Canada Statutory Law Analysis

David Kafka

California’s statutory law establishes that employment, having no specified term, may be terminated at will by either the employer or employee. Cal. Lab. Code § 2922 (2017). This presumption is subject to contrary evidence, such as an implied or expressed agreement that an employment relationship will continue indefinitely. The issue in this case is whether Reynaldo Perez had an implied contract of employment with Malloy’s Department Store that could be terminated only for cause.

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If an employer has created an implied or expressed contract for permanent employment, that employee may be terminable only for good cause. When determining if an implied agreement exists, the court will look at a number of factors. These include: personnel policies or practices of the employer, employee’s longevity of service, assurances by the employer for continued employment, and practices of the industry. Formal handbooks and manuals outlining employment terms are also given consideration. An implied covenant of good faith protects the parties’ right to receive the benefit of their agreement, but does not necessarily create any other duty outside of the contract.

Pugh was found to have had an implied agreement with See’s Candies based on his duration of employment, lack of criticism for work, assurances given, and his employer’s acknowledged policies. Pugh v. See’s Candies, Inc., 116 Cal. App. 3d 311 (1981).

Pugh was frequently told that if he did a good job, his future with the company was secure. There was also a policy where administrative staff would only be fired for good cause. Pugh was not given a reason for his termination, nor was it based on good cause. The court found that an implied contract existed, and Pugh was wrongfully terminated. Id.

At will provisions in company manuals are significant in determining the policies of an employer. “Parol evidence is admissible to explain, supplement, or even contradict the terms on an unintegrated agreement” Guz v. Bechtel Nat’l, Inc., 8 P.3d 1089 (Cal. 2000). When an employer has policies in formal handbooks, it “create[s] a clear and uniform alternative to haphazard practices, understanding, and arrangements within the company.” Id.

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Guz was told by a Bechtel official that the company avoids arbitrary firings. However, the court found that the company did not waive its right to discharge its employees at will based on this statement. Id. The court places great credence in what is included in formal handbooks when determining if employment is at will. An official cannot waive those policies simply by making his or her own arrangements.

Guz received no promises that he would be retained except for good cause. His long employment, raises, promotions, and good reviews were not sufficient enough to prove that an implied contract existed where he was no longer an at will employee. The court found that the implied covenant of good faith did not protect Guz from termination. Id.

Perez was employed at Malloy’s for a total of 20 years, consistently received good evaluations, had salary increases, and on one occasion was given assurance his job was safe if he kept performing at a certain level. Perez was told early in his employment by the president of Malloy’s that his job would always be safe, and that the company doesn’t “just fire people.” The length and success of his employment might also benefit his argument for an implied contract.

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The company’s application form contained ambiguous language which could be interpreted as a contract for continued employment. It stated that “Malloy’s hires and retains hard-working people.” However, both the application form and employee manual reiterate that employment is at will. The application stated “our employment relationship will end whenever we determine that it should.” The employee manual had similar language, stating that an employee could be fired at any time, for any reason.

It is likely that the employee manual and job application form will be given great consideration. Malloy’s clear policy of employment at will was outlined in these documents and contradict any promise that was made to Perez early in his career. As in Guz v. Bechtel Nat’l, Inc., 8 P.3d 1089 (Cal. 2000), an employee handbook is admissible in court to explain or contradict terms of an “unintegrated agreement.” In Perez’s case, the handbook will likely contradict the president’s statement that his job would always be safe.

Perez agreed with the company president that he was fine with his reassignment. He continued working in this position for an entire year. There was never a clear agreement that Perez would only be fired for just cause, and there was no indication that this was Malloy’s company policy. Therefore, it is unlikely that the court will find that Perez had an implied contract of employment that could be terminated only for cause.

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