UO. 86-352
IN THE SUPREME COURT OF THE STATE OF MONTANA
1987
PENNY L. KERR,
Plaintiff and Respondent,
-VS-
GIBSON'S PRODUCTS COMPANY OF BOZEMAN,
INC., a Montana corpora-tion,
Defendant and Appellant.
APPEAL FROM: District Court of the Eighteenth Judicial District,
In and for the County of Gallatin,
The Honorble Joseph B. Gary, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Landoe, Brown, Planalp, Kommers & Johnstone; Gene I.
Brown, Bozeman, Montana
For Respondent:
Cok & Wheat; Michael D. Cok, Bozeman, Montana
Submitted on Briefs: Dec. 3, 1986
Decided: March 10, 1987
Mr. Chief Justice J. A. Turnage delivered the Opinion of the
Court.
Gibson's Products Company of Rozeman, Inc., appeals a
jury verdict entered by the District Court of the Eighteenth
Judicial District of the State of Montana, in favor of re-
spondent Penny Kerr, on her claims for relief from the termi-
nation of her employment.
We affirm.
Gibson's raises two issues for our review:
1. Whether there was substantial credible evidence to
support submission of respondent's case to the jury based
upon breach of implied covenant of good faith and fair
dealing?
2. Whether the jury properly awarded compensatory
damages to the respondent?
Kerr (respondent) was hired as a sales clerk and teller
on June 14, 1978. She worked in various capacities until
February 10, 1984, at which time Roy Hampton, Gibson's manag-
er, discharged her. Hampton testified that Kerr was not
terminated for cause but as a necessary business decision.
The issues presented for review involve substantial
credible evidence questions. We will examine the facts in a
light favorable to respondent. First National Bank in Libby
v. Twombly (Mont. 19841, 689 P.2d 1776, 41 St.Rep. 1948;
Jacques v. Montana National Guard (1982), 199 Mont. 493, 503,
644 P.2d 1319, 1325. Additionally, we will exercise re-
straint in interfering with the constitutionally-mandated
process of jury decision. Barmeyer v. MPC (Mont. 1983) , 657
P.2d 594, 40 St.Rep. 23.
During the five and one-half years of her employment,
respondent performed her job in a satisfactory manner. She
wa.s promoted to the position of department head and super-
vised at least eight different departments. She also served
as head cashier for two years. Kerr's starting wage of $2.75
per hour was steadily increased by eleven merit pay raises to
S7.25 per hour. Kerr was never the subject of disciplinary
action. In 1983, she publicly received a bonus as a sign of
Gibson's appreciation for her five years of service.
Gibson's Products Company of Bozeman, Inc., began to
experience financial difficulties in 1980. Its financial
difficulties continued until the store was sold to Chaffin,
Inc., in May 1984. During 1983 and 1984, Kerr, along with
other employees of Gibson's, were assured by Charles Brooks,
the store's owner, that Gibson's was not going bankrupt.
Hampton and Brooks told the employees that Gibson's would cut
back employee hours before they would terminate employees.
Despite Hampton's and Brooks' assurances, Kerr was discharged
during her shift, without notice or severance pay, on Febru-
ary 10, 1984. Hampton refused to provide her with a refer-
ence letter. Gibson's did not offer her a transfer, reduced
hours or reduced pay.
Gibson's contended that Kerr was terminated as part of
a legitimate store-wide reduction in force during which
Gibson's also discharged or transferred thirteen other em-
ployees, some of whom were seasonal employees. However,
within four months of Kerr's termination, Gibson's replaced
the terminated employees with eleven lower paid employees.
Additionally, the Gibson's employee handbook outlined
its termination procedure. The handbook stated that a layoff
due to lack of work would be termination without prejudice
and the employee would retain recall rights. Kerr was not
given recall rights. Further, her termination report indi-
cated there was no chance for rehire.
Kerr filed the present action on November 8, 1984,
alleging that she had been wrongfully discharged from her
employment with Gibson's Products Company and sought damages
under several theories. Kerr alleged tha-t Gibson's breached
the implied covenant of good faith and fair dealing. She
further alleged that appellant acted negligently, maliciously
and with reckless disregard of her rights, entitling her to
exemplary damages. The complaint was amended to include a
fourth count alleging negligent infliction of emotional
distress. A jury trial was held on March 5, 1986. The jury
found for Kerr and awarded her $59,026 in compensatory
damages.
Issue One
Was there substantial credible evidence to support
submission of respondent's case based upon breach of the
implied covenant of good faith and fair dealing?
The principal argument a.dvanced by appellant is that
Gibson's was experiencing severe economic problems. There-
fore, in an effort designed to cut costs, Gibson's terminated
the respondent. Appellant claims that bankruptcy of Gibson's
was imminent. Appellant did not recall the respondent, offer
her a lower paid position or offer to transfer to her to
another Gibson's store or department.
In a fashion similar to Flanigan v. Prudential Fed.
S & L Assoc. (Mont. 1986), 720 P.2d 257, 259, 43 St.Rep. 941,
943, appellant argues that a Montana jury should not be a
silent partner in every decision to terminate an employee.
However, here, as in Flanigan, there is evidence that the
employer acted with other than purely economic motives when
the respondent was terminated.
Kerr disputed that she was terminated as a necessary
reduction-of-force. She cites her termination without notice
and Gibson's refusal to rehire her at a lower wage. Respon-
dent points to the refusal of Gibson's to offer a letter of
recommendation and its hiring of eleven employees at lower
wages. One of these newly-hired employees assumed respon-
dent's duties in the lawn and garden department.
Further, Kerr argues that Gibson's failed to follow its
own termination policy promulgated in its handbook. The
Gibson's employee handbook states as follows: "4. Layoff--A
layoff due to lack of work will be considered a termination
without prejudice and the employee will retain recall
rights." Respondent points to the fact that Gibson's not
only failed to recall her, but placed "No Rehire" in her
termination report.
Appellant claims that because Gibson's employee hand-
book was distributed after respondent began her employment,
the handbook does not create contractual rights. Gates v.
Life of Montana Ins. Co. (Gates I) (19821, 196 Monk. 178,
183, 638 P.2d 1063. The employee handbook was distributed in
June 1979 and was in effect for the remaining four and
one-half years of respondent's employment. Gibson's employee
handbook contained rules of employee conduct and sanctions
for employee misconduct. The handbook contained Gibson's
policy for employee benefits, promotions and terminations.
As an employer, Gibson's was freely able to enforce employee
handbook rules of conduct. It likewise follows that Kerr, as
an employee, could reasonably rely on the procedures outlined
in Gibson's employee handbook during employment termination.
The circumstances of this case are that
the employee entered into an employment
contract terminable at the will of
either party at any time. The employer
later promulgated a handbook of person-
nel policies establishing certain proce-
dures with regard to terminations. The
employer need not have done so, but
presumably sought to secure an orderly,
cooperative and loyal work force by
establishing uniform policies. The
employee, having faith that she would be
treated fairly, then developed the peace
of mind associated with job security.
- - employer has failed-to follow its
If the
own policies, the peace _ _ - of its
of-mind -
employees - shattered - - injustice
is and an
is done. [Emphasis supplied.1
--
Gates I, 196 Mont. at 184, 638 P.2d at 1067.
'
Implicit throughout the respond-ent s case is the alle-
gation that she was terminated because of her high wages.
Kerr was one of Gibson's most senior employees. Her work
performance was satisfactory. However, testimony revealed
that Gibson's retained or hired less-experienced employees,
who then occupied positions respondent had previously held.
The covenant of good faith and fair dealing is implied
when objective manifestations by the employer give rise to
the employee's reasonable belief that he or she has job
security and will be trea-ted fairly. Dare v. Montana Petro-
leum Marketing Company (Mont. 1984), 687 P.2d 1015, 1020, 41
St.Rep. 1.735, 1739. Gibson's repeatedly acknowledged respon-
dent's work as satisfactory through promotions and. pay in-
creases. It was reasonable for respondent to believe that
she had job security and. would be treated fairly.
We hold that sufficient evidence was presented rebut-
ting appellant's claim of economic necessity. Our holding
does not foreclose an employer from engaging in legitimate
reductions in force necessary to maintain economic vitality
of the company. Flanigan, 720 P.2d at 261, 43 St.Rep. at
946.
Therefore, the trial court properly submitted this
issue to the jury.
Issue Two
Whether the jury properly awarded compensatory damages
to the respondent?
Respondent was awarded $50,995 in lost wages and $8,031
for her interest in the profit sharing plan. Extensive
testimony of Kerr's search for employment was presented.
Testimony revealed that respondent held numerous temporary
and part-time jobs before becoming employed in 1985 at First
Security Bank in Bozeman. Kerr presently earns $3.67 per
hour at First Security Bank.
Dominque Carestia, an economics expert, testified that
respondent's lost wages to July 1989, mitigated by her
present income, is $50,995. Carestia projected Kerr's lost
wages to 1989, based on respondent's testimony that she
planned to quit Gibson's and raise a family at that time.
Additionally, Carestia determined that Kerr would have re-
ceived $8,031 upon the sale of Gibson's to Chaffin Corpora-
tion in May 1984.
Appellant argues that Kerr is not entitled to future
damages after May 1984 when Gibson's was sold to Chaffin
Corporation. Appellant does not dispute that nearly all of
Gibson's employees were retained by Chaffin. Nor does appel-
lant dispute that Chaffin disbursed Gibson's profit sharing
account in 1984. If respondent had been employed by Gibson's
in May 1984, less than four months after her discharge,
clearly she would have received an additional $8,031.
In Gates v. Life of Montana Ins. Co. (Gates 11) (~ont.
1983), 668 P.2d 213, 214, 40 St.Rep. 1287, 1289, this Court
held that a breach of the implied covenant of good faith and
fair dealing has its remedy in tort. Further, this Court has
recognized expert testimony on future damages. Graham v.
Clark Fork's National Bank (Mont. 1981), 631 P.2d 718, 720,
721, 38 St.Rep. 1140, citing Frisnegger v. Gibson (1979), 183
. .. Section 27-1-203, MCA, provides
that damages may be awarded in a judi-
cial proceeding for detriment resulting
after commencement thereof "or certain
to result in the future." ... [Ilt
has always been the practice in Montana
to instruct juries that future damages
need only be reasonably certain, - -
and not
absolutely certain - - statute seems
as the
to imply.
-
A jury or an expert testifying on the subject must make
assumptions to some degree. Frisnegger, 598 P.2d at 582. As
a.n additional precaution, Judge Gary properly instructed the
jury not to award speculative damages.
We find that evidence was properly presented to the
jury of respondent's future earnings reduced by her present
wages under the standard of Graham and 5 27-1-203, MCA. The
evidence was sufficient to uphold the jury's finding of
damages.
Affirmed.
Fe concur:
l
1