Guz v. Bechtel National, Inc.

• Citation: 100 Cal.Rptr.2d 352,24 Cal.4th 317,8 P.3d 1089
• Decision Date: 05 October 2000
• Docket Number: No. S062201.,S062201.
• Court: United States State Supreme Court (California)
• Parties: John GUZ, Plaintiff and Appellant, v. BECHTEL NATIONAL, INC., et al., Defendants and Respondents.

100 Cal.Rptr.2d 352

24 Cal.4th 317

8 P.3d 1089

John GUZ, Plaintiff and Appellant, v. BECHTEL NATIONAL, INC., et al., Defendants and Respondents.

No. S062201.

Supreme Court of California.

October 5, 2000.

Bianco & Murphy, Stephen M. Murphy, San Francisco; Quackenbush & Quackenbush and William C. Quackenbush, San Mateo, for Plaintiff and Appellant.

Thomas W. Osborne and Melvin Radowitz, Washington, Dist. of Col., for the American Association of Retired Persons as Amicus Curiae on behalf of Plaintiff and Appellant.

Paul, Hastings, Janofsky & Walker, Paul Grossman, Paul W. Cane, Jr., John C. Oakes, Los Angeles; Thelen, Marrin, Johnson & Bridges, Thelen Reid & Priest, Curtis A. Cole, Janet F. Bentley, Clarice

C. Liu, Michael Hallerud and Thomas M. McInerney, San Francisco, for Defendants and Respondents.

Gibson, Dunn & Crutcher, Pamela L. Hemminger and Kathleen M. Vanderziel, Los Angeles, for California Chamber of Commerce as Amicus Curiae on behalf of Defendants and Respondents.

Law Offices of Steven Drapkin and Steven Drapkin, Los Angeles, for the Employers Group as Amicus Curiae on behalf of Defendants and Respondents.

Lloyd C. Loomis, Los Angeles, for California Employment Law Council as Amicus Curiae on behalf of Defendants and Respondents.

BAXTER, J.

This case presents questions about the law governing claims of wrongful discharge from employment as it applies to an employer's motion for summary judgment. Plaintiff John Guz, a longtime employee of Bechtel National, Inc. (BNI), was released at age 49 when his work unit was eliminated and its tasks were transferred to another Bechtel office. Guz sued BNI and its parent, Bechtel Corporation (hereinafter collectively Bechtel), alleging age discrimination, breach of an implied contract to be terminated only for good cause, and breach of the implied covenant of good faith and fair dealing. The trial court granted Bechtel's motion for summary judgment and dismissed the action. In a split decision, the Court of Appeal reversed. The majority found that Bechtel had demonstrated no grounds to foreclose a trial on any of the claims asserted in the complaint.

Having closely reviewed the Court of Appeal's decision,¹ we reach the following conclusions First, the Court of Appeal used erroneous grounds to reverse summary judgment on Guz's implied contract cause of action. The Court of Appeal found triable evidence (1) that Guz had an actual agreement, implied in fact, to be discharged only for good cause, and (2) that the elimination of Guz's work unit lacked good cause because Bechtel's stated reason—a "downturn in ... workload"—was not justified by the facts, and was, in truth, a pretext to discharge the unit's workers for poor performance without following the company's "progressive discipline" policy. We acknowledge a triable issue that Guz, like other Bechtel workers, had implied contractual rights under specific provisions of Bechtel's written personnel policies. But neither the policies, nor other evidence, suggests any contractual restriction on Bechtel's right to eliminate a work unit as it saw fit, even where dissatisfaction with unit performance was a factor in the decision. The Court of Appeal's ruling on Guz's implied contract claim must therefore be reversed. The Court of Appeal did not reach the additional ground on which Guz claims a contractual breach—i.e., that Bechtel failed to follow its fair layoff policies when, during and after the reorganization, it made individual personnel decisions leading to Guz's release. Accordingly, we leave that issue to the Court of Appeal on remand.

Second, the Court of Appeal erred in restoring Guz's separate cause of action for breach of the implied covenant of good faith and fair dealing. Here Guz claims that even if his employment included no express or implied-in-fact agreement limiting Bechtel's right to discharge him, and was thus "at will" (Lab.Code, § 2922), the covenant of good faith and fair dealing, implied by law in every contract, precluded Bechtel from terminating him arbitrarily, as by failing to follow its own policies, or in bad faith. But while the implied covenant requires mutual fairness in applying a contract's actual terms, it cannot substantively alter those terms. If an employment is at will, and thus allows either party to terminate for any or no reason, the implied covenant cannot decree otherwise. Moreover, although any breach of the actual terms of an employment contract also violates the implied covenant, the measure of damages for such a breach remains solely contractual. Hence, where breach of an actual term is alleged, a separate implied covenant claim, based on the same breach, is superfluous. On the other hand, where an implied covenant claim alleges a breach of obligations beyond the agreement's actual terms, it is invalid.

Finally, we disagree with the Court of Appeal that Guz's claim of prohibited age discrimination has triable merit. Bechtel presented evidence, largely undisputed, that the reasons for its personnel decisions leading to Guz's release had nothing to do with his age. In the face of this showing, evidence cited by Guz that certain workers preferred over him were substantially younger is insufficient to permit a rational inference that age played any significant role in his termination.

For the reasons set forth above, we will reverse the judgment of the Court of Appeal and will remand to that court for further proceedings consistent with this opinion.

FACTS

In October 1994, Guz sued Bechtel, challenging the June 1993 termination of his Bechtel employment. The complaint alleged causes of action for breach of an implied employment contract (see Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 254 Cal.Rptr. 211, 765 P.2d 373 (Foley)), breach of the covenant of good faith and fair dealing, and age discrimination in violation of the California Fair Employment and Housing Act (FEHA; Gov.Code, § 12941).

After extensive discovery, Bechtel filed a motion for summary judgment in August 1995. The motion, and Guz's opposition thereto, attached numerous supporting documents, including declarations and deposition excerpts. On the basis of these submissions, the following facts appear to be essentially undisputed:

In 1971, Bechtel hired Guz as an administrative assistant at a salary of $750 per month. Throughout his Bechtel career, Guz worked in "management information," performing, at various times, duties on both the "awarded" and "overhead" sides of this specialty. He received steady raises and promotions. His performance reviews were generally favorable, though his March 1992 evaluation indicated he needed to follow through on ideas and should become "fully computer literate in order to improve his long-term job success."

BNI, a division of Bechtel Corporation, is an engineering, construction, and environmental remediation company that focuses on federal government programs, principally for the Departments of Energy and Defense. Prior to 1993, BNI had its own in-house management information unit, the BNI Management Information Group (BNI-MI). BNI-MI itself represented a 1986 consolidation of two Bechtel management information units, which resulted in the work of these groups being done by fewer people. Between 1986 and 1991, BNI-MI's size was further reduced from 13 to six persons, and its costs were reduced from $748,000 in 1986 to $400,000 in 1991.

Guz had worked for BNI-MI since 1986. In 1992, at age 49, he was employed as a financial reports supervisor, responsible for supervising BNI-MI's overhead section, which included himself and 44-year-old Dee Minoia. At salary grade 27, Guz earned $5,940 per month. BNI-MI's six-member staff also included its manager, Ronald Goldstein (age 50), Goldstein's secretary Pam Fung (age 45), Robert Wraith (age 41), and Christine Siu (age 34). Guz's immediate superior was his longtime friend and colleague Goldstein. Goldstein, in turn, reported to Edward Dewey, BNI's manager of government services.

During this time, Bechtel maintained Personnel Policy 1101, dated June 1991, on the subject of termination of employment (Policy 1101). Policy 1101 stated that "Bechtel employees have no employment agreements guaranteeing continuous service and may resign at their option or be terminated at the option of Bechtel."

Policy 1101 also described several "Categories of Termination," including "Layoff and "Unsatisfactory Performance." With respect to Unsatisfactory Performance, the policy stated that "[e]mployees who fail to perform their jobs in a satisfactory manner may be terminated, provided the employees have been advised of the specific shortcomings and given an opportunity to improve their performance."² A layoff was defined as "a Bechtel-initiated termination[ ] of employees caused by a reduction in workload, reorganizations, changes in job requirements, or other circumstances ..." Under the Layoff policy, employees subject to termination for this reason "may be placed on `holding status' if there is a possible Bechtel assignment within the following 3-month period." Guz understood that Policy 1101 applied to him.

In January 1992, Robert Johnstone became president of BNI. While previously running another Bechtel entity, Johnstone had received management information services from the San Francisco Regional Office Management Information Group (SFRO-MI) headed by James Tevis. BNI-MI and SFRO-MI performed similar functions, and John Shaeffer,³ a veteran Bechtel employee who was several months older than Guz, had overhead reporting duties for SFRO-MI that were similar to Guz's job within BNI-MI.

Johnstone soon became unhappy with the size, cost, and performance of BNMI. In April 1992, he advised Dewey, Goldstein, and Guz that BNI-MI's work could be done by three people. A May 1992 memo from Dewey to Goldstein warned that Dewey and Johnstone had agreed BNI-MI's 1992 overhead budget of $365,000 was a "maximum not to be...