TO: FROM: DATE: RE:
D.C. Nelson, Partner Exam #3936; Section B November 17, 2003 Garcia v. FBOC, case no. 4839
I.
Issue For the purpose of establishing an implied employment contract under California law, did
“the totality of circumstances,” including repeated assurances of job security and eight years of dedicated service, give rise to a reasonable expectation of an implied employment contract between Gloria Garcia, (“Garcia”), and First Bank of California, (“FBOC”)? II. Brief Answer Probably yes. In the absence of an expressed employment contract California courts look at the “totality of circumstances” to determine the actual terms of employment. The following factors are most relevant: (1) personnel policies and practices of the employer; (2) employee‟s longevity of service; (3) actions or communications by the employer reflecting job security; (4) and industry practices. The courts find an implied employment contract when the totality of circumstances give the plaintiff a reasonable expectation of such. In this case it is likely that the circumstances, more specifically the eight years of service provided to FBOC and the repeated assurances of job security provided by FBOC, led Garcia to a reasonable expectation of an implied employment contract. On an evaluation, her supervisor stated that Garcia‟s continued hard work would lead to another promotion. On the other hand, her employee handbook states the policy of FBOC is to treat all employees as “at-will.” The industry practice is still vague and additional information needs to be obtained on this element. Garcia has told us that the industry
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practice is not to sign expressed employment contracts. If the industry practice is to treat all employees as “at will,” our case is slightly less impressive. However, if the industry practice is to assume implied employment contracts for all employees, then our case is reinforced. Taking into account the “totality of circumstances,” the court is likely to find a reasonable expectation of an implied employment contract. III. Statement of Facts In May of 1993 FBOC hired Garcia as a teller under the supervision of Mark Malone, (“Malone”). Because of her hard work, Garcia was promoted to Branch Manager in 1995 and promoted again to Accounting Clerk in 1996. Helen Lee, (“Lee”), became Garcia‟s supervisor in the accounting department. Upon Lee‟s recommendation, Garcia was promoted to the newly created position of Assistant Accounting Manager in 1998. Garcia worked directly under Lee and had four employees who worked under her. In June of 2000 Lee retired as Accounting Manager. Garcia assumed she would be promoted because she had assumed many of the responsibilities of Accounting Manager over the previous two years. Instead, FBOC hired Kent Richardson, (“Richardson”), to fill the position of Accounting Manager. In November of 2001 Garcia was given a two-week notice that she was being laid off. In total, Garcia worked at FBOC for eight years and six months receiving three promotions and three salary increases. On a 1995 review, Malone indicated Garcia would have a “long future at the Bank.” On a 1997 review, Lee similarly indicated Garcia would have a “long, fruitful career with [the] Bank.” In 1999, Lee wrote about Garcia, “[her] continued hard-work will lead to another promotion.” Garcia did not sign any employment contracts as she claims it
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is not industry practice for any employees to sign contracts. The Employee Handbook states that all employees may be terminated for any reason. IV. Discussion For the purpose of establishing an implied employment contract under California law, did “the totality of circumstances,” including repeated assurances of job security and eight years of dedicated service, give rise to a reasonable expectation of an implied employment contract between Gloria Garcia, (“Garcia”), and First Bank of California, (“FBOC”)? In 1988, the Supreme Court of California held that in the absence of an expressed agreement specifying the length of employment, the actual nature of the employment contract will be determined by the totality of circumstances, including but not limited to: (1) the personnel policies or practices of the employer; (2) the employee‟s longevity of service; (3) the actions or communications by the employer reflecting assurances of continued employment; (4) and the practices of the industry. See Foley v. Interactive Data Corp., 47 Cal. 3d 654, 680 (1988). An employment contract may be implied if the totality of circumstances leads the plaintiff to a reasonable belief of such. See Id. at 679-80. The plaintiff in Foley was employed by defendant for six years and nine months without an expressed employment contract limiting the grounds for which plaintiff could be terminated. See Id. at 663. When he learned his supervisor was under investigation for embezzlement, the plaintiff informed his employer, Interactive Data Corp. Shortly thereafter, the defendant terminated the plaintiff, leading the plaintiff to bring an action for breach of an implied-in-fact employment contract. See Id. at 664. Over the course of employment, the plaintiff received steady salary increases and promotions. The Plaintiff alleged that “defendant‟s officers made
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repeated oral assurances of job security so long as his performance remained adequate.” Id. The “[p]laintiff also alleged that during his employment, defendant maintained written „Termination Guidelines‟ that set forth express grounds for discharge and a mandatory seven step pretermination procedure.” Id. at 664. While the defendant overemphasized the fact that plaintiff was employed for “only” six years and nine months, the court held that “six years and nine months is sufficient time for conduct to occur on which a trier of fact could find the existence of an implied contract.” Id. at 681. The court concluded that the preceding facts, if proved, “may be sufficient for a jury to find an implied-in-fact contract.” Id. at 682. In 2000 the Supreme Court of California re-asserted that the totality of circumstances must be examined to determine whether the parties‟ conduct gives rise to an implied-in-fact contract. Guz v. Bechtel Nat’l, Inc., 24 Cal. 4th 317, 337 (2000). The Plaintiff in Guz was employed by defendant for more than 20 years without an expressed employment contract. Over the course of his employment, the plaintiff received several promotions and raises, but was eventually laid off when his division was disbanded by defendant. See Id. at 330. During the course of employment defendant maintained a personnel policy that stated employees have no employment agreements and thus may resign or be terminated at any time. See Id. at 328. The court held that “at-will provisions in personnel handbooks, manuals, or memoranda do not bar, or necessarily overcome, other evidence of the employer‟s contrary intent.” Id. at 339. The plaintiff introduced, as evidence to establish an implied employment contract, his longevity of service and several promotions; however, the trial court dismissed the action reasoning that the plaintiff did not introduce any evidence that he was ever told at any time that he would be retained as long as he was doing a good job. See Id. at 333. The Supreme Court agreed with the
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trial court and determined there was not enough triable evidence to form an implied employment contract. See Id. at 326. In sum, California courts find an implied employment contract exists only when the “totality of circumstances” creates a reasonable expectation of such. Here, the facts of Garcia‟s case are similar to those of Foley and distinguishable from those of Guz. The court allowed Foley to continue his cause of action because the circumstances were such that a jury may find a reasonable expectation of an implied contract. Foley, 47 Cal. 3d at 682. In reference to longevity of service, the court stated that six years and nine months is sufficient time for conduct to occur that would lead to the existence of an implied employment contract. See Id. at 681. In our case Garcia was employed for eight years and six months, almost two years longer than the plaintiff in Foley. Therefore, like the plaintiff in Foley, Garcia‟s longevity of service provides a sufficient amount of time for a reasonable expectation of an implied contract to develop. The plaintiff in Guz was not able to establish an implied employment contract because he could not produce sufficient evidence that he was told he would be retained as long as he was doing a good job. Guz, 24 Cal. 4th at 333. On the contrary, Garcia does have concrete evidence of assurances of job security. Two of her supervisors stated on performance reviews that Garcia would have a long career with the bank. In 1999 her supervisor went on to state that Garcia‟s “continued hard work would lead to another promotion.” Because the courts look for assurances of job security in determining if there is a reasonable expectation of an implied employment contract, Garcia has a much stronger claim for an implied employment contract than the plaintiff in Guz.
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On the other hand, the court may find that Garcia should have relied on the at-will clause in her employee handbook in determining the terms of her employment. The at-will clause contradicts the implications made by her supervisors; ultimately, it will be up to the trier of fact to determine if the totality of circumstances led Garcia to a reasonable expectation of an implied employment contract. However, on balance, the court is likely to find the totality of circumstances led to the existence of an implied employment contract. Garcia worked at the bank for eight and a half years and over the course of employment she received repeated assurances of job security from her supervisors. These assurances are documented on Garcia‟s annual performance reviews. The totality of circumstances led Garcia to a reasonable expectation of an implied employment contract. V. Conclusion In the absence of an expressed employment contract, an implied contract is established when the totality of circumstances leads the plaintiff to a reasonable expectation of such. The court will focus on the following factors: (1) personnel policies and practices of the employer; (2) employee‟s longevity of service; (3) assurances of job security made by the employer; (4) and industry practices. While the employee handbook claims all FBOC employees are at-will, Garcia‟s longevity of service, eight and a half years, and FBOC‟s repeated assurances of job security, likely create an implied employment contract. I recommend doing some additional research to determine the industry practice with regards to employment contracts. Garcia has told us that the industry practice is not to sign employment contracts. This information does not help or hurt our case until we can find additional information. If industry practice is to maintain at-will employment, Garcia‟s case will be slightly less impressive. In contrast, our case will be
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reinforced if industry practice is one of implied employment contracts in lieu of expressed contracts. Looking at the totality of circumstances, we have a likely cause of action for an implied employment contract.
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