Lewis v. Oregon Beauty Supply Co.
714 P.2d 618, 77 Or. App. 663 (1986)
Rule of Law:
An at-will employment relationship can be the basis for a claim of intentional interference with economic relations, and a constructive discharge, where an employee resigns due to objectively intolerable working conditions, satisfies the termination element required for such a claim. While an employer cannot be liable for interfering with its own contract, its agents may be personally liable for such interference, and the employer can be vicariously liable for employees' outrageous conduct.
Facts:
- Plaintiff worked for Oregon Beauty Supply Company (OBSC), directly for Lawrence Stebbeds, OBSC’s principal owner and manager.
- Lawrence's son, Scott Stebbeds, supervised OBSC's warehouse, and plaintiff began dating him.
- When plaintiff desired to date other men, Scott became jealous and began treating her in a hostile manner at work, including 'glaring' at her, calling her names, searching her personal belongings, throwing things at her, and intentionally slamming a door into her.
- Scott spread false rumors about plaintiff, including that she was a drug addict and had given him a venereal disease, and intentionally withheld information critical to her job performance.
- Plaintiff complained to Lawrence about Scott's harassment, who initially agreed to speak with Scott but the harassment continued.
- Plaintiff complained to another supervisor, who also attempted to intervene, but subsequently quit her job.
- Plaintiff again met with Lawrence, who informed her that Scott would continue working at OBSC and that if she did not like it, she could quit, though he discouraged her from doing so; the harassment persisted.
- Approximately six months after the harassment began, plaintiff asked Lawrence for time off to seek new employment and for Scott to be kept away from her, to which Lawrence responded that it would be best if she quit.
- Plaintiff subsequently resigned from her employment at OBSC.
Procedural Posture:
- Plaintiff initiated an action in the trial court against OBSC, Scott Stebbeds, and Lawrence Stebbeds, asserting claims for intentional interference with economic relations and outrageous conduct.
- The trial court granted OBSC a directed verdict on both of plaintiff's claims (intentional interference and outrageous conduct).
- The trial court granted Lawrence Stebbeds a directed verdict on plaintiff's outrageous conduct claim.
- The jury found against Lawrence Stebbeds and Scott Stebbeds on the intentional interference claim, awarding $65,000 in general damages and punitive damages of $75,000 against Lawrence and $25,000 against Scott.
- The trial court subsequently granted Lawrence Stebbeds' motion for a judgment notwithstanding the verdict on the interference claim.
- The trial court denied Scott Stebbeds' similar motion for a judgment notwithstanding the verdict or a new trial on the interference claim.
- Plaintiff appealed the trial court's orders in favor of defendants OBSC and Lawrence Stebbeds.
- Defendant Scott Stebbeds cross-appealed the trial court’s denial of his motion for a judgment notwithstanding the verdict or a new trial on plaintiff's interference claim.
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Issue:
Does an at-will employment relationship support a claim for intentional interference with economic relations when an employee resigns due to objectively intolerable working conditions created by a co-worker's harassment, and can individual agents of the employer be held liable for such interference and outrageous conduct?
Opinions:
Majority - Van Hoomissen, J.
Yes, an at-will employment relationship can form the basis for an intentional interference claim, and a constructive discharge can establish the necessary termination. Furthermore, individual agents like Lawrence Stebbeds can be held personally liable for interference and outrageous conduct, but the employer (OBSC) cannot be liable for interfering with its own contract. The court first addressed Scott Stebbeds' cross-appeal, concluding that an at-will employment relationship can form the basis for an intentional interference claim, citing Restatement (Second) Torts § 766, Comment g, which states that such a contract is valid until terminated. The court then formally recognized the concept of 'constructive discharge' in Oregon, adopting an objective 'reasonable employee' standard, meaning an employee must show that 'the employer made conditions so intolerable that the employee reasonably felt compelled to resign.' The court found that Scott’s severe harassment, interference with plaintiff’s job, and the supervisors' inaction created conditions so intolerable that a reasonable person would have been compelled to quit, thus satisfying the constructive discharge requirement. Scott's conduct, which included sexual harassment (forbidden discrimination under Holien v. Sears, Roebuck and Co.), defamatory statements, and physical actions, constituted 'improper means' for interference. The court affirmed the denial of Scott’s motion for judgment notwithstanding the verdict on the interference claim. Regarding the appeal, the court held that Lawrence Stebbeds, as an agent ('vice principal') of OBSC and not its sole owner, could be held personally liable for acting in concert with Scott and acquiescing in the harassment, which amounted to interference with plaintiff’s employment relationship. Therefore, the trial court erred in granting Lawrence a judgment notwithstanding the verdict. However, the court found that OBSC could not be liable for intentional interference with its own employment contract, as liability for interference only applies to a third party. The court reversed the involuntary dismissal of the outrageous conduct claim against Lawrence and OBSC, stating that a reasonable jury could find Scott’s conduct outrageous, and Lawrence and OBSC could be held vicariously liable for it even if Scott was not a party to that specific claim. Finally, the court affirmed the punitive damages award against Scott, distinguishing it from cases like Wheeler v. Green and Hall v. The May Dept. Stores because Scott's actions involved both expressive and non-expressive conduct (e.g., throwing things, slamming doors), and thus were not solely protected speech. The jury could reasonably find that Scott intentionally disregarded plaintiff's rights.
Analysis:
This case is significant for formally recognizing the doctrine of constructive discharge in Oregon, adopting an objective 'reasonable employee' standard for its application, which focuses on the effect of the conditions on the employee rather than the employer's specific intent. It clarifies that an at-will employment relationship can support a claim for intentional interference with economic relations if 'improper means or purpose' is involved. The ruling establishes an important distinction between the liability of an employer's individual agents for interference with an employment contract (personally liable) and the employer itself (not liable, as it's a party to its own contract), while affirming that an employer can still be vicariously liable for egregious conduct by its employees.
