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Guz v. Bechtel National, Inc.

Supreme Court of California

October 5, 2000, Decided ; October 5, 2000

No. S062201.


 [*325]  [**1094]  [***357]    BAXTER, J. 

This case presents questions about the law governing claims of wrongful discharge from employment as it applies to an employer's motion for summary judgment. Plaintiff John Guz, a longtime employee of Bechtel National, Inc. (BNI), was released at age 49 when his work unit was eliminated and its tasks were transferred to another Bechtel office. Guz sued BNI and its parent, Bechtel Corporation (hereinafter collectively Bechtel),  [*326]  alleging age discrimination, breach of an implied contract to be terminated only for good cause, [****3]  and breach of the implied covenant of good faith and fair dealing. The trial court granted Bechtel's motion for summary judgment and dismissed the action. In a split decision, the Court of Appeal reversed. The majority found that Bechtel had demonstrated no grounds to foreclose a trial on any of the claims asserted in the complaint.

Having closely reviewed the Court of Appeal's decision, 1 we reach the following conclusions:

 [****4]  [***358]   First, the Court of Appeal used erroneous grounds to reverse summary judgment on Guz's implied contract cause of action. The Court of Appeal found triable evidence (1) that Guz had an actual agreement, implied in fact, to be discharged only for good cause, and (2) that the elimination of Guz's work unit lacked good cause because Bechtel's stated reason--a “downturn in . . . workload”--was not justified by the facts, and was, in truth, a pretext to discharge the unit's workers for poor performance without following the company's “progressive discipline” policy. We acknowledge a triable issue that Guz, like other Bechtel workers, had implied contractual rights under specific provisions of Bechtel's written personnel policies. But neither the policies, nor other evidence, suggests any contractual restriction on Bechtel's right to eliminate a work unit as it saw fit, even where dissatisfaction with unit performance was a factor in the decision. The Court of Appeal's ruling on Guz's implied contract claim must therefore be reversed. The Court of Appeal did not reach the additional ground on which Guz claims a contractual breach--i.e., that Bechtel failed to follow its fair [****5]  layoff policies when, during and after the reorganization, it made individual personnel decisions leading to Guz's release. Accordingly, we leave that issue to the Court of Appeal on remand.

Second, the Court of Appeal erred in restoring Guz's separate cause of action for breach of the implied covenant of good faith and fair dealing. Here Guz claims that even if his employment included no express or implied-in-fact agreement limiting Bechtel's right to discharge him, and was thus “at will” ( Lab. Code, § 2922), the covenant of good faith and fair dealing, implied by law in every contract, precluded Bechtel from terminating him  [*327]  arbitrarily, as by failing to follow its own policies, or in bad faith. But while the implied covenant requires mutual fairness in applying a contract's actual terms, it cannot  [**1095]  substantively alter those terms. ] If an employment is at will, and thus allows either party to terminate for any or no reason, the implied covenant cannot decree otherwise. Moreover, although any breach of the actual terms of an employment contract also violates the implied covenant, the measure of damages for such a breach remains [****6]  solely contractual. Hence, where breach of an actual term is alleged, a separate implied covenant claim, based on the same breach, is superfluous. On the other hand, where an implied covenant claim alleges a breach of obligations beyond the agreement's actual terms, it is invalid.

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24 Cal. 4th 317 *; 8 P.3d 1089 **; 100 Cal. Rptr. 2d 352 ***; 2000 Cal. LEXIS 7498 ****; 84 Fair Empl. Prac. Cas. (BNA) 64; 2000 Cal. Daily Op. Service 8230; 16 I.E.R. Cas. (BNA) 1345; 2000 Daily Journal DAR 10929; 142 Lab. Cas. (CCH) P59,072

JOHN GUZ, Plaintiff and Appellant, v. BECHTEL NATIONAL, INC., et al., Defendants and Respondents.

Prior History:  [****1] Superior Court of the City and County of San Francisco. Super. Ct. No. 964836. William J. Cahill, Judge.

Court of Appeal of California, First Appellate District, Division Four. A072984.

Disposition: For the reasons set forth herein, the judgment of the Court of Appeal is reversed. The cause is remanded to the Court of Appeal for further proceedings consistent with this opinion.


termination, employees, age discrimination, positions, reasons, prima facie case, eliminating, summary judgment, implied covenant, policies, layoff, cause of action, younger, contractual, rights, Guidelines, good cause, ranking, salary, summary judgment motion, trial court, work force, replacement, decisions, at-will, parties, limits, discriminatory, statistical, personnel

Business & Corporate Compliance, Contracts Law, Types of Contracts, Covenants, Contracts Law, Breach, General Overview, Standards of Performance, Discharge & Termination, Quasi Contracts, Labor & Employment Law, Employment Relationships, At Will Employment, Duration of Employment, Exceptions, Implied Contracts, Employment Contracts, Breaches, Wrongful Termination, Breach of Contract, Civil Procedure, Summary Judgment, Supporting Materials, Appeals, Summary Judgment Review, Standards of Review, Opposing Materials, Entitlement as Matter of Law, Standards of Review, De Novo Review, Public Policy, Evidence, Presumptions, Statutory Presumptions, For Cause Standard, Conditions & Terms, Discharges, Employer Handbooks, Express Contracts, Contract Formation, Acceptance, Meeting of Minds, Governments, Legislation, Statutory Remedies & Rights, Guaranty Contracts, Contract Interpretation, Good Faith & Fair Dealing, Contracts Implied in Fact, Torts, Business Torts, Bad Faith Breach of Contract, Discrimination, Age Discrimination, Federal & State Interrelationships, Disparate Treatment, Statutory Application, Age Discrimination in Employment Act, Courts, Judicial Precedent, Evidence, Burdens of Proof, Burden Shifting, Burdens of Proof, Initial Burden of Persuasion, Inferences & Presumptions, Rebuttal of Presumptions, Ultimate Burden of Persuasion, Defenses, Discriminatory Employment Practices, Scope & Definitions, Reductions in Force