California Supreme Court Sides With Employer On Two Key Issues

Employers obtained a significant victory in a recent ruling by the California Supreme Court, Guz v. Bechtel National, Inc.

The case concerned a 22-year employee who was terminated allegedly due to a downturn in workload. The employee sued his employer for breach of an implied contract that he would be terminated only for cause and age discrimination. California employers should take note of this decision for two reasons:

First, Guz establishes unequivocally that long tenure and a history of raises, promotions, and good reviews do not create by themselves an implied contract that the employer can terminate an employee only for cause. The decision reverses a series of appellate decisions to the contrary on this issue. In reaching its decision, the California Supreme Court placed great weight on the employer's written policy distributed to its employees providing that there was no guarantee of continued employment. The Court's reliance on this written policy as being a clear expression of the parties' intent is further reason why employers should distribute written at-will policies to their employees.

The Guz decision has also established that - at least under state law - an employee must have more than just minimal evidence of age discrimination to merit a trial. The California Supreme Court interpreted a recent U.S. Supreme Court decision, Reeves v. Sanderson Plumbing Products, Inc., in a pro-employer fashion. It held that an employer can avoid trial where an employee has presented so little evidence that no reasonable jury could conclude the employer's actions are discriminatory. Employees looking for a more favorable interpretation of age discrimination laws may, in light of this pro-employer state decision, choose to proceed in federal court under federal laws where it appears that the courts might be more willing to allow the case to proceed to trial. Ironically, federal court, which has historically been more favored by employers, may no longer be the best venue for employers to resolve age discrimination cases in California as a result of Guz.