Understanding “Discharge for Good Cause”

“Good Cause” Defined — Understanding “Discharge for Good Cause” Breach of Implied Employment contract –

1. Definition: In California, “discharge for good cause” refers to terminating an employee for a legitimate, substantial reason related to job performance or business necessity. This contrasts with “at-will” employment, where either party can end the employment relationship without cause.
2. Implied Employment Contracts: These are agreements based on actions, statements, or company policies implying continued employment. An example is a company handbook stating that employees will only be fired for specific reasons.
3. Wrongful Termination: Wrongful termination occurs when an employee is fired in violation of an implied contract or for reasons that are illegal, like discrimination or retaliation.

Legal Framework in California

1. At-Will Presumption: California law generally presumes employment is “at-will,” meaning either employer or employee can terminate the relationship without cause. However, this is subject to exceptions.
2. Exceptions to At-Will Employment: These include implied contracts, public policy (e.g., firing someone for refusing to break the law), and statutory protections (e.g., anti-discrimination laws).
3. Proving “Good Cause”: For employers, demonstrating good cause for termination often requires showing a history of poor performance, policy violations, or business reasons, supported by documentation.

Potential Legal Issues and Problems

1. Ambiguity in Implied Contracts: Determining the existence and terms of an implied contract can be complex. For instance, an employee might argue that positive performance reviews implied job security.
2. Discrimination Claims: An employee may claim the stated “good cause” was a pretext for discrimination based on race, gender, age, etc., leading to legal challenges.
3. Retaliation Claims: If an employee is terminated after engaging in protected activities (like whistleblowing), they might claim wrongful termination based on retaliation, even if the employer cites good cause.
4. Public Policy Violations: Firing an employee for reasons that violate California’s public policy, such as refusing to participate in illegal activities, can lead to wrongful termination claims.

Examples and Reasoning

1. Performance-Based Termination: An employer dismisses an employee for consistent underperformance. If the employer has documented performance issues and provided opportunities for improvement, this is likely a valid “good cause” termination.
2. Violation of Policy: Dismissal due to a breach of company policy (e.g., safety violations) can be justified as good cause, provided the policy and consequences are clearly communicated.
3. Economic Reasons: Layoffs due to economic downturns can constitute good cause, assuming they’re not used as a cover for illegal termination reasons.
4. Wrongful Termination Case: An employee is fired shortly after filing a discrimination complaint, despite having a good performance record. Even if the employer cites a valid reason, this timing could lead to a wrongful termination lawsuit based on retaliation.

Conclusion

In California, while employers have broad discretion in terminating employment relationships, they must navigate various legal complexities, especially concerning implied contracts and wrongful termination claims. Employers should carefully document performance issues and policy violations to establish “good cause,” while being mindful of potential legal pitfalls such as discrimination, retaliation, and public policy violations.

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Additional Information

Discharge for Good Cause and Implied Employment Contracts in California:

In California, employment relationships are generally presumed to be “at-will,” meaning that either the employer or the employee can terminate the employment relationship at any time, for any reason, or no reason at all, with or without notice. However, there are exceptions to this rule, and one such exception is when an implied employment contract exists.

1. Implied Employment Contracts:

An implied employment contract arises when there is an understanding, either through oral or written communication or through the actions and practices of the employer, that employment will not be terminated without good cause. These implied contracts can be formed in various ways, such as through verbal promises, employee handbooks, or consistent practices over time.

2. Discharge for Good Cause in Implied Contracts:

When an implied employment contract exists, the employer is generally required to have good cause to terminate the employee. Good cause is typically defined as a substantial, legitimate reason for the termination, such as poor job performance, violation of company policies, or other justifiable factors.

3. Legal Consequences of Discharge for Good Cause in Implied Contracts:

In cases where an implied employment contract is established, discharging an employee without good cause can potentially lead to a wrongful termination claim. This means that if an employer terminates an employee without good cause when such an implied contract exists, the employee may have legal grounds for a lawsuit.

4. Problems That Could Arise:

a. Dispute Over the Existence of an Implied Contract: One challenge in these cases is determining whether an implied employment contract indeed exists. It can be subjective and may depend on the specific circumstances, conversations, and actions between the parties.

Example: Lisa has worked for a company for several years, during which her supervisor consistently praised her and assured her of job security. One day, Lisa is terminated without warning, and she believes it’s without good cause. She argues that the implied contract for continued employment was formed based on her supervisor’s assurances.

b. Defining Good Cause: The interpretation of what constitutes “good cause” can vary and may lead to disputes. Employers and employees may have differing views on whether the termination met this standard.

Example: David is let go by his employer for alleged poor job performance. David argues that he consistently met the performance expectations and that the termination was arbitrary. The employer insists that David’s work did not meet their standards.

c. Inconsistent Practices: If an employer has a history of not terminating employees without good cause but then does so in a particular case, it may lead to legal challenges.

Example: ABC Company has a long-standing practice of only terminating employees for good cause. However, they suddenly fire Sarah without clear justification. Sarah believes this is a breach of the implied contract and files a wrongful termination lawsuit.

d. Documentation and Evidence: Employers must maintain clear records of performance issues, policy violations, or other legitimate reasons for termination to defend against wrongful termination claims.

Example: Mark is terminated for repeated tardiness. His employer, XYZ Inc., maintains detailed records of Mark’s attendance issues, including warnings and discussions about improvement. This documentation helps XYZ Inc. establish good cause for the termination.

Conclusion:

In California, discharge for good cause in the context of an implied employment contract can be complex. While the default presumption is at-will employment, the existence of an implied contract can create legal obligations for employers to terminate only for good cause. Problems can arise when there are disputes over the existence of an implied contract, differing interpretations of good cause, inconsistent practices, and the adequacy of documentation. Employers and employees must carefully consider these factors, and when in doubt, consult with legal counsel to understand their rights and obligations under California employment law. Employees who believe they have been wrongfully terminated should seek legal advice to assess the merits of their potential claims.

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2405. Breach of Implied Employment Contract—Unspecified Term—“Good Cause” Defined—Misconduct

New September 2003

Directions for Use

This instruction should be given when there is a dispute as to whether misconduct, in fact, occurred. (Cotran v. Rollins Hudig Hall International, Inc. (1998) 17 Cal.4th 93 [69 Cal.Rptr.2d 900, 948 P.2d 412].)

Sources and Authority

• “The proper inquiry for the jury . . . is not, ‘Did the employee in fact commit the act leading to dismissal?’ It is ‘Was the factual basis on which the employer concluded a dischargeable act had been committed reached honestly, after an appropriate investigation and for reasons that are not arbitrary or pretextual?’ The jury conducts a factual inquiry in both cases, but the questions are not the same. In the first, the jury decides the ultimate truth of the employee’s alleged misconduct. In the second, it focuses on the employer’s response to allegations of misconduct.” (Cotran, supra, 17 Cal.4th at p. 107.)
• “ ‘Good cause’ in the context of implied employment contracts is defined as: ‘fair and honest’ reasons, regulated by good faith on the part of the employer, that are not trivial, arbitrary or capricious, unrelated to business needs or goals, or pretextual. A reasoned conclusion, in short, supported by substantial evidence gathered through an adequate investigation that includes notice of the claimed misconduct and a chance for the employee to respond.’ ‘Three factual determinations are relevant to the question of employer liability: (1) did the employer act with good faith in making the decision to terminate; (2) did the decision follow an investigation that was appropriate under the circumstances;

and (3) did the employer have reasonable grounds for believing the employee had engaged in the misconduct.’ ‘Cotran did not delineate the earmarks of an appropriate investigation but noted that investigative fairness contemplates listening to both sides and providing employees a fair opportunity to present their position and to correct or contradict relevant statements prejudicial to their case, without the procedural formalities of a trial.’ ” (Serri v. Santa Clara University (2014) 226 Cal.App.4th 830, 872–873 [172 Cal.Rptr.3d 732], internal citations omitted.)

• “We have held that appellant has demonstrated a prima facie case of wrongful termination in violation of his contract of employment. The burden of coming forward with evidence as to the reason for appellant’s termination now shifts to the employer. Appellant may attack the employer’s offered explanation, either on the ground that it is pretextual and that the real reason is one prohibited by contract or public policy, or on the ground that it is insufficient to meet the employer’s obligations under contract or applicable legal principles. Appellant bears, however, the ultimate burden of proving that he was terminated wrongfully.” (Pugh v. See’s Candies, Inc. (1981) 116 Cal.App.3d 311, 329–330 [171 Cal.Rptr. 917], disapproved on other grounds in Guz v. Bechtel National Inc. (2000) 24 Cal.4th 317, 350−351 [100 Cal. Rptr. 2d 352, 8 P.3d 1089],

internal citation omitted.)

• “[Plaintiff] contends that it was up to a jury to decide whether the [defendant] ‘honestly and objectively reasonably’ believed that her conduct was egregious enough to be ‘gross misconduct’ and that the court therefore erred in granting summary adjudication of her fourth cause of action for breach of contract. Although the elements of the Cotran standard are triable to the jury, ‘if the facts are undisputed or admit of only one conclusion, then summary judgment may be entered . . . .’ ” (Serri, supra, 226 Cal.App.4th at p. 873.)

Secondary Sources

3 Witkin, Summary of California Law (11th ed. 2017) Agency and Employment,

§§ 219, 220, 221

Chin et al., California Practice Guide: Employment Litigation, Ch.4-C, “Good Cause” for Termination, ¶¶ 4:270–4:271, 4:289 (The Rutter Group)

1 Wrongful Employment Termination Practice (Cont.Ed.Bar 2d ed.) Contract Actions, §§ 8.22–8.26

4 Wilcox, California Employment Law, Ch. 60, Liability for Wrongful Termination and Discipline, § 60.09[5][b] (Matthew Bender)

21 California Forms of Pleading and Practice, Ch. 249, Employment Law: Termination and Discipline, §§ 249.21, 249.43 (Matthew Bender)

10 California Points and Authorities, Ch. 100, Employer and Employee: Wrongful Termination and Discipline, §§ 100.25, 100.29 (Matthew Bender) California Civil Practice: Employment Litigation, § 6:19

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