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"At will" company sued for wrongful termination after layoff

Courts often are reluctant to find a wrongful termination as a result of a layoff. Layoffs usually affect large numbers of people, thus appearing to be legitimate. A layoff of one person, however, looks suspicious, especially where the reason given for layoff keeps changing, and where the company does not follow its policies in implementing the layoff.

The California Court of Appeals in San Francisco ruled on May 9 that a 22 year employee of Bechtel could sue for wrongful termination and age discrimination. The employee, Mr. Guz, was an excellent performer in the information services group. A new division president came in and reorganized, such that several employees were transferred into other groups, and Mr. Guz was laid off, he was told, due to a "downturn in workload."

When Mr. Guz sued, the President testified that it was not a downturn in the workload, but rather his unhappiness with the performance of Mr. Guz's manager that led to the reorganization. The company admitted it did not follow its progressive discipline policy for handling the poor performance of Mr. Guz's manager. Nor did the company follow its policies for ranking and rating before layoff.

The company argued to the court it was an at-will employer because of a statement to that effect in the policy handbook. The court disagreed, saying that the other policies in the handbook contradicted the at-will statement, and therefore the entire issue must be decided by the jury.

This is a textbook example of the wrong way to terminate an employee.

Following 22 years of employment with Bechtel Corporation and/or its wholly owned subsidiary Bechtel National, Inc. (BNI) ("respondents"), plaintiff and appellant John Guz (Guz) was placed on holding status and was eventually terminated. He sued alleging causes of action for breach of an implied contract not to terminate without cause, breach of the implied covenant of good faith and fair dealing, and age discrimination under the California Fair Employment and Housing Act (Gov. Code, 12900 et seq.). Respondents moved for summary judgment asserting there were no triable issues of material fact and that they were entitled to judgment in their favor as a matter of law. (Code Civ. Proc., 437c, subd. (c).) The trial court granted respondents' motion finding that Guz was an at-will employee and had failed to establish a prima facie case of age discrimination. Guz appeals from the subsequently rendered judgment in respondents' favor. We conclude that the trial court erred in granting summary judgment for respondents and reverse.

At the time of his termination in December of 1992 Guz held the position of financial reports supervisor in BNI's Management Information Group (BNI MI), a grade 27 position, which paid an annual salary of $71, 280. Guz was 49 years old.

During his 22 years with Bechtel, Guz received 6 major promotions and 17 merit raises. In 1992 Guz received the Silver Performance Plus Award from the president of BNI, Robert C. Johnstone, in recognition of his excellent work performance and for saving the company $1.7 million. His performance review for the period of 1991-1992 indicated that Guz "'meets requirements'" in all stated categories. Goldstein noted in the evaluation that Guz was a "'strong performer' in [his] group," continued to do "'an excellent job,'" and that his "'knowledge of Bechtel based on over twenty years of experience is invaluable.'" Goldstein's supervisor, Dewey, concurred in that appraisal. At no time during his 22 years with respondents was Guz advised that any of his skills were deficient.

We start with Personnel Policy 1101 (June 1991 ed.) which is entitled, "Termination of Employees." Subsection A of the three-page policy sets forth "general" policy statements applicable to "all categories of termination." Within that section it is stated: "Bechtel employees have no employment agreements guaranteeing continuous service and may resign at their option or be terminated at the option of Bechtel." In respondents' view this statement establishes as a matter of law that Guz is an at-will employee. We disagree. Certainly this is some evidence which may be argued to the jury-as we will explain in detail-but it does not in and of itself establish that Guz was an at-will employee.

Guz relied on Bechtel personnel policies, including Policy 1101, which sets forth a progressive discipline policy by which unsatisfactory employees are given both notice and an opportunity to correct deficiencies[FOOTNOTE 7] prior to termination. The president of BNI made a statement to the effect that Bechtel's practice was not to terminate employees unless there was good cause. In his deposition, Guz's supervisor Goldstein testified that Bechtel's policy was to train supervisors to document performance problems so that cause to terminate the employee could be established.

Nothing we hold today is at odds with either Miller v. Pepsi-Cola Bottling Co., supra, 210 Cal.App.3d 1554, or Davis v. Consolidated Freightways, supra, 29 Cal.App.4th 354. In each of those cases, summary judgment for the employer was found proper where the employee was only able to establish longevity of employment, regular salary increases and promotions. As stated by the Miller court, "Basically, the record revealed that all Miller can urge are two promotions and regular salary increases during his eleven years with Pepsi. Promotions and salary increases are natural occurrences of an employee who remains with an employer for a substantial length of time. These factors should not change the status of an 'at-will' employee to one dischargeable only for 'just cause.' We hold that, as a matter of law, Miller had no enforceable contract with Pepsi." (Miller v. Pepsi-Cola Bottling Co., supra, 210 Cal.App.3d at p. 1559; see also Davis v. Consolidated Freightways, supra, at pp. 369-370.) Each of these cases is distinguishable from the case at hand because of the additional evidence Guz presented regarding his employer's personnel practices.

Guz argued that respondents did not have good cause to terminate him. His argument was twofold: (1) the consolidation of BNI MI and SFRO MI was arbitrary and capricious (e.g., not a legitimate business decision), and (2) even if the reorganization were deemed a legitimate business decision, it did not constitute good cause for terminating Guz as respondents had not followed their personnel policies for reduction in force and forced ranking. Respondents countered that their force ranking policies did not apply to the layoff as the BNI MI group was too small.

Guz's showing was sufficient to create a triable issue as to whether the business reason for terminating Guz proffered by respondents-a downturn in BNI workload-was pretextual.

This testimony by itself created a triable issue as to whether the motivation for the reorganization was pretextual: the motivation was not a downturn in BNI's workload but a dissatisfaction with the overall performance of the BNI MI group. We express no opinion as to whether dissatisfaction with the performance of the group may constitute good cause to disband the group. But under Bechtel policies, such dissatisfaction with performance required written warnings and an opportunity to improve.

Guz also created a triable issue as to whether elimination of the BNI group was justified by a "downturn in workload" which was the stated reason for his termination. Johnstone's declaration does not mention a downturn in workload as a factor in his decision to do away with the BNI MI group. Respondents presented no evidence that any other departments in BNI were required to reduce staff because of a "downturn in workload." Finally, Guz presented evidence suggesting that a reduction in BNI's workload would not necessarily mean a reduction in BNI MI's workload, and indeed the converse may well be true.

In sum, the existence of these triable issues alone made summary adjudication of Guz's cause of action for breach of the implied promise not to terminate without good cause improper.

Guz v. Bechtel National, Inc.,
___ Cal.App.4th ___, 97 C.D.O.S. 3552 (1st CA, 1997)

Information here is correct at the time it is posted. Case decisions cited here may be reversed. Please do not rely on this information without consulting an attorney first.
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