Fortune v. National Cash Register Co.
364 N.E.2d 1251 (1977)
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Rule of Law:
A contract for employment at will contains an implied covenant of good faith and fair dealing, and a termination by the employer that is motivated by bad faith, such as a desire to avoid paying earned compensation, constitutes a breach of that contract.
Facts:
- Orville E. Fortune was employed by The National Cash Register Company (NCR) for approximately 25 years under a written 'salesman's contract' that was terminable at will.
- The contract provided for bonus commissions on sales within Fortune's assigned territory, which included First National Stores Inc.
- In late 1968, after Fortune helped arrange a demonstration of a new cash register, First National signed an order for approximately $5,000,000 worth of machines.
- Fortune's name appeared on the order form in the space for 'salesman credited,' with a potential bonus credit of over $92,000.
- On January 6, 1969, the first business day after the new year began, Fortune received a termination notice from NCR dated December 2, 1968.
- A manager told Fortune to 'stay on' in a 'sales support' role to assist with the First National order, but in this capacity, he received only a portion (75%) of the commissions for delivered machines.
- Approximately 18 months later, in June 1970, after refusing to retire, NCR fired Fortune, which ended his eligibility for any further commission payments from the First National order.
Procedural Posture:
- Orville E. Fortune sued The National Cash Register Company in Massachusetts Superior Court (trial court) to recover unpaid commissions.
- The case was submitted to a jury, which returned special verdicts finding that NCR had acted in bad faith when it terminated Fortune's salesman contract and when it later fired him.
- The trial court entered a judgment on the jury verdict in favor of Fortune.
- NCR, as the appellant, appealed the decision to the Massachusetts Appeals Court (intermediate appellate court).
- The Appeals Court reversed the judgment of the Superior Court, finding in favor of NCR.
- The Supreme Judicial Court of Massachusetts, the state's highest court, granted Fortune's application for further appellate review.
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Issue:
Does the termination of an at-will employee, motivated by the employer's desire to avoid paying the employee commissions earned through their efforts, constitute a breach of the employment contract?
Opinions:
Majority - Abrams, J.
Yes. A termination of an at-will employee motivated by bad faith to deprive them of earned compensation is a breach of the implied covenant of good faith and fair dealing inherent in the contract. While a literal reading of the at-will contract suggests NCR could terminate Fortune without cause, all contracts in the Commonwealth contain an implied covenant of good faith and fair dealing. An employer may not act to destroy or injure the right of an employee to receive the 'fruits of the contract.' The jury was entitled to find that NCR's termination of Fortune—a 25-year employee—on the next business day after he secured a $5 million order was motivated by a desire to avoid paying him the full commissions he had earned. Such a bad faith termination constitutes a breach of the employment contract, notwithstanding its at-will nature.
Analysis:
This decision is a foundational case in employment law, establishing a significant exception to the traditional, rigid employment-at-will doctrine. It introduces the implied covenant of good faith and fair dealing as a check on an employer's power to terminate employees, particularly when the termination appears calculated to deprive the employee of earned compensation. The ruling shifted the legal landscape by making an employer's motive for termination a justiciable issue, paving the way for wrongful termination claims based on bad faith. It forces employers to consider not just their contractual rights but also their ethical and good faith obligations in termination decisions.
