Professor Michelle Travis – Employment Law – Fall 2014 – UC Hastings College of the Law
I. The At-Will Employment Presumption
1. Default presumption for ER/EE relationship (except: MT has for-cause default).
2. Symmetrical so ER or EE can end the relationship at any time for good reason, bad reason, or no reason at all (except certain statutory limitations like discrimination).
3. Parties can K around this presumption, T&C of job can change.
4. Analysis:
1. Was a K formed?
2. If yes, what type of protection did that K provide?
3. Was the K breached?
4. Remedies for breach?
a. Lost wages and benefits
b. Sometimes reinstatement
II. Common Law Contract Limits to At-Will Employment
A. Express Contracts:
1. CA Labor Code 2922: An employment, having no specified term, may be terminated at the will of either party on notice to the other. Employment for a specified term means an employment for a period greater than one month.
2. CA Lab. Code 2924: An employment for a specified term may be terminated at any time by the ER in case of any willful breach of duty by the EE in the course of his employment, or in case of his habitual neglect of his duty or continued incapacity to perform it.
3. Definite Term K:
a. Just-cause means:
1) just-cause for the term
2) objective standard, no ER mistakes allowed
3) ER cannot terminate for economic reasons
4) a mistaken belief by ER is NOT sufficient in CA.
5) Sometimes courts will apply just-cause to the EE as well (if EE leaves before the definite term ends), look to intent behind negotiations.
4. Indefinite Term Just-Cause K:
a. Looking for an individualized statement that links job performance to job security.
b. Lasts until the parties change their agreement or just-cause arises.
c. Can be created through oral agreements, usually statements by ER where EE relies.
d. Just-cause means:
1) objective standard, no ER mistakes allowed
2) ER can terminate for economic reasons because adverse market conditions can’t be predicted forever and damages would be difficult to calculate.
e. Statute of Frauds defense not likely to succeed here because the oral K can be terminated within a year w/o breach for economic reasons.
f. No accurate measure of damages because the term is indefinite, so protects the EE more than ER
g. Hetes v. Schefman & Miller Law Office p.72:
1) No written agreement between ER and EE. ER told EE “your job is secure as long as you do a good job.” EE was later fired without cause. EE argued the statement meant just-cause, ER argued there was a satisfaction K.
2) ER statements that link job security to quality of work are often interpreted as an express agreement by the ER to only terminate the EE for cause. Statement was made before EE accepted the offer, so it could be interpreted as an inducement to accept the position.
5. Satisfaction K:
a. Slightly more protection because it binds the ER to have a reason for termination but some courts say termination is prima facie dissatisfaction.
b. Subjective standard, so ER mistakes are allowed
c. ER can terminate for economic reasons
B. Implied-in-Fact Contracts:
1. Threshold Question:
a. Did the ER’s words or conduct, on which the EE reasonably relied, give rise to an understanding of just-cause or something beyond at-will?
2. Pugh v. See’s Candies:
a. established standard for just-cause IIFK’s for longstanding EEs.
b. Jury could find the IIFK here because:
1) duration of employment (32 years)
2) promotions and gifts received by EE
3) lack of criticism of EE’s work
4) assurances given to EE
5) ER’s acknowledged company policies (just-cause termination for admin)
c. Burden then shifts to ER to prove just-cause for the termination, EE may rebut by demonstrating that the claimed cause is pre-text or insufficient.
3. Courts look to these factors to determine whether or not this K exists:
a. TOTALITY of ER/EE relationship
b. personnel policies or practices of ER
c. EE’s longevity of service
d. actions or statements by ER that assure continued employment
e. practices of the industry in which the EE works
4. Wooley v. Hoffman-La Roche:
a. The EE manual created an IIF indefinite term just-cause K
b. Absent a clear disclaimer, an implied promise that the EE will only be fired for cause, contained in an employment manual may be enforceable against the ER even when the relationship is for an indefinite term and would otherwise be an at-will relationship.
c. Mass distribution of a document to EE’s that implies such promises should be construed from the reasonable perspective of the EE’s and their reliance on such implied promises.
d. Disclaimers in EE manuals are not always enough to prevent a K, most courts hold they must be clear and obvious to the EE (no fine print or hidden text).
5. Demasse v. ITT (AZ):
a. When an ER includes in an EE handbook, a statement that ER should reasonably expect the EE to rely on as a commitment, that term becomes an offer to form an IIFK (exception to at-will presumption) and is accepted when the EE accepts employment.
b. ITT did reserve the right to modify the handbook at any time, but terms of an IIFK cannot be modified unilaterally.
c. Majority Approach – To effectively modify a K (express of IIF) there must be:
1) an offer to modify the K,
2) assent /acceptance of that offer, and
3) consideration.
4) Continued employment is not sufficient to constitute adequate consideration for or acceptance of a modification for an IIFK.
d. Minority Approach – no new consideration is needed to modify an IIFK.
e. Third Approach – ER must give reasonable advance notice in order to modify.
f. When moving from at-will to a greater protection in favor of EE, courts find consideration easily in EEs continuance at work. Notice to EE is generally assumed.
g. When moving from a greater protection to at-will in favor of ER, courts give more scrutiny and hold ER to a higher standard in providing consideration for the K modification.
h. In CA, ER can unilaterally modify a K moving down in protection to at-will, so long as there was sufficient notice and consideration, and the modification does not disturb accrued benefits such as seniority and vacation time.
C. Parole Evidence Rule
1. Parole Evidence (statements coming before a writing) is excluded only when it is used to vary or modify the terms of an existing contract.
2. Ohanian v. Avis
agreements.
6) Effect on Lawyers:
a) Requires attorneys to report violations up the corporate ladder, then if not responded to properly, to an outside entity.
b) Allows lawyer to reveal confidential information to the extent reasonably necessary to prevent a violation that is “likely to cause substantial injury to the financial interest or property of the issuer or investors.”
B. Covenant of Good Faith and Fair Dealing:
1. In every K there is an implied covenant that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the K, which means in every K there is an implied covenant of good faith and fair dealing.
2. Example:
a. EE has stock option plan that vests after 6 months of employment and ER fires EE after 5 months without any just-cause.
C. Fraud:
1. Elements:
a. misrepresentation,
b. defendant’s knowledge of its falsity,
c. intent to defraud (to induce action in reliance on the misrepresentation),
d. reasonable reliance, and
e. resulting harm.
2. Hunter v. Up-Right (CA):
a. ER forced EE to resign or be fired, constructive termination.
b. Majority said there is no claim for fraud when the ER uses the misrepresentation to induce a resignation. The reliance was not detrimental, because at-will would have prevailed if EE had been terminated instead of being induced to resign.
3. Foley (CA):
a. the EE/ER relationship is mostly contractual and declined to extend tort remedies for breach of the good faith covenant in an employment K.
4. Lazar v. Rykoff-Sexton (CA):
a. ER cannot make intentional misrepresentations to potential EE to induce an employment relationship, especially when such misrepresentations result in reliance and serious detriment to EE.
D. Intentional Infliction of Emotional Distress:
1. Elements (P must prove):
a. actor intended to inflict emotional distress or knew/should have known that emotional distress was substantially certain to result,
b. conduct was extreme and outrageous,
c. actions of D were the cause of P’s distress, and
d. emotional distress sustained by P was severe.
2. Agis v. Howard Johnson (MA):
a. F: ER suspected a thief and began firing EEs alphabetically. ER fired the P publicly and she claimed emotional distress. No fraud claim because no misrepresentation, no wrongful discharge because only affected Agis.
b. R: A jury could find IIED based on viewing the facts in favor of the P.
