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With Justice Kathryn Mickle Werdegar sidelined, a split California Supreme Court ruled Thursday that a guarantee of job security can be rescinded even if the specific condition needed to terminate the contract is not met. By a 4-3 vote, a majority led by Justice Ming Chin said Pacific Bell could terminate an established employment policy as long as the company made the change after a reasonable time, on reasonable notice, and without interfering with employees’ vested benefits. Employment lawyers say if Werdegar — who is often sympathetic to workers in employment cases — hadn’t recused herself for undisclosed reasons, the decision may well have gone the other way. Chief Justice Ronald George suggested the same thing in a blistering — and rare — dissent that was joined by Justices Stanley Mosk and Joyce Kennard, the two more liberal justices. “It is particularly unfortunate that the majority reaches out to address a broad issue that is not presented by this case, when the court is so closely divided and lacks the participation of all its permanent members,” George wrote, after describing the majority’s result as “patently unfair” and “unconscionable.” Santa Clara University School of Law Professor Gerald Uelmen, who carefully tracks the justices’ voting patterns, said it is troubling when the outcome of a case is determined by a judge sitting by assignment. “The situation does indicate the extent to which the appointment of justices to sit in can and does affect the outcome,” Uelmen said. Casting the decisive vote in Werdegar’s place in Asmus v. Pacific Bell, 00 C.D.O.S. 4247, was 4th District Court of Appeal Justice Judith Haller. Justices Marvin Baxter and Janice Brown also joined Chin’s majority opinion. “The general rule,” Chin wrote, “is that once the promiser determines after a reasonable time that it will terminate or modify the contract, and provides employees with reasonable notice of the change, additional consideration is not required.” George said the majority’s ruling was completely inconsistent with the contract’s intent and said it couldn’t be cancelled unilaterally because it was a policy of definite duration. “Not only is such a result entirely inconsistent with fundamental tenets of contract law,” George wrote, “but it also condones and encourages manipulative, oppressive and unfair treatment of employees.” San Mateo employment lawyer William Quackenbush called the case significant because for the first time the court said that a company can be held to its promises of job security — although companies are also now free to rescind those polices once the conditions laid out by Chin are met. Quackenbush also said that if Werdegar had voted, it’s likely that she would have come down on George’s side. In 1986, Pacific Bell adopted a management employee security policy for managers who met the company’s business expectations. Pac Bell told its workers: “This policy will be maintained so long as there is no change that will materially alter Pacific Bell’s business plan achievement.” Citing economic changes and the need for greater flexibility, Pac Bell cancelled the job security policy in 1992, explaining in a memo that doing so would allow it to compete more effectively in the marketplace. Sixty former managers later sued Pac Bell and parent company Pacific Telesis Group in federal court seeking injunctive relief as well as damages for breach of contract, breach of fiduciary duty, fraud and Employee Retirement Income Security Act violations. A federal judge concluded that Pac Bell could not terminate its MESP unless it could demonstrate a change that would materially alter the company’s business plan. Because no California case has considered whether an employer can modify or cancel a unilaterally implemented employment policy, the 9th U.S. Circuit Court of Appeals asked the California Supreme Court to decide the matter. Chin’s opinion said that by continuing on as employees, the managers had accepted the terms of the new contract. George couldn’t have agreed less. “The majority endorses a patently unfair, indeed unconscionable, result — permitting an employer that made a promise of continuing job security to its employees in order to retain their services during a period of good job prospects, to repudiate that promise with impunity several years later when the employer determined that it was no longer in its interest to honor its earlier commitment,” George wrote. But Nancy Abell, who argued the case on behalf of Pacific Bell, said “the court is explicitly telling employers that they recognize that business conditions change.” Had the court gone the other way, the Paul, Hastings, Janofsky & Walker partner said, “employers would be hesitant to issue [beneficial workplace] policies.”

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