S.E. 2d
THE STATE OF SOUTH CAROLINA
In The Supreme Court
C. Kenneth Stiles,Plaintiff,
v.
American General Life
Insurance Company, Defendant.
On Certification from the United States District
Court for the District of South Carolina
Dennis W. Shedd,
United States District Judge
Opinion No. 24945
Heard October 7, 1998 - Filed May 24,1999
CERTIFIED QUESTION ANSWERED
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, C.J.: 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
p.1
Stiles v. American General Life Ins. Co.
"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.
Plaintiff's 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
1 287 S.C. 219, 337 S.E.2d 213 (1985).
p.2
Stiles v. American General Life Ins. Co.
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. Harland, 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
2 We note that Shivers v. Harland involved purely a breach of
contract claim and there was no allegation of bad faith.
p.3
Stiles v. American General Life Ins. Co.
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, A.J.,
concurring in a separate opinion.
p.4
Stiles v. American General Life Ins. Co.
TOAL, A.J. (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 diff6rs 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. 812 188 S.E. 499 (lP36).
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. Springs Indus., Inc., 292 S.C. 481,357 S.E.2d
452 (1987). Second, employee's at-will status can be altered where the discharge
violates a clear mandate of public policy. See Ludwick, 287 S.C. at 225, 337
S.E.2d at 216. In Ludwick, an employer asked an employee to violate a
criminal law. Since Ludwick, this Court has expanded the public policy
p.5
Stiles v. American General Life Ins. Co.
exception. See Garner v. Morrison Knudson Corp., 318 S.C. 223,456 S.E.2d 907
(1995); Culler v. Blue Ridge Elec. Coop., Inc., 309 S.C. 243,422 S.E.2d 91(1992);
see also C.F.W. Manning, II, Note, Public Policy Exception Open to Possible
Expansion in Employment At-Will Situations, 48 S.C. L. Rev. 133 (1996). In
Garner, we recognized the exception's development and noted, " [w]hile we have
applied the public policy exception to situations where an employer requires an
employee to violate a criminal law, and situations where the reason for
termination was itself a violation of criminal law, we have never held the
exception is limited to these situations." Id. at 266, 456 S.E.2d at 909.
While the Ludwick public policy exception has expanded, this Court has
also noted that the exception will not apply where the employee has a statutory
remedy. See Dockins v. Ingles Markets, Inc., 306 S.C. 496, 413 S.E.2d 18
(1992)(finding the Fair Labor Standards Act provided a remedy to the employee
and that he was limited to pursuing that statutory remedy); Epps v. Clarendon
County, 304 S.C. 424,405 S.E.2d 386 (1991)(refusing to expand Ludwick where
Title 42 U.S.C. 1983 allows a civil action for damages against a government
official who deprives an individual of a constitutionally protected right). As
these cases make clear, the Ludwick exception is not designed to overlap an
employee's statutory or contractual rights to challenge a discharge, but rather
to provide a remedy for a clear violation of public policy where no other
reasonable means of redress exists.
The Ludwick public policy exception, is designed to serve two important
policy goals: (1) the vindication of the state's interest by prohibiting termination
in violation of the clear mandate of public policy; and (2) the protection of at-will
employees who are often without a remedy when terminated in violation of
public policy. For the current case, we must decide whether the notice provision
provides a remedy sufficient for both the employee and the state to obviate the
need for a Ludwick action.
The nature of the employment contract between Stiles and American
General is important in determining whether the Ludwick exception should be
available. In Shivers v. John H. Harland Co., 310 S.C. 217, 220, 423 S.E.2d
105, 107 (1992), we held that:
Under South Carolina law, an employment contract containing a
notice provision is a contract for a definite term. An employment
contract containing a notice provision does not provide for a specific
termination date, but is continually in force until notice is given.
p.6
Stiles v. American General Life Ins. Co.
Once notice is given, the employment contract assumes a definite
term, this being the last day of the notice period. (Citations
omitted)(emphasis added).
This analysis makes it clear that an employment agreement with a notice
provision is basically an at-will agreement that, subject to a contingency, may
become a contract for a definite term. Unlike the usual contract for a definite
term, the worker is not guaranteed a specific term of employment, only that at
a minimum he will have work for the term of the notice provision. Without a
Ludwick exception, the employer could choose any reason to trigger the notice
provision, regardless of whether the reason violated public policy.
Also, whatever protection there would be under such a contract would not
occur until the employer decides to provide notice. The notice provision in such
contracts provides no protection from the discharge itself, but simply makes an
employer wait longer before the termination of an employee is complete. If an
employer can avoid the possibility of damages associated with a public policy
violation by simply giving the employee a written contract with a stated notice
period before termination, the public policy exception would become ineffectual
at achieving its policy goals. As such, the notice provision in such a contract
does not provide an alternate remedy similar to those in Epps and Dockins.
Unlike a definite term contract containing mandatory "for cause"
termination provisions, a notice provision in an at-will contract does not
vindicate either the state's interest in preventing an employee discharge in
violation of public policy or the employee's rights to be protected from
retaliatory discharge in violation of public policy. Under a contract for a
definite term the employee can only be fired for cause, whereas the at-will
employee with a notice provision can quickly find himself jobless even if he is
a model employee. In situations where the only protection from termination for
reasons which violate public policy is a notice provision, the purposes served by
Ludwick cannot be achieved through any other means than the application of
the public policy exception allowing a suit in tort.
p.7