Sabetay v. Sterling Drug, Inc.

506 N.E.2d 919, 69 N.Y.2d 329, 514 N.Y.S.2d 209, 2 I.E.R. Cas. (BNA) 150, 1987 N.Y. LEXIS 15806
CourtNew York Court of Appeals
DecidedMarch 26, 1987
StatusPublished
Cited by364 cases

This text of 506 N.E.2d 919 (Sabetay v. Sterling Drug, Inc.) is published on Counsel Stack Legal Research, covering New York Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sabetay v. Sterling Drug, Inc., 506 N.E.2d 919, 69 N.Y.2d 329, 514 N.Y.S.2d 209, 2 I.E.R. Cas. (BNA) 150, 1987 N.Y. LEXIS 15806 (N.Y. 1987).

Opinions

OPINION OF THE COURT

Bellacosa, J.

Plaintiff asserts he was wrongfully discharged from employment because he refused to participate in certain improper, unethical and illegal activities, and because he "blew the whistle” on these alleged activities. He was employed by a division of the defendant corporation without a written contract, and alleges that his dismissal was in violation of two contractual obligations: the first arising from the "Corporate Employee Relations Policy” manual and the second arising from Sterling’s Code of Corporate Conduct and Internal Control Guide (together referred to as the "Accounting Code”).

The issue is whether plaintiff stated a cause of action by alleging that a statement in a corporate personnel policy manual created an enforceable contractual promise not to terminate him on any ground not mentioned in the manual, or by alleging that various corporate accounting policies constituted an employment agreement precluding plaintiff’s ter[332]*332mination for refusing to participate in allegedly improper activities.

From June 1972 to December 1984 plaintiff, a director of financial projects, was employed by Sterling International Group, a division of Sterling Drug. He had been administering the dissolution of Sterling’s Greek manufacturing facility. The liquidation was completed in June 1983. In February 1984, plaintiff was recalled to New York and was notified of his discharge in July, when no job within Sterling or any of its subsidiaries could be found for him.

Plaintiff alleges that he was discharged because he refused to participate in certain illegal activities (i.e., tax avoidance schemes and maintenance of slush funds) arising out of the liquidation of Sterling’s Greek manufacturing facility, and because he disclosed these activities to his supervisor in compliance with what plaintiff believed to be corporate policy. His complaint alleges four contract and three tort causes of action, all based on wrongful discharge from employment.

Defendant Sterling moved, pursuant to CPLR 3211 (a) (7), to dismiss the complaint on the ground that none of the seven causes of action stated a cognizable claim. Supreme Court dismissed the tort actions but denied the motion as to the four contract causes of action. The Appellate Division affirmed the dismissal of the causes of action sounding in tort and also dismissed the four claims based on a breach of an implied contract of employment. Although the complaint was dismissed in its entirety, plaintiff, on appeal to this court, challenges only the dismissal of the four contract causes of action. We agree with the Appellate Division that plaintiff has failed to state a cognizable cause of action for breach of any implied contract rights.

As the basis for the first breach of contract claim, Sabetay contends that Sterling’s personnel manual, which enumerates seven grounds for termination, establishes an implied promise that those are the only grounds for termination and that plaintiff’s termination without cause amounted to a breach of that implied contractual agreement.

The three remaining contract claims (plaintiff’s second, fourth and sixth causes of action) are based on Sterling’s written policies, which plaintiff contends require an employee to refrain from certain illegal or unethical activities and impose a duty on the employee to report such activities to senior management officials. Sabetay argues that these poli[333]*333cies, coupled with a statement on the employment application that all Sterling employees are to comply with company rules and regulations, create an implied agreement not to dismiss an employee for activity in accordance with these very policies.

It is still settled law in New York that, absent an agreement establishing a fixed duration, an employment relationship is presumed to be a hiring at will, terminable at any time by either party (Martin v New York Life Ins. Co., 148 NY 117, 121). The original purposes of the employment at-will doctrine were to afford employees the freedom to contract to suit their needs and to allow employers to exercise their best judgment with regard to employment matters.

In recent years, however, the unfettered power of employers to dismiss employees without cause has come under sharp scrutiny (see, Blades, Employment At Will vs. Individual Freedom on Limiting the Abusive Exercise of Employer Power, 67 Colum L Rev 1404 [1967]; and see generally, Note, Protecting Employees At Will Against Wrongful Discharge: The Public Policy Exception, 96 Harv L Rev 1931 [1983]). To offset the harsh effect of the at-will doctrine and to afford workers a measure of job security, other courts have carved out exceptions to the common-law employment at-will doctrine (see, Peterman v International Bhd. of Teamsters, 174 Cal App 2d 184, 344 P2d 25; Trombetta v Detroit, Toledo & Ironton R. R. Co., 81 Mich App 489, 265 NW2d 489; Novosel v Nationwide Ins. Co., 721 F2d 894 [3d Cir]; Sheets v Teddy’s Frosted Foods, 179 Conn 471, 427 A2d 385 [recognizing claims of wrongful discharge based on dismissal for refusing to commit an unlawful act, or for performing a public obligation or for exercising a legal right]; see also, Toussaint v Blue Cross & Blue Shield, 408 Mich 579, 292 NW2d 880 [recognizing an implied-in-fact agreement limiting the employer’s right to dismiss an at-will employee]; see also, Monge v Beebe Rubber Co., 114 NH 130, 316 A2d 549; Cleary v American Airlines, 111 Cal App 3d 443, 168 Cal Rptr 722 [recognizing an implied-in-law covenant of good faith and fair dealing in employment contracts which limits the right to discharge without just cause]).

In Weiner v McGraw-Hill, Inc. (57 NY2d 458), this court dealt with its long-standing acceptance of the common-law rule. The plaintiff, who had begun his career with another publishing house, was invited to join the staff of McGraw-Hill. As part of its recruitment effort, McGraw-Hill’s representative [334]*334assured the plaintiff that it was company policy not to terminate employees without just cause, and that employment at McGraw-Hill would bring the advantage of job security. Moreover, the application form Weiner signed specified that his employment would be subject to the provisions of the Mc-Graw-Hill handbook on personnel policies. The handbook stated that "[t]he company will resort to dismissal for just and sufficient cause only, and only after all practical steps toward rehabilitation or salvage of the employee had been taken and failed. However, if the welfare of the company indicates that dismissal is necessary, then that decision is arrived at and is carried out forthrightly” (id., at 460-461). Weiner alleged that he had relied on these assurances when he left his former employer, forfeiting accrued fringe benefits and a proffered salary increase.

After eight years of employment, Weiner was advised that he was discharged for "lack of application” (id., at 461). He sued, alleging a breach of contract. McGraw-Hill countered that there was no contract of employment and that its promises of job security were not binding. While we found for Weiner, we adhered to our view that an employer has the right to terminate an at-will employee at any time for any reason or for no reason, except where that right has been limited by express agreement.

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Bluebook (online)
506 N.E.2d 919, 69 N.Y.2d 329, 514 N.Y.S.2d 209, 2 I.E.R. Cas. (BNA) 150, 1987 N.Y. LEXIS 15806, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sabetay-v-sterling-drug-inc-ny-1987.