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Years of service and a spotless record do not an employment contract make, the California Supreme Court held Thursday. In handing management a win in one of the most anticipated employment decisions of the year, the court also made it tougher for plaintiffs to get past summary judgment on an age discrimination claim. In Guz v. Bechtel National Inc., 00 C.D.O.S. 8230, Justice Marvin Baxter ruled for a 6-1 court that an express at-will employment provision could not be trumped by the implied covenant of good faith and fair dealing. “While the implied covenant requires mutual fairness in applying a contract’s actual terms, it cannot substantively alter those terms,” Baxter wrote. He added: “The mere existence of an employment relationship affords no expectation, protected by law, that employment will continue, or will end only on certain conditions, unless the parties have actually adopted such terms.” The ruling means that John Guz, who worked at Bechtel for 22 years before losing his job to what Bechtel characterized as a reduction in force, did not have an implied agreement only to be discharged for good cause. However, the court remanded the case to the First District Court of Appeal on the issue of whether Bechtel followed its own written “progressive discipline” policy in terminating Guz. As for Guz’s age discrimination claim, the court applied the U.S. Supreme Court’s reasoning last year in Reeves v. Sanderson Plumbing Products, 120 S. Ct. 2097, to California’s Fair Employment and Housing Act in holding that Guz failed to present sufficient evidence to raise a triable issue of fact. “As Reeves indicated,” Baxter wrote, “summary judgment for the employer may . . . be appropriate where, given the strength of the employer’s showing of innocent reasons, any countervailing circumstantial evidence of discriminatory motive is too weak to raise a rational inference that discrimination occurred.” That sparked the only dissent of the opinion. Justice Joyce Kennard disagreed with the majority’s reasoning and said because Guz was over 40 when he was fired, had good job performance and was replaced by younger workers, the evidence gives rise to a presumption of age discrimination. Bechtel’s attorney Paul Cane Jr. of Paul, Hastings, Janofsky & Walker was not available for comment, but the two-pronged opinion was heralded as a victory by employment defense lawyers like Jeffrey Wohl of Orrick, Herrington & Sutcliffe. Wohl, who wasn’t involved in the case, called Baxter’s opinion a “very powerful decision” and a big win for California’s employers. He said not only is it the first time the court has decided implied-contract law as it applies to a reduction-in-force scenario, but now age discrimination claims are subject to summary judgment just like any other case. On the plaintiff’s side, William Quackenbush downplayed the significance of the implied-contract issue, saying it will do little to change the current law under the court’s 1988 decision in Foley v. Interactive Data Corp., 47 Cal. 3d 654 — an opinion that considers a range of factors when defining at-will employment and implied contract law. Quackenbush, a San Mateo employment lawyer and co-counsel for Guz, said the real setback for plaintiffs is the discrimination issue. “It’s harder now if you don’t have concrete evidence of discrimination,” he said. “The bottom line is you need a little bit more than what Mr. Guz had.” Guz, who was 49 at the time, sued Bechtel in 1994 after the San Francisco construction giant — citing a downturn — terminated him after two decades of employment. San Francisco Superior Court Judge William Cahill granted summary judgment in favor of Bechtel on the grounds that Guz was an at-will employee and had failed to introduce any evidence that he was ever told he would have permanent employment or that he would be retained as long as he was doing a good job. But a divided First District Court of Appeal panel disagreed and said Guz’s longevity, promotions, raises and favorable performance reviews, together with Bechtel’s written progressive discipline policy, raised a triable issue that Guz had an implied contract to be dismissed only for good cause.

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