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Guz v. Bechtel Nat'l, Inc. - 24 Cal. 4th 317, 100 Cal. Rptr. 2d 352, 8 P.3d 1089 (2000)

Rule:

A breach of an employment contract may also constitute a breach of the implied covenant of good faith and fair dealing. But insofar as the employer's acts are directly actionable as a breach of an implied-in-fact contract term, a claim that merely realleges that breach as a violation of the covenant is superfluous. That is because the remedy for breach of an employment agreement, including the covenant of good faith and fair dealing implied by law therein, is solely contractual. In the employment context, an implied covenant theory affords no separate measure of recovery, such as tort damages. Allegations that the breach was wrongful, in bad faith, arbitrary, and unfair are unavailing; there is no tort of "bad faith breach" of an employment contract.

Facts:

A longtime employee who was terminated at age 49 when his work unit was eliminated brought a wrongful termination action against his former employer, alleging age discrimination in violation of the Fair Employment and Housing Act (Gov. Code, § 12941), breach of an implied contract to be terminated only for good cause, and breach of the implied covenant of good faith and fair dealing. The trial court granted defendant's motion for summary judgment and dismissed the action.  The California Court of Appeals for the First District reversed.

Issue:

Did the trial court erred in granting summary judgment to defendant employer on plaintiff's claim of breach of an implied contract?

Answer:

Yes.

Conclusion:

The Supreme Court of California reversed the judgment of the Court of Appeals and remanded for further proceedings. The court held that the trial court erred in granting summary judgment to defendant on plaintiff's claim of breach of an implied contract, since there was a triable issue of fact as to whether plaintiff had implied contractual rights under specific portions of defendant's written personnel policies. Although the record negated any inference of an implied contract restricting defendant's right to implement work force reductions at will, written company policies and guidelines guaranteed fair layoff protections, such as objective employee ranking and placement assistance. There were triable issues as to whether those specific provisions became an implicit part of plaintiff's employment contract, and whether defendant breached that implied contract. The court also held, however, that the trial court did not err in granting summary judgment to defendant on plaintiff's claim that, even if he was an at-will employee, defendant's actions breached the implied covenant of good faith and fair dealing. The covenant of good faith and fair dealing cannot impose substantive terms and conditions beyond those to which the parties actually agreed. Because employment at will gives the employer the freedom to terminate the relationship as it chooses, the employer does not frustrate the employee's contractual rights merely by doing so. The court also held that the trial court did not err in granting summary judgment to defendant on plaintiff's age discrimination claim. In the face of defendant's strong and unrebutted showing that it took its actions for nondiscriminatory reasons, the evidence of age favoritism proffered by plaintiff lacked sufficient probative force to allow a finding of intentional age discrimination.

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