by Hara Marks
An award winning, yet at-will employee can be
fired, the California Supreme Court rules in Guz v. Bechtel National
Inc. The employee, John Guz, argued that his superior work record
and length of time at the company created an implied contract, but
the court found no guarantee of job security. Guz was also denied
his claim of age discrimination, with the court finding that older
workers fired during reductions in force for business purposes may
not claim age bias merely because some younger employees were not
terminated.
Just the facts
Guz was an employee of Bechtel National Inc.,
an engineering and construction company in San Francisco, for 22
years. During his tenure at Bechtel he was promoted six times, received
17 merit raises, and won an award for saving the company $1.5 million.
In 1993 Guz, who was at that time a financial
reports manager, was suddenly fired. His entire six-member business
unit was eliminated and replaced with three employees, who were
ages 34, 41 and 52. Guz was then 49.
He sued for age discrimination. At first a trial
judge in San Francisco threw out the lawsuit. But a state court
of appeals reinstated the claim and ruled that Guz was entitled
to a jury trial on all of his claims. The court noted that the evidence
could show that the company broke a promise of continued employment
and that the layoff was a pretext for age discrimination -- both
of which the California high court now denies.
Guz' lawsuit also indicated he felt Bechtel had
offered him an implied promise of job security. He cited his excellent
record and length of service, but failed to sway the high court
judges.
Just the legal stuff
Justice Martin Baxter writes for the court in
a 6-1 decision, and rules on three major points of employment law
as they apply to the facts of this case:
- the employer had the absolute right to eliminate
- the employee's work unit; the employee did not have an independent
claim for breach of implied covenant of good faith and fair dealing;
and
- the employee failed to show he was a victim of age discrimination.
The ruling goes against the grain of an earlier
California Supreme Court opinion -- in 1988 the court had made it
difficult for employers to fire employees if their performance was
good, even though California was and is an at-will employment state.
Defense attorneys are calling the Guz case, which affects all private,
nonunion California workplaces, a major victory for employers.
Guz's attorneys, on the other hand, said the
court seemed to be giving businesses free rein to reduce their workforces
for any reason and didn't protect workers from unfair termination.
According to the ruling, employees can be fired at will unless their
employer promised they could keep their jobs if they performed satisfactorily.
This promise, or implied contract, can be an express agreement or
private assurances made by the employer.
No contract
Statements in company handbooks may also suffice
to create the implied contract, but an employee's record of good
conduct, raises and promotions [the facts Guz was relying on] do
not create any kind of job security for the employee.
"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," Baxter writes.
And Baxter reminds employers that, short of this
implied contract, an employer "may act peremptorily, arbitrarily,
or inconsistently, without providing specific protections such as
prior warning, fair procedures, objective evaluation, or preferential
reassignment" towards employees and the employee will have no recourse
-- the very definition of at-will.
Employment law professor Carlin Meyer notes that
this ruling follows a pro-employer trend in California law. "California
has always been in the forefront of protecting employee rights,
but has, in recent years, been backing away," Meyers tells HRWire.
"Here, the court is cutting back on a 1988 case that allowed an
employee to use all sorts of evidence to show a genuine belief in
a promise of long-term employment, holding, instead, that there
had to be objective evidence of the makings of such a promise. This
is more in line with what most other states hold."
Employers' attorneys seem grateful for the ruling,
as they noted the justices clearly laid out guidelines on how to
avoid implied contracts. Los Angeles-based employment attorney Diana
Scott thinks that employers outside of California should take note
as well. "[The ruling is] a departure from existing California authority
and will undoubtedly influence out-of-state decisions on these issues,"
Scott says. "Factors such as mere longevity at work do not create
a contractual agreement, express or implied. As always, however,
employers must caution supervisors not to make such representations
to their staffs."
Meyer adds that "the majority of states seem
to recognize that a policy stated in a personnel manual can be binding,
but it often depends on whether and how widely the policy has been
disseminated." In light of this uncertainty, employment attorney
Patricia Hill reminds HR that effective communication and information
sharing is a necessity. "Companies that take the time and effort
and money to write policies need to make sure that all managers
and supervisors are well informed of the policies," she says.
No age discrimination
The state Supreme Court threw out the age discrimination
claim because the justices felt that workers must show significant
evidence of actual discrimination. Guz' attorneys argued that a
false reason for the termination was sufficient proof. Bechtel's
attorneys countered with the argument that much of Guz' workload
was taken on by someone older than he was.
The California justices waited for the ruling
in Reeves v. Henderson before hearing the Guz case. In Reeves, the
U.S. Supreme Court found that juries are entitled to infer bias
if they disbelieve an employer's claimed reason for firing. Hill
says the current ruling is "well-thought out with respect to age.
It follows Reeves." There was no evidence that the employer was
lying with its claim of business necessity as the reason for the
layoffs of Guz and his unit.
But Scott notes some differences between the
cases. "While Guz ostensibly reconciles its holding with Reeves,
Guz suggests that disproving the employer's explanation for adverse
employment actions is still not enough to meet the employee's burden,"
Scott says. "Reeves was a pro-employee holding that arguably lowers
the evidentiary bar for employees to get their case to a jury, particularly
when the employee can establish that the employer is lying about
its proffered reasons for action."
Unlike the implied contract aspect of the case,
Scott says she thinks the age discrimination aspect will have little
impact -- within California or nationwide. "Discrimination cases
are so fact-intensive and specific that this ruling will probably
have little impact on the filing of cases, although it will certainly
assist [California] employers in successfully dispatching them through
summary judgment." Most plaintiff attorneys file discrimination
cases in federal courts anyway, notes Hill, because it's faster
and judges are more educated about Reeves.
One small victory for Guz
Baxter and the state high court rule in Guz'
favor on only one part of his claim. Bechtel had a written policy
that set guidelines for layoffs and helping employees find other
jobs in the company. Guz' theory was that "Bechtel also breached
its implied contract by failing, during and after the reorganization,
to provide him personally with fair layoff protections, including
force ranking and reassignment help, which are set forth in its
[policies]." Although Baxter determines that Guz did not have an
implied contract, he notes that Guz may have been entitled to certain
rights under that policy, and he remands the case to the court of
appeals to decide whether that issue should go to trial.
CaseFacts
Court: California Supreme Court
Date: October 5, 2000
Citation: Guz v. Bechtel Nat'l, Inc., No. S062201, 2000 WL 1473898
Online: http://www.courtinfo.ca.gov/
This article is courtesy of HRWire. All rights reserved.
|
