69 N.Y.2d 329 (1987)

Under New York law, an employee handbook or corporate policy does not create an enforceable contract limiting an employer’s right to terminate an at-will employee unless there is an express agreement to that effect, demonstrating explicit limitations on the employer’s right of discharge.

Summary

Sabetay, an at-will employee, alleged he was wrongfully discharged for refusing to participate in illegal activities and reporting them. He argued that Sterling’s employee manual and corporate policies created an implied contract guaranteeing job security. The court held that absent an express agreement limiting the employer’s right to terminate at-will employment, corporate policy manuals do not create enforceable contractual obligations. The decision reinforces the importance of clear, explicit language when attempting to create contractual limitations on at-will employment in New York.

Facts

Alexander Sabetay was a director of financial projects at Sterling International Group, a division of Sterling Drug, Inc., from June 1972 to December 1984. He managed the dissolution of Sterling’s Greek manufacturing facility. After the liquidation was completed, Sabetay was recalled to New York in February 1984 and terminated in July 1984 because no suitable position could be found within Sterling or its subsidiaries. Sabetay claimed his discharge stemmed from his refusal to engage in tax avoidance schemes and the maintenance of slush funds related to the Greek facility liquidation, and because he reported these activities internally.

Procedural History

Sabetay filed a complaint asserting four contract and three tort causes of action based on wrongful discharge. Sterling moved to dismiss the complaint. The Supreme Court dismissed the tort actions but upheld the contract causes of action. The Appellate Division affirmed the dismissal of the tort claims and also dismissed the contract claims. Sabetay appealed to the Court of Appeals, challenging only the dismissal of the contract causes of action.

Issue(s)

1. Whether a statement in a corporate personnel policy manual, which enumerates grounds for termination, creates an implied promise that those are the only grounds for termination, and whether a termination without cause amounts to a breach of that implied agreement.
2. Whether various corporate accounting policies, requiring employees to refrain from and report illegal or unethical activities, constitute an employment agreement precluding termination for refusing to participate in allegedly improper activities.

Holding

1. No, because New York law presumes at-will employment, terminable at any time by either party, absent an express agreement establishing a fixed duration or limiting the employer’s right to discharge.
2. No, because these policies, coupled with a statement on the employment application requiring compliance with company rules, do not create an express agreement not to dismiss an employee for acting in accordance with those policies; rather, they suggest standards for employee performance which, without more, are not actionable.

Court’s Reasoning

The Court of Appeals reaffirmed New York’s adherence to the at-will employment doctrine, allowing employers to terminate employees for any reason or no reason, unless expressly limited by agreement. The court distinguished the case from Weiner v. McGraw-Hill, Inc., where an express agreement was found in the employer’s handbook and employment application, coupled with assurances made to the employee during hiring. The court emphasized that Sabetay failed to demonstrate an express limitation on Sterling’s right to terminate his employment. The court cited Murphy v. American Home Products Corp. to reject the notion of an implied covenant of good faith in employment contracts, stressing that such an implied obligation would be inconsistent with the employer’s unrestricted right to terminate at will. The court stated that the language in Sterling’s personnel handbook and Accounting Code did not amount to an express agreement limiting Sterling’s right to discharge at will. The court underscored that significant alterations to employment relationships are best left to the legislature, as stability and predictability in contractual affairs is a highly desirable jurisprudential value.