Wrongful-Termination Ruling Suggests Benefits of Job Contract

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A much-anticipated state Supreme Court ruling recently issued in a wrongful-termination case doesn’t dramatically change the relationship between employers and workers, say lawyers and human-resource professionals who have spent some time reviewing the lengthy opinion.

As many lower courts have ruled, the justices held that companies may lay off at-will workers without cause. And the court provided guidance on a pivotal 1988 opinion as to what an employee can point to in challenging his at-will status.

For both employers and employees, the ruling signals that the best time to nail down rights concerning job security is upfront.


“The primary message for employers to take from this ruling is if you want to have at-will employment, you want to have an employment contract,” said Tom Makris, a Sacramento attorney and advisor to the Northern California Human Resources Assn.

“Each individual person has to have a contract that says, ‘Employment is at will,’ and an integration provision that says, ‘This contract supersedes everything that came before it and it can only be changed in writing,’ ” Makris said.

Employees, particularly those in demand, need to use that bargaining power to get contracts that give them the job security they want, said Gary Laturno, a San Diego lawyer who represents employees and employers. “If the company wants your services, I would not overlook the possibility of negotiating a contract with them that is other than an at-will agreement.”

In his lawsuit against Bechtel National Inc., 22-year employee John Guz “claimed the benefit of the implied contract, i.e., ‘You can’t fire me without good cause,’ ” said Joe Posner, an Encino attorney who heads the Los Angeles chapter of the National Employment Lawyers Assn. “The court ruled that just being there a long time does not a good-cause employee make.”

Several attorneys said that came as no surprise.

“Most courts have said that an employer has an absolute right to downsize,” said William Quackenbush, a San Mateo, Calif., attorney who represents Guz.

The Guz case was the first time California’s highest court had addressed the idea of the implied job contract since it ruled in Foley vs. Interactive Data Corp. in 1988 that courts could look at several factors, including tenure, in deciding if an employee served at will. That opinion offered no guidance on how courts should weigh those factors, giving rise to mixed rulings in lower courts.


“We’ve gotten summary judgment [in the employer’s favor] in case after case after case. That’s why Guz isn’t earth-shattering,” said Lynne Hermle, a Silicon Valley lawyer who represents employers in wrongful-termination suits.

The Guz ruling tells courts “to look for an actual understanding between the employer and the employee of guaranteed employment,” Hermle said. “It’s not a dramatic change.”

The ruling maintains employees’ ability to use company policies, such as progressive discipline rules, as evidence that they would be fired only for cause, attorneys said.

“It’s really left the door open for employees to be able in some cases to get around an employer’s at-will policy,” said Larry J. Shapiro, publisher of the California Employer Advisor newsletter.

In addition to the implied-contract ruling, the court threw out an age discrimination claim by Guz, who was laid off in 1993 at 49. Attorneys debated whether there was any wider impact on employment discrimination law.

Tom Osborne, an attorney with AARP, said the ruling appeared to leave intact the evidence threshold for getting a discrimination case to trial, set in June by the U.S. Supreme Court.


But Quackenbush said he believes the ruling may require a higher level of discrimination evidence to get to trial in state court, so employees may have a better chance with federal judges, particularly in the U.S. 9th Circuit Court of Appeals, which includes California.