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Martin v. Federal Life Insurance Co.





Appeal from the Circuit Court of Cook County, the Hon. Arthur A. Sullivan, Jr., Judge, presiding.


Rehearing denied October 22, 1982.

Plaintiff, George Martin, filed an action for damages allegedly caused by his wrongful termination from employment with defendant Federal Life Insurance Company. His second amended complaint contains three counts sounding in estoppel and breach of contract, breach of implied covenant of good faith and fair dealing, and tortious inducement of breach of contract. The trial court granted defendants' motion to dismiss the second amended complaint and plaintiff appeals from the judgment. The allegations of plaintiff's action follow.

In February 1954, plaintiff began working for Federal Insurance as personnel manager. In the next 22 years he was promoted to director of personnel and purchasing, assistant vice president, assistant secretary, chairman of the personnel committee, and second vice president and senior officer.

Plaintiff's complaint further alleges that on or about July 1967, he received and intended to accept an attractive job offer with a competing insurance company. In response to that information, the president of Federal, now deceased, promised that if plaintiff refused the offer he would retain plaintiff until he retired from all business pursuits or no longer wished to be employed at Federal, so long as he continued to perform satisfactorily. Plaintiff, in reliance of this promise, refused the competitor's offer and entered into an oral agreement for permanent employment with Federal.

In January 1976, the board of directors named plaintiff to the post of vice president of the company. A year later he was reelected by the full board. One month later, the executive committee, allegedly at the behest of defendant Joseph Austin, Federal's president, discharged plaintiff without cause. Plaintiff was not accused of any wrongdoing, poor performance or incompetence.

As a result of this discharge plaintiff states that he was denied the job security for which he had bargained when he entered into the agreement with Federal. Further, plaintiff alleges that Federal had other jobs to which he could have been assigned. The discharge was a stigma and impaired plaintiff's ability to find new opportunities. Defendant Austin's role in the firing, plaintiff alleges, was an attempt to "solidify his own personal control" over Federal's management and thereby assure his own job security "by eliminating experienced, capable managers who might detect errors in his decisions or bring such errors to the attention of the Board of Directors." The result was damage to employee morale, loss of the valuable services of plaintiff, and the inhibition to the free flow of information to Federal's board of directors. Plaintiff requests actual damages of $500,000 plus punitive damages for malicious conduct, and for interest and costs.

On November 20, 1980, the trial court granted defendants' motion to strike and dismiss the second amended complaint. The court's order stated that Illinois adopts the policy that "mere continuance as an employee is not sufficient consideration to support an alleged oral contract for permanent employment." The court also found that plaintiff's alternative theories failed to overcome the requirement of "separate, independent and substantial consideration." With respect to the allegations against defendant Austin individually, the court held that there could be no cause of action for tortious inducement of breach of contract since no contract existed between Federal and plaintiff. Finally, the court held that the allegations of Austin's interference with prospective economic advantage failed to state a cause of action. We reverse in part, affirm in part, and remand.



The primary issue before us is whether plaintiff's allegations of an oral agreement state a cause of action. Defendants view the employment agreement as a terminable at-will relationship that was legally terminated and maintain that the alleged agreement for "permanent" employment lacked sufficient consideration and mutuality of obligation. Alternatively, they contend that if a binding contract for permanent employment was formed, its enforcement is barred by the Statute of Frauds.

• 1 Before addressing the questions of consideration and mutuality it may be helpful to review the terminable at will doctrine, which has caused some confusion over the remedies available to a discharged employee. Generally, an employment agreement is formed when one party promises to render services in exchange for the other party's promise to pay wages. If the agreement does not specify a definite duration, it will last for as long as is mutually satisfactory, and either employer or employee may terminate the employment "at will," without liability for breach of contract. (Criscione v. Sears, Roebuck & Co. (1978), 66 Ill. App.3d 664, 667, 384 N.E.2d 91.) Thus, it has been held that employees at will may be discharged for any reason, or none at all. (Criscione v. Sears, Roebuck & Co. (1978), 66 Ill. App.3d 664, 670, 384 N.E.2d 91, 95.) In the usual case the employee is not entitled to prior notice or a hearing on the merits of his discharge. (Kraftco Corp. v. Kolbus (1971), 1 Ill. App.3d 635, 274 N.E.2d 153, 156-57.) Several limitations to the terminable at will concept have arisen, however. For example, an employee at will who is terminated for exercising his statutory right to file a workmen's compensation claim against his employer has a right of action for damages (Kelsay v. Motorola, Inc. (1978), 74 Ill.2d 172, 384 N.E.2d 353), as does an employee who is discharged for informing law enforcement officials of the criminal activity of a co-employee (Palmateer v. International Harvester Co. (1981), 85 Ill.2d 124, 421 N.E.2d 876). In these cases the employee's right to be free of a retaliatory discharge is grounded in public policy rather than from the employment relationship itself. See also Manuel v. International Harvester Co. (N.D. Ill. 1980), 502 F. Supp. 45, 51.

The Requirement of Consideration

• 2 In determining whether a contract is terminable at will, some courts> have stated that an agreement of permanent employment is not binding unless it is supported by "specially bargained for consideration," that is, something in addition to plaintiff's performance of his employment duties. As authority for this rule, defendants rely on certain language in Heuvelman v. Triplett Electrical Instrument Co. (1959), 23 Ill. App.2d 231, 161 N.E.2d 875.) In affirming a summary judgment for defendant employer, the appellate court stated:

"Oral contracts for `permanent employment' (meaning that as long as defendant was engaged in the prescribed work and as long as plaintiff was able to do his work satisfactorily, defendant would employ him) have been sustained, provided such contracts are supported by a consideration other than the obligation of services to be performed on the one hand and wages to be paid on the other." (23 Ill. App.2d 231, 235, 161 N.E.2d 875, 877.)

In Heuvelman, the plaintiff alleged that he had stayed in defendant's employ despite an offer from a competitor firm because defendant had orally promised him permanent employment. Of this alleged offer, the court remarked that it was "presented in such a vague, indefinite way that it is impossible to consider it an obligation." The employer supposedly told plaintiff, "as they walked down State Street in Chicago, that their arrangement was a permanent one." The court also stated, without elaboration, "It is not sufficient consideration for a contract of ...

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