24 June 2013

Writing sample: At-will employment

QUESTION PRESENTED
          Under the California presumption that employment is at-will, but can be overcome by the totality of the circumstances, can Electra prevail in a breach of contract claim when she believed the personnel policies, longevity, assurances of continued employment and industry practices created an implied contract to terminate only for cause?
BRIEF ANSWER
          Probably not. California employment is at-will, but this presumption can be rebutted by an implied contract. This can be demonstrated by the parties’ conduct and the totality of the circumstances. These include the personnel policies or practices of the employer; longevity of the employee's service; actions or communications by the employer reflecting assurances of continued employment; and practices of the industry. However, a vague combination of factors by itself does not necessarily give rise to an implied contract. The actual understanding of the contract must be determined from the circumstances. On Electra’s facts, a court would likely rule that Electra was an at-will employee. As a result, an implied contract probably did not exist and she could not recover for breach of contract.
FACTS
          Our client, Carmen Electra, worked for the First Bank of California (“FBOC”) for 22 years. During that time, she progressed from teller to branch manager to Assistant Accounting Manager, receiving positive performance reviews each year. Additionally, she received verbal assurances of continued employment; among them, that she would “have a long, fruitful career with the bank.”
Lucy Liu, Electra’s former supervisor, encouraged FBOC to create a new Assistant Accounting Manager position, and she recommended Electra for this position. Subsequently, PBOC chose Electra. Liu, preparing for retirement, started assigning duties to Electra with the expectation that Electra’s “continued hard-work would lead to another promotion” as the next Accounting Manager.
Upon Liu’s retirement in 2010, FBOC hired Gary Sinise as its new Accounting Manager instead of Electra. A personality conflict between Sinise and Electra soon developed. Approximately one year later, Electra was discharged, allegedly due to FBOC’s cost-saving measures that eliminated the Assistant Accounting Manager’s position. FBOC’s employee handbook states that the “First Bank of California may terminate any employee…with two weeks [sic] notice for any reason so decided by First Bank of California.”  Electra, unemployed for almost two years with no current prospects of a new job, came to us for assistance.
DISCUSSION
I. Was Carmen Electra an At-Will Employee?
California is an at-will employment state, but this presumption can be overcome by evidence to the contrary. Foley v. Interactive Data Corp., 765 P.2d 373 (Cal. 1988). Employers and employers retain the freedom of contract, and as a result, courts will look to the parties' actual conduct to determine if their actions demonstrate an implied contract. Id. at 677. To evaluate the parties’ actions, the courts will look at the totality of the circumstances, including the employer’s personnel policies or practices, longevity of the employee’s service, the employer’s actions or communications that would indicate assurances of continued employment, and the practices of the employee’s industry. Pugh v. See’s Candies, Inc., 171 Cal. Rptr. 917 (Ct. App. 1981).
However, promotions and salary increases are indicative only of lengthy employment and are not sufficient to establish an implied contract. Miller v. Pepsi-Cola Bottling Co., 259 Cal. Rptr. 56 (Ct. App. 1989). See also Quist v. Columbia/HCA Health Care Corp., 1999 U.S. App. LEXIS 13506, at *1 (9th Cir. June 17, 1999). Similarly, positive performance reviews, commendations, salary increases, and vague assurances of future positions are not adequate to overcome the presumption. Horn v. Cushman & Wakefield Western, Inc., 85 Cal. Rptr. 2d 459 (Ct. App. 1999). Lastly, a vague combination of factors by itself does not necessarily create an implied contract. The courts must use the totality of the circumstances to determine, by mutual agreement and meeting of the minds, the actual understanding of the contract. Guz v. Bechtel Nat. Inc., 8 P.3d 1089 (Cal. 2000).
A. The personnel policies or practices of the FBOC suggest at-will employment.
The first factor of the test is an examination of the personnel policies or practices of the employer. An implied contract can be inferred from an employee’s reliance on language in a company’s employee handbook. The handbook language may overcome the at-will presumption if it sets implied contractual limits on the circumstances under which an employer can end an employment relationship. Guz, 8 P.3d at 1104. For instance, in Foley the employee relied in part on the employer’s written “Termination Guidelines” which imposed limits on the employer’s ability to terminate. Foley, 765 P.2d at 388.
The courts distinguish these self-imposed limits on the employer from express at-will language in the company handbook. In Quist, at-will language in the handbook buttressed the presumption of at-will employment. Quist, 1999 U.S. App. LEXIS 13506, at *6. Such provisions represent direct expression of an employer’s intent and should be considered alongside other relevant evidence. Id. Similarly, in Guz, the company’s personnel policy specified no guarantee of continuous employment to the employee. Guz, 8 P.3d at 1105.
The primary evidence here is FBOC’s employee handbook. The relevant provision states that the “[FBOC] may terminate any employee…with two weeks [sic] notice for any reason so decided by [FBOC].” Electra’s situation is similar to the facts in Quist, where the handbook language specifically reinforced the presumption of at-will employment rather than limited it. No other language suggests any implied contractual limits. Electra claims she had no knowledge of such provisions in the handbook; nonetheless, there is nothing in the cases to suggest the employee must be aware of such a provision for it to have force. But see Quist, 1999 U.S. App. LEXIS 13506, at *6 (employee acknowledged receipt of company manual and was familiar with policies).  On the other hand, there is no evidence that Electra signed any written agreement. Here, the balance of evidence suggests that FBOC’s personal policies or practices lie in at-will employment, not an implied contract.
B. Electra’s longevity of service is probably sufficient to show conduct, communications, and assurances from the employer.
The second factor of the test is a measure of the longevity of service, which may aid in determining the existence of an implied contract. The cases that describe this factor indicate that longevity by itself does not create an implied contract, but is significant to the measure that it establishes an adequate base of time to accumulate conduct, communications, and assurances from the employer. Guz, 8 P.3d at 1104; Gould v. Md. Sound Indus., Inc., 37 Cal. Rptr. 2d 718, 726 (1995).
In Miller, the employee asserted 11 years of employment (along with two promotions and regular salary increases) as indicative of an implied contract. Miller, 259 Cal Rptr. at 59. The courts noted Miller’s longevity, but qualified it by indicating that promotions and salary increases were “natural occurrences” of this longevity, and alone, were not sufficient to give rise to an implied contract. Id. See also Guz, 8 P.3d at 1104 (“longevity, raises and promotions are their own rewards for the employee's continuing valued service; they do not, in and of themselves, additionally constitute a contractual guarantee of future employment security”); Horn, 85 Cal. Rptr. 2d at 474 (evidence of laudatory performance reviews, commendations, and salary increases did not rise to an implied contract).
In the instant case, Electra worked for FBOC for 22 years. This fits squarely in between two cases where longevity was found to contribute to an implied contract (Foley, six years and nine months; and Pugh, 32 years). Foley, 765 P.2d at 387; Pugh, 171 Cal. Rptr. at 918. However, as in Miller, Horn, and Guz, this time by itself does not rise to the level of an implied contract. Nonetheless, a court would likely conclude that this period of employment would satisfy the requirement to establish a timeline upon which evidence of employer conduct, communications, and assurances of employment can be stacked.
C. FBOC’s actions and communications indicating assurances of continued employment were too vague to create an implied contract.
The third factor of the test is a consideration of the actions or communications of the employer that would tend to indicate assurances of continued employment. Repeated assurances of job security and promotions may create a reasonable expectation of an implied contract, but they must be specific enough to establish an understanding between the parties. For instance, the court in Foley found that an employee could rely on repeated oral assurances of job security to contribute to the inference of an implied contract. Foley, 765 P.2d at 385. However, “oblique” language alone is not sufficient. Pugh, 171 Cal. Rptr. at 927. In Gould, the employee relied on oral assurances that the employer was looking for “long term” employees, but the court was not persuaded. Gould, 37 Cal. Rptr. 2d at 727. Similarly, in Horn, the employee cited positive text in performance evaluations and regular salary increases, and but the court found these were “vague assurances,” and thus not adequate to establish an agreement between the parties. Horn, 85 Cal. Rptr. 2d at 474.
Electra cites communications that she would have a “long and fruitful career,” and that “continued hard-work would lead to another promotion.” Additionally, she alleges that communications of FBOC led her to believe that she would become the Accounting Manager after Liu retired. Specifically, she points to the creation of the Assistant Accounting Manager position, and being groomed by taking on Liu’s responsibilities, Electra’s situation is closer to the facts in Horn, where positive performance evaluations and regular salary increases were too vague to create an implied contract. Id.
Here, while Electra may have genuinely understood these communications to mean she would become the next Accounting Manager, there are no facts to suggest FBOC actually shared the same beliefs. While Liu did hand off some of her responsibilities to Electra, this tends to demonstrate at best that she was considered a candidate for the position, not a communicative guarantee of promotion. Electra herself understood this to mean she was being groomed, but there are no facts to suggest anything more. Electra’s situation compares favorably to Guz, where the employee alleged an implied contract based upon an unwritten policy to terminate only for cause, but the court found that the employer’s general disclaimer of at-will employment was controlling. Guz, 8 P.3d at 1107.
The last potentially relevant communication is the greeting card given to Electra by Liu which wished Electra good luck “in her new position.” None of the cases deal with communications from a former employer. While the card would otherwise lean strongly in Electra’s behavior, a court would probably find this card to be irrelevant because Liu had already left FBOC when the card was given, and thus was no longer a representative of the bank. As a result, the language on this card likely holds no weight of authority.
On the third factor, a court would probably conclude that, while the actions or communications of FBOC may have suggested assurances of continued employment, these communications were too “oblique” or “vague” to reach any actual understanding between the parties.
D. Practices of the industry are insufficient to support an implied contract.
          The fourth and final factor of the test is an examination of the practices of the industry. Practices common among certain industries may contribute to the rise of an implied contract. In Guz, the court found that an industry that operated through competitive bidding was volatile and was not indicative of secure employment. Guz, 8 P.3d at 1107. In both Guz and Horn, the employees were terminated as a result of company-wide reorganizations. Id. at 1102; Horn, 85 Cal. Rptr. 2d at 463-64. No other cases cite the impact of industry practices, although an inference from Guz is that more conservative business models are likely to be less volatile industries, and potentially better indicators of job security.
          In this case, Electra alleges that during her tenure, the banking industry did not sign employment contracts. There are no other facts to determine the practices of the industry. However, the banking industry appears to be different from the industry in Guz, which was characterized by volatility. Id. Additionally, Electra’s situation is more similar to the circumstances in Horn and Guz, where a termination as a result of a company-wide reorganization was lawful. Guz, 8 P.3d at 1102; Horn, 85 Cal. Rptr. 2d at 463-64. Likewise, a court would probably find that the practices of the industry are insufficient to give rise to an implied contract.
CONCLUSION
Electra can rebut the presumption of at-will employment by demonstrating that the totality of the circumstances, including personnel policies or practices of the employer; the employee’s longevity; actions or communications by the employer reflecting assurances of continued employment; and practices of the industry; created an implied contract. An implied contract can be inferred from an understanding of the language in an employee handbook. Handbook language may overcome the presumption of at-will employment if it sets implied contractual limits on the circumstances under which an employer can terminate its employees. Longevity by itself does not create an implied contract, but is significant to the measure that it establishes time to accumulate communications, and assurances from the employer. Repeated assurances of job security and promotions may create a reasonable expectation of an implied contract if they are specific enough to establish an understanding between the parties. Lastly, practices in some industries may contribute to the rise of an implied contract.  The combination of Electra’s longevity of service and frequent promotions, top level performance reviews and raises, and verbal assurances of a lengthy career is noteworthy, but nonetheless it probably does not give rise to an implied contract. A court would probably rule that Electra was an at-will employee, and as such, an implied contract did not exist.
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