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THE WRONGFUL TERMINATION ROLLERCOASTER

By David Salvin June 9th, 1997

Published in "Orange County Lawyer Magazine" June, 1997

The 90's have been a roller-coaster ride for employment and labor attorneys and their clients. While the state Supreme Court was actively enhancing and broadening the rights and protections of older workers, many of the state=s Appellate Courts were actively weakening those protections. Despite several Supreme Court rulings which enhance the protections for older employees, many Appellate Courts have recently taken great strides in reducing those protections.

Since the opening salvo in the wrongful termination campaign was fired by the Supreme Court in the early and mid 80's, courts across California have shown little coordination in their treatment of wrongful termination cases, particularly those involving age discrimination and implied contract claims.

In 1988, the Supreme Court in Foley v. Interactive Data, (1988) 47 Cal.3d 654 held that the cause of action for an implied contract was valid, and that even though the employer may have an At will clause in their employment agreement, the courts could interpret the actions and historical relationship of the parties i.e. the employer and employee, to determine the full scope of the contractual relationship. The Court, using another landmark decision in Tameny v. Atlantic Richfield Company, (1980) 27 Cal.3d 167, held that the employers right to discharge an at will employee is still subject to the limits imposed by public policy, since otherwise the threat of discharge could be used to coerce employees into committing crimes, concealing wrongdoing, or taking other action harmful to the public welfare.@ Foley, 47 Cal.3d at 665.

It has been said that an employer may terminate an employee for any reason, provided it is not a wrong reason. In practice, Tameny set forth the standard by which wrongful termination claims would be measured. The Court in Tameny established a penumbra of protection for the employee stating courts have recognized that an employers traditional broad authority to discharge an at-will employee may be limited by statute. . or by considerations of public policy. Tameny 27 Cal.3d at 172 citing Peterman v. International Brotherhood of Teamsters (1959) 174 Cal. App. 2d 184. The Tameny Court set forth the wrong reasons for which an employer could be found liable for terminating an employee. (That is, in violation of some law or public policy.) Absent those limitations, the general rule of thumb was that an >at-will= employee was freely dischargeable.

With the playing field established, employees increasingly relied on the implied contract and the implied covenant of good faith and fair dealing to establish breach of contract claims to support their wrongful termination claims. The courts clearly established that if you could show some violation of state or federal law or public policy, you could bring a tort claim under Tameny, which in California would be embodied in the Fair Employment and Housing Act (Government Code Section 12940 et seq.) If you could not show such a violation of law, and were an at will employee no matter how long you may have worked for the company, or what the company may have done or said, you could simply be terminated. Thus increased use of the implied contract and good faith clause began.

The typical plaintiffs argument goes something like this. Since a contract necessarily must arise between the relationship between the employer offering to pay for work, and the employee offering to work for pay, it naturally follows that like any other contract, the implied covenant of good faith and fair dealing must attach. In short, neither contracting party may do anything which would unfairly deprive the other of the rights and benefits of the subject contract. Therefore, many employees argue that continued employment or the expectation of continued employment are benefits of that contract, and should the employer terminate the employment contract without good cause (or in good faith), the employer violates the implied covenant of good faith and fair dealing.

Signing your life away?

Employers for some time have been altering their initial hiring agreements between themselves and their employees to include statements that the agreement may not be altered, modified or changed except in writing, and that no implied contracts are now or ever considered by the parties. Employers argue that since the initial agreement is fully consolidated and integrated, no implied agreements could ever be applicable. The ultimate conclusion, therefore, would be that if no implied contract could exist between the employer and employee, then no implied contract requiring good cause could be found to exist, and the employer, short of those reasons enumerated in Tameny, would be free to terminate any employee at any time for any reason.

Appellate Courts have looked at this situation in different ways. Wagner v. Glendale Medical, (1989) 216 Cal. App. 3d 1379 used a parole evidence and integration analysis to hold that there can be no implied contractual term completely at variance with an express term of a contract.@ Wagner 216 Cal. App. 3d at 1393 Citing Shapiro v. Wells Fargo Realty Advisers, 152 Cal. App. 3d at p. 482. The Court in Slivinsky v. Watkins-Johnson Company, (1990) 221 Cal. App. 3d 799 also used a parole evidence/integration type analysis to hold that Even if the reduction in force were a pretextual ground for terminating Slivinskys employment, it would not be actionable with an at will employment contract unless the employers motivation for a discharge contravenes some substantial public policy principal. Slivinsky, 221 Cal. App. 3d at 806.

Even more recently, one appeals court held that without an implied contract requiring good cause for termination, no implied covenant of good faith and fair dealing may be found. The second District Court of Appeals in Camp v. Jeffer, Mangels, Buttler & Marmaro, (1995) 35 Cal. App. 4th 620 held that ASince the trial court properly found that there was no implied-in-fact contract requiring good cause for termination, Jeffer Mangels could not, and did not, breach the covenant of good faith and fair dealing Camp 35 Cal. App. 4th at 631.

It must be noted, however, that the Court in Camp was faced with a very unlikeable set of plaintiffs. The Camps were indicted on several felony counts for conspiracy to use false information, and federal bank fraud to name just a few. When applying with the defendants company, both of them were asked if they had ever been convicted of a felony, and both lied and said no. Thereafter, the court was extremely motivated to find for the defendants when the plaintiffs were terminated.

The problem is, the Court ripped a huge gash in the delicate fabric of the wrongful termination matrix in finding against the plaintiffs in Camp. If no implied covenant of good faith and fair dealing can exist without an implied contract, and no implied contract can exists because all employers routinely have employees sign iron clad employment agreements baring their existence, it would stand to reason that based upon the Courts holding in Camp, the implied covenant of good faith and fair dealing is dead baring the failure of some company to provide an at-will no implied contracts agreement at the outset of employment. This analysis is further bolstered by the holding in Haggard v. Kimberly Quality Care, Inc, (1995) 39 Cal. App. 4th 508, in which the Sixth District held that no contract implied from oral statements or conduct could modify the at-will agreement termination provision of parties employment agreement where the agreement expressly stated that it could only be modified by formal, written agreement.

Do Older Employees Matter?

The Appellate Courts onslaught against the implied in fact contract and the covenant of good faith and fair dealing hits older workers harder than other protected grounds, because in most cases, the older worker will not have evidence of outright discrimination, only a long, distinguished work history with the company and that he or she was discarded only years before retirement. Older workers have come to rely upon the disparate impact theory in order to prove their age discrimination claims. The disparate impact theory holds that even though an employer may lay off a number of workers, or enforce certain workplace restrictions, if thoselay-off, polices or actions hurt older employee in a disproportionately higher rate, the acts of the employer may be found to be discriminatory.

The attack on the protection of older workers recently hit a crescendo when the 9th District Court of Appeal ruled in Marks v. Loral, 97 D.A.R. 9559 that a company may fire employees merely because they make too much money regardless of the fact that older workers would suffer at a greatly disproportionate rate as opposed to younger employees. While it seems reasonable that if a company can get the same work done for less money, then they should be allowed to take their work to whomever they choose. This pits the invisible hand of economics against the very visible hand of an increasingly aging workforce of baby boomers who make up a large proportion of the work force.

If an older employee with a 20 or 30 year history with the company cannot establish an implied covenant not to fire him or her without good cause because they signed an employment contract 20 or 30 years ago, very few age discrimination cases could (or would) be brought via the breach of contract means. This seemingly leaves older employers with only the FEHA statute to rely upon. However, until very recently, FEHA only applied to employers with five or more employees. Those companies with less than five employees were free to discriminate at will against at wills. However, in a bold move, the California State Supreme Court in Jennings v. Marralle, (1994) 8 Cal. 4th 121 held that to limit the remedies provided in the FEHA act to only those employees who work in companies with over five employeeswould be inconsistent with the legislative intent reflected in the various provisions of the FEHA.

 New Hope for Older Workers?

While the Appellate Courts have been hard at work erasing protections for older Americans, the State Supreme Courts has been equally busy redefining and expanding those very same protections. The Court in Stevenson v. Superior Court, S052588, held that discrimination against workers over the age of 40 violates a fundamental public policy in California. So much so, that the court went on to hold that the right of older employees to be free of discrimination in the workplace was so important, that employees could no longer be barred from bringing their suits because they failed to exhaust their administrative remedies, a traditional bar for many wrongful termination plaintiffs.

The Court in Scott v. Pacific Gas and Electric Co., (1995) 11 Cal. 4th 454 made its intentions clear in holding that implied contractual terms ordinarily stand on equal footing with express terms, and that courts must look to the employers policies, practices and communications to discover the contents of the employment contract, and must not confine themselves to examining express agreements between employers and individual employees. Thus, the Supreme Court has made it intentions clear, that implied contracts are not dead, and that employers cannot simply have employees sign their lives away= and then use their employees for 20 or 30 years only to terminate them shortly before retirement with impunity.

While the dichotomy between the States Supreme and Appellate Courts widens, employees (and their attorneys) in certain appellate districts can take heart that Supreme Court holdings are still controlling, and other appellate court rulings are only suggestive. In any event, the appellate courts will soon have to consolidate their opinions on age discrimination, or face being overruled by the Supreme Court which has made its intentions to protect older employees quite clear.


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