Hillesland v. Federal Land Bank Association of Grand Forks
407 N.W.2d 206 (1987)
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Rule of Law:
North Dakota's employment-at-will statute, N.D.C.C. § 34-03-01, is not modified by an implied covenant of good faith and fair dealing. An employer may terminate an at-will employee for any reason, or no reason, so long as it is not an illegal reason.
Facts:
- Elmer Hillesland began working for the Federal Land Bank Association of Grand Forks in 1956 and was promoted to Chief Executive Officer in 1972.
- In 1983, Hillesland learned that Association customers, Ray and Eva Westby, were in financial distress and intended to sell their farm.
- Following discussions, Hillesland's sons, David and Don, made an offer to purchase the Westby farm.
- Hillesland submitted the proposed transaction to the Association's board of directors, which approved it.
- He then submitted the matter to the Federal Land Bank of St. Paul's Review Committee, which expressed concern over a potential conflict of interest but did not disapprove the transaction.
- Shortly after the sale to Hillesland's sons was completed, the Bank launched an investigation into the matter.
- On June 15, 1983, representatives of the Bank discharged Hillesland, citing violations of conduct standards, damage to the company's reputation, and poor business judgment.
Procedural Posture:
- Elmer Hillesland commenced an action in a North Dakota district court against the Federal Land Bank Association of Grand Forks and the Federal Land Bank of St. Paul.
- Hillesland's complaint alleged violation of the Farm Credit Act, breach of contract, age discrimination, and tortious interference with his employment contract.
- The district court (trial court) granted summary judgment in favor of the defendants, dismissing all of Hillesland's claims.
- Hillesland (appellant) appealed the district court's summary judgment dismissal to the Supreme Court of North Dakota.
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Issue:
Does North Dakota law recognize an implied covenant of good faith and fair dealing in an at-will employment contract, thereby creating a cause of action for wrongful discharge?
Opinions:
Majority - Erickstad, Chief Justice
No. North Dakota law does not recognize an implied covenant of good faith and fair dealing in an at-will employment contract. The state's at-will doctrine is codified in N.D.C.C. § 34-03-01, which provides that an employment relationship with no specified term may be terminated at the will of either party. The court explicitly rejects the approach taken by California courts and aligns with the emerging majority of states that have declined to judicially create this exception to the at-will doctrine. The court reasoned that implying such a covenant would effectively abrogate the legislative statute, subject every termination to judicial review over the 'amorphous concept of bad faith,' and represent a judicial intrusion into a matter best left to the legislative process or collective bargaining. The court also rejected Hillesland's other claims, finding no implied private right of action for wrongful discharge under the Farm Credit Act and no evidence to overcome the presumption of at-will employment for his breach of contract claim.
Dissenting - Pederson, Surrogate Justice
The dissent disagrees with the majority's outright rejection of the implied covenant of good faith and fair dealing. The author argues that in all relationships, there is an obligation not to act in bad faith. The dissent suggests that courts should provide a remedy in appropriate circumstances involving an aggravated breach of this obligation or unconscionable conduct by the employer, even in an at-will context.
Analysis:
This decision solidifies North Dakota's strict adherence to the statutory employment-at-will doctrine. By explicitly rejecting the implied covenant of good faith and fair dealing, the court closed a path for wrongful discharge litigation that had been opened in other states. This ruling signals a strong policy of judicial restraint in employment law, deferring to the legislature to create any exceptions to the at-will rule. The case establishes a significant precedent that limits at-will employees' legal recourse for terminations perceived as unfair, forcing them to rely on express contractual provisions or specific statutory protections, such as anti-discrimination laws.
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