Guns in the Workplace
By far the most highly publicized controversy in the employment arena has concerned the right of Utah employees to bring firearms into the workplace. In Hansen v. America Online, Inc., 96 P.3d 950, 2004 UT 62, the Utah Supreme Court reviewed a trial court ruling that a private employer can prohibit its employees from bringing guns onto the employer's property. The action arose out of the employer's decision to terminate three employees because they transported firearms in their cars onto a leased employee parking lot for the purpose of an after-work target shooting outing. Id. at ¦¦2-4. In the employer's view, their conduct constituted an impermissible violation of its Workplace Violence Prevention Policy which, among other things, prohibited bringing weapons of any sort onto company property, including its parking lots. Id. On appeal, the employees argued that their terminations unlawfully violated "clear and substantial" public policy where the Utah Constitution explicitly provides that "[t]he individual right of the people to keep and bear arms for security and defense of self, family, others, property, or the state, as well as for lawful purposes shall not be infringed." Utah Const. art. 1, ¤6.

The Supreme Court's analysis was predicated on the "at-will" nature of the relationship between Utah employers and their employees, noting that exceptions thereto are narrow and of relatively recent origin. Id. at ¦¦8-14. Among the recognized exceptions is "exercising a legal right or privilege."1 Accordingly, the issue before the Court was whether the employees' constitutional right "to keep and bear arms" constitutes a "clear and substantial" public policy that displaces the at-will employment relationship.

The Court observed that Utah "employer[s] owe[] a duty to [their] employees . . . not to exploit the employment relationship by demanding that an employee choose between continued employment and violating a law or failing to perform a public obligation of clear and substantial public import." Id. at ¦10. On the other hand, an employer's insistence that its employees relinquish legal rights or privileges as a condition of employment "will not expose the employee[s] to possible criminal penalties or other legal sanctions." Id. at ¦11. In the Court's view, the balance tipped in favor of the employer's legitimate interest in "regulat[ing] the workplace environment to promote productivity, security, and similar business objectives" over the employees' interest in "maximiz[ing] access to their statutory and constitutional rights within the workplace." Id.

The Court noted that the "clear and substantial" public policy embodied in the Utah Constitution at Article 1, sec. 6, is subject to a qualifying provision that "nothing herein shall prevent the legislature from defining the lawful use of arms." Id. at ¦13. The Legislature recently exercised that authority when passing Firearms Laws, Utah Code ¤¤63-98-101 through -102, which laws are designed for the "sole purpose . . . to preempt efforts by the University of Utah to restrict the possession of firearms on its campus . . . ." Id. at ¦16. During debate, members of the Legislature stated that the new Firearms Laws were not intended to limit the right of private employers to restrict possession of guns in the workplace. Id. at ¦¦17-19. Accordingly, an employer who exercises that right is not in violation of any "clear and substantial" public policy. In particular, because no public policy was violated in connection with the contested terminations, the Supreme Court affirmed judgment for the defendant employer.

Employment Contracts
In Prince, Yeats & Geldzahler v. Young, 94 P.3d 179, 2004 UT 26, the Utah Supreme Court considered whether a law firm had entered into, and then breached, an employment contract with its associate attorney. (Significantly, the law firm brought a claim against the associate for breach of fiduciary duty, not treated herein.) Essentially, the associate asserted that the law firm breached two oral contracts with him: first, a promise that he would receive increased compensation and be elevated to shareholder status; and second, that he would receive a "fair and equitable" portion of fees for certain contingency fee cases. Id. at ¦¦2-7 (summarizing discussions between the law firm and the associate regarding the terms of his employment).

"Under the terms of his original employment agreement, which was never reduced to writing, the firm president indicated that, as a general rule, attorneys at the firm received increased compensation based on performance and positive results. Further, the usual partnership track for a lateral hire with [the associate's] experience ranged from two to three years, depending on performance." Id. at ¦2. Further, partners in the firm met with the associate to negotiate an appropriate allocation of contingency fees and communicated their intention to be "fair" in attempting to determine the amount of compensation that the associate would receive. Id. at ¦5. The parties reached a tentative verbal agreement on a one third/two thirds split between the associate and firm, respectively. The firm reduced the agreement to writing and requested that associate sign, but the associate instead made a "counteroffer" agreeing to the split provided his employer "made him a shareholder, allowed him a voice in that year's bonus distribution, and guaranteed an increased salary for the next two years." Id. at ¦6. When the parties continued to disagree on their respective rights and obligations, the firm filed suit for breach of fiduciary duty and the associate countersued for breach of oral contract. In the wake of a jury verdict in favor of the associate, the firm appealed denial of its motion for summary judgment on the contract claims. Id. at ¦¦6-7.

The Supreme Court held that discussions concerning the general relationship between performance and compensation, or the firm's usual practices concerning compensation and elevation to shareholder status, were too indefinite to create a contract. "Without some definite language addressing the amount, timing, or conditions of [the associate's] potential additional compensation . . . comments [by the firm president] represent only the facade of a promise, . . . statements made in such vague or conditional terms that the person making them commits himself to nothing. . . . [W]here there was simply some nebulous notion in the air that a contract might be entered into in the future, the court cannot fabricate the kind of a contract the parties ought to have made and enforce it." Id. at ¦14 (internal citations and punctuation omitted).

Likewise, the defendant law firm's statements regarding the anticipated "fair and equitable" division of a contingency fee were too indefinite to create an express contract. "[N]o agreement was ever reached on the integral feature of the alleged contract - [the associate's] compensation. Other than the tentative one-third/two-thirds division . . . , which [the associate] expressly rejected with his counteroffer, the parties never agreed upon the specific amount of, or formula to determine, [the associate's] share of fees. In the absence of any consensus on actual numbers or adoption of a mutually satisfactory method of calculating "fair and equitable" compensation, [the firm's] stated desire to be "fair" . . . , standing alone, is too indefinite to create a contractual obligation." Id. at ¦¦16-17. Accordingly, the Court reversed the trial court's denial of summary judgment on the contract claims and entered summary judgment for the defendant law firm.

Employer's Liability for its Agents
In Wardley Better Homes and Gardens v. Cannon, 61 P.3d 1009, 2002 UT 99, the Utah Supreme Court found a corporate employer liable for the misconduct of its agent. The facts were these: a real estate agent fraudulently extended the duration term in real estate listing agreements existing between his brokerage and certain property sellers. He changed the term from one day to one year. Id. at ¦¦2-3. When the sellers contracted with a second brokerage, and subsequently sold the properties to a principal of that brokerage, the first brokerage sued to enforce the contract stated in the listing agreements. Id. at ¦5. After the purchaser countersued for negligence, fraud and breach of contract, the brokerage expanded its suit to include claims for interference with contract, interference with prospective economic relationship, and conversion. Id.
Following a bench trial, the court ruled in favor of the purchaser, who thereafter moved for an award of attorney fees based on the "bad faith" statute, Utah Code ¤78-27-56. The trial court denied the motion, the purchaser appealed to the Supreme Court, and the case was poured over to the Utah Court of Appeals. The Court of Appeals rejected the purchaser's argument that, because the employer's agent fraudulently altered the listing agreements, the agent's knowledge of that act could be imputed to his employer and, ergo, the employer was guilty of bad faith in initiating the suit to enforce the fraudulently altered listing agreements. Wardley Better Homes and Gardens v. Cannon, 21 P.3d 235, 2001 UT App 48. The Court of Appeals reasoned that "[t]here is no legal support for the claim that vicarious liability should be applied in a manner that imputes the agent's knowledge to the principal to answer for the principal's own actions." Id. at ¦¦7-12. The purchaser appealed the case to the Supreme Court.

The Supreme Court agreed that, as a general rule, imputed knowledge is constructive and cannot be used when determining an individual's subjective mental state. However, the Court went on to hold that this limitation does not apply where the principal is a corporation "because a corporation has no belief or intent independent of that of its officers and agents" - thus a corporation's knowledge "is entirely imputed." Id. at ¦22. (citations and internal punctuation omitted). Consequently, the question of whether the first brokerage had acted in bad faith within the meaning of the "bad faith" attorney fee provision was answered by reference to the subjective mental state of its agent. Id. at ¦23.

The employer also argued that the real estate agent was an independent contractor, not an employee, and that the agent's fraudulent conduct exceeded the scope of his authority. The Supreme Court swiftly dismissed the first argument, reiterating its prior holding that "[t]he relationship between a real estate broker and its agents is that of employer and employee." Id. at ¦25 (citing White v. Fox, 665 P.2d 1297, 1301 (Utah 1983)). The Court went on to hold that the agent's fraudulent conduct was, indeed, within the scope of his authority. "[T]he fact that [the agent] committed fraud does not necessarily mean that he acted outside of his authority. Scope of authority refers to those acts which are so closely connected with what the servant is employed to do, and so fairly and reasonably incidental to it, that they may be regarded a methods, even though quite improper ones, of carrying out the objectives of the employment." Id. at ¦26 (citing Birkner v. Salt Lake County, 771 P.2d 1053, 1056 (Utah 1989)).

Damages for Breach of Employment Contract
In Kraatz v. Heritage Imports, 71 P.3d 188, 2003 UT App 201, the Utah Court of Appeals considered the proper measure of damages for wrongful termination in breach of the plaintiff's employment contract. Although the plaintiff was hired for a five-year term, he was fired after twenty-seven months. Id. ¦1. Following a trial court ruling that his termination was not wrongful, the plaintiff appealed and the case was reversed and remanded for a determination of damages. See Kraatz v. Heritage, 1999 UT App 70. The trial court then awarded the plaintiff certain direct damages and a portion of his attorney fees, but denied consequential damages as a matter of law, and the plaintiff appealed the case for a second time. 2003 UT App 201 ¦¦2-3.

On appeal, the Court of Appeals explained that the plaintiff was entitled to recover both general and consequential damages "to place the plaintiff-promisee in as good a position as he would have been in had the defendant-promisor not breached the contract." Id. at ¦4 (citing Williston, Law of Contracts ¤64:1 (4th ed. 2002)). General damages consisted of his salary over the remainder of his five-year employment contract, plus the value of an array of benefits lost as a result of his termination, including company stock, a profit bonus, club memberships, relocation expenses, health care expenses, attorney fees and costs, and prejudgment interest on any damages, including consequential damages, that were "fixed as of a particular time and measurable by facts and figures." Id. at ¦¦7-47, ¦¦56-81 (discussing measure of each damage category seriatim).

In addition, the Court explained that the plaintiff was entitled to recover whatever consequential damages - for example, the value of 401(k) contributions, Christmas bonuses and Jazz tickets - he could prove against the three-part test set forth in Mahmood v. Ross, 1999 UT 104, 990 P.2d 933, and Castillo v. Atlanta Casualty Co., 939 P.2d 1204 (Utah Ct. App. 1997). Id. ¦49. That test requires proof that (1) consequential damages were caused by the breach; (2) such damages were foreseeable at the time the parties contracted; and (3) the amount is provable "within a reasonable certainty." Id. The "reasonable certainty" standard is less exacting "than that required to establish the fact or cause of a loss. . . . [and] is met . . . if there is sufficient evidence to enable the trier of fact to make a reasonable approximation." Id. ¦54 (quoting Cook Associates v. Warnick, 664 P.2d 1161, 1166 (Utah 1983)). Because Mahmood's "reasonable certainty" factor has yet to be defined or applied in subsequent Utah case law, we may see a third appeal if the parties are unable to satisfactorily resolve their dispute on remand.

Preemption under the Utah Anti-Discrimination Act
In Gottling v. P.R. Inc., 61 P.3d 989, 2002 UT 95, the Utah Supreme Court considered whether to expand the common law tort of wrongful termination in violation of public policy to encompass causes of action based on discriminatory conduct by small businesses. The plaintiff alleged that she was terminated because she refused sexual overtures by the owner of the company where she was employed. Id. at ¦2. However, because the company employed fewer than fifteen (15) employees, she was unable to assert a sexual harassment claim under the Utah Anti-Discrimination Act ("UADA") which, like its federal analog, applies only to employers "employing 15 or more employees within the state for each working day in each of 20 calendar weeks or more in the current or preceding calendar year." Utah Code ¤34A-5-102(8)(a)(iv). Instead, the plaintiff asserted a common law claim for wrongful termination, and pointed to the UADA as evidence of Utah's "clear and substantial" public policy against workplace harassment. Id. at ¦3.

The Court's analysis turned on whether the Utah Legislature had intended the UADA to displace "the contemporaneous application and development of the common law" in Utah. Id. at ¦8. The Court held that the UADA's exclusive remedy provision explicitly states that intention, thereby preempting all common law causes of action based on the specific grounds listed therein: race, color, sex, retaliation, pregnancy, childbirth, pregnancy-related conditions, age, religion, national origin, and disability. Utah Code Ann. ¤34A-5-107(15). Moreover, since the UADA prohibits "employment discrimination" generally, its preemptive effect is not limited to those employers who employ 15 or more employees and are covered by the UADA. Rather, it preempts common law causes of action for employment discrimination against all employers, including small employers not subject to its prohibition on employment discrimination. Id. at ¦¦10-11.

In a companion case, Byers v. Creative Corner, Inc., 57 P.3d 1064, 2002 UT 96, the Utah Supreme Court applied the rule in Gottling to a wrongful termination claim where the asserted public policy was pregnancy discrimination. The Court affirmed the trial court's dismissal of the plaintiff's claim where the defendant employer employed fewer than 15 employees. Id. at ¦3.

Claim Preclusion
In Massey v. Board of Trustees of Ogden Area Community Action Committee, Inc., 86 P.3d 120, 2004 UT App 27, the Utah Court of Appeals considered the preclusive effect of a failed federal claim on the aggrieved employee's common law claim in Utah state court. Following his termination as a high-level executive with a Utah non-profit corporation, the plaintiff filed a claim in federal court pursuant to 42 U.S.C. ¤1983 ("Section 1983") which permits a private cause of action to redress violations of constitutional or other federal rights by state actors. Id. at ¦2. Massey alleged that his expectation of continued employment was a property interest, and that his termination deprived him of that interest without constitutional due process. Id. The federal court dismissed Massey's claim for failure to show that his former employer was a "state actor" within the meaning of Section 1983, which ruling was affirmed by the Tenth Circuit Court of Appeals. Id. ¦3.

Thereafter, Massey filed a second action in state court for breach of contract and wrongful termination in violation of public policy. The trial court granted summary judgment in favor of the defendant employer on the basis of res judicata, and the plaintiff appealed. Id. at ¦4. The state appellate court applied the federal law of claim preclusion (noting that the result would be same under to state law) which requires: (1) a judgment on the merits in an earlier action: (2) identity of the parties or their privies in both suits; and (3) identity of the cause of action in both suits. Id. at ¦9 (citation omitted). While conceding the second prong, the plaintiff protested that his claims asserted in the state court action were different from those adjudicated in the federal court because they were "different in fundamental theory" and the federal court's ruling on the "state actor" issue on his Section 1983 claim was merely a threshold matter that did not go to the merits.

The Court of Appeals rejected these arguments. First, because the facts underlying the plaintiff's Section 1983 claim were the same as those underlying his common law claims for breach of contract and wrongful termination, the claims were "related in time, space, origin and motivation, and form a convenient trial unit that may defendant could expect to be brought in one suit" - in short, his state law claims based on the same facts "could and should have [been] brought . . . in the prior suit." Id. at ¦12. Second, the Court held that the federal court's ruling on the "state actor" issue constituted a judgment on the merits because it constituted a necessary element of his Section 1983 claim. Id. at ¦¦14-15. Once the federal suit was disposed of with prejudice, that judgment foreclosed any possibility of reviving claims based on the same facts, albeit on different legal theories, in another forum. This result could have been avoided if the state law claims had been raised before the federal court at the outset of the litigation.

Conclusion
While your practice may not focus on employment law, if you represent employers or employees, you will likely face an employment law question. Hopefully, this update will help you keep up to date on state employment law issues.

1. The other exceptions are for: refusing to commit an illegal or wrongful act; performing a public obligation; and reporting an employer's criminal activity to a public authority. Id. at ¦9 (quoting Ryan v. Dan's Food Stores, Inc., 972 P.2d 395, 408 (Utah 1998)).