Tameny v. Atlantic Richfield Co.
164 Cal. Rptr. 839, 27 Cal. 3d 167, 610 P.2d 1330 (1980)
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Rule of Law:
When an employer discharges an employee for refusing to engage in illegal conduct that violates fundamental principles of public policy, the discharged employee may maintain a tort action for wrongful discharge and recover damages traditionally available in tort.
Facts:
- Gordon Tameny was hired by Atlantic Richfield Company (Arco) in 1960 and, after regular advancements, was promoted to retail sales representative in 1966.
- Beginning in the early 1970s, Arco and its district manager, McDermott, allegedly engaged in a combination to reduce, control, stabilize, fix, and peg retail gasoline prices of Arco service station franchisees.
- This conduct allegedly violated the Sherman Antitrust Act, the Cartwright Act, and a specific federal antitrust consent decree against Arco.
- Arco increasingly pressured Tameny to threaten and cajole independent service station dealers in his territory to cut their gasoline prices to levels specified by Arco.
- Tameny refused to yield to the pressure to engage in these illegal price-fixing tactics.
- Tameny's supervisor informed him that his discharge was imminent due to his refusal.
- Tameny was fired, effective March 25, 1975, with Arco's personnel records stating 'incompetence' and 'unsatisfactory performance,' but Tameny alleged the sole reason was his refusal to commit illegal acts.
Procedural Posture:
- Plaintiff Gordon Tameny instituted an action against his former employer, Atlantic Richfield Company (Arco), in trial court.
- Tameny's complaint alleged wrongful discharge based on tort theories (wrongful discharge, breach of the implied covenant of good faith and fair dealing, and interference with contractual relations), breach of contract, and treble damages under the Cartwright Act.
- Arco demurred to the complaint, contending that the allegations did not state a cause of action in tort and that the employee's remedy sounded only in contract.
- The trial court sustained Arco's general demurrer as to all tort counts and the antitrust count, with leave to amend for the latter, but allowed the breach of contract count to proceed.
- Tameny voluntarily dismissed the remaining contract count.
- The trial court then dismissed the entire action and entered judgment in favor of Arco.
- Tameny appealed the adverse judgment to the California Court of Appeal.
- The Court of Appeal affirmed the trial court judgment in all respects.
- Tameny filed a petition for hearing with the Supreme Court of California, confining his objections to the portion of the Court of Appeal decision that affirmed the dismissal of the tort causes of action.
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Issue:
Does an employee discharged for refusing to engage in illegal conduct at the employer's request have a cause of action in tort for wrongful discharge, allowing for compensatory and punitive damages, or is the employee's remedy limited solely to contract damages?
Opinions:
Majority - Tobriner, J.
Yes, an employee discharged for refusing to engage in illegal conduct at the employer's request may bring a tort action for wrongful discharge. The traditional common law rule of "at-will" employment is not absolute and is limited by considerations of public policy. Building on precedent like Petermann v. International Brotherhood of Teamsters (1959), which established that discharging an employee for refusing to commit perjury violates public policy, the Court affirmed that fundamental public policy prohibits an employer from discharging an employee who complies with a legal duty and refuses to commit an illegal act. The employer's obligation to refrain from such discharge is a duty imposed by law, not an express or implied contractual promise, reflecting fundamental public policies embedded in penal statutes. California law recognizes that a wrongful act committed in the course of a contractual relationship may afford both tort and contractual relief. Tort actions, unlike contract actions, are created to protect interests in freedom from harm, with duties imposed by law based on social policy. Prior California cases and decisions from other jurisdictions confirm the availability of a tort remedy when an employer's discharge contravenes public policy, even without an explicit statutory prohibition against the specific discharge. An employer's authority does not extend to demanding an employee commit a criminal act, and such coercion through discharge violates a basic legal duty.
Dissenting - Clark, J.
No, the employee's remedy for such misconduct should be limited to an action for breach of contract, not tort. The role of the court does not include overriding legislatively declared policy. Labor Code section 2922 provides that employment without a specific term may be terminated at will, and the Legislature has created limited, specific exceptions to this rule. By stating the general rule and expressly making exceptions, the Legislature intended no other judicial exceptions for now. Precedent like Petermann v. International Brotherhood of Teamsters (1959) only held that discharge for refusal to commit perjury constituted a breach of contract, not that it gave rise to tort liability. Other cases cited by the majority, where a duty originating in contract also gave rise to tort, are distinguishable because they involved an actual tortious act (e.g., wrongful ejection of a passenger) in addition to a contractual breach. In the present case, the alleged actionable conduct is only the termination of an employment contract, which, under established law, does not also constitute a tortious breach. The court is improperly creating new law and stepping into the legislative role, displaying insensitivity to its judicial function.
Concurring - Manuel, J.
Yes, the cause of action in this case flows from a clear statutory source, specifically Labor Code section 2856. This statute provides that an employee shall substantially comply with employer directions, 'except where such obedience is impossible or unlawful.' Therefore, there is no need to base the finding of a cause of action on the more 'vague and ill-defined dictates of “fundamental public policy.”'
Analysis:
This case is a seminal decision in California employment law, significantly curtailing the absolute nature of the "at-will" employment doctrine by establishing a robust public policy exception. It expanded employee protections beyond statutory prohibitions, recognizing that societal interests in preventing criminal acts outweigh an employer's right to discharge. The ruling's allowance of tort remedies, including compensatory and potentially punitive damages, greatly increased the financial stakes for employers who coerce employees into illegal conduct, shifting the balance of power in favor of employee integrity. This precedent has been crucial for the development of wrongful termination law, influencing how courts define and apply public policy exceptions in subsequent cases, and continues to be a cornerstone for protecting employees who act as 'whistleblowers' or refuse to participate in unlawful schemes.
