Court Opinion

ID: 9559930
Source: CourtListenerOpinion
Date Created: 2023-08-21 17:38:20.260707+00
Date Added: 2024-06-11T09:11:51.377571
License: Public Domain

KENNARD, J., Dissenting.
Plaintiff Charles Hunter worked as a welder for defendant Up-Right, Inc., from January 1973 until September 1987. He was considered an excellent employee. On September 10, 1987, Hunter’s supervisor induced him to resign by falsely telling him that his position was being eliminated because of a corporate reorganization. Six months later, Hunter learned of the fraud. He then brought this action. The jury awarded Hunter damages of $38,013 for breach of contract and $120,000 for the fraud.
The issue is whether an employee may recover tort damages for fraud perpetrated by the employer for the purpose of concealing from the employee his or her rights under the employment contract. The majority, relying primarily on this court’s decision in Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654 [254 Cal.Rptr. 211, 765 P.2d 373] (Foley), holds that the employee’s recovery is limited to contract damages. According to the majority, fraud is indistinguishable from a constructive wrongful termination because the employer “simply employed a falsehood to do what it otherwise could have accomplished directly,” that is, terminated employment. (Maj. opn., ante, at p. 1184.) In any event, the majority concludes, “[i]t cannot be said that Hunter relied to his detriment on the misrepresentation in suffering constructive dismissal.” (Ibid.) The majority is wrong. As Justice Mosk points out in his dissent, this court’s decision in Foley does not govern this case. (Dis. opn. of Mosk, J., ante, at pp. 1187-1188.)
Contrary to the majority’s conclusion in this case, the fraud that the employer perpetrated upon the employee cannot be deemed a constructive wrongful termination. Properly analyzed, fraud is readily distinguishable from constructive wrongful discharge. The latter occurs when an employee is forced to resign as a result of actions or conditions so intolerable that a reasonable person in the employee’s position would have resigned, and the employer—with actual or constructive knowledge of the intolerable actions or conditions and their impact on the employee—could have remedied the situation but did not. (Soules v. Cadam, Inc. (1991) 2 Cal.App.4th 390, 399 *1197[3 Cal.Rptr.2d 6]; Zilmer v. Carnation Co. (1989) 215 Cal.App.3d 29, 38 [263 Cal.Rptr. 422].) Constructive wrongful discharge may occur when an employee leaves because of intolerable physical working conditions (see, e.g., Panopulos v. Westinghouse Electric Corp. (1989) 216 Cal.App.3d 660, 664-665, 667 [264 Cal.Rptr. 810]), racial discrimination (see, e.g., Valdez v. City of Los Angeles (1991) 231 Cal.App.3d 1043, 1056-1057 [282 Cal.Rptr. 726]), or a myriad of other intolerable actions, including fraud. Indeed, the intolerable action could consist of a physical assault.
Constructive wrongful termination is the legal consequence of the employer’s conduct; it is not the conduct itself. No one would seriously contend that a physical assault—one of the many intolerable types of conduct by an employer that may cause a constructive discharge—is indistinguishable from a wrongful termination because the employer could have terminated the employee by other means. Characterizing the consequence of the employer’s conduct as constructive discharge, as the majority does here, does not address the question of whether the conduct itself is actionable in contract, in tort, or under other civil legal principles.
Detrimental reliance is an essential element of fraud. (5 Witkin, Summary of Cal. Law (9th ed. 1988) Torts, §§ 676, 711, pp. 778, 810-811.) The facts of this case do not support the majority’s conclusion that Hunter did not detrimentally rely on his employer’s fraudulent misrepresentation in resigning. Because the employer might have accomplished the termination in another manner does not mean that Hunter did not detrimentally rely on the fraud. Hunter did rely on the fraud: he resigned.
In my view, there are two analytic approaches that may entitle the employee to recover in tort for the employer’s fraud. First, when, as here, an employer resorts to fraud to deprive an employee of his or her rights, the employer’s conduct is not within the scope of the contractual employment relationship. (See Johns-Manville Products Corp. v. Superior Court (1980) 27 Cal.3d 465, All [165 Cal.Rptr. 858, 612 P.2d 948, 9 A.L.R.4th 758]; see generally, Livitsanos v. Superior Court (1992) 2 Cal.4th 744, 754-755 [7 Cal.Rptr.2d 808, 828 P.2d 1195]; Shoemaker v. Myers (1990) 52 Cal.3d 1, 16 [276 Cal.Rptr. 303, 801 P.2d 1054]; Cole v. Fair Oaks Protection Dist. (1987) 43 Cal.3d 148, 161 [233 Cal.Rptr. 308, 729 P.2d 743].) Second, the employer’s misconduct in this case did not have as its sole objective a wrongful termination of employment. The misconduct included the additional unlawful objective of preventing the employee from learning of and enforcing his contractual rights. Because under my approach the defrauded employee is entitled to recover tort damages under either of these two analytic approaches, it is not necessary in this case to decide which of these two approaches is preferable.
*1198I find the practical effect of the majority’s opinion most troubling. An employer who has decided to wrongfully terminate an employee now has nothing to lose by accomplishing that termination through the means of fraud. Indeed, the employer has everything to gain—if the fraud succeeds, the employee will never discover the true reason for the termination, and will never trouble the employer with a wrongful termination action.
I would affirm the judgment of the Court of Appeal.
Respondent’s petition for a rehearing was denied January 20, 1994. Mosk, J., and Kennard, J., were of the opinion that the petition should be granted.