Shebar v. Sanyo Business Systems Corp.
3 I.E.R. Cas. (BNA) 1385, 544 A.2d 377, 111 N.J. 276 (1988)
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Rule of Law:
An employer's specific oral promise to an individual employee to terminate employment only for cause can create an enforceable contract if the employee provides valuable consideration beyond continued service, such as forgoing a firm job offer from another company.
Facts:
- Arthur Shebar was employed by Sanyo Business Systems Corp. as a National Sales Manager.
- Dissatisfied with Sanyo's business practices and his prospects for advancement, Shebar sought and received a job offer from Sony Corporation.
- On October 1, 1984, Shebar tendered his written resignation to Sanyo to accept the Sony offer.
- Sanyo's president, Mr. Yamazaki, and executive vice president, Mr. Yamashita, refused to accept the resignation, with Yamazaki tearing up the letter.
- Yamazaki and Yamashita allegedly told Shebar he had a job for the rest of his life and that the company does not fire its managers.
- In reliance on these specific oral assurances of job security, Shebar revoked his acceptance of the Sony offer and remained with Sanyo.
- Approximately four months later, on February 5, 1985, Sanyo's new president fired Shebar.
Procedural Posture:
- Arthur Shebar sued Sanyo Business Systems Corp. in a New Jersey trial court, alleging breach of contract, fraud, tortious interference, outrage, and defamation.
- The trial court granted summary judgment for the defendant, Sanyo, on all counts.
- Shebar, as appellant, appealed the trial court's decision to the Appellate Division.
- The Appellate Division affirmed the dismissal of the outrage and defamation counts but reversed the summary judgment on the breach of contract, fraud, and tortious interference counts.
- The New Jersey Supreme Court granted Sanyo's petition for certification to review the Appellate Division's decision.
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Issue:
Does an employer's specific oral promise of continued employment terminable only for cause, made to an individual employee to induce them to reject a competing job offer, create an enforceable contract modifying the employee's at-will status?
Opinions:
Majority - Garibaldi, J.
Yes. An employer's specific oral promise of continued employment terminable only for cause, made to an individual employee to induce them to reject a competing job offer, can create an enforceable contract that modifies the at-will employment relationship. The court reasoned that this case is distinct from those involving vague assurances of 'lifetime employment' (Savarese) or company-wide policies in employee manuals (Woolley). Here, the claim is based on a special contract with a particular employee. The court found that Shebar presented a material issue of fact that Sanyo's promise was intended to induce him to stay and that he acted in reliance on it. Furthermore, Shebar's act of forgoing the job opportunity at Sony could constitute valuable consideration sufficient to support a contract. Such bargained-for promises—Sanyo retaining a valued employee in exchange for relinquishing its right to terminate at will—are sufficient for an enforceable contract, and the terms are not so indefinite as to be unenforceable. Therefore, the issue is a question for a factfinder, and summary judgment was improper.
Analysis:
This decision carves out a significant exception to the at-will employment doctrine based on individualized oral promises. It clarifies that while general promises of 'lifetime employment' are difficult to enforce, a specific promise of 'for cause' termination can be binding if supported by independent consideration. The case distinguishes between company-wide policies (governed by Woolley) and special, one-on-one agreements, providing a path for employees to enforce oral promises by showing they gave up something tangible, like a competing job offer, in a bargained-for exchange. This holding increases the potential liability for employers who make specific assurances to retain key employees and underscores the importance of consideration in modifying employment contracts.
