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Cotran v. Rollins Hudig Hall Internat., Inc - 17 Cal. 4th 93, 69 Cal. Rptr. 2d 900, 948 P.2d 412 (1998)

Rule:

The terms just cause and good cause connotes a fair and honest cause or reason, regulated by good faith on the part of the party exercising the power. Care must be taken, however, not to interfere with the legitimate exercise of managerial discretion. And where the employee occupies a sensitive managerial or confidential position, the employer must of necessity be allowed substantial scope for the exercise of subjective judgment.

Facts:

Two female employees of the defendant employer alleged that plaintiff Ralph Cotran harassedcontinually them, the conduct of which included, inter alia,  exposing himself to them and obscene phone calls. After an investigation, defendant employer terminated Cotran, he filed an action for wrongful discharge. Defendant offered a defense based upon the fact that the decision to fire plaintiff had been reached honestly and in good faith. The trial court rejected this defense and instructed the jury that defendant could prevail only if the jury was satisfied that sexual harassment had actually occurred. The jury returned a verdict for plaintiff. Defendant appealed.

Issue:

Did the superior court err in refusing defendant’s request for jury instruction as to the good cause for the termination of the plaintiff employee?

Answer:

Yes.

Conclusion:

The court concluded that the jury should have been instructed that the question critical to defendants' liability was not whether plaintiff in fact sexually harassed other employees, but whether, at the time the decision to terminate plaintiff's employment was made, defendants, acting in good faith and after an investigation that was appropriate under the circumstances, had reasonable grounds for believing plaintiff had done so.The court reversed the judgment in favor of plaintiff employee because the trial court's instructions to the jury were improper.

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