Utah Affirms Again – Implied Covenants, Even Good Faith and Fair Dealing, Do Not Trump Express Covenants

On October 29, 2019, the Utah Supreme Court issued a rare decision reversing the Utah Court of Appeals. At issue was whether an at-will salesperson who had completed six contracts for sale of television services, and who was terminated before they were installed, had earned the commissions on those sales. In Vander Veur v. Groove Entertainment Technologies, 2019 UT 64, the plaintiff employee sued his employer for commissions that would have been paid had he still been employed at the time of the installations of the services he sold. He was let go after contracting for the sales, but before installation, and sued the employer for breach of the implied covenant of good faith and fair dealing when the company did not pay the commissions to him. The trial court sided with the employer, finding that the commissions were earned only upon installation, and since the employee was not employed at the time of installation, he hadn’t earned the commissions. On appeal to the Utah Court of Appeals, that court reversed the trial court, finding that terminating the employment just before installation, and thus depriving the salesperson of the commission, was a violation of the implied covenant. On a petition of certiorari to the Utah Supreme Court, it reversed the Utah Court of Appeals and held firm to the legal doctrine that an implied covenant cannot trump an express covenant. The employment contract was clear that commissions are earned only at installation of services sold, and that the salesperson had to be employed at the time of installation. Terminating an at-will employee before the commissions were earned under the express terms of the contract was not a breach of the implied covenant, the Utah Supreme Court ruled. This decision highlights the importance of making express in written agreements terms that might otherwise be viewed as unfair or worse, a breach of good faith and fair dealing.

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