CACI 2404 Breach of Employment Contract—Unspecified Term—Good Cause Defined

California Civil Jury Instructions CACI

2404 Breach of Employment Contract—Unspecified Term—“Good Cause” Defined

Good cause exists when an employer’s decision to discharge an employee is made in good faith and based on a fair and honest reason. An employer has substantial but not unlimited discretion regarding personnel decisions[, particularly with respect to an employee in a sensitive or confidential managerial position]. However, good cause does not exist if the employer’s reasons for the discharge are trivial, arbitrary, inconsistent with usual practices, or unrelated to business needs or goals, or if the stated reasons conceal the employer’s true reasons.

In deciding whether [name of defendant] had good cause to discharge [name of plaintiff], you must balance [name of defendant]’s interest in operating the business efficiently and profitably against the interest of [name of plaintiff] in maintaining employment.

Directions for Use

This instruction may not be appropriate in the context of an implied employment contract where the parties have agreed to a particular meaning of “good cause” (e.g., a written employment agreement specifically defining “good cause” for discharge). If so, the instruction should be modified accordingly.

Include the bracketed language in the opening paragraph if the defense alleges that the plaintiff was in a sensitive or confidential managerial position.

When the reason given for the discharge is misconduct, and there is a factual dispute whether the misconduct occurred, then the court should give CACI No. 2405, Breach of Implied Employment Contract—Unspecified Term—“Good Cause” Defined—Misconduct, instead of this instruction. (See Cotran v. Rollins Hudig Hall International, Inc. (1998) 17 Cal.4th 93, 107 [69 Cal.Rptr.2d 900, 948 P.2d 412].)

Sources and Authority

“Three factual determinations are relevant to the question of employer liability: (1) did the employer act with good faith in making the decision to terminate; (2) did the decision follow an investigation that was appropriate under the circumstances; and (3) did the employer have reasonable grounds for believing the employee had engaged in the misconduct.” (Jameson v. Pacific Gas & Electric Co. (2017) 16 Cal.App.5th 901, 910 [225 Cal.Rptr.3d 171].)

“ ‘Good cause’ in the context of implied employment contracts is defined as: ‘fair and honest reasons, regulated by good faith on the part of the employer, that are not trivial, arbitrary or capricious, unrelated to business needs or goals, or pretextual.’ ” (Serri v. Santa Clara University (2014) 226 Cal.App.4th 830, 872 [172 Cal.Rptr.3d 732], internal citations omitted.)

“It is the employer’s honest belief in the stated reasons for firing an employee and not the objective truth or falsity of the underlying facts that is at issue … .” (Jamesonsupra, 16 Cal.App.5th at p. 911.)

“The term is relative. Whether good cause exists is dependent upon the particular circumstances of each case. In deciding whether good cause exists, there must be a balance between the employer’s interest in operating its business efficiently and profitably and the employee’s interest in continued employment. Care must be exercised so as not to interfere with the employer’s legitimate exercise of managerial discretion. … Where there is a contract to terminate only for good cause, the employer has no right to terminate for an arbitrary or unreasonable decision.” (Walker v. Blue Cross of California (1992) 4 Cal.App.4th 985, 994 [6 Cal.Rptr.2d 184], internal citations omitted, abrogated on another ground in Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 351 [100 Cal.Rptr.2d 352, 8 P.3d 1089].)

“ ‘Cotran did not delineate the earmarks of an appropriate investigation but noted that investigative fairness contemplates listening to both sides and providing employees a fair opportunity to present their position and to correct or contradict relevant statements prejudicial to their case, without the procedural formalities of a trial.’ [Citation] [¶] … Although the elements of the Cotran standard are triable to the jury, ‘if the facts are undisputed or admit of only one conclusion, then summary judgment may be entered … .’ ” (Jamesonsupra, 16 Cal.App.5th at p. 910.)

“[W]here, as here, the employee occupies a sensitive managerial or confidential position, the employer must of necessity be allowed substantial scope for the exercise of subjective judgment.” (Pugh v. See’s Candies, Inc. (Pugh I) (1981) 116 Cal.App.3d 311, 330 [171 Cal.Rptr. 917], disapproved on other grounds in Guz, supra, 24 Cal.4th at pp. 350–351.)

“[G]ood cause” in [the context of wrongful termination based on an implied contract] “is quite different from the standard applicable in determining the propriety of an employee’s termination under a contract for a specified term.” (Pugh, supra, 116 Cal.App.3d at p. 330.)

“We have held that appellant has demonstrated a prima facie case of wrongful termination in violation of his contract of employment. The burden of coming forward with evidence as to the reason for appellant’s termination now shifts to the employer. Appellant may attack the employer’s offered explanation, either on the ground that it is pretextual (and that the real reason is one prohibited by contract or public policy, or on the ground that it is insufficient to meet the employer’s obligations under contract or applicable legal principles. Appellant bears, however, the ultimate burden of proving that he was terminated wrongfully.” (Pugh, supra, 116 Cal.App.3d at pp. 329–330, internal citation omitted.)

Secondary Sources

3 Witkin, Summary of California Law (11th ed. 2017) Agency and Employment, §§ 219–221, 244
Chin et al., California Practice Guide: Employment Litigation, Ch.4-C, “Good Cause” for Termination, ¶¶ 4:270–4:273, 4:300 (The Rutter Group)
1 Wrongful Employment Termination Practice (Cont.Ed.Bar 2d ed.) Contract Actions, §§ 8.22–8.25
4 Wilcox, California Employment Law, Ch. 60, Liability for Wrongful Termination and Discipline, § 60.09[2] (Matthew Bender)
21 California Forms of Pleading and Practice, Ch. 249, Employment Law: Termination and Discipline, §§ 249.21[14][c], 249.63 (Matthew Bender)
10 California Points and Authorities, Ch. 100, Employer and Employee: Wrongful Termination and Discipline, §§ 100.22, 100.27, 100.29, 100.34 (Matthew Bender)
California Civil Practice: Employment Litigation, § 6:19 (Thomson Reuters)