scott v. pg&e

Scott v. PG&E
SC of CA, 11 Cal 4th 454, 1995
Facts:                         p’s were senior management at PG&E, demotion resulted in 25% redux in pay and loss of supervisor capacity.  p’s sued saying PG&E breached implied K not to demote without good cause.  p’s had worked for D for 20 and 24 yrs.  Supervised 250 and 56 employees. 
Demoted because of supposed poor supervising and an outside company they had that caused a supposed conflict of interest.  IA did extensive query into their business and personal finances.  Charged with negligent supervising and conflicts of interest with side business. 
p’s were suspended with brief explanation of charges.  One month later they could see the report, and had 3 days to respond.  They did extensive response.  Demoted one month later.  Decision to demote made several months prior, and extensive response to report was not factored in. 
IA didn’t like p’s because they p’s had intervened to “save” an employee from IA once before.
Theory of implied K comes from Positive Discipline guidelines.  Guidelines were not followed in this case.  Guidelines says immediate termination can occur only when major consequence, i.e. theft, battery.  Demotion appropriate when employee has “ability deficiency.”  Company and employees were expected to rely on the manual.
Witness showed that no favorable treatment took place, and D couldn’t show any specific instances of conflicts of interest.
Procedure:               Jury found such a K did exist, found in favor of p.  Trial court rejected D’s JNOV.  Appealate court said judicial involvement in employment decisions re: demotion is not proper. 
Issue(s):              May courts enforce implied K terms not to demote without cause?
              In this case, is there evidence supporting an implied agreement not to demote without cause?
Rule:                         Foley: Implied K not to discharge without good cause is enforced, even over Labor Code section re: “at-will” employment.  Oral K can overcome statutory presumption of at-will Labor Code statute.  Court’s priority is to enforc actual understanding of the parties to a K, including implied K indicated by parties’ conduct.  Creation of this implied K is a question of fact, for jury/judge.  “Impled K terms usually stand on same footing as express terms.”  Courts will look at policies, practices and communications of the company to discovery contents of employee K.  Can include employee reliance on policies, assurances from company re: continued employment.
              Chinn: Policy to pay severance benefits isn’t just gift, but a unilateral K.  Also applies to stock options, pension benefits, and nonmonetary benefits. Question of fact whether policy for hiring laid-off employees first is a K or not.
                         Common law presumption that employee can be demoted and discharged at will.  Right is not absolute:  discrimination, age, retaliation. 
Holding(s):              Yes.
Rationale:              In this case, there was an implied K because the company set forth a policy that they expected the employees to follow, and the employees did follow the policy.  Employees relied upon the fact that they would not be terminated or demoted without just cause, except for the exceptions in the manual.  Manual is an implied employment K.  p’s were demoted not according to the manual.  Therefore, D breached the implied K.

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