Uintah Basin Med. Ctr. v. Hardy - 2005 UT App 92, 110 P.3d 168

Rule:

In determining the question of what an employer must show to prove it terminated an employee for just cause, there appear to be three different approaches to this question. Some courts seem to give deference to the justifications stated by the employer. A few other courts have taken the opposite approach and required the employer to prove that the conditions necessitating termination actually existed. A far greater number of states have adopted a more balanced approach that requires an employer to justify termination with an objective good faith reason supported by facts reasonably believed to be true by the employer. These courts recognize that an employer's justification for discharging an employee should not be taken at face value but also recognize that a judge or jury should not be called upon to second-guess an employer's business decisions. The Court of Appeals of Utah agrees with the majority of courts and adopts the objective reasonableness approach.

Facts:

Dr. Leo W. Hardy is a board-certified pathologist. On November 29, 1994, he executed an employment agreement (the Agreement) to provide pathology services for UBMC, which is owned by Duchesne County and operated by the UBMC Board of Trustees (Board). Under the Agreement, which consists of only two pages taken almost verbatim from that of Dr. Hardy's predecessor, UBMC was to refer certain types of laboratory work to Dr. Hardy and pay a $ 400 monthly laboratory director's fee. In return, Dr. Hardy would work as the director of UBMC's laboratory and provide related services, which included weekly visits to the hospital. The Agreement does not include a fixed termination date; rather, it would "continue to bind parties . . . until terminated after ninety (90) days written notice for just cause of termination by either party or by mutual consent of the parties to a shorter notice period." The Agreement does not define "just cause" or otherwise clarify what grounds would justify termination. On July 29, 1996, UBMC sent Dr. Hardy notice of termination and later hired Dr. Thomas Allred in his place. On October 28, 1996, UBMC brought a suit for declaratory judgment to establish that its termination of the Agreement with Dr. Hardy was for "just cause." Dr. Hardy filed a counterclaim alleging that the termination was without "just cause" and a breach of contract. Following discovery, the trial court granted UBMC's motion for summary judgment. The court determined that the Board in place at the time Dr. Hardy was hired had, during the course of Dr. Hardy's employment, been replaced by a successor Board and that the successor Board was no longer bound by the Agreement. Dr. Hardy appealed.

Issue:

Did the trial court err in granting summary judgment in favor of UBMC?

Answer:

Yes.

Conclusion:

The appellate court found that although both parties ascribed different meanings to the "just cause" provision in the employment agreement, the term was not ambiguous. The evidence did not indicate that the parties understood the "just cause" provision to have a unique meaning particular to the agreement. The parties did not incorporate other documents to define when either party would have cause to terminate the agreement. The provision was ordinarily understood to provide employers with power to terminate an employee for legitimate business reasons and in the interest of improving client services as long as the justification was not a mere pretext for capricious, bad faith, or illegal termination. Because the "just cause" permitted termination for legitimate business reasons, the agreement was for a reasonable duration. The trial court had to determine whether the center's board of trustees terminated the employee for legitimate business reasons or whether the termination was capricious, in bad faith, or illegal.