Opinion ID: 538896
Heading Depth: 2
Heading Rank: 1

Heading: Breach of Contract/Good Faith and Fair Dealing

Text: 71 In order to collect from Levolor, Ada Kern must prove that an employment contract existed, that Levolor breached the contract and that she suffered injury as a result. See Otworth v. Southern Pacific Transportation Co., 166 Cal.App.3d 452, 458, 212 Cal.Rptr. 743 (1985). The record contains insufficient evidence to go to the jury on any one of these questions.
72 1. The law in California is clear: An employment, having no specified term, may be terminated at the will of either party on notice to the other. Cal Labor Code Sec. 2922 (West 1989). The California Supreme Court recently confirmed that section 2922 establishes a presumption of at-will employment if the parties have made no agreement specifying the length of employment or grounds for termination. Foley v. Interactive Data Corp., 47 Cal.3d 654, 677, 254 Cal.Rptr. 211, 765 P.2d 373 (1988). Section 2922 reflects a legislative judgment that employers and employees are not bound to their employment relationship unless they take affirmative steps to provide otherwise. 73 In 1872, California became the first state to create a statutory presumption of at-will employment, with the enactment of the predecessor to section 2922. See Lawrence C. Levine, Judicial Backpedaling: Putting the Brakes on California's Law of Wrongful Termination, 20 Pacific L.J. 993, 994 & n. 5 (1989). For a century, the California courts applied the law as one might expect: Unless one of the parties could show some express agreement to the contrary, the relationship was deemed terminable at will. See, for example, Union Labor Hospital Association v. Vance Redwood Lumber Company, 158 Cal. 551, 554, 112 P. 886 (1910); Patterson v. Philco Corp., 252 Cal.App.2d 63, 65-66, 60 Cal.Rptr. 110 (1967). See also Note, Protecting At Will Employees Against Wrongful Discharge: The Duty to Terminate Only in Good Faith, 93 Harv.L.Rev. 1816, 1825-26 (1980). 74 As of late, without any relevant amendment of the statutory language, the courts have found more and more situations where the presumption of at-will employment has been overcome by a nod, a wink, a smile or a stray comment. See, for example, Pugh v. See's Candies, Inc., 116 Cal.App.3d 311, 329, 171 Cal.Rptr. 917 (1981); Wayte v. Rollins International, Inc., 169 Cal.App.3d 1, 18, 215 Cal.Rptr. 59 (1985); Robinson v. Hewlett-Packard Corp., 183 Cal.App.3d 1108, 1122-23, 228 Cal.Rptr. 591 (1986); Harlan v. Sohio Petroleum Co., 677 F.Supp. 1021, 1030 (N.D.Cal.1988) (applying California law). What was once a relatively simple inquiry has become the stuff of lengthy trials and burdensome discovery, encompassing everything that ever transpired between the employee and her employer, as well as the employer's treatment of other employees. Not surprisingly, juries, and judges too, often become confused as to whether there really was anything amounting to an agreement between the parties, and natural sympathies substitute for the missing facts. The net effect is that the statutory presumption of at-will employment has been reduced to a hollow legal fiction, an inconvenience to be endured on the way to a hefty recovery. 1 75 One can fairly debate the merits of at-will versus for-cause employment. Contrast Richard Epstein, In Defense of the Contract at Will, 51 U.Chi.L.Rev. 947 (1984), with Lawrence E. Blades, Employment at Will vs. Individual Freedom: On Limiting the Abusive Exercise of Employer Power, 67 Colum.L.Rev. 1404 (1967). But the judgment is a legislative one; it should be considered, debated and enacted by the branches of government directly accountable to the public. See, for example, Mont.Code Ann. Secs. 39-2-201 et seq. (1987); Meech v. Hillhaven West, Inc., --- Mont. ---, 776 P.2d 488 (1989). Achieving the same result judicially not only short-circuits democratic processes, it imposes substantial collateral costs and uncertainties on everyone involved. Searching for the existence, and divining the terms, of an implied contract is a burdensome, time-consuming and uncertain proposition. The risk of an erroneous determination is greatly magnified, encouraging parties with weak positions--employers as well as employees--to spin the litigation wheel-of-fortune. Rational planning or a reasonable litigation strategy becomes very difficult as no one can tell even remotely how a case will be resolved once it gets into court. The ability to predict outcomes, which lay at the heart of Justice Holmes's model of the legal profession, is lost as a vocation; the lawyer ceases to be a forecaster and becomes a croupier. 76 2. The majority's treatment of Levolor's claim that Ada Kern was not entitled to recover because she had failed to overcome the statutory presumption of at-will employment well illustrates the problem. Under the current state of California law, the presumption of employment at will can be overcome if one of two conditions is met: 77 (1) the contract was supported by consideration independent of the services to be performed by the employee for his prospective employer; or (2) the parties agreed, expressly or impliedly, that the employee could be terminated only for good cause. 78 Pugh, 116 Cal.App.3d at 326, 171 Cal.Rptr. 917 (1981), quoting Rabago-Alvarez v. Dart Industries, Inc., 55 Cal.App.3d 91, 96, 127 Cal.Rptr. 222 (1976). Ada Kern does not claim that there was independent consideration for an employment contract or that she had an express agreement with anyone at Levolor that she would be discharged only for good cause or in accordance with certain procedures. Thus, Kern was required to prove that there was an implied contract between herself and Levolor. The majority notes, citing Foley, that evidence of such a contract may come from many sources, including an employment manual, the employer's personnel practices and policies, and longevity of service. 79 From this hefty record, Ada Kern culls only two pieces of evidence from which the jury might have divined a contract: (1) Levolor's policy, described in its Employee Handbook, of laying off AAA employees last; and (2) the procedure adopted by Levolor in implementing the February 1985 workforce reduction by which the company laid off employees based on ratings for grade, production and attendance, irrespective of seniority--the so-called golf-score analysis. These items sound good, and I can certainly understand how the majority comes to rely on them; after all, there must be something there or else the lawyers wouldn't be spending so much time talking about them. The fact is, however, when one examines the record carefully, neither item amounts to an agreement within the Foley/Pugh definition, so as to rebut the statutory presumption of at-will employment. 2 80
81 In language even a second-grader could understand, the first page of the Levolor Employee Handbook states: this is not a contract of employment and policies may be modified by the Company at any time. Appellee's Excerpts of the Clerk's Record (AER) at 5. 3 It is the most fundamental principle of contract law that there can be no legally enforceable obligation without a promise, a commitment to future behavior. 4 It is difficult to imagine a clearer statement that one does not intend to be legally bound by the contents of a written document than the words Levolor used here. Yet the majority relies on the manual as evidence of a contract. Majority op. at 776. I fail to see how an employment manual that states on its face that it is not a legally enforceable agreement, one which provides that it is subject to change by the employer at any time, can serve as any type of proof that the parties had a contract, implied or otherwise. 82 Cases from both California and this court recognize that an implied agreement is not enforceable where there is an explicit agreement to the contrary. See, for example, Shapiro v. Wells Fargo Realty Advisors, 152 Cal.App.3d 467, 199 Cal.Rptr. 613, 622 (1984); Wal-Noon Corp. v. Hill, 45 Cal.App.3d 605, 613, 119 Cal.Rptr. 646 (1975); Gianaculas v. Trans World Airlines, Inc., 761 F.2d 1391, 1394 (9th Cir.1985) (applying California law). In Shapiro, the California Court of Appeal held that an explicit disclaimer in a stock option agreement that reserved the employer's right to discharge at will could not be overridden by any implied-in-fact agreement to the contrary. 199 Cal.Rptr. at 615-16, 622. Accord, Gianaculas, 761 F.2d at 1394. Levolor's Employee Handbook states explicitly that Levolor is not bound by any of the policies outlined therein. Nonetheless, Ada Kern would have the court find an implied contract in this document. But she can't have it both ways: If Kern wants to rely on the Handbook, she must accept the express limitations contained therein. Under California law, a document that states explicitly that it is not a contract cannot be evidence of an implied contract. 83
84 Nor does the second item of evidence--the golf scores--provide the slightest support for finding a contractual obligation between Levolor and Ada Kern. Ada Kern was a good employee. But in the workplace, as elsewhere, everything is relative. Steven Smithling, Kern's shift supervisor at Levolor, testified without contradiction that Ada Kern was laid off because the company was experiencing a downturn in business and needed the production of only two full-time wandmakers, rather than the three they were then employing. Reporter's Transcript (RT) 7/28 at 44. All three wandmakers had AAA ratings, the highest the company gave, and excellent attendance records. Id. at 45. Unfortunately, Ada Kern's production was slightly lower than that of the other two wandmakers, and she was the least senior. Id. 85 In preparation for the February 1985 layoff decisions, Levolor carefully recorded relevant employee data on a series of tally sheets. AER at 55-66. The tally sheets contained two sets of scores. One was a series of absolute measures, reflecting the employee's grade (AAA, A, B, etc.), average production, and a measure of attendance. All employees eligible for layoff, including Kern, received these ratings. Id. at 64. Many of the tally sheets also contained a set of golf scores, in which the absolute measures were converted to a relative scale; the better the employee, the lower the score, hence the analogy to golf scores. It was Steven Smithling's uncontroverted testimony that golf scores were used only to compare employees in the same job classification in the same shift. RT 7/28 at 45-46. They were not used to compare employees on different shifts, or employees on the same shift doing different jobs. 86 There was nothing magic about the golf scores; they were simply a mathematical summary of various employees' work performance, used to make layoff decisions among employees who were otherwise similarly situated. Because Ada Kern was the only wandmaker on her shift and there was no one with whom to compare her, no golf scores were prepared for her. 87 Based on this evidence, the majority concludes that a jury could reasonably find that Levolor had a contractual obligation to prepare golf scores for Ada Kern. I don't get it. Levolor demonstrated by uncontroverted evidence that the golf scores were inapplicable to Ada Kern. How could a rational jury conclude from this that Levolor and Ada Kern had an implied contract that she would receive such scores? 88 The majority relies on the fact that Levolor calculated golf scores for two other employees who were the only ones on their shift in their job classification. Majority op. at 774. But these were the exceptions, and there is no indication that the golf scores, once computed, played any part in the decision whether to lay them off. The fact is, most employees in Ada Kern's position were treated exactly the same: they did not receive golf scores. See AER at 65. Under the majority's rationale, Ada Kern had an implied contract to be treated different than most of the other employees in her position. This just doesn't make sense. 5 89 Equally significant, the record is clear that Ada Kern was not aware of the golf-score system until after her layoff. RT 7/27 at 97. Yet she claims that Levolor breached its contract with her by failing to give her a golf score before laying her off. To show that she had an implied agreement with Levolor that they would give her such a rating, however, Kern must first prove that Levolor management did or said something to her. Pugh, 116 Cal.App.3d at 326, 171 Cal.Rptr. 917. It confuses implied with imaginary to find that an employer and employee had an agreement over a policy about which the employee had absolutely no knowledge. 90 Where the majority finds an obligation on Levolor's part to provide golf scores is beyond me. It's not in the Employee Handbook (even assuming the Handbook could serve as a contract). It's not in any written agreement. Nor is there any evidence that Ada Kern talked to anybody about the golf scores before her layoff. What we have here is a cheap litigation trick, honed to a fine art by contingency-fee-hungry lawyers: rummage through the opposing party's files and records until you find something that looks vaguely like your client has been afforded differential treatment, no matter how trivial or irrelevant, and then parade it before the jury as a grave injustice. 6 91 To say, as the majority does, that a rational jury might find that Ada Kern had a contractual right to have Levolor perform an irrelevant, hypothetical and to her unknown tabulation on the layoff tally sheet, is so contrary to common sense it does not, in my opinion, pass the snicker test. Quite aside from the substantive problems with today's opinion, one unfortunate consequence is that lawyers will be encouraged to engage in this type of scorched-earth litigation tactic; after all, you never know what triviality might impress a court and jury. This is no doubt welcome news for lawyers, but I doubt it helps the economy or that it is in the long-term interest of employees.
92 Even if Ada Kern could prove that Levolor had some contractual obligation to her regarding her layoff, there is no evidence that the company did anything less than what it promised. It is uncontroverted that before the layoff Levolor had three wandmakers, and after the layoff only two. Kern had the least seniority of the three wandmakers: She had five and a half years seniority at the time of her layoff; Martha Barone had seven years; Gloria Vanes had eleven and a half years. Levolor's Employee Handbook states that seniority is considered ... in the event of a layoff. AER at 30. It also states that [o]ur general guideline is that the least senior person will be laid off first, provided that the remaining employees have the skill, ability, knowledge and efficiency to perform the required work. Id. at 32. Levolor's decision to lay off Ada Kern rather than her more senior colleagues is obviously consistent with this guideline. 93 But seniority is not the only factor mentioned in the Handbook. Ada Kern points particularly to the following passage: [E]mployees who are classified as 'AA' & 'AAA' workers will normally be laid off from their job last, even though they may have less seniority than other employees in the same classification. Id. She claims that because she was a AAA worker, she should have been laid off last, regardless of seniority. The problem with this argument is that Martha Barone and Gloria Vanes were not merely more senior than Ada Kern, but they too had AAA ratings. RT 7/28 at 45. The Handbook provision on which Kern relies may sound compelling, but it does her absolutely no good. 94 Nor does the Handbook support what appears to be her related argument that Levolor had the responsibility to first lay off lower-rated employees in other job classifications, perhaps Ivan Ortiz, a mechanic, or Jaber Salk, a janitor. See AER at 65. The quoted language is, by its terms, applicable only to employees in the same classification. In a factory where workers perform specialized functions, this is the only sensible system; it is the system Levolor adopted in its Employee Handbook and which it scrupulously followed in making its February 1985 layoff decisions. Moreover, if the Employee Handbook is a contract, it gives rights to many parties; employees other than Kern were entitled to rely on the guarantees that they would not be bumped by a higher-rated employee in another classification. Had Levolor laid off Ortiz, Salk or some other similarly situated employee to make room for Kern, the company would surely have found itself in litigation with that employee. 95 Having alleged that Levolor failed to follow its own policies by considering seniority when making layoff decisions, Ada Kern turns around and accuses Levolor of failing to follow its own policies by not considering seniority in calling workers back from layoff. In particular, she points to temporary workers hired during the summer of 1985, while she was on layoff, who spent some time cutting wands. Assuming again that Levolor had any obligation to bring back Kern before it hired temporary workers, the uncontroverted evidence showed that Levolor's actions fully complied with its stated policies. Steven Smithling testified that the temporary workers would only occasionally make wands, and that Levolor did not require three full-time wandmakers during that summer, RT 7/28 at 59, 66; there was no evidence to the contrary. Moreover, the Employee Handbook states: Qualified employees who are recalled from layoff will be called back to work to their job classification in the reverse order that they were laid off. AER at 32 (emphasis added). Ada Kern was the first and only wandmaker laid off; no one was hired or recalled before her to be a full-time wandmaker. 96 Ada Kern's relative seniority and production level indicate that her layoff and recall were in accordance with the procedures described in the Levolor Employee Handbook. At the same time, there is absolutely no evidence of any other mechanism or motivation behind her layoff. The only explanation Kern presented for her discharge is age discrimination, RT 7/29 at 148, and there is no evidence to support this theory. 97 The majority acknowledges that no, or virtually no, evidence was presented tending to show that Levolor treated Kern as it did because of her age. Majority op. at 777. The subordinate clause is superfluous. It is uncontroverted that Ada Kern, at 59, was not the oldest of the three wandmakers; the two retained wandmakers were also protected by California's age discrimination statute--Martha Barone was 62 and Gloria Vanes was 52. RT 7/29 at 49-50. Ada Kern presented no evidence that anyone at Levolor ever said or did anything to indicate they believed she was too old for the job. Kern presented no evidence that Levolor ever discriminated against any of its employees because of their age. She testified that she had no reason to believe that her supervisors had anything against her at all. 7 Ada Kern's lawyer speculated that age discrimination might have been Levolor's hidden motive for mistreating her client. RT 7/29 at 148. Even by way of argument, she offered no other sinister motive for Levolor's action. 98 In the face of evidence that her layoff was consistent with Levolor's stated policies, Ada Kern presented no evidence to support her only alternative explanation for the discharge. These facts cannot support a jury verdict of breach of contract.
99 As we are all taught during our first year of law school, in order to collect damages on a contract claim, the plaintiff must prove that she suffered injury caused by defendant's breach. See California Civil Code Sec. 3300 (1970); Otworth v. Southern Pacific Transportation Co., 166 Cal.App.3d 452, 458, 212 Cal.Rptr. 743 (1985); Patent Scaffolding Co. v. William Simpson Constr. Co., 256 Cal.App.2d 506, 511, 64 Cal.Rptr. 187 (1967). The only relevant evidence here demonstrates that, had Levolor done every little thing Ada Kern claims it should have, she would still have been laid off. Where, then, is her beef? 100 We have already seen that Levolor followed precisely the terms of its Employee Handbook. Thus, even if the Handbook was a contract, there could have been no injury because there was no breach. Kern did show that she was not given golf scores. But, assuming Levolor had a contractual duty to prepare golf scores, the company's failure to do so cannot support a damage award if there is no causal connection to Kern's claimed injuries. The record shows without contradiction that the golf scores were merely a mechanical tabulation of each employee's performance ratings, all of which were in fact prepared for Kern as for every other employee. How, then, could a jury reasonably conclude that Ada Kern was injured by Levolor's failure to prepare a golf score for her? The uncontroverted testimony of Levolor officials was that preparation of golf scores for Kern would have made no difference whatsoever. RT 7/28 at 101-02. 101 The boiling point of water is the same whether expressed as 212? Fahrenheit, 100? Celsius or 373? Kelvin. Applying a mechanical formula for converting Ada Kern's performance ratings into golf scores cannot affect her relative position in the layoff queue vis-a-vis other employees; the fact remains, she was still the least productive and most junior of the three wandmakers. The idea that Kern suffered injury because the company failed to perform some routine and irrelevant computations on her tally sheet, without any consideration of what would have happened had they done so, makes no sense to me. Even if the jury might have drawn some sinister inference from the absence of the calculation, plaintiff still faces the age-old principle that she can only recover if she can show injury. She has shown none.
102 There is really not much to say here. There is insufficient evidence to support a finding that a contract existed, or that Levolor breached it, or that any such breach caused injury to Ada Kern. It would defy logic to then hold that there was sufficient evidence to find that Levolor might have done something to injure the right of [Ada Kern] to receive the benefits of the agreement. Foley, 47 Cal.3d at 684, 254 Cal.Rptr. 211, 765 P.2d 373, quoting Comunale v. Traders & General Ins. Co., 50 Cal.2d 654, 658, 328 P.2d 198 (1958). See also Foley, 47 Cal.3d at 698 n. 39, 254 Cal.Rptr. 211, 765 P.2d 373 (implied covenant of good faith and fair dealing cannot override employment at will). 103