown, his wife; John W. Holmes and Jane Doe Holmes, his wife; and Kay Smith, a single person, Defendants-Appellees.

No. 17646-PR.

Supreme Court of Arizona, In Banc.

June 17, 1985.

Reconsideration Denied Aug. 20, 1985.

Supplemental Opinion Nov. 27, 1985.

Hocker & Axford by Naida B. Axford, R. Kelly Hocker, Phoenix, for appellant

Thomas V. Rawles, Mesa, and Fennemore, Craig, Von Ammon, Udall & Powers by John D. Everroad, R.C. Mitten, Timothy Berg, Phoenix, for appellees.

FELDMAN, Justice.

Catherine Sue Wagenseller petitioned this court to review a decision of the court of appeals affirming in part the trial court's judgment in favor of Scottsdale Memorial Hospital and certain Hospital employees (defendants). The trial court had dismissed all causes of action on defendants' motion for summary judgment. The court of appeals affirmed in part and remanded, ruling that the only cause of action available to plaintiff was the claim against her supervisor, Kay Smith. Wagenseller v. Scottsdale Memorial Hospital, 148 Ariz. ---, 714 P.2d 412 (1984). We have jurisdiction pursuant to Ariz. Const. art. 6, § 5(3) and Rule 23(c), Ariz.R.Civ.App.P., 17A A.R.S. We granted review to consider the law of this state with regard to the employment-at-will doctrine. The issues we address are:

1. Is an employer's right to terminate an at-will employee limited by any rules which, if breached, give rise to a cause of action for wrongful termination?

2. If "public policy" or some other doctrine does form the basis for such an action, how is it determined?

3. Did the trial court err, in view of Leikvold v. Valley View Community Hospital, 141 Ariz. 544, 688 P.2d 170 (1984), when it determined as a matter of law that the terms of Scottsdale Memorial Hospital's personnel policy manual were not part of the employment contract?

4. Do employment contracts contain an implied covenant of "good faith and fair dealing," and, if so, what is the nature of the covenant? ¹

5. What is the scope of a supervisor's privilege to interfere in the beneficial employment relationship between a supervised employee and the common employer?

FACTUAL BACKGROUND

Catherine Wagenseller began her employment at Scottsdale Memorial Hospital as a staff nurse in March 1975, having been personally recruited by the manager of the emergency department, Kay Smith. Wagenseller was an "at-will" employee--one hired without specific contractual term. Smith was her supervisor. In August 1978, Wagenseller was assigned to the position of ambulance charge nurse, and approximately one year later was promoted to the position of paramedic coordinator, a newly approved management position in the emergency department. Three months later, on November 1, 1979, Wagenseller was terminated.

Most of the events surrounding Wagenseller's work at the Hospital and her subsequent termination are not disputed, although the parties differ in their interpretation of the inferences to be drawn from and the significance of these events. For more than four years, Smith and Wagenseller maintained a friendly, professional, working relationship. In May 1979, they joined a group consisting largely of personnel from other hospitals for an eight-day camping and rafting trip down the Colorado River. According to Wagenseller, "an uncomfortable feeling" developed between her and Smith as the trip progressed--a feeling that Wagenseller ascribed to "the behavior that Kay Smith was displaying." Wagenseller states that this included public urination, defecation and bathing, heavy drinking, and "grouping up" with other rafters. Wagenseller did not participate in any of these activities. She also refused to join in the group's staging of a parody of the song "Moon River," which allegedly concluded with members of the group "mooning" the audience. Smith and others allegedly performed the "Moon River" skit twice at the Hospital following the group's return from the river, but Wagenseller declined to participate there as well.

Wagenseller contends that her refusal to engage in these activities caused her relationship with Smith to deteriorate and was the proximate cause of her termination. She claims that following the river trip Smith began harassing her, using abusive language and embarrassing her in the company of other staff. Other emergency department staff reported a similar marked change in Smith's behavior toward Wagenseller after the trip, although Smith denied it.

Up to the time of the river trip, Wagenseller had received consistently favorable job performance evaluations. Two months before the trip, Smith completed an annual evaluation report in which she rated Wagenseller's performance as "exceed[ing] results expected," the second highest of five possible ratings. In August and October 1979, Wagenseller met first with Smith and then with Smith's successor, ² Jeannie Steindorff, to discuss some problems regarding her duties as paramedic coordinator and her attitude toward the job. On November 1, 1979, following an exit interview at which Wagenseller was asked to resign and refused, she was terminated.

She appealed her dismissal in letters to her supervisor and to the Hospital administrative and personnel department, answering the Hospital's stated reasons for her termination, claiming violations of the disciplinary procedure contained in the Hospital's personnel policy manual, and requesting reinstatement and other remedies. When this appeal was denied, Wagenseller brought suit against the Hospital, its personnel administrators, and her supervisor, Kay Smith.

Wagenseller, an "at-will" employee, contends that she was fired for reasons which contravene public policy and without legitimate cause related to job performance. She claims that her termination was wrongful, and that damages are recoverable under both tort and contract theories. The

Hospital argues that an "at-will" employee may be fired for cause, without cause, or for "bad" cause. We hold that in the absence of contractual provision such an employee may be fired for good cause or for no cause, but not for "bad" cause.

THE EMPLOYMENT-AT-WILL DOCTRINE

History

As early as 1562, the English common law presumed that an employment contract containing an annual salary provision or computation was for a one-year term. Murg & Scharman, Employment at Will: Do the Exceptions Overwhelm the Rule? 23 B.C.L.Rev. 329, 332 (1982). Originally designed for the protection of seasonal farm workers, the English rule expanded over the years to protect factory workers as well. Workers were well protected under this rule, for the one-year presumption was not easy to overcome. Id. English courts held an employer liable for breaching the employment contract if he terminated an employee at any time during the year without "reasonable cause to do so." 1 W. Blackstone, Commentaries * 413. To uphold an employer's discharge of an employee without a showing of "good cause," the courts required a clear expression of a contrary intent as evidenced either on the face of the contract or by a clearly defined custom of the industry. Murg & Scharman, supra, at 332.

In the early nineteenth century, American courts borrowed the English rule. The legal rationale embodied in the rule was consistent with the nature of the predominant master-servant employment relationship at the time because it reflected the master's duty to make provision for the general well-being of his servants. Id. at 334 and n. 22. In addition, the master was under a duty to employ the servant for a term, either a specified or implied time of service, and could not terminate him strictly at will. Hermann & Sor, Property Rights in One's Job: The Case for Limiting Employment-at-Will, 24 Ariz.L.Rev. 763, 770 (1982). The late nineteenth century, however, brought the Industrial Revolution; with it came the decline of the master-servant relationship and the rise of the more impersonal employer-employee relationship. In apparent response to the economic changes sweeping the country, American courts abandoned the English rule and adopted the employment-at-will doctrine. Murg & Scharman, supra, at 334. This new doctrine gave the employer freedom to terminate an at-will employee for any reason, good or bad.

The at-will rule has been traced to an 1877 treatise by H.G. Wood, in which he wrote:

With us the rule is inflexible, that a general or indefinite hiring is prima facie a hiring at will, and if the servant seeks to make it out a yearly hiring, the burden is upon him to establish it by proof.... [I]t is an indefinite hiring and is determinable at the will of either party....

H.G. Wood, Law of Master and Servant § 134 at 273 (1877). As commentators and courts later would point out, none of the four cases cited by Wood actually supported the rule. See Toussaint v. Blue Cross & Blue Shield, 408 Mich. 579, 602 & nn. 13-14, 292 N.W.2d 880, 886-87 & nn. 13-14 (1980); Note, Implied Contract Rights to Job Security, 26 Stan.L.Rev. 335, 341-42 n. 54 (1974). Wood's rule also ran directly counter to another American treatise that stated the one-year presumption as the rule that some courts continued to follow. Note, Protecting At Will Employees Against Wrongful Discharge: The Duty to Terminate Only in Good Faith, 93 Harv.L.Rev. 1816, 1825 n. 51 (1980) (citing C. Smith, Law of Master and Servant 53-57 (1852)).

However unsound its foundation, Wood's at-will doctrine was adopted by the New York courts in Martin v. New York Life Insurance Co., 148 N.Y. 117, 42 N.E. 416 (1895), and soon became the generally accepted American rule. In 1932, this court first adopted the rule for Arizona: "The general rule in regard to contracts for personal services, ......