E.I. DuPont De Nemours & Co. v. Pressman
679 A.2d 436, 1996 WL 229453 (1996)
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Rule of Law:
An employer breaches the implied covenant of good faith and fair dealing by terminating an at-will employee when the termination is based on the employer's agent deceitfully manufacturing materially false grounds. A termination based solely on malice, hatred, or ill will, without accompanying deceit, does not breach the covenant.
Facts:
- E.I. DuPont de Nemours and Company (DuPont) hired Norman J. Pressman, a Ph.D. scientist, in December 1986.
- Initially, Pressman received positive evaluations from his supervisor, David Pensak.
- In January 1988, Pressman confronted Pensak about a potential conflict of interest involving Pensak's paid advisory role with an outside company named Genesis.
- After the confrontation, Pensak became angry, restricted Pressman's work-related travel, and began a campaign to have him fired.
- Pensak placed an anonymous negative evaluation in Pressman's file and progressively lowered his performance ratings.
- Pensak misrepresented Pressman’s responsibilities to superiors, edited a progress report to understate Pressman’s accomplishments, and failed to pass along a separate report detailing some of Pressman’s significant achievements.
- On April 12, 1989, DuPont terminated Pressman's employment based on the distorted record created by Pensak.
Procedural Posture:
- Norman J. Pressman sued E.I. DuPont de Nemours and Company in the Delaware Superior Court (trial court) for, among other things, breach of the implied covenant of good faith and fair dealing.
- The trial court instructed the jury that the covenant is breached if the discharge is malicious (due to hatred or ill will) or in bad faith (fraud or deceit).
- The jury found for Pressman on the breach of covenant claim and awarded him compensatory damages for lost wages, as well as damages for emotional distress and punitive damages.
- The jury found for DuPont on Pressman's claim for breach of an implied-in-fact contract requiring good cause for termination.
- DuPont, the defendant, appealed the judgment on the breach of covenant claim to the Delaware Supreme Court (the highest court).
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Issue:
Does an employer breach the implied covenant of good faith and fair dealing by terminating an at-will employee based on a supervisor's retaliatory campaign of fabricating negative performance records and hiding positive ones?
Opinions:
Majority - Veasey, Chief Justice
Yes, an employer breaches the implied covenant of good faith and fair dealing when it terminates an at-will employee based on deceitfully manufactured grounds. While the employment-at-will doctrine is broad, it is limited by the covenant's prohibition on acts of fraud, deceit, or misrepresentation. The court reasoned that the covenant applies not just to fraud in the inducement of a contract, but also to situations where an employer's agent falsifies or manipulates an employee's record to create a fictitious basis for termination. However, the court carefully distinguished this from terminations based merely on personal motivations like dislike, hatred, or ill will, which alone do not breach the covenant. The trial court's jury instruction was erroneous because it was disjunctive, allowing the jury to find a breach based solely on malice, which is inconsistent with the breadth of the at-will doctrine. Furthermore, the court held that damages for emotional distress and punitive damages are not available for this type of contract breach, distinguishing employment contracts from insurance contracts where such damages may be permitted due to a 'special relationship' and the inability of the insured to 'cover'.
Concurring - Allen, Chancellor
Yes. The author agrees with the majority's conclusion to reverse the trial court's judgment because the jury instruction overstated the scope of the implied covenant of good faith in an at-will employment contract. While noting a potentially different analytical approach, the author concurs with the majority's holding and specifically praises the 'admirable discussion of the unavailability of punitive damages' in this type of contract action.
Analysis:
This case significantly refines the employment-at-will doctrine in Delaware by establishing a narrow but critical exception based on the implied covenant of good faith and fair dealing. It clarifies that while an employer's motive for termination is largely irrelevant, the means cannot involve deceit or falsification of records. This decision protects employees from terminations based on a manufactured pretext, while simultaneously preserving the employer's broad discretion to terminate by rejecting claims based on mere malice or ill will. The court's refusal to award punitive or emotional distress damages reinforces the traditional divide between contract and tort remedies, preventing the covenant from becoming a vehicle for tort-like damages in employment disputes.
