Mitch Tomlinson v. NCR Corporation

¶1 Following his termination from NCR Corporation, Appellee

Mitch Tomlinson brought suit challenging his termination on a

variety of grounds. The district court dismissed most of Mr.

Tomlinson's claims pursuant to rule 12(b)(6) of the Utah Rules of

Civil Procedure. Two of Mr. Tomlinson's claims survived NCR's

motion to dismiss: (1) wrongful termination in breach of an

employment contract and (2) breach of the implied covenant of good

faith and fair dealing. The district court subsequently granted

NCR's motion for summary judgment on both claims, reasoning that

Mr. Tomlinson had failed to present any evidence of an employment

contract between the parties sufficient to overcome the presumption

of at-will employment under Utah law.

TOMLINSON v. NCR CORP.

Opinion of the Court

2

¶2 Mr. Tomlinson timely appealed. The court of appeals

affirmed the rule 12(b)(6) dismissal but reversed the district court's

grant of summary judgment. NCR filed a petition for writ of

certiorari, which we granted. On certiorari, we examine "[w]hether

the court of appeals erred in holding that NCR's Corporate

Management Policy Manual could be read to create an implied

contract rebutting the presumption that Mr. Tomlinson was an atwill

employee and also permitting a claim for breach of the covenant

of good faith and fair dealing.”

¶3 We reverse the court of appeals because the language

contained in NCR's policy manual does not evidence an intent to

form an implied-in-fact contract sufficient to overcome the

presumption of at-will employment.

BACKGROUND

¶4 Mr. Tomlinson was employed by NCR as a customer

engineer, a position in which he was responsible for servicing and

repairing ATMs at customer locations. NCR terminated Mr.

Tomlinson's employment for "failure to properly manage [his] time

reporting and improve [his] call management procedures.” At the

time of his termination, Mr. Tomlinson had been employed by NCR

for approximately ten years.

¶5 Mr. Tomlinson, appearing pro se, filed suit against NCR,

alleging thirteen causes of action. NCR moved to dismiss eleven of

Mr. Tomlinson's claims pursuant to rule 12(b)(6) of the Utah Rules

of Civil Procedure. After briefing and a hearing, the district court

granted NCR's motion to dismiss. Following the court's order, Mr.

Tomlinson's only surviving claims were for wrongful discharge

based on an alleged breach of contract and breach of the implied

covenant of good faith and fair dealing.

¶6 The parties commenced discovery, after which NCR moved

for summary judgment on Mr. Tomlinson's remaining claims. The

district court granted NCR's motion for summary judgment, and

Mr. Tomlinson filed a motion to alter or amend the judgment

pursuant to rule 59 of the Utah Rules of Civil Procedure. The court

denied Mr. Tomlinson's motion, and he timely appealed.

¶7 Before the court of appeals, Mr. Tomlinson argued that the

district court erred when it dismissed his claims under rule 12(b)(6)

of the Utah Rules of Civil Procedure. Tomlinson v. NCR Corp., 2013

UT App 26, ¶ 5, 296 P.3d 760. He also argued that the district court's

grant of summary judgment on his remaining two claims was

Cite as: 2014 UT 55

Opinion of the Court

1 Following oral argument, Mr. Tomlinson filed a motion to

compel arbitration. We hereby deny the motion because Mr.

Tomlinson waived his right to arbitrate. A party who has agreed to

an arbitration clause waives the right to arbitrate "if the opposing

party can demonstrate (1) that the party seeking arbitration substantially

participated in the underlying litigation to a point inconsistent

with the intent to arbitrate; and (2) that this participation resulted in

prejudice to the opposing party.” Educators Mut. Ins. Ass'n v. Evans,

2011 UT App 171, ¶ 65, 258 P.3d 598 (internal quotation marks

omitted). In this case, Mr. Tomlinson has actively participated in

litigation since 2009, including filing a complaint, conducting

discovery, pursuing his case through summary judgment, and

appealing the trial court's judgment. NCR will suffer prejudice if

Mr. Tomlinson is allowed to compel arbitration because of the

wasted expense incurred in the last five years of litigation and

additional expense of arbitration.

NCR seeks an award of attorney fees under rule 33(a) of the Utah

(continued...)

3

improper. Id. ¶ 6. Specifically, Mr. Tomlinson argued that NCR's

Corporate Management Policy Manual (Manual) created an implied

contract that rebutted the presumption of at-will employment under

Utah law. Id. ¶ 31.

¶8 The court of appeals affirmed the rule 12(b)(6) dismissal of

Mr. Tomlinson's claims, but reversed the district court's grant of

summary judgment on his claims for wrongful discharge and breach

of the implied covenant of good faith and fair dealing. Id. ¶ 47. The

court of appeals concluded that Mr. Tomlinson had raised an issue

of material fact as to whether NCR intended to limit its right to

terminate Mr. Tomlinson at will. Id. ¶ 45. Because the court of

appeals concluded that Mr. Tomlinson had raised a factual dispute

as to the existence of an implied contract, it also reversed summary

judgment on his claim of breach of the implied covenant of good

faith and fair dealing. Id. ¶ 46.

¶9 We granted certiorari on the issue of "[w]hether the court

of appeals erred in holding that [NCR's] Corporate Management

Policy Manual could be read to create an implied contract rebutting

the presumption that [Mr. Tomlinson] was an at-will employee and

also permitting a claim for breach of the covenant of good faith and

fair dealing.” We have jurisdiction pursuant to section 78A-3-

102(3)(a) of the Utah Code.1

TOMLINSON v. NCR CORP.

Opinion of the Court

1(...continued)

Rules of Appellate Procedure, which provides that the court may

award reasonable attorney fees if a motion is either "frivolous or for

delay.” While we deny the motion to compel arbitration, we decline

to award fees.

4

STANDARD OF REVIEW

¶10 On certiorari, "we review the decision of the court of

appeals, not the decision of the district court.” Bangerter v. Petty,

2009 UT 67, ¶ 10, 225 P.3d 874 (internal quotation marks omitted).

"We review the court of appeals' decision for correctness, with

particular attention to whether [it] reviewed the [district] court's

decision under the correct standard.” Id. (alterations in original)

(internal quotation marks omitted). Summary judgment is

appropriate when "there is no genuine issue as to any material fact

and . . . the moving party is entitled to a judgment as a matter of

law.” UTAH R. CIV. P. 56(c). We view all of the facts and any

reasonable inferences drawn therefrom "in the light most favorable

to the nonmoving party.” Massey v. Griffiths, 2007 UT 10, ¶ 8, 152

P.3d 312 (internal quotation marks omitted). But "the district court's

legal conclusions and ultimate grant or denial of summary judgment

are reviewed for correctness.” Id.

ANALYSIS

I. MR. TOMLINSON FAILED TO OVERCOME THE

PRESUMPTION OF AT-WILL EMPLOYMENT

¶11 NCR argues that the court of appeals erred when it reversed

the district court's grant of summary judgment. The district court

granted NCR's motion for summary judgment because Mr.

Tomlinson failed to present "evidence that . . . the intent of NCR in

this case was to enter into an agreement” sufficient to overcome

Utah's presumption of at-will employment. An employment

relationship for an indefinite term gives rise to a presumption that

the employment relationship is at will. Fox v. MCI Commc'ns Corp.,

931 P.2d 857, 859 (Utah 1997); Johnson v. Morton Thiokol, Inc., 818 P.2d

997, 1000 (Utah 1991). Such a relationship allows "both the

employer and the employee to terminate the employment for any

reason and allows the employer to do so without extending any

procedural safeguards to an employee.” Fox, 931 P.2d at 859; see also

Hansen v. Am. Online, Inc., 2004 UT 62, ¶ 7, 96 P.3d 950 (noting that

an at-will employment relationship may be terminated by either

Cite as: 2014 UT 55

Opinion of the Court

5

party "for any reason (or no reason) except where prohibited by

law”). But a "plaintiff/employee may overcome this presumption

by showing that the parties created an implied-in-fact contract,

modifying the employee's at-will status.” Hodgson v. Bunzl Utah,

Inc., 844 P.2d 331, 333 (Utah 1992). In the absence of an express

employment agreement, the employee bears "the burden of

establishing the existence of an implied-in-fact contract provision.”

Johnson, 818 P.2d at 1001.

¶12 "The existence of such an agreement is a question of fact

which turns on the objective manifestations of the parties' intent. . . .

[and] is primarily a jury question.” Id. But we may properly

determine the existence of an implied contract as a matter of law if

no reasonable jury could find such a contract and if the evidence

relied on by the parties presents no triable issues of fact. Cabaness v.

Thomas, 2010 UT 23, ¶ 56, 232 P.3d 486. Relevant evidence of the

parties' intent may include announced personnel policies,

employment manuals, the course of conduct between the parties,

and relevant oral representations. Id. ¶ 57; see also Hodgson, 844 P.2d

at 333–34; Berube v. Fashion Centre, Ltd., 771 P.2d 1033, 1044 (Utah

1989).

¶13 Evidence of an implied contract "must meet the

requirements for an offer of a unilateral contract.” Johnson, 818 P.2d

at 1002. This is because the employer's promise of employment

consistent with certain provisions for an indefinite term constitutes

the employer's consideration for the contract and the terms of the

contract itself. Id. In return, the employee's performance of his job

consistent with the promised provisions constitutes the employee's

acceptance of the contract terms, as well as his consideration. Id.

Accordingly, the employer must communicate a manifestation of

intent to the employee that is sufficiently definite to constitute a

contract provision. Id.; see also Cabaness, 2010 UT 23, ¶ 55.

¶14 We have consistently held that "an employer's internally

adopted policies and procedures concerning discharge can be

sufficient evidence to rebut the presumption of at-will employment

and can, in effect, become part of the contractual relationship

between the employer and the employee.” Caldwell v. Ford, Bacon &

Davis Utah, Inc., 777 P.2d 483, 485 (Utah 1989); see also Brehany v.

Nordstrom, Inc., 812 P.2d 49, 54 (Utah 1991); Berube, 771 P.2d at

1044–46. In Caldwell, we recognized that the existence of an internal

policy manual detailing procedures required before an employee

could be terminated for cause may be sufficient to raise a factual

TOMLINSON v. NCR CORP.

Opinion of the Court

2 At oral argument, Mr. Tomlinson also relied on Policy Number

706, arguing that Policy 210 must be read in conjunction with NCR's

internal dispute resolution processes contained in Policy 706.

However, this argument was not preserved at the district court, nor

mentioned in Mr. Tomlinson's briefs. Accordingly, we do not

address this argument. "We generally will not consider an issue

unless it has been preserved in the court below.” Baird v. Baird, 2014

UT 8, ¶ 20, 322 P.3d 728 (internal quotation marks omitted).

6

question as to whether the presumption of at-will employment had

been rebutted. 777 P.2d at 485–86.

¶15 In this case, Mr. Tomlinson points to NCR's Corporate

Management Policy Number 422 (Policy 422) and Policy Number

210 (Policy 210) in support of his contention that NCR was required

to comply with internal procedures prior to terminating his

employment.2 Mr. Tomlinson argues that Policy 422 and Policy 210

both evidence NCR's intent to create an implied-in-fact contract with

its employees.

A. Policy 422 Does Not Constitute an Implied-in-Fact Contract

¶16 NCR argues that the court of appeals erred when it drew a

negative inference from Policy 422's distinction between tactical and

core workforce employees to support its conclusion that Policy 422

constituted an implied-in-fact employment contract. Policy 422

specifically designates NCR's tactical workforce employees as at

will, but it is silent as to the status of NCR's core workforce.

Tomlinson v. NCR Corp., 2013 UT App 26, ¶¶ 34, 36, 296 P.3d 760.

Mr. Tomlinson asserts that Policy 422's silence regarding the at-will

status of core employees gives rise to an inference that NCR

intended to limit its ability to terminate those employees without

cause. Id. The court of appeals relied on our ruling in Cabaness to

support its conclusion that the limited at-will designation of tactical

employees was sufficient to raise a factual dispute as to the at-will

status of core employees. Id. We conclude that any negative

inference to be drawn from Policy 422 is insufficient to overcome the

presumption of at-will employment under Utah law. Accordingly,

the court of appeals erred.

¶17 Policy 422 distinguishes between NCR's "core workforce

who perform ongoing work which is necessary for the continuing

operation of the business and a workforce buffer that sets the

staffing arrangements that will allow for expansion and

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Opinion of the Court

7

contraction.” Id. (internal quotation marks omitted). Supplement A

to Policy 422 describes the tactical workforce, which consists of

temporary employees who are employed with NCR on an as-needed

basis. These employees are distinguished from those in the core

workforce, who are expected to work a certain number of hours per

pay period. Section 5 of Supplement A, which specifically governs

tactical employees, states, "[E]mployment at NCR is AT WILL. No

statement in this policy implies any guarantee of employment or

length of employment.” But Policy 422 does not contain any similar

statements regarding full-time or core employees. NCR conceded

that Mr. Tomlinson was a member of NCR's core workforce, but

nevertheless contends that he was an at-will employee. Mr.

Tomlinson argues that the "limited at-will statement” contained in

Policy 422 is evidence to the contrary.

¶18 In Cabaness, an employee brought a wrongful termination

claim against his employer, Bountiful City, alleging that an

employee manual created an implied contract. 2010 UT 23, ¶¶ 15,

47. The language in the employee manual contained affirmative

promises that certain policies would be followed in the event an

employee complained of harassment. For example, the policy

manual stated, "City policy will not tolerate verbal or physical

conduct by any employee which harasses.” Id. ¶ 59 (emphasis

added). It also stated that harassment "shall not be tolerated by the

City,” harassment and violence was "strictly prohibited,” and "[a]ny

such form of reprisal will render the official or employee subject to

disciplinary actions.” Id. We held that the definitive statements in

the employee manual were evidence of an implied-in-fact contract

because they displayed the City's intent to voluntarily undertake

additional duties beyond an employer's normal obligations to its

employees. Id. ¶¶ 59–60.

¶19 The City relied on a disclaimer that stated, "No contract

exists between [the City] and its employees with respect to salary,

salary ranges, movement within salary ranges, or employee

benefits.” Id. ¶ 58 (emphasis added). We held that this statement

did not absolve Bountiful City of all contractual liability because the

express language limited the disclaimer to the specifically listed

items related to salary. Id. Because there was an express restriction

limiting the disclaimer to certain items, we inferred that Bountiful

City "intended to create a contract with its employees with respect

to the items in the Employee Manual that are not specifically listed

in the disclaimer.” Id.

TOMLINSON v. NCR CORP.

Opinion of the Court

8

¶20 The court of appeals incorrectly relied on Cabaness in

holding that a negative inference can overcome the presumption of

at-will employment. The court of appeals stated that the "limited atwill

statement” contained in Policy 422 was comparable to the

"limited” disclaimer contained in Cabaness. Tomlinson, 2013 UT App

26, ¶¶ 34–36. But in Cabaness, it was definitive language in Bountiful

City's employment manual that created the implied-in-fact contract.

2010 UT 23, ¶ 59. While the "limited” disclaimer failed to disclaim

liability created by these implied contract terms, it was not the

"limited” disclaimer itself that gave rise to an implied-in-fact

contract. Id. ¶ 58. In contrast, Policy 422 does not contain any

definitive provisions creating an implied-in-fact contract. Instead,

the policy contains a broad statement, "[e]mployment at NCR is AT

WILL,” when referencing the tactical workforce. The policy is

simply silent as to the status of core workforce employees. And

mere silence is not sufficient evidence to rebut the presumption of

at-will employment. Accordingly, we hold that Policy 422 does not

raise a factual dispute as to the existence of an implied-in-fact

contract.

B. Policy 210 Disclaimed Any Contractual Liability

¶21 We next consider whether Policy 210 can be the basis of an

implied-in-fact contract between NCR and its employees. The court

of appeals held that Policy 210 contains definitive command

language regarding termination procedures on which an employee

could reasonably expect to rely. Tomlinson, 2013 UT App 26, ¶ 39.

It further held that this definitive language created a mandatory

policy to be followed for employees in need of performance

improvement, and thus "a reasonable jury could find an implied

contract limiting NCR's right to terminate Tomlinson at-will.” Id.

¶ 45. The court of appeals also held that the disclaimer contained in

Policy 210 was insufficient as a matter of law to prevent the

formation of an implied-in-fact contract because the language "does

not specifically state that employment at NCR is 'at-will,' nor does

it define the voluntary nature of the employment relationship.” Id.

¶ 44.

¶22 Mr. Tomlinson argues that NCR was required to comply

with the internal procedures articulated in Policy 210 prior to

terminating his employment. Policy 210 contains NCR's procedures

for addressing both employee misconduct and deficient

performance. It indicates that incidences of misconduct "may result

in a range of responses from a written warning up to termination.”

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Opinion of the Court

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But it states that issues involving deficient performance will "result

in a Performance Improvement Plan (PIP) with stated requirements

for improvement.” It then details a series of phases that managers

are instructed to initiate "immediately” whenever an employee's

performance falls below expectations.

¶23 Policy 210 also requires NCR managers to review an

employee's performance to assess the performance gap, prepare a

PIP with clear goals and a timetable for improvement, deliver the

PIP to the employee with detailed instructions, and conduct routine

follow-up sessions to assess the employee's progress. If an

employee meets all of the performance goals, managers are

instructed to "formally close out the 'PIP' with the employee.” In

the event that an employee fails to maintain satisfactory

performance, managers are instructed to issue a "Final Warning”

letter.

¶24 In addition to offering Policy 210, Mr. Tomlinson argues

that the parties' course of conduct over the ten years in which he was

employed at NCR corresponded to NCR's Manual. For example,

Mr. Tomlinson asserts that he had successfully completed a PIP in

June of 2004. Mr. Tomlinson also offers his 2004 annual performance

review as evidence that NCR was following its own internal

employee evaluation procedures.

¶25 Even if Mr. Tomlinson is correct that the terms of Policy 210

and NCR'a course of conduct may have created an implied-in-fact

contract between NCR and its employees, Utah law allows

employers to disclaim any contractual relationship that might

otherwise arise from employee manuals. We have recognized that

a "clear and conspicuous disclaimer, as a matter of law, prevents

employee manuals or other like material from being considered as

implied-in-fact contract terms.” Johnson, 818 P.2d at 1003. "[W]hen

an employee handbook contains a clear and conspicuous disclaimer

of contractual liability, any other agreement terms must be

construed in the light of the disclaimer.” Hodgson, 844 P.2d at 334.

¶26 We will "interpret any conduct, oral statement, or written

sentence asserted to be a term in a contract in a manner harmonious

to the overall meaning of the contract,” taking into account the

disclaimer language. Id. The prominence of the text, the placement

of the disclaimer, and the language of the disclaimer are all relevant

factors in determining whether a disclaimer is clear and

conspicuous. Hamilton v. Parkdale Care Ctr., Inc., 904 P.2d 1110, 1112

(Utah Ct. App. 1995).

TOMLINSON v. NCR CORP.

Opinion of the Court

10

¶27 Policy 210 contains a disclaimer in bold text, set off by a text

box, which states:

These guidelines are not intended to be contractual in

nature, nor should they be interpreted as strict rules for

responses to individual activity. The appropriate

response to each unique situation may differ. For

example, some circumstances may call for immediate

action, either in the way of written warning or

termination, depending upon the frequency or

severity of the offense.

(Emphasis added.) NCR argues that this text is sufficient, as a

matter of law, to disclaim any contractual requirement that NCR

comply with the requirements of Policy 210. We agree.

¶28 Mr. Tomlinson argues that Policy 210's disclaimer is

insufficiently prominent to disclaim a contractual relationship. We

acknowledge that this case differs from our previous cases because

NCR did not place its disclaimer at the beginning of the entire policy

manual. See Ryan v. Dan's Food Stores, Inc., 972 P.2d 395, 401 (Utah

1998); Johnson, 818 P.2d at 999. Instead, NCR's disclaimer is located

at the top of Policy 210. But we have never required that an

employer place disclaimers in any particular location. Rather, the

focus of the analysis is on whether the placement of the disclaimer

is sufficiently prominent to place a reasonable employee on notice

that the employer was disclaiming any contractual relationship.

Because the disclaimer at issue here is conspicuously located at the

top of the relevant policy and is prominently bolded and set apart by

a text box, we conclude that it was sufficiently prominent to put

employees on notice of its terms. Thus, the only remaining question

is the extent to which the language in the disclaimer limited NCR's

contractual liability.

¶29 Mr. Tomlinson argues that Policy 210's disclaimer fails to

limit NCR's contractual liability because it lacked explicit at-will

language. Whether a disclaimer must contain explicit at-will

language is a question of first impression for this court, but the

federal district court for the District of Utah found that a disclaimer

lacking specific at-will language was nevertheless sufficient as a

matter of law to disclaim a contractual relationship. Johnson v. City

of Murray, 909 F. Supp. 2d 1265, 1297 (D. Utah 2012). In Johnson, the

employee signed an employment application with the following

disclaimer:

I understand that this employment application and

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Opinion of the Court

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any other City documents are not contracts of

employment and that any oral or written statements to

the contrary are hereby expressly disavowed and

should not be relied upon by any prospective or

existing employee.

Id. at 1273. The district court concluded that the "clear and

conspicuous” disclaimer did not "evince an intent by the [employer]

to create a contract with its employees.” Id. at 1297.

¶30 The disclaimer language of Policy 210 is similar to the

disclaimer language in Johnson. Both disclaimers convey an express

intent that the provisions of the company employment policies do

not give rise to an enforceable contract. The language of a disclaimer

need not employ the magic words "at-will” if it otherwise clearly

conveys the employer's intention not to enter into a contract or to

create mandatory procedures for employment terminations. And

NCR's disclaimer clearly conveyed such an intent. Without

evidence that NCR intended to create a contract, a reasonable jury

could not have determined that NCR agreed to limit its ability to

terminate its employees. In short, given the clear and unambiguous

language of the disclaimer, no reasonable jury could conclude that

NCR intended Policy 210 to give rise to an implied contract.

¶31 We hold that NCR's policy manual did not create an

implied-in-fact contract limiting NCR's ability to terminate Mr.

Tomlinson at will. The court of appeals erred in concluding that the

lack of express at-will language in Policy 422 gave rise to an impliedin-

fact contract. And Policy 210's disclaimer was sufficient as a

matter of law to disclaim any contractual liability arising from

NCR's failure to follow the procedures contained therein. We

accordingly reverse the court of appeals and affirm summary

judgment in favor of NCR.

II. MR. TOMLINSON FAILED TO ESTABLISH A BREACH OF

THE IMPLIED COVENANT OF GOOD FAITH AND

FAIR DEALING

¶32 "An implied covenant of good faith and fair dealing inheres

in every contract.” Eggett v. Wasatch Energy Corp., 2004 UT 28, ¶ 14,

94 P.3d 193. But we have consistently rejected the notion of a freestanding

implied covenant of good faith and fair dealing in the

absence of a contract. Brehany v. Nordstrom, Inc., 812 P.2d 49, 55

(Utah 1991). And the implied covenant cannot "establish new,

independent rights or duties not agreed upon by the parties.” Id.

Because we conclude that Mr. Tomlinson failed to establish the

TOMLINSON v. NCR CORP.

Opinion of the Court

12

existence of an implied contract, he cannot establish a violation of

the covenant of good faith and fair dealing. We accordingly reverse

the court of appeals and affirm summary judgment on this claim as

well.

¶33 The court of appeals erred in holding that NCR’s Corporate

Management Policy Manual could be read to create an implied

contract rebutting the presumption that Mr. Tomlinson was an atwill

employee. Summary judgment in favor of NCR was

appropriate on Mr. Tomlinson’s claim of an implied contract and on

the related claim for breach of the implied covenant of good faith

and fair dealing.