D. DEFENDANTS' DEMURRER MUST BE OVERRULED BECAUSE
PLAINTIFF HAS STATED FACTS CONSTITUTING CAUSES OF
ACTION FOR BREACH OF CONTRACT AND BREACH OF THE
IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING.
Defendants’ sole ground for demurring to the fourth cause of action for breach of implied-in-fact contract is based on Plaintiff’s inability to maintain a breach of contract claim as against Defendant ESTRADA. Defendants do not contend that this cause of action is defective in any other respect.
As set forth above, Plaintiff has alleged his breach of implied-in-fact contract as against Defendant UPS only, and not against any individual Defendant. As such, the demurrer to the fourth cause of action must be overruled. To the extent that Defendants’ demur to the fifth cause of action for breach of the implied covenant of good faith and fair dealing (labeled as “Bad Faith”) on the ground that no individual liability exists, the Demurrer must be overruled for the same reasons.
Defendants further demur to the fifth cause of action for breach of the implied covenant of good faith and fair dealing, alleging that there is no such cause of action. Their assertion flies in the face of longstanding law and practice.
Under federal and state law, an employee may not be wrongfully discharged, disciplined nor demoted as the result of unlawful discrimination and "there is no rational reason why an employer's policy that its employees will not be demoted except for good cause, like a policy restricting termination ... cannot become an implied term in an employment contract." Scott v. Pacific Gas and Elec. Co. (1995) 11 Cal.4th 454, 464. An employee is entitled to rebut the presumption of at-will employment by a contractual agreement, express or implied, to limit an employer's power of demotion, discipline or wrongful termination. Id. at 465.
Plaintiff alleges he was not an “at-will” employee and his allegation of breach of the implied covenant of good faith and fair dealing, which inures to every contract, necessarily follows. The covenant of good faith is read into contracts in order to protect the promises of the contract. In essence, the covenant is implied as a supplement to the contractual covenants, to prevent a contracting party from engaging in conduct which, while not technically transgressing the covenants, frustrates the other party's right to the benefits of the contract. Racine & Laramie, Ltd. v. Department of Parks and Recreation (1992) 11 Cal.App.4th 1026, 1031.
Breach of the implied covenant of good faith and fair dealing as a viable cause of action is clearly expressed in Comeaux v. Brown & Williamson Tobacco Company (1990) 915 F.2d 1264. The Comeaux Court held that “[t]he implied covenant, however, remains available as a cause of action, even in the face of an at-will employment contract, where a plaintiff alleges that conduct other than his discharge violated the covenant.” Id. at 1272. In the case at hand, the First Amended Complaint alleges the Defendant UPS breached the covenant by interfering with Plaintiff in the performance of his job duties, denying him employment benefits, and by fabricating a pretext for terminating Plaintiff. Complaint ¶ 48. Plaintiff has unequivocally alleged that he was not an “at-will” employee and that conduct other than his discharge violated the covenant. Thus, Plaintiff has alleged a viable cause of action for breach of the covenant.
Defendants mistakenly rely on Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317. Guz involved a motion for summary judgment, not a demurrer. Moreover, the Guz Court specifically states that the “case presents questions about the law governing claims of wrongful discharge from employment as it applies to an employer’s motion for summary judgment.” Id. at 325. [Emphasis added.] Unlike demurrers, summary judgment motions are based on lack of “evidence” or “proof.” The focus of a demurrer is sufficient pleading--not proof or evidence. Finally, Defendants surreptitiously neglect to inform the Court that Guz dealt solely with at-will employment. The present action does not involve at-will employment. It involves an implied-in-fact contract. Guz provided that the implied covenant of good faith and fair dealing is tied to breach of contract and since the Court found there was no express or implied contract in that case, a cause of action for breach of the implied covenant could not apply. Id. at 349.
Guz further denounced the breach of the covenant of good faith and fair dealing where the sole ground for applying the covenant was the act of wrongful termination. Id. at 351. The present action does not allege that the sole ground for applying the covenant is the termination itself. It alleges that UPS breached the covenant by interfering with Plaintiff in the performance of his job duties, denying him employment benefits, and by fabricating a pretext for terminating him. Complaint ¶ 48.
Defendants conspicuously ignore the telling language in Guz which clearly enunciates that there is a cause of action for breach of the implied covenant of good faith and fair dealing. Specifically, the Court concluded:
We do not suggest the covenant of good faith and fair dealing has no function whatever in the interpretation and enforcement of employment contracts. As indicated above, the covenant prevents a party from acting in bad faith to frustrate the contract’s actual benefits. Thus, for example, the covenant might be violated if termination of an at-will employee was a mere pretext to cheat the worker out of another contract benefit to which the employee was clearly entitled, such as compensation already earned. We confront no such claim here. Id. at 353, fn.18.
In this case, Plaintiff, whose employment was not at-will, has alleged violation of the covenant by UPS’s fabrication of a pretext for termination which denied Plaintiff his employment benefits.
Finally, although Defendants make a fleeting citation to Award Metals, Inc v. Superior Court (1991) 228 Cal.App.3d 1128, that case did not involve causes of action for either breach of contract or breach of the covenant of good faith and fair dealing. Rather, the issue in that case was Plaintiff’s attempt to plead two identical negligence causes of action. As such, Award Metals is wholly inapplicable.
The Complaint in this action clearly enunciates that Plaintiff was not an at-will employee, that UPS breached the implied covenant to frustrate the contract’s actual benefits, by interfering with Plaintiff’s performance, and by terminating Plaintiff based on pretext. The Guz Court expressly stated that under such circumstances, the covenant of good faith and fair dealing serves its proper function. Therefore, the Demurrer to this cause of action must be overruled.
Dated: April 5, 2002 KEEGAN & ASSOCIATES
Attorneys at Law
Dru Anne Keegan
Attorney for ROBERT ALLMAN