Opinion
Certified for Partial Publication .
Pursuant to California Rules of Court, rule 976.1, this opinion is certified for publication with the exception of parts 3, 5 and 6.
Review Granted Dec. 3, 1990.
Previously published at 230 Cal.App.3d 889 [Copyrighted Material Omitted] [Copyrighted Material Omitted] [Copyrighted Material Omitted] COUNSEL
Paul, Hastings, Janofsky & Walker, Andrew C. Peterson, Al Latham, Jr., and Paul W. Cane, Jr., Los Angeles, for defendants and appellants.
Irell & Manella, James N. Adler and Robert Barnes, Los Angeles, as amici curiae on behalf of defendants and appellants.
McCormick, Barstow, Sheppard, Wayte & Carruth, Stephen R. Cornwell and David H. Bent, Fresno, for plaintiff and respondent.
OPINION
FRANSON, Presiding Justice.
STATEMENT OF THE CASE
Ciba-Geigy Corporation, Steven Parker, Bruce Yergler and Joseph Prochaska (collectively appellants or Ciba-Geigy) appeal from the judgment entered on a jury verdict awarding $1.8 million dollars in compensatory and punitive damages to Gene Lanouette on his claims arising from an alleged breach of an employment contract. Specifically, the jury awarded Lanouette $100,000 for pain and suffering for tortious breach of the implied covenant of good faith and fair dealing, $100,000 for intentional infliction of emotional distress and $1 million in punitive damages, for total tort damages of $1.6 million. It also awarded $600,000 for breach of the termination-for-cause-only employment contract.
We hold as follows: (1) Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 254 Cal.Rptr. 211, (hereafter Foley ), bars all tort damages for breach of the implied covenant of good faith and fair dealing; hence, the judgment must be modified to delete the $100,000 award for such damages. (2) In answer to a question of first impression, Foley does not bar tort damages for the intentional infliction of emotional distress. Further, such a claim is not preempted by the worker's compensation law where there is no injury causing disability or the need for medical treatment. Since there is substantial evidence to support the $100,000 compensatory damage award for this tort, we affirm the award.
(3) Because we cannot determine whether the $1 million punitive damage award was based on the permissible finding of intentional infliction of emotional distress or on the impermissible finding of a breach of the implied covenant of good faith and fair dealing, we reverse the punitive damage award and remand for a new trial on that issue.
(4) We affirm the $600,000 award for breach of the employment contract, holding among other things that the jury properly computed Lanouette's lost wages for the remainder of his working years.
STATEMENT OF FACTS
Viewing the record in the light most favorable to the judgment shows the following. Ciba-Geigy, one of the largest agricultural chemical companies in the country, manufactures and markets herbicides, fungicides and insecticides to be used on crops. Ciba-Geigy sells its products either directly to farmers or through contracts with distributors of farm products to sell through their retail outlets. Gene Lanouette was a sales representative for Ciba-Geigy.
Lanouette worked in the northern California district of the western region. Steven Parker was the northern California district manager and Lanouette's immediate supervisor. Joseph Prochaska was the regional manager, and Bruce Yergler was the assistant regional manager. Parker reported to Prochaska and Yergler. Oliver Adams had been Lanouette's district manager from the early 1970's until January 1982.
After Lanouette graduated from college in June 1966, he went to work for Ciba-Geigy as a sales representative assigned to the Bakersfield territory. He was transferred to the Fresno territory in March 1969. The Fresno territory included Fresno, Madera, San Benito and Monterey Counties. It was a significant area to Ciba-Geigy because Fresno is the most productive agricultural county in the United States, and many of Ciba-Geigy's key customers are headquartered in the territory.
Lanouette's responsibilities as a sales representative were to familiarize customers with Ciba-Geigy products and to persuade them to sell or use them. Lanouette was one of the better informed sales representatives in the district regarding product labels, uses and restrictions. Lanouette was also particularly skilled in conducting training sessions for other sales representatives and was considered a leader among sales representatives in the district.
During his 17 years with the company, Lanouette was promoted from a level I to a level V sales representative. Level V was introduced in 1978 or 1979 to recognize superior, long-term sales representatives. Lanouette's sales increased from approximately $500,000 during his first year in the Fresno territory to approximately $3,814,000 in 1982.
The Ciba-Geigy crop year ran from October 1 to September 30. The sales representatives were evaluated annually at the end of the crop year. Ciba-Geigy analyzed its representatives in five "key areas": contracted customer development, territory sales development, expense management, communications and personal contribution and development. The review process was very detailed. The evaluator commented on the representative's performance in each key area and rated it as "exceeds expectations," "meets expectations" or "below expectations." The representative was also given an overall rating. That rating scale ran from "1" to "5," with "1" for performance beyond expectations in all or almost all key result areas; "2" for performance noticeably exceeding expectations in most key result areas; "3" for performance meeting expectations; "4" for performance in an acceptable fashion in most key result areas but with significant deficiencies in one or more areas; and "5" for inadequate performance to meet the requirements of the job. Lanouette's average overall rating over the years was approximately "2." He never received a rating lower than "3" before 1983.
Lanouette conducted his business from an office in his home. Because of the nature of the work, his hours varied from 6 a.m. to 10 p.m., depending on what needed to be done and the time of year. In addition to his daily sales activities, Lanouette was involved in a substantial amount of customer entertainment.
Over the years, there was a noticeable increase in the volume of paperwork required of the sales representatives. Ciba-Geigy management needed regular input from the sales representatives in the field in order to plan, implement and evaluate effective marketing strategies.
Lanouette was required to make weekly written accomplishment reports; however, there were times when due to the press of other business he did not submit the reports in a timely fashion. He would combine several weeks' reports in one. Lanouette was criticized in his annual reviews over the years for failing to submit separate and timely reports. Even the years he was promoted or was rated "1," his superiors criticized his performance in the communication key result area. However, he was never told that failure to submit timely reports would have an effect on his job security. According to Adams, most sales representatives and district managers had trouble submitting the written reports in a timely fashion. Hank Stuit, a sales representative in the Sacramento area, testified he was rated as "below expectations" in the communications key area consistently between 1980 and 1985 because of his late reporting.
When Adams retired, Parker became Lanouette's district manager in March 1982. Parker gave Lanouette his 1982 annual evaluation on December 22, 1982. Parker rated Lanouette as "below expectations" in communication and "exceeds expectations" in personal contribution and development. In the other key areas, Lanouette met expectations. He was rated a "3" overall. In the written evaluation, Parker told Lanouette that doubling up on weekly accomplishment reports was not acceptable and that Lanouette needed to complete more key customer call reports. Parker never suggested that Lanouette's job was in jeopardy, however, or that he was a candidate for probation.
Lanouette missed three weeks of work in December while on the president's trip to Hawaii, which he combined with a family vacation. The president's trip was a sales bonus awarded to sales representatives who exceeded their sales goals. On January 16, 1983, Lanouette developed a problem with his neck which forced him to miss another six weeks of work. While he was convalescing at home, he researched and wrote material for a training manual and various technical memoranda, but he was unable to contact his customers. Lanouette was back in the field on a limited basis during the first two weeks of March and returned to work at full capacity in April 1983.
During the 1983-crop year, because of various factors, Ciba-Geigy anticipated decreased sales. On May 4, 1983, Parker sent a memo to the six northern California sales representatives stating the district had been asked to decrease its operating expenditures for the rest of 1983.
Lanouette first learned Parker was very dissatisfied with his work at his six-month review on May 6, 1983. Before he wrote Lanouette's evaluation, Parker noted that Lanouette was behind in his work, and the company had received some complaints about him from customers. Parker wrote a very negative evaluation. Lanouette was rated below expectations in all key result areas. His overall performance was rated "5," and he was placed on a three-month probation. The evaluation did not mention Lanouette's accomplishments for the period.
Despite his absences, Lanouette accomplished a number of things that year. He organized and implemented the four-week long Pajaro Dunes meetings which were praised as innovative and beneficial to business in the company newsletter and by other sales representatives. He coordinated efforts to obtain governmental authorization to use Ridomil, a Ciba-Geigy product, on lettuce which resulted in $500,000 to $600,000 in new sales that year. He held a meeting with Sanger Nursery involving more than 400 growers and spoke at several large customer meetings about various Ciba-Geigy products.
Lanouette told Parker the evaluation was nothing but criticisms, which made Lanouette feel that someone was out to get him. Parker did not respond to his comments. Lanouette admitted that most of the criticisms were true but explained he was behind in accomplishing his objectives for the year because of his absences and his involvement with the new Ridomil label.
Parker also drafted a probation memorandum which set out specific assignments for Lanouette during the probation period. During that period, Parker would review Lanouette's performance on May 31, June 30 and August 1, 1983. Lanouette believed he would be on probation until August 1, and Parker did not suggest that Lanouette's failure to turn in an assignment on time would constitute grounds for immediate termination.
After reviewing the probation tasks, Lanouette protested that it was impossible for him to complete all the tasks by the due dates because he had normal sales activities and customer meetings already planned. Parker did not respond. Parker, Prochaska and Yergler had already agreed the assignments were realistic.
Adams reviewed the probation assignments before trial. He doubted if Lanouette or anyone could accomplish the tasks in three months. Don Wolfe, the sales representative who took over Lanouette's territory when Lanouette was terminated, opined that some of the due dates were unrealistic. If a sales representative were to do the normal things his job entailed plus the other assignments on the list, it would constitute a massive task. Lorna Galli, a former sales representative in the Modesto-Merced areas, testified that if a person worked seven days a week, twenty-four hours a day, the tasks could not be completed by the due dates. She believed the memorandum assignments would take about 45 days to accomplish. Hank Stuit, a retired Ciba-Geigy sales representative, testified the probation assignments included tasks a sales representative would not ordinarily do. Lanouette's probation memorandum reminded Stuit of an incident when Ciba-Geigy hired an individual by mistake and his supervisor gave him a list of so many things to do that he would be forced to quit.
Lanouette was confused and frustrated by the probation terms, but he worked weekends and evenings in addition to his regular work hours to accomplish the assignments. Despite a Ciba-Geigy policy to work with persons on probation to assist them to improve their performance, Parker did not call Lanouette or counsel him regarding his progress. Lanouette wanted feedback so he asked for a meeting with Parker on May 22. Lanouette told Parker it was obvious he was being set up to be fired and they needed to talk about it. Lanouette did not want to leave Ciba-Geigy, but asked if the company would allow him to resign with severance pay so he could continue his career in the agricultural chemical industry. Parker said he would look into the matter.
During the meeting on May 22, Lanouette handed Parker the projects he had completed hoping for positive feedback. Parker took the papers, put them aside and did not seem impressed.
At the June 1 meeting, Lanouette handed Parker the projects he had completed since May 22. Parker pulled out a notebook and recited the assignments Lanouette had not completed, which included those Lanouette had just handed him at the meeting. Lanouette assumed Parker was detailing his tasks for the month of June and took notes. Parker concluded, however, since Lanouette had not completed all the projects assigned for the month of May, he was recommending Lanouette's termination to the regional office. He also told Lanouette he would not receive severance pay but would be paid for accrued vacation time. Lanouette asked Parker if that meant he was fired. Parker nodded his head affirmatively.
Lanouette was extremely angry, upset and shaken by the events. He walked out of the meeting assuming he was terminated. Lanouette went to Adams's house. Adams described Lanouette as shaking and visibly upset. Adams gave him some medication to calm him. Lanouette waited with Adams until his wife came home from work. He told her what had happened, which was very difficult for him.
Prochaska asked Parker to send documentation describing the June 1 meeting to the regional office. Parker wrote a memorandum reflecting that Lanouette's progress was not satisfactory, and therefore, he was recommending his termination prior to the end of the three-month period. Sometime later, Parker learned his recommendation was not accepted and changed the wording of the memo. The revised memorandum indicated Lanouette was told Ciba-Geigy wanted to give him every opportunity for meeting expectations but that the decision would be his. The memorandum also indicated that Lanouette was told if all probation objectives were not met, it was unlikely that the probation period would be extended through July. Lanouette denied being told either.
Prochaska explained the memorandum was changed to reflect that personnel had not accepted the recommendation for termination. But he admitted Lanouette was not told the company wanted to provide him with every opportunity for meeting expectations.
When Parker terminated Lanouette, he instructed him to call Edith Faingnaert in the human relations department at the company headquarters regarding his termination. Lanouette called her on June 8 and told her he wanted an opportunity to complete his probation. She "talked down" to him and told him the problem was his, not Ciba-Geigy's. Lanouette referred her to the probation memorandum. She put him on hold, then came back and said he was not terminated. He was still on probation. Lanouette asked if Parker and Prochaska knew that. Faingnaert said they did. Lanouette met with Parker the next day, June 9, to discuss his June probation assignments. As the meeting was concluding, Parker said, "well, if nothing else, you will get at least two more weeks pay or more severance." Parker did not communicate again with Lanouette until July 1, 1983.
Lanouette returned to his work activities and called on his regular customers. He found that Parker and Wolfe had called on some of his customers. He was confused and embarrassed. He wondered if it was a foregone conclusion he would be terminated. Lanouette also learned that Ken Kemp, a national director of sales and logistics, had visited the territory. Parker had arranged a dinner with Kemp and several of Lanouette's customers but did not invite Lanouette. Lanouette considered his exclusion a "slap in the face." Nevertheless, he worked to accomplish all the tasks set forth in the June 9 memorandum.
On June 27, 1983, Parker compared the documentation he had received from Lanouette with the tasks assigned in the June 9 memo. Parker had not received much. Again he recommended Lanouette's termination. Yergler, the assistant regional manager who was filling in for Prochaska who was on vacation, concurred with the recommendation. Ciba-Geigy's human relations department received Parker's documentation and approved the decision to terminate Lanouette. Lanouette met with Parker on July 1 and turned in every assignment for June. Parker acknowledged that Lanouette came to the meeting with a substantial stack of material, but was upset that Lanouette had not submitted the assignments earlier. Although the memorandum directed Lanouette to submit only one report on a specific date, Parker felt Lanouette should have known he was supposed to turn in each project as he finished it.
Parker told Lanouette that because the paperwork had not been submitted in a timely manner and because all the projects for the May probation had not been completed, he was recommending Lanouette's termination effective July 15. Lanouette asked why he had been given false hopes and allowed to think he had a chance to survive if all that was going to be done was to give him two week's notice. Parker responded that was the way personnel handled things.
After Lanouette was terminated, Ciba-Geigy assigned Don Wolfe to the Fresno territory. When he worked in the Tulare and Kings County territory, Wolfe could complete his administrative duties, including paperwork, in less than eight hours a week. After he came to Fresno, his administrative workload increased to about 20 hours per week. His total hours on the job also increased. Wolfe added that being off the job for a month would put him at a disadvantage in terms of getting things done and would require him to revise priorities to accomplish those tasks which were most important. Other Ciba-Geigy employees agreed.
After Wolfe took over Lanouette's area, the "coast territory" was split off, and Wolfe's territory was limited to Fresno County so he could make more calls on Fresno County growers.
When he left Ciba-Geigy, Lanouette went to work with Adams in a consulting and sales training business. He made between $4,000 and $6,000 from July through December 1983 and between $15,000 and $20,000 during 1984. Lanouette tried to find another job in the agricultural chemical industry. He sent his resume to a number of chemical companies but received no interviews. He attended the Western Ag Chemical Association Weed Conference in January 1985 to job hunt. The conference had a career opportunity room where those seeking employment posted their resumes. Lanouette had done a lot of recruiting for Ciba-Geigy in that room. He posted his resume, and individuals questioned him or commented to him about his termination. Lanouette felt like a failure in front of his peers; the experience was humiliating.
Because he could not earn an adequate income in the consulting business, in April 1985 Lanouette invested in a Nevada Bob's Golf and Tennis franchise in Chico. He earned $2,000 a month from his new business. When he was fired from Ciba-Geigy, he was earning approximately $48,000 a year plus benefits. Lanouette's expert testified if Lanouette had worked at Ciba-Geigy until age 61, he would have earned substantially more than he could expect to earn at Nevada Bob's. By the expert's calculations, Lanouette lost $676,339.66 in past and future wages and benefits because of the termination.
DISCUSSION
1. Foley does not bar all tort damages for emotional distress flowing from employment termination.
Breach of the Implied Covenant of Good Faith and Fair Dealing Foley, 47 Cal.3d at page 700, 254 Cal.Rptr. 211, , held that tort remedies are not available for breach of the implied covenant of good faith and fair dealing in an employment contract to employees who allege they have been discharged in violation of the covenant. Newman v. Emerson Radio Corp. (1989) 48 Cal.3d 973, 993, 258 Cal.Rptr. 592, , held that Foley was retroactive to all cases not final on January 30, 1989. Foley applies to this case. Since the jury awarded Lanouette tort damages for such breach, the judgment must be modified to delete the $100,000 award for breach of the implied covenant.
Intentional Infliction of Emotional Distress
Ciba-Geigy argues that Foley should be broadly construed to also bar tortious emotional distress claims which arise solely from the employment relationship because the "employment relationship is fundamentally contractual." (Foley, 47 Cal.3d at p. 696, 254 Cal.Rptr. 211, .)
Usually when a party to a contract fails to perform, he is liable only for the economic losses that were foreseeable when the contract was formed. Even if the breach was malicious or caused the other party great inconvenience and worry, damages are limited to economic losses. To do otherwise would place too great a burden on the world of commerce where breach of contract is an economic fact of life. (Jung & Harkness, Life After Foley: The Future of Wrongful Discharge Litigation (1989) 41 Hastings L.J. 131, 140.)
In some contracts, however, deliberate breach is not acceptable. The California courts have held that breach of these contracts is so unacceptable that tort and punitive damages are available to deter those breaches. (Jung & Harkness, Life After Foley: The Future of Wrongful Discharge Litigation, supra, 41 Hastings L.J. at p. 140; Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809, 820, 169 Cal.Rptr. 691, .) Thus, an insured who is harmed by bad-faith breach of an insurance contract may recover damages to compensate for economic losses and for the emotional distress suffered as a result of the breach. The insured can also recover punitive damages if he can prove malice. (Jung & Harkness, Life After Foley: The Future of Wrongful Discharge Litigation, supra, 41 Hastings L.J. 131, 141.)
In Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167, 164 Cal.Rptr. 839, , the Supreme Court hinted that employment contracts might also be entitled to special protection. However, Foley concluded that while tort damages were appropriate for breach of the implied covenant of good faith and fair dealing in an insurance contract, such damages were not appropriate for breach of the implied covenant in an employment contract. The court reasoned the employment relationship is not sufficiently similar to that of insurer and insured to warrant judicial extension of traditional tort remedies in view of countervailing concerns about economic policy and stability, traditional separation of tort and contract law and the numerous protections against improper terminations already afforded employees. (Foley, 47 Cal.3d at p. 693, 254 Cal.Rptr. 211, .) Ciba-Geigy sees the same concerns in awarding damages for intentional infliction of emotional distress stemming from a wrongful termination.
In addition, Ciba-Geigy argues, because every employment termination is necessarily painful for the terminated employee, both types of tort claims would make it "difficult if not impossible to formulate a rule that would assure that only 'deserving' cases give rise to tort relief." (Foley at p. 697, 254 Cal.Rptr. 211, .) Further, there is in both instances the same need to avoid disputes over "the subjective intentions of the employer" that could not be "disposed of at the demurrer or summary judgment stage." (Ibid.) Finally, Ciba-Geigy believes sound policy dictates if the alleged wrongful conduct arose out of an employment activity, the need to shield employers from tort claims and to dispose of wrongful termination actions at an early stage, without trial, overrides any right of the injured employee to seek redress for the wrong.
We reject Ciba-Geigy's arguments for several reasons. First, there are significant differences between claims for breach of the implied covenant and intentional infliction of emotional distress, and different objectives underlie the remedies for each. The covenant of good faith and fair dealing was developed in the contract arena as a "safety valve" by which judges could fill gaps and qualify or limit rights and duties otherwise arising under specific contract terms. The courts employed the covenant to effectuate the contracting parties' intentions and to protect their reasonable expectations. (Foley at pp. 683, 684, 254 Cal.Rptr. 211, .) Thus, when the court enforces an implied covenant, it is protecting the interest of having promises performed--the traditional realm of a contract action--rather than protecting some general duty to society placed on the employer without regard to the substance of its contractual obligations to its employee. (Id. at pp. 689-690, 254 Cal.Rptr. 211, .) Contract damages, therefore, are the proper remedy when the employer breaches the implied covenant of good faith and fair dealing in the employment contract.
However, intentional infliction of emotional distress damages are aimed at remedying a different wrong. "Peace of mind is now recognized as a legally protected interest, the intentional invasion of which is an independent wrong, giving rise to liability without the necessity of showing the elements of any of the traditional torts." (5 Witkin, Summary of Cal. Law (9th ed. 1988) Torts, § 403, p. 483.) The modern rule defining intentional infliction of emotional distress is that there is liability for "outrageous" conduct which is especially calculated to cause, and does cause, mental distress. (Wallis v. Superior Court (1984) 160 Cal.App.3d 1109, 1120, 207 Cal.Rptr. 123.)
The usual employment contract breach does not entail "outrageous" behavior as defined in case law. Thus, the usual termination will not result in tort liability for the employer. There is no reason to shield from liability the occasional employer who, in addition to breaching an employment contract, also engages in conduct "so extreme as to exceed all bounds of that usually tolerated in a civilized community." (Cervantez v. J.C. Penney Co. (1979) 24 Cal.3d 579, 593, 156 Cal.Rptr. 198, .)
When an employer breaches an implied covenant or a term in the employment contract and also engages in behavior amounting to intentional infliction of emotional distress, he perpetrates two separate "wrongs," and the employee suffers injury in addition to the normal distress of termination. Thus, contract damages alone are not adequate to remedy emotional distress from outrageous behavior in addition to breach of the employment contract. Accordingly, the policies promoted by placing breach of the implied covenant damages in the contract context do not mandate a similar limitation for intentional infliction of emotional distress damages.
Second, allowing intentional infliction of emotional distress claims will not unduly deprive employers of discretion to dismiss an employee. While every termination is necessarily painful for the terminated employee, every termination is not accompanied by outrageous conduct. The difficulty in establishing outrageous conduct and intent assures that only "deserving cases" will give rise to tort relief. (See, e.g., Yurick v. Superior Court (1989) 209 Cal.App.3d 1116, 1129-1130, 257 Cal.Rptr. 665; Trerice v. Blue Cross of California (1989) 209 Cal.App.3d 878, 883, 257 Cal.Rptr. 338.) Thus, while pleading an independent tort cause of action may open the back door to the type of damages Foley foreclosed, it opens the door only a crack. (Jung & Harkness, Life After Foley: The Future of Wrongful Discharge Litigation, supra, 41 Hastings L.J. 131, 147.)
Third, pleading and proof of intentional infliction of emotional distress is not confined to disputes over "the subjective intent of the employer" that could not be "disposed of at the demurrer or summary judgment stage." (Foley 47 Cal.3d at p. 697, 254 Cal.Rptr. 211, .) Rather, the plaintiff must show outrageous conduct, an objective fact. Nonmeritorious cases can be weeded out prior to trial. (See, e.g., Yurick v. Superior Court, supra, 209 Cal.App.3d 1116, 1129-1130, 257 Cal.Rptr. 665; Trerice v. Blue Cross of California, supra, 209 Cal.App.3d 878, 883, 257 Cal.Rptr. 338.)
Fourth, there is no sound reason to immunize employers from liability for outrageous conduct associated with an employment activity that results in severe emotional distress for the employee. There can be little doubt that the threat of tort liability for outrageous conduct associated with termination will cause employers to adopt and implement procedures which make terminations more fair and less arbitrary. (Jung & Harkness, Life After Foley: The Future of Wrongful Discharge Litigation, supra, 41 Hastings L.J. 131, 148.) Thus, recognition of a separate remedy when the terminated employee can establish the elements of intentional infliction of emotional distress promotes an important public policy.
Finally, Foley approved tort recovery for discharges in violation of public policy. (Foley, 47 Cal.3d at p. 667, 254 Cal.Rptr. 211, .) Accordingly, appellants' argument that all employment decisions, right or wrong, are matters of contract, must fail. Foley does not preclude an award for intentional infliction of emotional distress stemming from an employment termination.
2. The intentional infliction of emotional distress claim is not preempted by the Workers' Compensation Act.
Labor Code section 3600 provides that an employer is liable under workers' compensation law "for any injury sustained by his or her employees arising out of and in the course of the employment." Section 3602, subdivision (a) provides that when an injury is compensable under section 3600, recovery under section 3600 is the employee's "sole and exclusive remedy."
All statutory references are to the Labor Code unless otherwise indicated.
In Renteria v. County of Orange (1978) 82 Cal.App.3d 833, 147 Cal.Rptr. 447, the court held that an employee could maintain an action for intentional infliction of emotional distress against his employer where he suffered emotional distress but no physical injury or disability. Renteria alleged his employer's acts caused him humiliation, mental anguish and emotional and physical distress. He did not allege that he suffered any physical illness or employment disability. (Id. at p. 840, 147 Cal.Rptr. 447.) The trial court sustained a demurrer on the ground workers' compensation provided the exclusive remedy for the wrongs alleged. The Court of Appeal reversed. It concluded that workers' compensation does not cover purely emotional injuries. Unless an action at law were permitted in cases where there was no physical injury or disability, the employee would be left without a remedy for the intentional tortious conduct. The court reasoned that an action for intentional infliction of emotional distress is part of a class of civil wrongs outside the contemplation of the workers' compensation system. Therefore, if the essence of the tort is nonphysical and injuries are of a nonphysical sort, the action should not be barred. (Id. at p. 842, 147 Cal.Rptr. 447.)
A number of cases followed Renteria, but others refused to allow a separate tort action where the employee alleged intentional infliction of emotional distress that resulted in emotional distress as well as physical injury or disability otherwise compensable under workers' compensation law. (Compare, e.g., McGee v. McNally (1981) 119 Cal.App.3d 891, 895-896, 174 Cal.Rptr. 253 with Ankeny v. Lockheed Missiles & Space Co. (1979) 88 Cal.App.3d 531, 535-536, 151 Cal.Rptr. 828.)
Such was the state of the law when the Supreme Court decided Cole v. Fair Oaks Fire Protection Dist. (1987) 43 Cal.3d 148, 233 Cal.Rptr. 308, . In Cole, the plaintiff alleged his employer engaged in such extreme on-the-job harassment that he suffered a totally disabling cerebral vascular accident. As a result, he could not move, care for himself, or communicate, other than by blinking. (Id. at p. 153, 233 Cal.Rptr. 308, .) The issue presented was whether an employee could maintain an action for intentional infliction of emotional distress against his employer and fellow employee when the conduct complained of caused mental and physical disability compensable under workers' compensation law. (Id. at p. 151, 233 Cal.Rptr. 308, .)
The court acknowledged the Renteria line of cases and commented that the physical injury/emotional injury distinction "presents an anomaly." "Intentional infliction of emotional distress which results in physical injury and disability is ordinarily more reprehensible than intentional infliction of emotional distress which does not result in disability, but civil action is allowed only in the latter situation." (Cole, supra, 43 Cal.3d at p. 156, 233 Cal.Rptr. 308, .) The court did not attempt to explain or justify the anomaly however, because Renteria was factually distinguishable in that Renteria did not suffer physical disability and Cole did. (Ibid.)
Instead, the court addressed whether the intentional character of the employer's conduct should provide an exception to the exclusive remedy rule of workers' compensation. The court concluded, "when the misconduct attributed to the employer is actions which are a normal part of the employment relationship, such as demotions, promotions, criticisms of work practices, and frictions in negotiations as to grievances, an employee suffering emotional distress causing disability may not avoid the exclusive remedy provisions of the Labor Code by characterizing the employer's decisions as manifestly unfair, outrageous, harassment, or intended to cause emotional disturbance resulting in disability. The basis of compensation and the exclusive remedy provisions is an injury sustained and arising out of the course of employment [citation], and [when] the essence of the wrong is personal physical injury or death, the action is barred by the exclusiveness clause no matter what its name or technical form if the usual conditions of coverage are satisfied." (Cole, supra, 43 Cal.3d at p. 160, 233 Cal.Rptr. 308, , emphasis added.)
Ciba-Geigy reads Cole broadly to hold that all emotional distress claims arising out of the employment relationship are preempted by the Workers' Compensation Act. Cole cannot be cited for that proposition. Cole did not address whether an emotional distress claim unaccompanied by physical distress or disability is barred by the workers' compensation exclusivity provision. (Pichon v. Pacific Gas & Electric Co. (1989) 212 Cal.App.3d 488, 495, 260 Cal.Rptr. 677.) Cole only held that employees who suffer emotional distress which results in physical injury or disability are barred from bringing a civil action by the exclusive remedy doctrine. Conversely, a complaint for intentional infliction of emotional distress unaccompanied by physical injury or disability is not barred by the exclusive remedy doctrine. (Green v. City of Oceanside (1987) 194 Cal.App.3d 212, 224-225, 239 Cal.Rptr. 470; Robards v. Gaylord Bros., Inc. (9th Cir.1988) 854 F.2d 1152, 1157; Miller v. Fairchild Industries, Inc. (9th Cir.1989) 885 F.2d 498, 510.)
To date, with one exception, no court has read Cole as precluding an emotional distress cause of action when the employee does not claim resulting physical injury or disability. The exception is Zilmer v. Carnation Co. (1989) 215 Cal.App.3d 29, 40, 263 Cal.Rptr. 422, where the entire discussion on the exclusivity of the workers' compensation law on "emotional distress" claims was in the context of a cause of action for breach of implied covenant of good faith and fair dealing. Zilmer did not involve a tort action for the intentional infliction of emotional distress.
In Hart v. National Mortgage & Land Co. (1987) 189 Cal.App.3d 1420, 235 Cal.Rptr. 68, the court criticized Renteria 's physical injury/emotional injury distinction as illogical and concluded that a more reasonable test for the workers' compensation versus suit-at-law choice was whether the acts complained of were a " 'normal part of the employment relationship' " or were "incidents of the employment relationship." (Id. 189 Cal.App.3d at pp. 1429-1430, 235 Cal.Rptr. 68.) However, the court concluded, intentional infliction of emotional distress continues to be one wrong for which workers' compensation provides no remedy. The Renteria exception must continue to be viable if injured workers are to have redress for wrongful acts committed by employers. "[W]hen employers step out of their roles as such and commit acts which do not fall within the reasonably anticipated conditions of work, they may not then hide behind the shield of workers' compensation." (Id. at p. 1431, 235 Cal.Rptr. 68.)
The physical injury/emotional injury distinction may be anomalous when applied in the wrongful termination situation. However, Cole did not overrule or disapprove Renteria, and Ciba-Geigy presents no compelling argument why this court should part company with Renteria. Accordingly, the workers' compensation exclusive remedy rule does not preclude Lanouette's claim for emotional distress.
3. There is substantial evidence to support the intentional infliction of emotional distress award.
See footnote *, ante.
4. The punitive damage award is tainted by reversal of the tort award for breach of the implied covenant of good faith and fair dealing.
The verdict form instructed the jurors that if they awarded breach of the implied covenant damages or intentional infliction of emotional distress damages, or both, they should proceed to the punitive damages issue. The punitive damage issue reads: "Did any of the Ciba-Geigy corporation managers act maliciously or oppressively toward the plaintiff?" The jurors answered "Yes" and awarded $1 million in punitive damages.
The pain and suffering damages awarded for breach of the implied covenant were improper under Foley, and that portion of the judgment must be reversed. Ciba-Geigy contends, as a result of the partial reversal, a new trial is necessary to redetermine punitive damages because the award does not separate the amount assessed as a result of the breach of the covenant from the amount assessed for the finding of intentional infliction of emotional distress.
The jury was instructed that in arriving at any award of punitive damages they should consider, among other things, the reprehensibility of defendant's conduct and that the punitive damages must bear a reasonable relation to the actual damages. Consequently, the $1 million punitive damages award may have been based on appellants' "reprehensible" conduct in breaching the implied covenant of good faith and fair dealing as well as on their outrageous, emotional distress causing behavior. Further, the amount awarded may have been calculated in relation to the combined amount of the awards. Where a jury verdict is erroneous in one part and the award of damages is not reasonably subject to separation, the judgment on that issue must be reversed. (Di Giorgio Corp. v. Valley Labor Citizen (1968) 260 Cal.App.2d 268, 276-279, 67 Cal.Rptr. 82.) This court cannot determine how the jury determined the punitive damages awarded. Thus, retrial of that issue is necessary.
Lanouette argues that since the intentional infliction of emotional distress findings support the punitive damages award, the award should stand. He relies on the principle that a judgment of the trial court will be sustained without regard to the reasons given if adequate grounds exist for the making of the judgment. (West Pico Furniture Co. v. Superior Court (1961) 56 Cal.2d 407, 413-414, 15 Cal.Rptr. 119, .) That principle is not applicable here. While the intentional infliction of emotional distress verdict and damages support a punitive damage award, we cannot say with certainty that those findings and award alone support the amount of punitive damages awarded. It is unreasonable to conclude that the jury did not base at least a portion of the award on the breach of the implied covenant findings and award.
Upon retrial of the punitive damages award, the second jury should be advised of the amount of general damages awarded for intentional infliction of emotional distress so it may maintain a reasonable relation between such damages and the punitive damages, if any, that it awards. (Brewer v. Second Baptist Church (1948) 32 Cal.2d 791, 802, .)
5.-6. 7. This court should not set a time limit for future damages in wrongful termination cases.
See footnote *, ante.
Amici curiae submit that we should adopt the reasoning of the California Fair Employment and Housing Commission and various federal courts and limit front pay for wrongfully terminated employees. They contend the employees should be compensated for future lost wages for only a few months to a few years, depending on the discharged employee's reasonable prospects of comparable employment.
Amici cite several cases involving claims under the Fair Employment and Housing Commission's jurisdiction as well as age and race discrimination suits brought under federal law. Those cases are inapplicable because they construe various types of statutory relief: reinstatement, back pay, front pay, attorney's fees, etc. (See, e.g., 42 U.S.C. § 2000e et seq.; 29 U.S.C. § 626(b).) Lanouette was awarded damages under California's contract law.
Traditional contract principles support the front pay award in this case. Amici make no compelling argument why future damages otherwise available under contract law should be limited in a wrongful termination suit.
DISPOSITION
The judgment is modified to delete the $100,000 award for breach of the implied covenant of good faith and fair dealing. The punitive damage award of $1 million is reversed and remanded for retrial on the intentional infliction of emotional distress finding. In all other respects, the judgment is affirmed. The parties are to bear their own costs.
MARTIN and BAXTER, JJ., concur.
Although Jenkins v. Family Health Program (1989) 214 Cal.App.3d 440, 449, 262 Cal.Rptr. 798, cited by appellant, did involve a claim for the intentional infliction of emotional distress, the cause of action alleged "physical" distress resulting from the employment termination and is therefore distinguishable.
The issue is currently before the California Supreme Court in Shoemaker v. Myers (1987) 217 Cal.App.3d 475, 237 Cal.Rptr. 686, review granted August 26, 1987 (S001726).