To: Feared/Revered Senior Lawyer
Re: Potential Claims of Ms. Dilbeart
Date: September 28, 1997
FactsErica Dilbeart is an employee of Global Engineers, Inc. (GEI) where she has worked for ten years. She has recently been laid off, and our client, GEI, wants to know if Ms. Dilbeart has any colorable claims against GEI for breach of contract related to her employment.
GEI has an “at-will” practice of employment, as does the company’s industry. The company personnel manual expressly states that employees are not guaranteed “continuous service” and may “be terminated at the option of GEI.” Ms. Dilbeart did not sign an employee contract, but the employees expect the company to follow the personnel manual in employment.
The policy manual details circumstances under which employees can be terminated. GEI can lay off employees any time the company needs downsize. The company may place layed off employees in a “holding status” where the company will try and find a new job for the employee. Employees can also be terminated if the employee fails to perform their job in a satisfactory manner. Such employees must be advised of the problem and given an opportunity to remedy the situation. This is covered by a detailed procedure for remedying unsatisfactory performance.
During Dilbeart’s tenure she received 6 major promotions, 17 merit raises and a company award for efficiency. Her reviews were all excellent, and she was cited as an invaluable employee. At no time during her employment was she ever advised of any skills deficiency.
In February, the department manager wrote a report critical of the efficiency and general performance of the Dilbeart’s group. In June she was notified that her group was being eliminated as part of a reorganization, and she was being laid off July 31, 1997.
On August 1, 1997, Dilbeart was placed on a holding status which gave her benefits but no salary pending possible reassignment. No reassignment has been found, and Dilbeart is scheduled to be terminated November 1, 1997.
Question PresentedDoes an implied contract term not to be terminated without good cause, established by a ten-year longevity, exemplary reviews and awards, as well as numerous promotions and raises, protect the employee from at-will termination despite the existence of an established, standard express at-will employment policy, which the company followed in terminating the employee?
Short AnswerAn implied contract term most likely exists in this case, and may protect the employee from at-will termination, despite the existence of an express policy of at-will employment. The implied term arises from the employee’s longevity, raises, promotions and positive recognition by the company, and may create a reasonable expectation that the employee will not be terminated without good cause. Such a term is enforceable against an express at-will employment policy.
DiscussionTo bring a claim for breech of contract against GEI, Dilbeart will need to establish the existence of an implied contract term which can override an express at-will term. The factors which can establish an implied contract term are (1) the company’s personnel policies and practices, (2) employee’s longevity of service, (3) oral or active assurances by the employer reflecting continued employment and (4) industry practices. Foley v. Interactive Data Corp. 765 P.2d 373, 387 (Cal. 1988). An express at-will contract or policy can be overcome by an implied contract term to the contrary. Soules v. Cadam, Inc. 3 Cal.Rptr.2d 6 (Ct.App. 1991). A later decision found that normal promotions, salary increases and tenure are not necessarily indicative of an implied contract term. Miller v. Pepsi-Cola, 259 Cal.Rptr. 56 (Ct.App. 1989). Dilbeart was hired at-will, but over the ten years of her employment she received numerous promotions, salary increases and exemplary reviews and awards. At no time was she warned of any problems with her performance. The totality of the relationship of her employment supports the existence of an implied contract term not to terminate except for good cause.
The first factor affecting Dilbeart’s claim of an implied contract term is the company’s personnel policies and practices. The Foley court held that employment contracts are to be treated as any other contracts, and that an implied contract term to terminate only for good cause can overcome an express contract term for at-will employment. Foley, 765 P.2d at 385. More similar to our case, in Soules, the employee was hired at-will, and the court found that evidence of longevity, promotions and positive reviews was sufficient to show the existence of an contract term. Soules 3 Cal.Rptr2d at 11. The GEI personnel policy manual expressly supports an at-will termination procedure for laying off employees due to downsizing. This policy was followed without exception. A court would most likely find that this express contract term could be modified by an implied contract term to terminate only for good cause if sufficient evidence of such an implied term existed.
The second factor to examine is the employee’s longevity of service. Foley was employed for 6 years and 9 months, a time period sufficient, according to the court, “for conduct to occur on which a trier of fact could find the existence of an implied contract.” Foley 765 P.2d at 388. The Soules court established that evidence of longevity in addition to the other factors was “sufficient to raise a triable issue regarding the existence of an implied agreement…” Soules 3 Cal.Rptr2d at 11. Miller had only been employed in his sales capacity for five years, and received minimal promotions. On that basis, the court found insufficient evidence of an implied contract term. Miller 259 Cal.Rptr. at 59. Unlike Miller, but similar to Foley and Soules, Dilbeart was an employee of GEI for ten years, during which time she received exemplary praise. Under the Foley analysis above, a court would most likely find that ten years is sufficient time for an implied contract term to have formed, and sufficient time to establish evidence of an implied term under the stricter guidelines of Miller.
The third factor to examine is the existence of oral or active assurances by the employer reflecting continued employment. During Foley’s employment, he received outstanding promotions, awards and evaluations, which the court found to reasonably establish an expectation that Foley would not be discharged except for good cause. Foley 765 P.2d at 388. The Soules court held that evidence of promotions, salary increases and superior performance ratings could establish the existence of an implied contract term. Soules 3 Cal.Rptr2d at 11. Contrary to Foley and Soules, the Miller court held that “promotions and salary increases are natural occurrences of an employee who remains with an employer for a substantial length of time.” The court went on to state that these factors should not change the status of an employee from at-will to “one dischargeable only for ‘just cause’”. Miller 259 Cal.Rptr. at 59. Miller only received two promotions and regular salary increases throughout his employment, which can easily be viewed as “natural occurrences” of eleven years of employment. During Dilbeart’s ten year employment, she received 6 major promotions, 17 merit raises, and in 1996, the Silver Performance Plus Award. This award, from the president of the company, was for saving the company $1.7 million. In addition, a recent review stated that she was doing an “excellent job,” was “invaluable,” and “meets the requirements” for her job. At no time during her employment was she advised that any of her skills were lacking. Dilbeart’s commendations go beyond the “natural occurrences” of employment, and most likely a court would find that this evidence supports an implied contract term.
The final factor to examine is the practices of the industry. No information is given regarding industry practices in Foley, Soules or Miller. The engineering, construction and environmental industries, of which GEI is a part, practice at-will employment. A court would most likely find this to support GEI’s claim for at-will employment.
GEI can argue that Dilbeart’s job performance was unsatisfactory under Policy 1101, and therefore she was terminated. Supporting this argument is the February, 1997 memo from Maria Manager critical of Dilbeart’s group’s efficiency and general performance. This argument will most likely fail, however, because GEI did not follow the policy in terminating Dilbeart by providing her notice and an opportunity to improve. Nor does the evidence of her reviews, awards and promotions support termination for unsatisfactory performance.
ConclusionAfter examining the four “Foley factors,” the court would most likely find that a trier-of-fact could find the existence of an implied promise that GEI would not terminate Dilbeart without good cause. Dilbeart’s claim will be supported by her longevity of employment, and the assurances she received in the form of abundant promotions, awards and exemplary reviews. The company policy and industry standard both supporting at-will employment will most likely be found by the trier-of-fact to be modified or overridden by the evidence supporting an implied contract term.