Under an oral contract of indefinite duration, Marlene S. Gates worked as a cashier for Life of Montana Insurance Company for more than three years prior to October 19, 1979, when she was called in to meet with her supervisor, Roger Syverson. Without any prior warning, she was given the option of resigning or being fired. She testified that while in a distraught condition and under duress, she signed a letter of resignation that was handed to her by Syverson. Gates stated that she signed the letter of resignation because she thought it would be better for her record and because Syverson told her he would give her a letter of recommendation so that she could be reemployed. Gates went home and discussed the situation with her husband, who advised her to retrieve the letter of resignation and inform her supervisor that she was not resigning. Appellant stated that she immediately called Syverson and demanded that the letter be returned, and that he promised to do so. Syverson testified that she only requested a photocopy of the letter. Syverson testified that he offered to give Gates a letter of recommendation if she resigned. However, he testified that he planned to give her only a letter that would state that appellant was employed by Life of Montana Insurance Company; he never intended to provide appellant with a favorable letter of recommendation. There was evidence from which a jury might infer that Gates understood she was to receive a favorable letter of recommendation and that Syverson allowed her to resign on this basis. The company contended that Gates was discharged for incompetence and insubordination. The evidence indicated that a resignation rather than a discharge may protect an employer from immediately becoming liable for unemployment compensation benefits in Montana and that by obtaining a letter of resignation, an employer may be insulating itself against a claim for wrongful discharge.
Montana law allows for the litigation of the question of whether there was a breach of an implied covenant of fair dealing when an employee is discharged without warning and an opportunity for a hearing. Montana law holds that a breach of the covenant of fair dealing is imposed by operation of law; therefore, its breach should find a remedy in tort for which punitive damages can be recovered if the defendant's conduct is sufficiently culpable, that is, if there was fraud, oppression, or malice.
The company contended that it was a legislative rather than a judicial function to create a cause of action that would apply a just-cause standard for the discharge of atwill employees and that, in any event, the company should not be liable for punitive damages if new legal rights are granted Gates, which rights could not have been known by the company at the time it terminated her.
Did the company breach its implied covenant of fair dealing to Gates when it terminated her? Should the company be held liable for punitive damages? Decide. [Gates v. Life of Montana Insurance Co., 668 P.2d 213 Mont., DLR No. 162]