102 | 2024 Cal-Peculiarities ©2024 Seyfarth Shaw LLP www.seyfarth.com Actions short of termination. The implied-contract action, like the tort claim for breach of public policy, extends to “wrongful demotion.” The California Supreme Court has recognized an enforceable promise not to be demoted without good cause.212 Procedural violations. The theory of implied contract may also challenge an employer’s failure to follow promised pre-termination procedures. The California Supreme Court has held that an employee might be able to recover on the basis that he would not have been dismissed in a reduction in force had the employer followed its own RIF procedures.213 5.5.2 Standard for “good cause” Balancing test. The standard of “good cause” for dismissal or demotion formally permits the employer to rely on any legitimate, nontrivial reason for dismissal. Here again, though, the latitude that the law appears to give to employers may be more nominal than real. A standard California jury instruction permits juries to apply the “good cause” standard in a discretionary fashion, balancing the employee’s interest in continued employment against the employer’s interest in operating the business efficiently and profitably.214 (Which way do you suppose the balance tips when the scale is administered by a jury of the plaintiff’s peers?) “Good cause” in cases of misconduct. In cases of suspected misconduct, an employer may have good cause for dismissal even if the employer’s belief in the existence of misconduct turns out to be factually mistaken. But a California employer that relies on a factually mistaken ground for dismissal must show that it conducted an “appropriate investigation,” which typically must include private interviews of witnesses, adequate documentation, and an opportunity for the accused to address the allegations.215 The investigation need not be perfect, but should be “appropriate” in light of all of the existing circumstances.216 Assuming the requisite level of propriety and fairness, courts will be hesitant to interfere with an employer’s legitimate exercise of managerial discretion in determining that an employee’s conduct constituted good cause for termination.217 5.6 Claims for Breach of Implied Covenant of Good Faith and Fair Dealing Under California law, each employment contract necessarily implies a covenant of good faith and fair dealing. An employer breaches the covenant by any action, taken in bad faith, that deprives an employee of the benefit of the express terms of the contract. An employer might breach the implied covenant even where there is no breach of an express contract, such as where an employer dismisses a salesperson to avoid paying a commission on a sale that the salesperson has already completed,218 or misleads an employee into taking a job in reliance on a reasonable assumption that he would have a chance to perform his job to the good faith satisfaction of the employer, and revokes the offer before the new hire begins work.219 The implied covenant of good faith and fair dealing does not impose substantive terms beyond those to which the parties actually agreed, and thus cannot transform an at-will employment contract into a contract terminable only for good cause. To the extent that a plaintiff claims a breach of the implied covenant simply on the basis that she was fired without good cause, the claim lacks merit.220 5.7 Limited Effectiveness of Common Defenses and Procedural Devices 5.7.1 Workers’ compensation preemption In many states, the workers’ compensation act generally provides the exclusive remedy for a work-related injury, and thus preempts claims based on that injury. One California exception to that general rule is that an employee can pursue a FEHA claim for discrimination, harassment, or retaliation without regard to workers’ compensation exclusivity.221 California has gone a step further, to permit employees to pursue tort claims for intentional and even
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