147 Ariz. 370 (1985) 710 P.2d 1025

Catherine Sue WAGENSELLER, Plaintiff-Appellant,
v.
SCOTTSDALE MEMORIAL HOSPITAL; Donald A. Andrews and Jane Doe Andrews, his wife; Neal Brown and Jane Doe Brown, his wife; John W. Holmes and Jane Doe Holmes, his wife; and Kay Smith, a single person, Defendants-Appellees.

No. 17646-PR.

Supreme Court of Arizona, En Banc.

June 17, 1985. Reconsideration Denied August 20, 1985. Supplemental Opinion November 27, 1985.

*373 Hocker & Axford by Naida B. Axford, R. Kelly Hocker, Phoenix, for appellant.

Thomas V. Rawles, Mesa, and Fennemore, Craig, Von Ammon, Udall & Powers by John D. Everroad, R.C. Mitten, Timothy Berg, Phoenix, for appellees.

FELDMAN, Justice.

Catherine Sue Wagenseller petitioned this court to review a decision of the court of appeals affirming in part the trial court's judgment in favor of Scottsdale Memorial Hospital and certain Hospital employees (defendants). The trial court had dismissed all causes of action on defendants' motion for summary judgment. The court of appeals affirmed in part and remanded, ruling that the only cause of action available to plaintiff was the claim against her supervisor, Kay Smith. Wagenseller v. Scottsdale Memorial Hospital, 714 P.2d 412 (1984). We have jurisdiction pursuant to Ariz. Const. art. 6, § 5(3) and Rule 23(c), Ariz.R.Civ.App.P., 17A A.R.S. We granted review to consider the law of this state with regard to the employment-at-will doctrine. The issues we address are:

1. Is an employer's right to terminate an at-will employee limited by any rules which, if breached, give rise to a cause of action for wrongful termination?

2. If "public policy" or some other doctrine does form the basis for such an action, how is it determined?

3. Did the trial court err, in view of Leikvold v. Valley View Community Hospital, 141 Ariz. 544, 688 P.2d 170 (1984), when it determined as a matter of law that the terms of Scottsdale Memorial Hospital's personnel policy manual were not part of the employment contract?

4. Do employment contracts contain an implied covenant of "good faith and fair dealing," and, if so, what is the nature of the covenant?^[1]

*374 5. What is the scope of a supervisor's privilege to interfere in the beneficial employment relationship between a supervised employee and the common employer?

FACTUAL BACKGROUND

Catherine Wagenseller began her employment at Scottsdale Memorial Hospital as a staff nurse in March 1975, having been personally recruited by the manager of the emergency department, Kay Smith. Wagenseller was an "at-will" employee — one hired without specific contractual term. Smith was her supervisor. In August 1978, Wagenseller was assigned to the position of ambulance charge nurse, and approximately one year later was promoted to the position of paramedic coordinator, a newly approved management position in the emergency department. Three months later, on November 1, 1979, Wagenseller was terminated.

Most of the events surrounding Wagenseller's work at the Hospital and her subsequent termination are not disputed, although the parties differ in their interpretation of the inferences to be drawn from and the significance of these events. For more than four years, Smith and Wagenseller maintained a friendly, professional, working relationship. In May 1979, they joined a group consisting largely of personnel from other hospitals for an eight-day camping and rafting trip down the Colorado River. According to Wagenseller, "an uncomfortable feeling" developed between her and Smith as the trip progressed — a feeling that Wagenseller ascribed to "the behavior that Kay Smith was displaying." Wagenseller states that this included public urination, defecation and bathing, heavy drinking, and "grouping up" with other rafters. Wagenseller did not participate in any of these activities. She also refused to join in the group's staging of a parody of the song "Moon River," which allegedly concluded with members of the group "mooning" the audience. Smith and others allegedly performed the "Moon River" skit twice at the Hospital following the group's return from the river, but Wagenseller declined to participate there as well.

Wagenseller contends that her refusal to engage in these activities caused her relationship with Smith to deteriorate and was the proximate cause of her termination. She claims that following the river trip Smith began harassing her, using abusive language and embarrassing her in the company of other staff. Other emergency department staff reported a similar marked change in Smith's behavior toward Wagenseller after the trip, although Smith denied it.

Up to the time of the river trip, Wagenseller had received consistently favorable job performance evaluations. Two months before the trip, Smith completed an annual evaluation report in which she rated Wagenseller's performance as "exceed[ing] results expected," the second highest of five possible ratings. In August and October 1979, Wagenseller met first with Smith and then with Smith's successor,^[2] Jeannie Steindorff, to discuss some problems regarding her duties as paramedic coordinator and her attitude toward the job. On November 1, 1979, following an exit interview at which Wagenseller was asked to resign and refused, she was terminated.

She appealed her dismissal in letters to her supervisor and to the Hospital administrative and personnel department, answering the Hospital's stated reasons for her termination, claiming violations of the disciplinary procedure contained in the Hospital's personnel policy manual, and requesting reinstatement and other remedies. When this appeal was denied, Wagenseller brought suit against the Hospital, its personnel administrators, and her supervisor, Kay Smith.

Wagenseller, an "at-will" employee, contends that she was fired for reasons which contravene public policy and without legitimate cause related to job performance. She claims that her termination was wrongful, and that damages are recoverable under both tort and contract theories. The *375 Hospital argues that an "at-will" employee may be fired for cause, without cause, or for "bad" cause. We hold that in the absence of contractual provision such an employee may be fired for good cause or for no cause, but not for "bad" cause.

THE EMPLOYMENT-AT-WILL DOCTRINE

History

As early as 1562, the English common law presumed that an employment contract containing an annual salary provision or computation was for a one-year term. Murg & Scharman, Employment at Will: Do the Exceptions Overwhelm the Rule? 23 B.C.L.Rev. 329, 332 (1982). Originally designed for the protection of seasonal farm workers, the English rule expanded over the years to protect factory workers as well. Workers were well protected under this rule, for the one-year presumption was not easy to overcome. Id. English courts held an employer liable for breaching the employment contract if he terminated an employee at any time during the year without "reasonable cause to do so." 1 W. Blackstone, Commentaries [*]413. To uphold an employer's discharge of an employee without a showing of "good cause," the courts required a clear expression of a contrary intent as evidenced either on the face of the contract or by a clearly defined custom of the industry. Murg & Scharman, supra, at 332.

In the early nineteenth century, American courts borrowed the English rule. The legal rationale embodied in the rule was consistent with the nature of the predominant master-servant employment relationship at the time because it reflected the master's duty to make provision for the general well-being of his servants. Id. at 334 and n. 22. In addition, the master was under a duty to employ the servant for a term, either a specified or implied time of service, and could not terminate him strictly at will. Hermann & Sor, Property Rights in One's Job: The Case for Limiting Employment-at-Will, 24 Ariz.L.Rev. 763, 770 (1982). The late nineteenth century, however, brought the Industrial Revolution; with it came the decline of the master-servant relationship and the rise of the more impersonal employer-employee relationship. In apparent response to the economic changes sweeping the country, American courts abandoned the English rule and adopted the employment-at-will doctrine. Murg & Scharman, supra, at 334. This new doctrine gave the employer freedom to terminate an at-will employee for any reason, good or bad.

The at-will rule has been traced to an 1877 treatise by H.G. Wood, in which he wrote:

With us the rule is inflexible, that a general or indefinite hiring is prima facie a hiring at will, and if the servant seeks to make it out a yearly hiring, the burden is upon him to establish it by proof.... [I]t is an indefinite hiring and is determinable at the will of either party....

H.G. Wood, Law of Master and Servant § 134 at 273 (1877). As commentators and courts later would point out, none of the four cases cited by Wood actually supported the rule. See Toussaint v. Blue Cross & Blue Shield, 408 Mich. 579, 602 & nn. 13-14, 292 N.W.2d 880, 886-87 & nn. 13-14 (1980); Note, Implied Contract Rights to Job Security, 26 Stan.L.Rev. 335, 341-42 n. 54 (1974). Wood's rule also ran directly counter to another American treatise that stated the one-year presumption as the rule that some courts continued to follow. Note, Protecting At Will Employees Against Wrongful Discharge: The Duty to Terminate Only in Good Faith, 93 Harv.L.Rev. 1816, 1825 n. 51 (1980) (citing C. Smith, Law of Master and Servant 53-57 (1852)).

However unsound its foundation, Wood's at-will doctrine was adopted by the New York courts in Martin v. New York Life Insurance Co., 148 N.Y. 117, 42 N.E. 416 (1895), and soon became the generally accepted American rule. In 1932, this court first adopted the rule for Arizona: "The general rule in regard to contracts for personal services, ... where no time limit is *376 provided, is that they are terminable at pleasure by either party, or at most upon reasonable notice." Dover Copper Mining Co. v. Doenges, 40 Ariz. 349, 357, 12 P.2d 288, 291-92 (1932). Thus, an employer was free to fire an employee hired for an indefinite term "for good cause, for no cause, or even for cause morally wrong, without being thereby guilty of legal wrong." Blades, Employment at Will v. Individual Freedom: On Limiting the Abusive Exercise of Employer Power, 67 Colum.L.Rev. 1404, 1405 (1967) (quoting Payne v. Western & Allegheny Railroad Co., 81 Tenn. (13 Lea) 507, 519-20 (1884), overruled on other grounds, Hutton v. Watters, 132 Tenn. 527, 179 S.W. 134 (1915)).

Present-Day Status of the At-Will Rule

In recent years there has been apparent dissatisfaction with the absolutist formulation of the common law at-will rule. The Illinois Supreme Court is representative of courts that have acknowledged a need for a less mechanical application of the rule:

With the rise of large corporations conducting specialized operations and employing relatively immobile workers who often have no other place to market their skills, recognition that the employer and employee do not stand on equal footing is realistic. In addition, unchecked employer power, like unchecked employee power, has been seen to present a distinct threat to the public policy carefully considered and adopted by society as a whole. As a result, it is now recognized that a proper balance must be maintained among the employer's interest in operating a business efficiently and profitably, the employee's interest in earning a livelihood, and society's interest in seeing its public policies carried out.

Palmateer v. International Harvester Co., 85 Ill.2d 124, 129, 52 Ill.Dec. 13, 15, 421 N.E.2d 876, 878 (1981) (citation omitted). Today, courts in three-fifths of the states have recognized some form of a cause of action for wrongful discharge. Lopatka, The Emerging Law of Wrongful Discharge — A Quadrennial Assessment of the Labor Law Issue of the 80s, 40 Bus. Law. 1 (1984).

The trend has been to modify the at-will rule by creating exceptions to its operation. Three general exceptions have developed. The most widely accepted approach is the "public policy" exception, which permits recovery upon a finding that the employer's conduct undermined some important public policy. The second exception, based on contract, requires proof of an implied-in-fact promise of employment for a specific duration, as found in the circumstances surrounding the employment relationship, including assurances of job security in company personnel manuals or memoranda. Under the third approach, courts have found in the employment contract an implied-in-law covenant of "good faith and fair dealing" and have held employers liable in both contract and tort for breach of that covenant. Wagenseller raises all three doctrines.

THE PUBLIC POLICY EXCEPTION

The public policy exception to the at-will doctrine began with a narrow rule permitting employees to sue their employers when a statute expressly prohibited their discharge. See Kouff v. Bethlehem-Alameda Shipyard, 90 Cal. App.2d 322, 202 P.2d 1059 (1949) (statute prohibiting discharge for serving as an election officer). This formulation was then expanded to include any discharge in violation of a statutory expression of public policy. See Petermann v. Teamsters Local 396, 174 Cal. App.2d 184, 344 P.2d 25 (1959) (discharge for refusal to commit perjury). Courts later allowed a cause of action for violation of public policy, even in the absence of a specific statutory prohibition. See Nees v. Hocks, 272 Or. 210, 536 P.2d 512 (1975) (discharge for being absent from work to serve on jury duty). The New Hampshire Supreme Court announced perhaps the most expansive rule when it held an employer liable for discharging an employee who refused to go out with her foreman. The court concluded that termination "motivated by bad faith or malice or based on *377 retaliation is not [in] the best interest of the economic system or the public good and constitutes a breach of the employment contract." Monge v. Beebe Rubber Co., 114 N.H. 130, 133, 316 A.2d 549, 551 (1974).^[3] Although no other court has gone this far, a majority of the states have now either recognized a cause of action based on the public policy exception or have indicated their willingness to consider it, given appropriate facts.^[4] The key to an employee's claim in all of these cases is the proper definition of a public policy that has been violated by the employer's actions.

Before deciding whether to adopt the public policy exception, we first consider what kind of discharge would violate the rule. The majority of courts require, as a threshold showing, a "clear mandate" of public policy. E.g., Parnar v. Americana Hotels, 65 Hawaii 370, 652 P.2d 625, 631 (1982); Geary v. United States Steel Corp., 456 Pa. 171, 184, 319 A.2d 174, 180 (1974); Thompson v. St. Regis Paper Co., 102 Wash.2d 219, 685 P.2d 1081 (1984). The leading case recognizing a public policy exception to the at-will doctrine is Palmateer v. International Harvester Co., supra, which holds that an employee stated a cause of action for wrongful discharge when he claimed he was fired for supplying information to police investigating alleged criminal violations by a co-employee. Addressing the issue of what constitutes "clearly mandated public policy," the court stated:

There is no precise definition of the term. In general, it can be said that public policy concerns what is right and just and what affects the citizens of the State collectively. It is to be found in the State's constitution and statutes and, when they are silent, in its judicial decisions. Although there is no precise line of demarcation dividing matters that are the subject of public policies from matters purely personal, a survey of cases in other States involving retaliatory discharges shows that a matter must strike at the heart of a citizen's social rights, duties, and responsibilities before the tort will be allowed.

85 Ill.2d at 130, 52 Ill.Dec. at 15-16, 421 N.E.2d at 878-79 (citation omitted).

Other courts have allowed a cause of action where an employee was fired for refusing to violate a specific statute. E.g., Petermann v. Teamsters Local 396, supra (declined to commit perjury before a legislative committee); Tameny v. Atlantic Richfield Co., 164 Cal. Rptr. 839, 164 Cal. Rptr. 839, 610 P.2d 1330 (1980) (would not engage in price-fixing); Sheets v. Teddy's Frosted Foods, 179 Conn. 471, 427 A.2d 385 (1980) (insisted that employer comply with state Food, Drug, and Cosmetic Act); Trombetta v. Detroit, Toledo & Ironton Railroad Co., 81 Mich. App. 489, 265 N.W.2d 385 (1978) (refused to alter statemandated pollution control reports); O'Sullivan v. Mallon, 160 N.J. Super. 416, 390 A.2d 149 (1978) (would not perform medical procedure for which she was not licensed); Harless v. First National Bank, 162 W. Va. 116, 246 S.E.2d 270 (1978) (would not violate consumer protection law). Failure to perform an act which would violate provisions of the Oregon state constitution formed the basis for a cause of action in Delaney v. Taco Time International, 297 Or. 10, 681 P.2d 114 (1984) (declined to sign a false and arguably tortious statement *378 regarding a co-employee). Similarly, courts have found terminations improper where to do otherwise would have impinged on the employee's exercise of statutory rights or duties. E.g., Glenn v. Clearman's Golden Cock Inn, 192 Cal. App.2d 793, 13 Cal. Rptr. 769 (1961) (right to join a union); Midgett v. Sackett-Chicago, 105 Ill.2d 143, 85 Ill.Dec. 475, 473 N.E.2d 1280 (1984) (filing of a workers' compensation claim by a union member protected by a collective bargaining agreement); Frampton v. Central Indiana Gas Co., 260 Ind. 249, 297 N.E.2d 425 (1973) (filing of a workers' compensation claim); Nees v. Hocks, supra (requesting not to be excused from jury duty). A division of our court of appeals recently adopted the public policy exception, ruling that the discharge of an at-will employee who refused to conceal a violation of Arizona's theft statute was contrary to public policy. Vermillion v. AAA Pro Moving & Storage, 146 Ariz. 215 at 216, 704 P.2d 1360 at 1361 (App. 1985). The court's ruling, it stated, was the "logical conclusion" to draw from previous decisions of the court of appeals. Id. See Daniel v. Magma Copper Co., 127 Ariz. 320, 620 P.2d 699 (App. 1980); Larsen v. Motor Supply Co., 117 Ariz. 507, 573 P.2d 907 (App. 1977).

It is difficult to justify this court's further adherence to a rule which permits an employer to fire someone for "cause morally wrong." So far as we can tell, no court faced with a termination that violated a "clear mandate of public policy" has refused to adopt the public policy exception. Certainly, a court would be hard-pressed to find a rationale to hold that an employer could with impunity fire an employee who refused to commit perjury. Why should the law imply an agreement which would give the employer such power? It may be argued, of course, that our economic system functions best if employers are given wide latitude in dealing with employees. We assume that it is in the public interest that employers continue to have that freedom. We also believe, however, that the interests of the economic system will be fully served if employers may fire for good cause or without cause. The interests of society as a whole will be promoted if employers are forbidden to fire for cause which is "morally wrong."

We therefore adopt the public policy exception to the at-will termination rule. We hold that an employer may fire for good cause or for no cause. He may not fire for bad cause — that which violates public policy. To the extent that it is contrary to the foregoing, we overrule Dover Copper Mining Co. v. Doenges, supra.

We turn then to the questions of where "public policy" may be found and how it may be recognized and articulated. As the expressions of our founders and those we have elected to our legislature, our state's constitution and statutes embody the public conscience of the people of this state. It is thus in furtherance of their interests to hold that an employer may not with impunity violate the dictates of public policy found in the provisions of our statutory and constitutional law.

We do not believe, however, that expressions of public policy are contained only in the statutory and constitutional law, nor do we believe that all statements made in either a statute or the constitution are expressions of public policy. Turning first to the identification of other sources, we note our agreement with the following:

Public policy is usually defined by the political branches of government. Something "against public policy" is something that the Legislature has forbidden. But the Legislature is not the only source of such policy. In common-law jurisdictions the courts too have been sources of law, always subject to legislative correction, and with progressively less freedom as legislation occupies a given field. It is the courts, to give one example, that originated the whole doctrine that certain kinds of businesses — common carriers and innkeepers — must serve the public without discrimination or preference. In this sense, then, courts make law, and they have done so for years.

*379 Lucas v. Brown & Root, 736 F.2d 1202, 1205 (8th Cir.1984). Other state courts have similarly recognized judicial decisions as a source of public policy. E.g., Palmateer v. International Harvester Co., 85 Ill.2d at 130, 52 Ill.Dec. at 15, 421 N.E.2d at 878; Pierce v. Ortho Pharmaceutical Corp., 84 N.J. 58, 72, 417 A.2d 505, 512 (1980); Thompson v. St. Regis Paper Co., 102 Wash.2d at 232-233, 685 P.2d at 1089. Thus, we believe that reliance on prior judicial decisions, as part of the body of applicable common law, is appropriate, although we agree with the Hawaii Supreme Court that "courts should proceed cautiously if called upon to declare public policy absent some prior legislative or judicial expression on the subject." Parnar v. Americana Hotels, 65 Hawaii at 380, 652 P.2d at 631. Thus, we will look to the pronouncements of our founders, our legislature, and our courts to discern the public policy of this state.

All such pronouncements, however, will not provide the basis for a claim of wrongful discharge. Only those which have a singularly public purpose will have such force. Lord Truro set forth the classic formulation of the public policy doctrine nearly 150 years ago:

Public policy is that principle of the law which holds that no subject can lawfully do that which has a tendency to be injurious to the public, or against the public good, which may be termed, as it sometimes has been, the policy of the law, or public policy in relation to the administration of the law.

Egerton v. Earl Brownlow, 4 H.L.Cas. 1, 196 (1853). Where the interest involved is merely private or proprietary, the exception does not apply. In Pierce v. Ortho Pharmaceutical Corp., supra, for instance, the court held that the plaintiff did not have a cause of action for wrongful discharge based on her refusal to do certain research, where she had failed to articulate a clear public policy that had been violated. Citing the personal nature of Dr. Pierce's opposition, the court stated:

Chaos would result if a single doctor engaged in research were allowed to determine, according to his or her individual conscience, whether a project should continue. An employee does not have a right to continued employment when he or she refuses to conduct research simply because it would contravene his or her personal morals. An employee at will who refuses to work in answer to a call of conscience should recognize that other employees and their employer might heed a different call.

84 N.J. at 75, 417 A.2d at 514 (citation omitted). Although an employee facing such a quandary may refuse to do the work believed to violate her moral philosophy, she may not also claim a right to continued employment. Id. The Oregon Supreme Court announced a similar limitation when it refused to recognize a cause of action for the discharge of an employee who claimed he was wrongfully terminated for exercising his statutory right as a stockholder to examine the books of his corporate employer. Campbell v. Ford Industries, 274 Or. 243, 546 P.2d 141 (1976). The court based its determination on its finding that the right claimed was "not one of public policy, but the private and proprietary interest of stockholders, as owners of the corporation." Id. at 249-50, 546 P.2d at 145.

However, some legal principles, whether statutory or decisional, have a discernible, comprehensive public purpose. A state's criminal code provides clear examples of such statutes. Thus, courts in other jurisdictions have consistently recognized a cause of action for a discharge in violation of a criminal statute. In a seminal case involving the public policy exception, Petermann v. International Brotherhood of Teamsters Local 396, 174 Cal. App.2d 184, 344 P.2d 25 (1959), the California Court of Appeals upheld an employee's right to refuse to commit perjury, stating:

The public policy of this state as reflected in the Penal Code ... would be seriously impaired if it were to be held that one could be discharged by reason of his refusal to commit perjury. To hold that one's continued employment *380 could be made contingent upon his commission of a felonious act at the instance of his employer would be to encourage criminal conduct upon the part of both the employee and employer and would serve to contaminate the honest administration of public affairs. This is patently contrary to the public welfare.

Id. at 189, 344 P.2d at 27.

Although we do not limit our recognition of the public policy exception to cases involving a violation of a criminal statute, we do believe that our duty will seldom be clearer than when such a violation is involved. We agree with the Illinois Supreme Court that "[t]here is no public policy more basic, nothing more implicit in the concept of ordered liberty, than the enforcement of a State's criminal code." Palmateer v. International Harvester Co., 85 Ill.2d at 132, 52 Ill.Dec. at 16, 421 N.E.2d at 879 (citations omitted).

In the case before us, Wagenseller refused to participate in activities which arguably would have violated our indecent exposure statute, A.R.S. § 13-1402. She claims that she was fired because of this refusal. The statute provides:

§ 13-1402. Indecent exposure; classifications

A. A person commits indecent exposure if he or she exposes his or her genitals or anus or she exposes the areola or nipple of her breast or breasts and another person is present, and the defendant is reckless about whether such other person, as a reasonable person, would be offended or alarmed by the act.

B. Indecent exposure is a class 1 misdemeanor. Indecent exposure to a person under the age of fifteen years is a class 6 felony.

While this statute may not embody a policy which "strikes at the heart of a citizen's social right, duties and responsibilities" (Palmateer, supra) as clearly and forcefully as a statute prohibiting perjury, we believe that it was enacted to preserve and protect the commonly recognized sense of public privacy and decency. The statute does, therefore, recognize bodily privacy as a "citizen's social right." We disagree with the court of appeals' conclusion that a minor violation of the statute would not violate public policy. (Slip op. at 6.) The nature of the act, and not its magnitude, is the issue. The legislature has already concluded that acts fitting the statutory description contravene the public policy of this state. We thus uphold this state's public policy by holding that termination for refusal to commit an act which might violate A.R.S. § 13-1402 may provide the basis of a claim for wrongful discharge. The relevant inquiry here is not whether the alleged "mooning" incidents were either felonies or misdemeanors or constituted purely technical violations of the statute, but whether they contravened the important public policy interests embodied in the law. The law enacted by the legislature establishes a clear policy that public exposure of one's anus or genitals is contrary to public standards of morality. We are compelled to conclude that termination of employment for refusal to participate in public exposure of one's buttocks^[5] is a termination contrary to the policy of this state, even if, for instance, the employer might have grounds to believe that all of the onlookers were voyeurs and would not be offended. In this situation, there might be no crime, but there would be a violation of public policy to compel the employee to do an act ordinarily proscribed by the law.

From a theoretical standpoint, we emphasize that the "public policy exception" which we adopt does not require the court to make a new contract for the parties. In *381 an at-will situation, the parties have made no express agreement regarding the duration of employment or the grounds for discharge. The common law has presumed that in so doing the parties have intended to allow termination at any time, with or without good cause. It might be more properly argued that the law has recognized an implied covenant to that effect. Whether it be presumption or implied contractual covenant, we do not disturb it. We simply do not raise a presumption or imply a covenant that would require an employee to do that which public policy forbids or refrain from doing that which it commands.

Thus, in an at-will hiring we continue to recognize the presumption or to imply the covenant of termination at the pleasure of either party, whether with or without cause. Firing for bad cause — one against public policy articulated by constitutional, statutory, or decisional law — is not a right inherent in the at-will contract, or in any other contract, even if expressly provided. See 1 A. Corbin, Contracts § 7; 6A A. Corbin, Contracts §§ 1373-75 (1962). Such a termination violates rights guaranteed to the employee by law and is tortious. See Prosser & Keeton on Torts § 92 at 655 (5th ed. 1984).

THE "PERSONNEL POLICY MANUAL" EXCEPTION

Although an employment contract for an indefinite term is presumed to be terminable at will, that presumption, like any other presumption, is rebuttable by contrary evidence. See Restatement (Second) of Agency § 442; Leikvold v. Valley View Community Hospital, 141 Ariz. 544, 547, 688 P.2d 170, 173 (1984). Thus, in addition to relying on the public policy analysis to restrict the operation of the terminable-at-will rule, courts have turned to the employment contract itself, finding in it implied terms that limit the employer's right of discharge. Two types of implied contract terms have been recognized by the courts: implied-in-law terms and implied-in-fact terms. An implied-in-law term arises from a duty imposed by law where the contract itself is silent; it is imposed even though the parties may not have intended it, and it binds the parties to a legally enforceable duty, just as if they had so contracted explicitly. 1 A. Corbin, Contracts § 17, at 38 (1960). The covenant of good faith and fair dealing, discussed post at 1038-1041, is an implied-in-law contract term that has been recognized by a small number of courts in the employment-at-will context.

An implied-in-fact contract term, on the other hand, is one