Thomas v. Ballou-Latimer Drug Co.
1968 Ida. LEXIS 300, 92 Idaho 337, 442 P.2d 747 (1968)
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Rule of Law:
An employment contract that does not specify a duration is presumed to be terminable at will, but this presumption can be rebutted by the totality of the circumstances, including provisions for annual compensation and reviews, which may indicate the parties intended a contract for a definite term.
Facts:
- On February 16, 1962, George Thomas entered into an employment agreement with the Ballou-Latimer Trust to serve as General Manager of its drug store.
- The agreement specified a monthly salary, an annual bonus of 25% of net profits calculated as of December 31st each year, and required semi-annual inventories on June 30th and December 31st.
- The contract stated it would be reviewed each year as of December 31st to adjust for any inequities.
- The agreement provided an option for either party to terminate the contract on December 31, 1962, with 30 days' notice, an option neither party exercised.
- Thomas relocated from Washington to Idaho to accept the position.
- During his employment, Thomas alleged that he and the directors orally agreed to modify the method for calculating his 1963 bonus, a claim the directors denied.
- On February 12, 1965, Ballou-Latimer terminated Thomas's employment.
Procedural Posture:
- George Thomas (plaintiff) instituted an action against Ballou-Latimer (defendant) in a trial court to recover salary, bonus money, and vacation pay.
- The case was tried before a jury, which rendered a special verdict finding that Thomas was discharged without cause and that the parties had orally modified the bonus computation method for 1963.
- Based on the jury's verdict, the trial court judge determined the contract was for year-to-year employment and entered a judgment in favor of Thomas for his remaining 1965 salary and the 1963 bonus.
- Ballou-Latimer (defendant-appellant) appealed the judgment to the Supreme Court of Idaho.
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Issue:
Does an employment contract that lacks a specific duration clause, but includes provisions for an annual bonus, semi-annual inventories, and annual reviews, create an employment term for a definite period (year-to-year) rather than an at-will employment relationship?
Opinions:
Majority - Taylor, Justice
Yes, the contract created a year-to-year employment term. While Idaho follows the American Doctrine, which presumes that a hiring for an indefinite period is terminable at will, this presumption is rebuttable. The controlling factor is the intent of the parties, which is determined by looking at the totality of the circumstances. The court found that provisions for an annual bonus tied to December 31st, semi-annual inventories, an annual review of the agreement, the importance of the position, and the fact that Thomas relocated for the job, collectively support the trial court's factual finding that the parties intended a year-to-year employment contract. The court also affirmed the jury's finding of an oral modification to the bonus calculation, holding that whether evidence is 'clear and convincing' is a determination for the trier of fact and will not be overturned if supported by substantial evidence.
Analysis:
This decision solidifies Idaho's adoption of the American Doctrine of at-will employment while establishing a significant exception. It demonstrates that the at-will presumption is not conclusive and can be overcome by a factual inquiry into the parties' intent, based on the 'totality of the circumstances.' The case serves as a precedent for employees to argue that contract provisions tied to an annual cycle (like bonuses or reviews) imply a definite term of employment, even if the contract is silent on duration. Consequently, employers must be more cautious in drafting agreements to avoid unintentionally creating a fixed-term contract when an at-will relationship is intended.
