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California Court Rules Wrongful Termination Claim Has No Merit

April 1, 2002

The Superior Court of California, County of Monterey, granted summary judgment for KM&M's client, a telecommunications company, against a former sales employee who had been terminated for unauthorized and deceptive business practices. To boost her sales (and hence her commissions), this employee had provided customers with hundreds of dollars worth of credits that they were not entitled to. She denied any wrongdoing, asserting that an unidentified telephone support person had informed her that the credits were available. Plaintiff alleged, therefore, that her termination breached an implied contract requiring good cause for termination and the implied covenant of good faith and fair dealing.

On summary judgment, we argued that there was no agreement such as plaintiff claimed. As a relatively new employee of our client (which had just acquired plaintiff's former employer), plaintiff had not yet signed a statement acknowledging her status as an at-will employee. However, we were able to establish at her deposition that plaintiff's allegations of an implied contract were too vague and insubstantial to support a claim that the parties had agreed to the terms she alleged.

To determine the existence of an implied contract, California law requires the court or jury to examine "the totality of the circumstances." It is difficult to imagine a standard that provides less guidance in how to identify the existence and terms of an implied contract. Fortunately for employers, the California Supreme Court clarified this standard in 2000 in Guz v. Bechtel National Inc., when it emphasized that the ultimate goal was to determine the parties' actual understanding.

Here, plaintiff's claims were based on her own assumptions concerning our client's policies and practices, the absence of prior discipline, and several awards and commendations (most of which pre-dated our client's acquisition of plaintiff's former employer). The court agreed that plaintiff's evidence failed to support her claim that there was any implied agreement concerning grounds for termination. In the absence of an implied contract limiting our client's right to terminate, plaintiff was similarly unable to claim that the termination breached the implied covenant of good faith and fair dealing. As a result, the court concluded that plaintiff could be terminated at will and granted our summary judgment motion, disposing of plaintiff's claims in their entirety.

April 1, 2002