Opinion
[REVIEW GRANTED BY CAL. SUPREME COURT]
[Reprinted without change Jan. 2000 Review Granted Opinions Pamphlet for tracking pending review and disposition by the Supreme Court.]
Superior Court of the City and County of San Francisco, No. 964836, William J. Cahill, Judge. [Copyrighted Material Omitted] [Copyrighted Material Omitted] COUNSEL
Bianco & Murphy and Stephen Murphy for Plaintiff and Appellant.
Thelen, Marrin, Johnson & Bridges and Janet Bentley for Defendants and Respondents.
OPINION
POCHé, J.
Following 22 years of employment with Bechtel Corporation and/or its wholly owned subsidiary Bechtel National, Inc. (BNI) (respondents), plaintiff and appellant John Guz (Guz) was placed on holding status and was eventually terminated. He sued alleging causes of action for breach of an implied contract not to terminate without cause, breach of the implied covenant of good faith and fair dealing, and age discrimination under the California Fair Employment and Housing Act (Gov. Code, section 12900 et seq.). Respondents moved for summary judgment asserting there were no triable issues of material fact and that they were entitled to judgment in their favor as a matter of law. (Code Civ. Proc., section 437c, subd. (c).) The trial court granted respondents' motion, finding that Guz was an at-will employee and had failed to establish a prima facie case of age discrimination. Guz appeals from the subsequently rendered judgment in respondents' favor. We conclude that the trial court erred in granting summary judgment for respondents and reverse.
I. Background
BNI is an engineering, construction, and environmental remediation company which focuses on federally funded programs, primarily the United States Departments of Energy and Defense. Guz was hired by Bechtel in January of 1971 as an administrative assistant, grade 21. For the next 22 years he worked in management information—both "awarded" and more recently in "overhead." Guz went to work for BNI in 1986 as part of a consolidation of two management information groups. At the time of his termination in December of 1992 Guz held the position of financial reports supervisor in BNI's management information group (BNI MI Group), a grade 27 position, which paid an annual salary of $71,280. Guz was 49 years old.
As financial reports supervisor, Guz was part of a six-person team which provided financial data (actual and forecasted) to senior management. Also in the group were the manager of BNI MI Group, Ronald Goldstein, Robert Wraith and Christine Siu, each of whom worked on awarded work and proposals, Dee Minoia, a subordinate to Guz who worked on overhead and work hours, and Pam Fung, Goldstein's secretary. Goldstein reported to Edward Dewey, the manager of government services. Dewey reported to the president of BNI.
Goldstein and Guz were close personal friends.
.) The defendant in Foley had urged the court to place special limitations upon the enforcement of employment security agreements, but that notion was unequivocally rejected: "We discern no basis for departing from otherwise applicable general contract principles." (47 Cal.3d at p. 678
During his 22 years with Bechtel, Guz received 6 major promotions and 17 merit raises. In 1992 Guz received the silver performance plus award from the president of BNI, Robert C. Johnstone, in recognition of his excellent work performance and for saving the company $1.7 million. His performance review for the period of 1991-1992 indicated that Guz " 'meets requirements' " in all stated categories. Goldstein noted in the evaluation that Guz was a " 'strong performer' in [his] group," continued to do " 'an excellent job,' " and that his " 'knowledge of Bechtel based on over twenty years of experience is invaluable.' " Goldstein's supervisor, Dewey, concurred in that appraisal. At no time during his 22 years with respondents was Guz advised that any of his skills were deficient.
In January of 1992 Johnstone became president of BNI. Before becoming president, Johnstone had received his management information services from the San Francisco Regional Office Management Information Group (SFRO MI Group), another management information group within Bechtel headed by James Tevis.
In April of 1992 Johnstone and Dewey suggested to Goldstein that the work performed by his group could be accomplished with a smaller staff.
In late 1992 Johnstone asked Tevis to submit a proposal for BNI MI Group services to be provided through his group. Tevis submitted a proposal of $200,000. In December of 1992 Johnstone accepted the proposal.
The budget for BNI MI Group for 1992 was $360,000.
Incredibly, the effect of the "presumption" of at-will employment is not even mentioned in BAJI's instructions.
Upon consulting with Goldstein, Tevis made a transition plan. Effective February 1, 1993, the BNI MI Group was transferred to SFRO MI Group. The new coordinator of the BNI MI Group under Tevis was John Wallace. Two members from the old BNI MI Group were given positions: Bob Wraith and Christine Siu. Each was younger and had a lower grade level than Guz.
In September of 1992 Minoia had been asked to look for work elsewhere within Bechtel.
Guz contends that the significant reduction in job hours reflected in these statistics is misleading because, subsequent to 1991, Bechtel changed the method of reporting job hours at the Savannah River Project (SRP). However, excluding SRP, BNI's job hours for 1991 and 1992 were 3,651,000 and 3,154,000, respectively. Moreover, the projected work hours for 1993 were 1,890,000.
In October of 1992 Guz was advised by Goldstein to look for another position within Bechtel in the event it was decided to reduce staff within the SFRO MI Group. In mid-November, Goldstein asked Guz if he would remain in the group; Guz agreed.
On December 9, 1992, Guz was notified that the entire BNI MI Group was being disbanded, and that he was being laid off due to a downturn in workload. Guz continued in his regular assignment until January 29, 1993, and assisted in the transition period. Guz's overhead reporting duties were transferred to John Schaeffer's group in the SFRO MI Group, and his governmental auditing work went to Ann Dersheimer's group.
Dersheimer was comptroller of BNI.
"Finally even assuming a covenant not to terminate without 'good cause,' to raise a triable issue of fact Guz must set forth facts showing that Bechtel acted in 'bad faith' and without 'probable cause.' [Citations.]" ("Defendants Bechtel National, Inc. and Bechtel Corp.'s Memorandum of Points and Authorities in Support of Their Motion for Summary Judgment or, in the Alternative, for Summary Adjudication of Issues," filed Aug. 18, 1995.)
Effective January 30, 1993, Guz was placed on a holding status, a nonpaid employment status during which time Bechtel employees continue to receive medical benefits and are available for reassignment in Bechtel. Guz was terminated effective June 11, 1993. While on holding status, Guz received no offers for other employment within Bechtel.
Although the written notification sets forth that holding status ended on April 30, 1993, in his deposition testimony Guz stated that he was terminated effective June 11, 1993. The record does not explain the discrepancy.
The majority avoided the issue by concluding, erroneously in my opinion, that respondents' personnel policies support Guz's claim that his employment was not "at-will."
II. Review
A. Summary Judgment
A brief recap of the rules governing summary judgment is warranted. Summary judgment is properly granted where the papers show that there is no triable issue as to any issue of material fact and the moving party is entitled to judgment in his favor as a matter of law. (Code Civ. Proc., section 437c, subd. (c).) Where the defendant is the moving party, he must show with respect to each cause of action either that (1) one or more elements cannot be established, or (2) there is a complete defense. (Code Civ. Proc., section 437c, subd. (o) (2).) Once that burden is met, the burden shifts to the plaintiff to show the existence of a triable issue of fact(s) with respect to that cause of action or defense. (Code Civ. Proc., section 437c, subd. (o) (2).) The plaintiff may not rely upon the mere allegations of or denial of its pleadings to show the existence of a triable issue; he must set forth specific facts showing that a triable issue exists as to the cause of action. (Ibid.; see generally, Union Bank v. Superior Court (1995) 31 Cal.App.4th 573, 590-592 [37 Cal.Rptr.2d 653].)
Placed in the context of a wrongful termination case, the burden of proof goes like this: The defendant has the initial burden of showing that the plaintiff's action has no merit; then and only then does the plaintiff have the obligation to respond and show the existence of a triable issue of fact. (Martin v. Lockheed Missiles & Space Co. (1994) 29 Cal.App.4th 1718, 1730-1731 [35 Cal.Rptr.2d 181].)
The appellate court examines the evidence presented to the trial court and independently determines its effect as a matter of law. (Transamerica Ins. Co. v. Superior Court (1994) 29 Cal.App.4th 1705, 1713-1714 [35 Cal.Rptr.2d 259].) It also independently reviews the trial court's determination of questions of law. To that end, the appellate court is not bound by the trial court's stated reasons: it reviews the ruling, not the rationale. (Stratton v. First Nat. Life Ins. Co. (1989) 210 Cal.App.3d 1071, 1083 [258 Cal.Rptr. 721].)
B. The Existence of an Implied Contract
1. Foley
In granting summary judgment for respondents on Guz's cause of action for an implied contract to discharge only for cause, the trial court reasoned: "Plaintiff was an at-will employee and has not introduced any evidence that he was ever told at any time that he had permanent employment or that he would be retained as long as he was doing a good job." With all due respect to the trial court, it is misreading the governing authority: Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654 [254 Cal.Rptr. 211, 765 P.2d 373] (Foley). All agree that that the parties did not have an integrated contract defining the employment relationship. Absent an integrated contract, the starting place for defining the employment relationship is Labor Code section 2922, which provides: "An employment, having no specified term, may be terminated at the will of either party on notice to the other...."
Although Bechtel relies on the language of personnel policy No. 1101 as some evidence of at-will employment, it did not argue below and does not argue here that the policy constituted an integrated written employment contract. As others have noted, language in employee handbooks is insufficient to constitute an express agreement that employment was at-will. (Wilkerson v. Wells Fargo Bank (1989) 212 Cal.App.3d 1217, 1226-1228 [261 Cal.Rptr. 185]; Walker v. Blue Cross of California (1992) 4 Cal.App.4th 985, 993-994 [6 Cal.Rptr.2d 184].)
The presumption of at-will employment created by Labor Code section 2922 may be overcome "by evidence that despite the absence of a specified term, the parties agreed that the employer's power to terminate would be limited in some way, e.g., by a requirement that termination be based only on 'good cause.' " (Foley, supra, 47 Cal.3d at p. 677.) Foley instructs that to determine the existence of such an implied contract, one looks to the "totality of the circumstances," including the following factors: the personnel policies or practices of the employer, the employee's longevity of service, actions or communications by the employer reflecting assurances of continued employment, and practices of the industry in which the employee is engaged. (At p. 680; accord, Camp v. Jeffer, Mangels, Butler & Marmaro (1995) 35 Cal.App.4th 620, 629 [41 Cal.Rptr.2d 329]; Gould v. Maryland Sound Industries, Inc. (1995) 31 Cal.App.4th 1137, 1151 [37 Cal.Rptr.2d 718].)
The Supreme Court has ruled that the existence of an implied contract is " 'a question of fact.' " (Foley, supra, 47 Cal.3d at p. 677.) That determination has been repeatedly restated and followed. (See, e.g., Alexander v. Nextel Communications, Inc. (1997) 52 Cal.App.4th 1376, 1381 [61 Cal.Rptr.2d 293]; Haycock v. Hughes Aircraft Co. (1994) 22 Cal.App.4th 1473,1490 [28 Cal.Rptr.2d 248]; Hejmadi v. AMFAC, Inc. (1988) 202 Cal.App.3d 525, 540 [249 Cal.Rptr. 5]; Luck v. Southern Pacific Transportation Co. (1990) 218 Cal.App.3d 1, 14 [267 Cal.Rptr. 618].)
This is not to say that the determination of whether an implied promise exists can never be made by way of summary judgment. Indeed, where the evidence is undisputed and defeats an element of the cause of action, summary judgment may well be proper. (Davis v. Consolidated Freightways (1994) 29 Cal.App.4th 354, 366 [34 Cal.Rptr.2d 438]; Miller v. Pepsi-Cola Bottling Co. (1989) 210 Cal.App.3d 1554, 1558-1559 [259 Cal.Rptr. 56].) 2. The Evidentiary Showing
Respondents asserted that summary judgment in its favor was proper because Guz was an at-will employee. In support of that argument, respondents relied upon (1) the presumption of Labor Code section 2922; and (2) personnel policy No. 1101.
We start with personnel policy No. 1101 (June 1991 ed.) which is entitled, "Termination of Employees." Subsection A of the three-page policy sets forth "general" policy statements applicable to "all categories of termination." Within that section it is stated: "Bechtel employees have no employment agreements guaranteeing continuous service and may resign at their option or be terminated at the option of Bechtel." In respondents' view this statement establishes as a matter of law that Guz is an at-will employee. We disagree. Certainly this is some evidence which may be argued to the jury—as we will explain in detail—but it does not in and of itself establish that Guz was an at-will employee.
Nevertheless, respondents were entitled to and did rely on the presumption of Labor Code section 2922 to satisfy their initial burden of showing at-will employment. Thus it then became necessary for Guz to demonstrate that there was a triable issue of material fact as to that showing. (Code Civ. Proc., section 437c, subd. (o).)
Guz undertook to establish many of the factors cited in Foley. Guz presented evidence showing that he was a long-term Bechtel employee who had received positive performance evaluations, and regular salary increases, promotions and bonuses. Guz relied on Bechtel personnel policies, including personnel policy No. 1101, which sets forth a progressive discipline policy by which unsatisfactory employees are given both notice and an opportunity to correct deficiencies prior to termination. The president of BNI made a statement to the effect that Bechtel's practice was not to terminate employees unless there was good cause. In his deposition, Guz's supervisor Goldstein testified that Bechtel's policy was to train supervisors to document performance problems so that cause to terminate the employee could be established. Bechtel gives preference to long-term employees during layoff.
"Employees who fail to perform their jobs in a satisfactory manner may be terminated, provided the employees have been advised of the specific shortcomings and given an opportunity to improve their performance."
In our view, the evidence of long-term employment, consistent promotions, salary increases and recognition for outstanding work, coupled with the personnel policies of Bechtel, was sufficient under Foley to create a triable issue as to whether Guz was an at-will employee. We are not alone in this view.
In Walker v. Blue Cross of California, supra, 4 Cal.App.4th 985, Division Three of this court found a triable issue to exist upon a showing of longevity of employment, consistent promotions and salary increases, satisfactory evaluation, and the personnel policies in existence during the employee's tenure. (At p. 993; see also Soules v. Cadam, Inc. (1991) 2 Cal.App.4th 390, 400 [3 Cal.Rptr.2d 6] [length of service, promotions, salary increases and superior performance ratings sufficient to create a triable issue of fact]; Haycock v. Hughes Aircraft Co., supra, 22 Cal.App.4th 1473 [longevity of employment, regular promotions, salary increases, favorable performance ratings, absence of discipline, employer personnel policies affording protection to long-term employees during layoff sufficient to create a triable issue of fact].)
The trial court focused exclusively on the absence of evidence of oral assurances of continued employment. While Foley lists oral assurances as a factor to consider in the totality of the circumstances, the absence of them is not determinative of at-will employment. (Foley, supra, 47 Cal.3d at p. 680.) While respondents are free to argue to the jury that the absence of oral assurances is evidence of at-will employment and the absence of an implied contract, the absence of that factor does not as a matter of law establish that Guz was an at-will employee. (See Haycock v. Hughes Aircraft Co., supra, 22 Cal.App.4th 1473, 1489.)
Nothing we hold today is at odds with either Miller v. Pepsi-Cola Bottling Co., supra, 210 Cal.App.3d 1554, or Davis v. Consolidated Freightways, supra, 29 Cal.App.4th 354. In each of those cases, summary judgment for the employer was found proper where the employee was only able to establish longevity of employment, regular salary increases and promotions. As stated by the Miller court, "Basically, the record revealed that all Miller can urge are two promotions and regular salary increases during his eleven years with Pepsi. Promotions and salary increases are natural occurrences of an employee who remains with an employer for a substantial length of time. These factors should not change the status of an 'at-will' employee to one dischargeable only for 'just cause.' We hold that, as a matter of law, Miller had no enforceable contract with Pepsi." (Miller v. Pepsi-Cola Bottling Co., supra, 210 Cal.App.3d at p. 1559; see also Davis v. Consolidated Freightways, supra, 29 Cal.App.4th at pp. 369-370.) Each of these cases is distinguishable from the case at hand because of the additional evidence Guz presented regarding his employer's personnel practices.
In sum, we express no opinion as to the merits of Guz's cause of action. We hold only that a triable issue of fact exists as to whether Guz was an at-will employee, and as such summary adjudication in favor of respondents was error.
3. Good Cause to Terminate
Respondents argue that even if Guz had an implied contract, there was good cause to terminate him. Because the trial court found Guz to be an at-will employee it did not reach the issue. Because there are a number of triable issues of material fact with respect to this question, the matter may not be resolved by summary judgment.
Although not explained on the record, the trial court struck the following proposed finding in its order granting summary judgment: "There is no triable issue of material fact that plaintiff was terminated as part of a reorganization."
The term "good cause" in the wrongful discharge context " '[e]ssentially ... connote[s] "a fair and honest cause or reason, regulated by good faith on the part of the party exercising the power" ' [citation], as opposed to one that is 'trivial, capricious, unrelated business needs or goals, or pretextual ....' [Citations.]" (Scott v. Pacific Gas & Electric Co. (1995) 11 Cal.4th 454, 467 [46 Cal.Rptr.2d 427, 904 P.2d 834]; cf. Malmstrom v. Kaiser Aluminum & Chemical Corp. (1986) 187 Cal.App.3d 299, 321 [231 Cal.Rptr. 820].)
Guz was notified that the reason for his layoff was a downturn in the workload at BNI. In their motion for summary judgment respondents argued they had good cause to terminate Guz due to that downturn in the workload and a continuing reduction in the budget for BNI MI Group's work. In opposition Guz argued that respondents did not have good cause to terminate him. His argument was twofold: (1) the consolidation of BNI MI Group and SFRO MI Group was arbitrary and capricious (e.g., not a legitimate business decision), and (2) even if the reorganization were deemed a legitimate business decision, it did not constitute good cause for terminating Guz as respondents had not followed their personnel policies for reduction in force and forced ranking. Respondents countered that their force ranking policies did not apply to the layoff as the BNI MI Group was too small.
Guz's showing was sufficient to create a triable issue as to whether the business reason for terminating Guz proffered by respondents—a downturn in BNI workload—was pretextual.
In his deposition, BNI President Johnstone testified that during the course of 1992 he had become increasingly dissatisfied with the performance of the BNI MI Group as led by Goldstein, who was in turn supervised by Dewey. By August or September Johnstone told Dewey to get Tevis's group "more actively involved." Johnstone never told Goldstein or Guz that he was dissatisfied with the BNI MI Group work product. The following is instructive:
"Q. Did you ever think in your own mind that you were being overly critical of the Management Information group of BNI?
"A. No.
"Q. Did you think you were being fair to Ron Goldstein?
"A. Yes. * * *
"Q. You understood that you had discretion as President of BNI to fix the problem as you saw fit?
"A. I did.
"Q. And the way you decided to fix the problem was reorganizing the company?
"A. The way I fixed—decided to fix the problem was to consolidate the activity with the San Francisco Regional Office activity.
"Q. Would you characterize that 'fix' as a reorganization?
"A. No.
"Q. It was a consolidation?
"A. No. It was buying the services from another group, which is a form of consolidation.
"Q. So you got—Your fix was to retain the services from the SFRO group as opposed to the BNI group?
"A. Correct."
This testimony by itself created a triable issue as to whether the motivation for the reorganization was pretextual: The motivation was not a downturn in BNI's workload but a dissatisfaction with the overall performance of the BNI MI Group. We express no opinion as to whether dissatisfaction with the performance of the group may constitute good cause to disband the group. But under Bechtel policies, such dissatisfaction with performance required written warnings and an opportunity to improve.
Guz also created a triable issue as to whether elimination of the BNI group was justified by a "downturn in workload" which was the stated reason for his termination. Johnstone's declaration does not mention a downturn in workload as a factor in his decision to do away with the BNI MI Group. Respondents presented no evidence that any other departments in BNI were required to reduce staff because of a "downturn in workload." Finally, Guz presented evidence suggesting that a reduction in BNI's workload would not necessarily mean a reduction in BNI MI's workload, and indeed the converse may well be true.
In sum, the existence of these triable issues alone made summary adjudication of Guz's cause of action for breach of the implied promise not to terminate without good cause improper.
C. The Covenant of Good Faith and Fair Dealing
With respect to the cause of action for breach of the covenant of good faith and fair dealing, the sole basis advanced by respondents below was that the covenant does not attach to an at-will employee. On appeal, respondents change course and argue that there was no bad faith in the termination. Because respondents did not advance that argument below they may not raise it for the first time on appeal.
If a trial court grants a summary judgment motion on an incorrect basis, a reviewing court must affirm if the grant would have been proper on another asserted basis. (See, e.g., Mero v. Sadoff (1995) 31 Cal.App.4th 1466, 1478 [37 Cal.Rptr.2d 769].) But where the moving party asserts only one basis for its motion, and the reviewing court finds that theory invalid, the moving party is not entitled to raise additional defenses or theories in support of the trial court's ruling for the first time on appeal where the opposing party was not given the opportunity to marshal its evidence in opposition to that theory.
D. Age Discrimination
Lastly, Guz argues that the trial court erred in concluding that as a matter of law he did not establish a prima facie case of age discrimination. We agree. We return to the question of who had to prove what. Had this cause of action reached trial, Guz would have had the initial burden of demonstrating a prima facie showing of wrongful discrimination. The burden would then shift to respondents to show a lawful reason for the termination. Guz would then have the burden of showing that the proffered justification was a mere pretext. (See, e.g., Gonzales v. MetPath, Inc. (1989) 214 Cal.App.3d 422, 426 [262 Cal.Rptr. 654]; accord, Martin v. Lockheed Missiles & Space Co., supra, 29 Cal.App.4th at p. 1730.)
In the context of adjudication by way of summary judgment the burden reverses. (University of Southern California v. Superior Court (1990) 222 Cal.App.3d 1028, 1036 [272 Cal.Rptr. 264]; accord, Martin v. Lockheed Missiles & Space Co., supra, 29 Cal.App.4th at pp. 1730-1731.) Thus the initial burden is on respondents to establish that they had a lawful nondiscriminatory reason for his termination; the burden would then shift to Guz to establish either (a) the existence of a triable issue of fact with respect to that showing; or (b) the proffered justification was pretextual. (Cf. Martin v. Lockheed Missiles & Space Co., supra, at p. 1732.)
Respondents advanced below that they had a lawful nondiscriminatory reason for terminating Guz: a reduction in workload. As we have already determined, triable issues of material fact exist with respect to why respondents terminated Guz. Summary adjudication in favor of respondents on this cause of action was improper as well.
E. Conclusion
The sharp attack of the dissent on our Foley analysis warrants some measured response.
The dissent is also critical of much of our failure to guide the trial court on how to instruct the jury. The short answer is that we would be premature in doing so. That decision is best made by the trial court judge who has heard the trial evidence, considered the pattern instructions in BAJI, and considered any pinpoint instructions suggested by trial counsel.
The dissent views the Foley factors to be the functional equivalent of elements of a tort: if one of the factors is missing, then the plaintiff loses. That analysis does not give Foley its due. In adopting the test first set forth in Pugh v. See's Candies, Inc. (1981) 116 Cal.App.3d 311 [171 Cal.Rptr. 917], the Supreme Court in Foley chose a totality of the circumstances test. In setting forth the four factors—the personnel policies or practices of the employer, the employee's longevity of service, actions or communications by the employer reflecting assurances of continued employment, and practices of the industry in which the employee is engaged—the Supreme Court did not purport to create an exhaustive list. Nor did the Supreme Court purport to weigh those four factors, or require the presence of a minimum number. That type of approach would be inconsistent with a totality of the circumstances test. What is consistent is making the determination a question of fact for the jury, not a question of law for the court to decide. The Courts of Appeal have correctly understood Foley in this light and have recognized that it does not take much by way of a factual showing in order to defeat an employer's motion for summary judgment.
The holding of this case is neither surprising nor unique. We have not created a conflict in the law which requires resolution by the California Supreme Court. Whether Guz will be ultimately successful requires clairvoyance. What we are able to clearly see is that Guz is entitled to his day in court.
The judgment is reversed. Appellant to recover costs on appeal.
Reardon, J., concurred.
ANDERSON, P. J.
I respectfully dissent. The trial court was correct in granting summary judgment on each of the three causes of action which form the basis of this appeal: (1) breach of an implied contract, (2) breach of an implied covenant of good faith and fair dealing, and (3) age discrimination. I would affirm the judgment in its entirety.
I. Bechtel's Employment Agreement Does Not Raise a Triable Issue Concerning the Existence of an Implied Contract Not to Terminate Except for Good Cause. Employment at Bechtel Was "At-Will" as a Matter of Law.
A. Guz's Employment Was Not for a Specified "Term."
Our analysis must necessarily begin with the statutory law as found in the Labor Code: "An employment, having no specified term, may be terminated at the will of either party on notice to the other...." (Lab. Code, section 2922.) Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654 [254 Cal.Rptr. 211, 765 P.2d 373] terms this a "presumption" which "may be overcome by evidence of contrary intent." (Id. at p. 677.) Foley settled the question of just how employment contracts should be determined by applying general principles of contract law. 1 The court found that "[g]enerally, courts seek to enforce the actual understanding of the parties to a contract, and in so doing may inquire into the parties' conduct to determine if it demonstrates an implied contract." (Id. at p. 677.) Thus, absent express evidence contradicting the "presumption," we look to the conduct of the parties to determine whether that conduct establishes an "actual understanding" to the contrary.
It is undisputed that Guz's employment had "no specified term" (Lab. Code, section 2922); therefore, we look to the conduct of the parties to ascertain their "actual understanding." Foley enumerates four types of conduct to consider in determining the actual understanding of the parties: " 'the personnel policies or practices of the employer, the employee's longevity of service, actions or communications by the employer reflecting assurances of continued employment, and the practices of the industry in which the employee is engaged.' " (Foley v. Interactive Data Corp., supra, 47 Cal.3d at p. 680, citing Pugh v. See's Candies, Inc. (1981) 116 Cal.App.3d 311, 327 [171 Cal.Rptr. 917].) I agree with the majority that the existence of certain of those characteristics may raise a question for the jury whether the Labor Code's "presumption" of at-will employment has been rebutted. However, in holding that the "presumption" has been rebutted here, the majority focuses on only two of the Foley factors, thereby effectively ignoring the totality of the circumstances of Guz's employment. I strongly disagree that any one circumstance present here, or the totality of those circumstances, raises a triable issue of fact for the jury. Every circumstance, save the plaintiff's longevity, reinforces the presumption of at-will employment.
Unfortunately, Foley does not provide guidance concerning how the existence or absence of these four factors (or the presence or absence of other circumstances) should be weighed by trial courts in determining whether there is a triable issue for the jury. We do know that in reversing the trial court's grant of demurrer, Foley relied heavily on the fact that " [p]laintiff here alleged repeated oral assurances of job security" (Foley v. Interactive Data Corp., supra, 47 Cal.3d at p. 681, italics added), as well as six-year and nine-month longevity with attendant promotions. Foley does not even instruct us as to which facts are the province of the jury, i.e., is it the jury's duty to determine the essential circumstances of the employment relationship (such as, the length of service, quality of performance, etc.) and the responsibility of the court to determine whether those facts as found by the jury establish or do not establish the existence of a contract to terminate only for good cause? or is it the jury's duty to determine this ultimate fact as well (as BAJI No. 10.12 (1994 8th ed.) implies)? This lack of guidance may stem from the fact that Foley only involved review of a trial court's grant of demurrer.
Review of a grant of summary judgment, however, involves a more complete record. Further, complicating the task of the trial court further are the conflicting opinions of appellate courts, which have disagreed whether increases in salary, promotions, commendations and lack of discipline are independent factors negating the existence of the at-will "presumption" 2 or whether they are merely indices of continued employment. (See Davis v. Consolidated Freightways (1994) 29 Cal.App.4th 354 [34 Cal.Rptr.2d 438]; Miller v. Pepsi-Cola Bottling Co. (1989) 210 Cal.App.3d 1554 [259 Cal.Rptr. 56]; Haycock v. Hughes Aircraft Co. (1994) 22 Cal.App.4th 1473 [28 Cal.Rptr.2d 248]; Walker v. Blue Cross of California (1994) 4 Cal.App.4th 985 [6 Cal.Rptr.2d 184].) Such lack of guidance by our Supreme Court and conflicting opinions by intermediate appellate courts notwithstanding, an examination of each of the characteristics of the Bechtel employment relationship herein convinces me that there is no conflict for a jury to resolve.
B. The Industry Practice Does Not Imply a Conditional "Term" of Employment.
Foley teaches that the conduct of the parties must be interpreted in the context of the practice of the industry. The practice of Bechtel's industry is unequivocally "at-will." Robert I. Silverforb, human resources manager for Bechtel, declared, "Bechtel, along with other employers in the engineering/construction business, is an at-will employer...." Bechtel's chief financial officer, Johnstone, while not characterizing Bechtel employment as "at-will," simply understood there to be no guarantee of continued employment; his reason for this was that "Bechtel operates project by project." It is obvious that when Bechtel secures a contract it hires on to complete that project, and when completed there might not be another project immediately available for continued employment of its employees. That Bechtel published a "layoff procedure" in its personnel manual and attempted to retain employees when a project was completed, does not establish a "reasonable expectation" in Bechtel employees that they "would not be discharged except for good cause." (Foley v. Interactive Data Corp., supra, 47 Cal.3d at p. 681.) This evidence establishing the industry practice of "at-will" employment is absolutely uncontradicted. C. Bechtel Made No Assurances to Guz That There Was a Conditional "Term" of Employment.
The record herein is absolutely devoid of any action or conduct by Bechtel toward Guz which could be interpreted as reflecting any assurance of continued employment. Indeed, Guz (unlike Foley) never alleged that he was personally given any such assurance by any kind of conduct on the part of his employer.
D. Bechtel's Personnel Manual Does Not Create a Conditional "Term" of Employment.
Bechtel's personnel policies, as evidenced by the personnel manual, do not support the existence of an agreement to terminate only for good cause. The preamble to the manual reads: " 'Bechtel employees have no employment agreements guaranteeing continuous service and may resign at their option or be terminated at the option of Bechtel.' " What follows must necessarily be interpreted in light of this preamble. Personnel policy No. 1101 then goes on to describe six "categories of termination"—four of which (medical termination, misconduct, resignation, and unexcused absence) everyone agrees, have no relevance to the case at bench. Guz specifically acknowledged in his deposition that he was aware of this policy and that he was governed by it.
Personnel policy No. 1101 also provides for termination under "Layoff" and "Unsatisfactory Performance" categories: "The term 'layoff' is applied to Bechtel-initiated terminations of employees caused by a reduction in workload, reorganizations, changes in job requirements, or other circumstances such as failure to meet client's site access requirements. In lieu of layoff, surplus employees may be placed on 'holding status' if there is a possible Bechtel reassignment within the following 3-month period. [¶] Advance notice of layoff is given so that efforts can be made to reassign employees or provide them with job search assistance. Employees with less than 10 years of continuous service will be given at least two weeks advance notice of layoff. Employees with 10 or more years of continuous service will be given at least four weeks advance notice of layoff. [¶] The advance notice period will also be provided to employees being placed on holding status. Employees that have been reassigned from layoff or holding status for a specific project or a set period of time may be subject to layoff or return to holding status without additional advanced notice. [¶] When no general or specific advance notice of layoff or holding status has been given, equivalent weeks pay in lieu of notice may be granted with a Category I approval authority. The effective date of termination or holding status remains the last day worked." (Original italics.) There is no dispute that Guz was terminated pursuant to this policy. Guz does not contend that he was not given proper notice of layoff or that he was improperly assigned to "layoff" status. He does contend that the layoff was pretextual and that Bechtel improperly failed to consider him for reemployment during his layoff status.
Bechtel's "Unsatisfactory Performance" category provides that employees "who fail to perform their jobs in a satisfactory manner may be terminated, provided the employees have been advised of the specific shortcomings and given an opportunity to improve their performance." The majority seems to conclude that this "progressive discipline" policy and Bechtel's self-imposed choice to limit terminations for unsatisfactory performance to situations where employees have been advised of their shortcomings and have failed to improve, to converts respondents' at-will termination policy to one requiring "good cause." I disagree.
Even assuming that respondents chose to use "techniques other than immediate termination ... that proves nothing regarding the existence or nonexistence of [respondents'] at-will termination policy. Otherwise, an employer would be forced purposely to terminate employees for any and every infraction—or none at all—in order to maintain the presumption of at-will employment. The law does not require such caprice to avoid creating an implied in fact contract." (Davis v. Consolidated Freightways, supra, 29 Cal.App.4th at p. 367.)
More importantly, however, respondents' practices regarding termination of employees with performance problems is irrelevant because Guz was not terminated for unsatisfactory performance. He was terminated because of the need to consolidate business operations—i.e., under the "layoff" provisions of the manual.
In a budget meeting in April of 1992, Johnstone mentioned that he thought three people instead of six could complete Bechtel National, Inc., Management Information Group's (BNI MI Group) functions. Johnstone was critical of the size of the BNI MI Group because of the apparent duplication of activities with the San Francisco Regional Office Management Information Group (SFRO MI Group). Furthermore, in May of 1992, concerns were expressed regarding the size of the BNI MI Group's budget. In fact, appellant had discussions with colleagues about ways to reduce overhead and eventually was told to prepare to seek other employment within the company because of budget constraints.
In October of 1992, appellant had further discussions with colleagues about ways to reduce costs as a result of a memorandum issued in response to a forecast which predicted that BNI MI Group's overhead would be well in excess of its 1992 budget. Appellant acknowledges that the initial budget target number for 1993 indicated that BNI MI Group would probably have to reduce its staff. In November of 1992, a memo was circulated stating, "We are in a major overhead crunch in BNI for 1992...." In fact, BNI MI Group ultimately exceeded its $360,000 budget by $67,000.
In addition, Bechtel National Inc. (BNI), anticipated a significant reduction in job hours from 1992 to 1993 after already experiencing a reduction from 1991 to 1992. In 1991 and 1992, BNI recorded 7,582,000 and 4,775,000 job hours, respectively. BNI forecasted 3,590,000 job hours for 1993. 3 As a result of all of these factors, Johnstone decided to consolidate BNI MI Group's activity with the SFRO MI Group, citing confidence in the SFRO MI Group and the need to achieve economies of scale as reasons for his decision.
The majority appears to conclude that a "reduction in workload" is a pretext for respondents' dissatisfaction with the BNI MI Group's performance, given that the cost reduction resulting from the consolidation totaled only 10 to 15 percent—or, $50,000—of overhead. The majority fails to take note that the purpose of BNI MI Group's consolidation with SFRO MI Group was to reduce BNI's overhead in an effort to maintain market competitiveness, not to save an admittedly inconsequential sum. According to Dewey's uncontradicted deposition testimony, "[Johnstone] was more interested in efficiency and not in recovery of government overhead rates as such that he felt certain tasks should be done efficiently, irrespective of whether the government should pay, and, furthermore, even if the government would pay, you still could become uncompetitive because you would be charging a higher rate than your competitor for the same level of work.... [¶] ... [Johnstone] wanted to get the organization into a way where the government overhead rates were fair and competitive. [¶] So he never focused on [how much money would be saved.] He just had a principal [sic] that he wanted us to be efficient and to have the lowest possible overhead rates commensurate with our work activities." In my view, the majority's lengthy quotation from Johnston's deposition does nothing to establish that the reasons for eliminating BNI MI were pretextual. Moreover, nothing in Bechtel's personnel manual guarantees a group (as opposed to an individual) an opportunity to improve performance. The majority relies on two "facts"—excerpts from depositions—to support its conclusion that respondents' personnel policies constitute a factor which may (along with Guz's longevity and positive performance) create a triable issue as to "whether Guz was an at-will employee." In truth, neither supports the majority's view.
The majority first notes that the president of BNI (Johnstone) "made a statement to the effect that Bechtel's practice was not to terminate ... unless there was good cause." (Maj. opn., ante, at p. 1311.) What Johnstone actually testified to was that the company had a practice of terminating employees when there was "a good reason to do so" or when "there was lack of work." (Italics added.)
The majority also quotes Goldstein as stating that Bechtel gave preference to long-term employees during layoffs and that Bechtel documented performance problems to establish cause for termination. Such policies, however, do not create a triable issue of fact regarding the establishment of a contractual right not to be terminated except for good cause—especially when, as here, an employee's performance is of high quality, but a lack of business necessitates elimination of an employee's job.
In sum, Bechtel's personnel policies and practices reaffirm the fact that their employees serve "at-will"—that their employment may be terminated "at the option of Bechtel." Those policies also contemplate reductions in the work force but do not even arguably guarantee employment when jobs are eliminated for economic reasons.
My conclusion that only one Foley factor—length and quality of employment—supports Guz's claim that he could only be terminated for good cause leaves unresolved the question left undecided by the majority: Is that factor, standing alone, enough to create a triable issue of fact on summary judgment? I conclude that it is not.
E. Long Employment and Favorable Job Evaluation Alone Do Not Establish a Conditional "Term" of Employment.
Recently, courts of appeal have disagreed as to how much weight should be given to particular evidence in evaluating the totality of the circumstances of an employment relationship and determining the existence of an implied contract to terminate only for good cause. In Haycock v. Hughes Aircraft Co., supra, 22 Cal.App.4th at pages 1489-1490, the Court of Appeal found strong evidence of an implied contract to terminate only for good cause despite the absence of oral assurances of permanent employment and approval from the company's law office, whose responsibility in part was to authorize commitments to employees regarding the duration of employment. The court concluded, "[p]laintiff had been continuously employed by defendant for more than 25 years, ... regularly received favorable performance ratings, 'merit' salary increases, and was never the subject of disciplinary proceedings. Defendant's written layoff procedures afforded significant protection to long-term employees...." (Id. at p. 1489.)
Similarly, in Walker v. Blue Cross of California, supra, 4 Cal.App.4th at page 993, the Court of Appeal held that the totality of the circumstances—appellant's 191/2 years of service, her consistent promotions, salary increases, and satisfactory evaluations and personnel policies, including a discretionary reduction-in-force policy—established a triable issue of fact regarding the existence of an implied in fact employment agreement, despite an employee handbook which stated that the employer's relationship with its employees was " 'voluntary employment "at will." ' "
By contrast, in Davis v. Consolidated Freightways, supra, 29 Cal.App.4th at page 367, the Court of Appeal concluded that Davis could not rebut the presumption of at-will employment because his employer provided adequate evidence that it had an undisputed policy of at-will employment, published in its personnel manual—a policy Davis admitted he was responsible for knowing. The court also noted that (a) the employer's progressive discipline policy did not nullify the effect of its at-will employment policy, (b) Davis never saw any company policy requiring good cause for termination, (c) promotions and salary increases naturally occur when an employee remains with an employer for a substantial length of time and does not affect an employee's at-will status, (d) Davis never received oral assurances that he would be permanently employed if he continuously performed well, and (e) the industry practice called for at-will employment. (Id. at pp. 367-368; accord, Miller v. Pepsi-Cola Bottling Co., supra, 210 Cal.App.3d at p. 1559.)
In my view, when, as here, the only factor implying a contract condition to terminate only for good cause is longevity of service (and its natural consequence of promotions and favorable job evaluations), that is not enough—as a matter of law—to overcome the Labor Code presumption of at-will employment. The Miller court had it right: "Promotions and salary increases are natural occurrences of an employee who remains with an employer for a substantial length of time. These factors should not change the status of an 'at-will' employee to one dischargeable only for 'just cause.' " (Miller v. Pepsi-Cola Bottling Co., supra, 210 Cal.App.3d at p. 1559.) II. No Evidence Supports a Conclusion That Respondents Violated the Covenant of Good Faith and Fair Dealing.
The majority avoids discussing the factual showings made by Guz and respondents on Guz's claim for breach of the covenant of good faith and fair dealing by asserting that respondents did not argue below that there was no bad faith in the termination. The majority is simply wrong. Respondents did advance that argument below. 4 Thus, it is appropriate to discuss both Guz's contentions, the law relating to the covenant, and the factual showings made by the parties.
Guz contended below just as he contends here that, even if his employment was at-will, a triable issue of fact exists as to whether or not respondents violated the covenant of good faith and fair dealing implied in all contracts by failing to follow their own procedures for giving employees whose positions are being eliminated the opportunity to find employment in other Bechtel groups.
The role played by the covenant of good faith and fair dealing in a California at-will employment context is hopelessly in conflict. The Sixth District has squarely held that, where an employment relationship is terminable at-will, the covenant does not apply because termination without good cause " '... does not deprive the employee of the benefits of the agreement.' [Citations.]" (Slivinsky v. Watkins-Johnson Co. (1990) 221 Cal.App.3d 799, 806 [270 Cal.Rptr. 585].)
The Supreme Court has noted, in dictum, that because breach of the covenant is "basically a contract claim [citation], [a claim for breach of the covenant] only becomes an issue when there is insufficient evidence to find an implied-in-fact contract not to terminate ...." (Scott v. Pacific Gas & Electric Co. (1995) 11 Cal.4th 454, 462, fn. 2 [46 Cal.Rptr.2d 427, 904 P.2d 834].) At least two courts of appeal have noted that the covenant may come into play to preclude termination in an at-will context. In Sheppard v. Morgan Keegan & Co. (1990 218 Cal.App.3d 61, 67 [266 Cal.Rptr. 784], Division Five of this district held that the covenant may preclude firing an employee who has moved across the country before the employee has had a chance to demonstrate his or her ability to handle the job. In Gray v. Superior Court (1986) 181 Cal.App.3d 813, 820-821 [226 Cal.Rptr. 570], the Third District implied that an employer's violations of its own personnel policies and practices may constitute a breach of the covenant.
We need not resolve the apparent conflict between Slivinsky and the other cited cases because, even if we assume that a claim for breach of the covenant may be advanced in the at-will employment context, the evidence in the case at bench establishes no breach as a matter of law.
To establish a breach of the covenant, an employer must engage in "bad faith action, extraneous to the contract, with the motive intentionally to frustrate the obligee's enjoyment of contract rights." (Sawyer v. Bank of America (1978) 83 Cal.App.3d 135, 139 [145 Cal.Rptr. 623].) Put another way, to sustain a claim for breach of the covenant, an employee must demonstrate "conscious and deliberate" conduct on the part of the employer which is designed to frustrate the employee's contract rights. (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395 [272 Cal.Rptr. 387].)
Respondents' "Guidelines For Reduction-In-Force" establish that, in preparation for layoff, the releasing organization should "[r]eview all current open requisitions in [its] organization to determine whether or not the layoff candidate's background meets minimum qualifications of any of the open positions.... [¶] Efforts Should Be Made to Contact Discipline Counterparts in Other Bechtel Entities/Services to Place Employees on Assignments in Those Other Organizations." Guz maintains that respondents breached those guidelines because they failed to consider him for any of the five positions that became available in the SFRO MI Group while he was on holding status.
When respondents consolidated BNI MI Group's activities with SFRO MI Group, Tevis consulted with Ronald Goldstein, the manager in charge of BNI MI Group, to formulate a transition plan. At that time, Tevis and Goldstein determined which of BNI MI Group's responsibilities SFRO MI Group was capable of handling in its then current state and which responsibilities would require additional employees. They concluded that two additional positions were needed in SFRO MI Group. Consequently, Goldstein recommended Chris Siu, because of her computer experience and grade level, and Robert Wraith, because of his project work experience, to fill each position. Tevis and Goldstein determined that additional employees to monitor and report overhead, Guz's job at BNI MI Group, were unnecessary.
Tevis acknowledged that, during this period, he did not know that Guz was available for reassignment and, consequently, did not review his credentials. Nevertheless, while helping formulate the transition plan, Goldstein, Guz's own supervisor who knew that appellant was looking for employment within Bechtel, did not recommend appellant for either of the two positions immediately available within SFRO MI Group and filled by Siu and Wraith, respectively. However, both Goldstein and Tevis knew that appellant did not possess the requisite computer skills for the position filled by Siu. Furthermore, upon consideration of Guz's personnel file, Tevis concluded that Guz, though qualified for the position filled by Wraith, was not as qualified as Wraith because of less project experience. Thus, an inference is established that Guz would not have been offered either position even had Tevis had knowledge of his availability. In fact, upon consideration of appellant's credentials, Tevis concluded that appellant would only have been considered for one of the five positions that became available within SFRO MI Group, given the qualifications and grade levels of those individuals ultimately placed in those positions.
Nothing in respondents' "Guidelines For Reduction-In-Force" guarantees an employee who has been laid off placement in an available position for which he is qualified. Just as importantly, respondents' failure to consider Guz for the one position for which he was qualified falls far short, as a matter of law, of intentional conduct designed to deprive Guz of an opportunity to stay in respondents' employ. Accordingly, no evidence supports Guz's claim for breach of the covenant of good faith and fair dealing. Thus, the trial court's ruling should be affirmed.
III. Guz Did Not and Cannot Establish a Prima Facie Case of Age Discrimination.
"Courts have not adopted a single statement of the elements of a prima facie case of age discrimination." (Ewing v. Gill Industries, Inc. (1992) 3 Cal.App.4th 601, 610 [4 Cal.Rptr.2d 640].) Indeed, the United States Supreme Court has concluded that "[t]he facts necessarily will vary in Title VII cases, and the specification ... of the prima facie proof required ... is not necessarily applicable in every respect to differing factual situations." (McDonnell Douglas Corp. v. Green (1973) 411 U.S. 792, 802, fn. 13 [93 S.Ct. 1817, 1824, 36 L.Ed.2d 668].)
In Martin v. Lockheed Missiles & Space Co., Inc. (1994) 29 Cal.App.4th 1718, 1723 [35 Cal.Rptr.2d 181], the Court of Appeal upheld the trial court's granting of defendant's motion for summary judgment regarding plaintiff's claim for age discrimination. The court fashioned the rule that "to meet an employer's sufficient showing of a legitimate reason for discharge the discharged employee, to avert summary judgment, must produce 'substantial responsive evidence' that the employer's showing was untrue or pretextual...." (Id. at p. 1735.) In doing so, it concluded that defendant sufficiently established a legitimate business purpose—a nondiscriminatory reduction in force dictated by adverse economic conditions—that led to plaintiff's termination. (Id. at pp. 1723, 1731.) I would adopt the rule constructed in Martin and apply it to the case at bench.
The majority concludes that the evidence introduced before the trial court created a triable issue of fact on the issue of whether or not Guz's termination was pretextual. I respectfully disagree for two reasons. First, the majority's analysis of the "pretext" issue relates not to terminating Guz's employment but, instead, relates to eliminating BNI MI Group. What relevance the decision to eliminate BNI MI Group has to do with determining an individual's age discrimination claim is beyond my ken. Second, as analyzed earlier in this dissent, I do not believe that a triable issue of fact exists on the pretext question—period.
IV. Conclusion.
In addition to avoiding the issue of whether the single factor of longevity establishes a triable issue of fact on the existence of an agreement not to terminate except for good cause, 5 the majority opinion avoids another key question left unanswered by Foley : the relative importance of each of the Foley factors. I would assign greater weight to (1) the practice of the industry and to (2) Bechtel's lack of any personal assurances to Guz than does the majority. Furthermore, to hold that a policy of "progressive discipline" is not only inconsistent with employment at the option of each party, and that together with longevity rebuts the Labor Code "presumption" of at-will, does a disservice to both California employees and employers. Certainly, today's opinion will counsel business to repeal socially desirable policies of progressive discipline and compassionate layoff procedures, if they alone or in combination with longevity trump California's at-will employment. And certainly, employers will not be disposed to retain employees for long periods if the mere passage of time converts at-will employment onto unemployment for an unspecified term which can be extinguished only for good cause. Finally, I find no guidance from my colleagues concerning what issues Mr. Guz's jury is to resolve on remand. What material facts are left for the jury to resolve? Will they now be charged to second-guess the employer's business decision to downsize and/or to eliminate groups in order to determine whether such action was motivated by a determination to terminate a specific employee? Hopefully, these troublesome, unanswered questions in California employment law are now finally ripe for resolution by our Supreme Court.
In the meantime, I would affirm the trial court's judgment.