CACI 2421 Breach of Employment Contract—Specified Term—Good-Cause Defense (Lab. Code, § 2924)

New September 2003; Revised June 2012

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This instruction sets forth the statutory grounds under which an employer may terminate an employment contract for a specified term. (See Lab. Code, § 2924.) It should be given when the employee alleges wrongful discharge in breach of the contract and the employer defends by asserting plaintiff was justifiably discharged.

This instruction may not be appropriate if the parties have agreed to a particular meaning of “good cause” (e.g., a written employment agreement specifically defining “good cause” for discharge). (See Uecker & Assocs. v. Lei (In re San Jose Med. Mgmt.) (B.A.P. 9th Cir. 2007) 2007 Bankr. LEXIS 4829.) If so, the instruction should be modified to set forth the contractual grounds for good cause. In the absence of grounds for termination in the contract, the employer is limited to those set forth in the statute. (See Khajavi v. Feather River Anesthesia Medical Group (2000) 84 Cal.App.4th 32, 57 [100 Cal.Rptr.2d 627].)

The third option may not be asserted if the plaintiff has a statutory right to be absent from work (for example, for family or medical leave or to accommodate a disability) throughout the entire period of incapacity.

•At-Will Employment. Labor Code section 2922.

•Termination of Employment for Specified Term. Labor Code section 2924.

•“[L]abor Code section 2924 has traditionally been interpreted to ‘inhibit[] the termination of employment for a specified term except in case of a wilful breach of duty, of habitual neglect of, or continued incapacity to perform, a duty.’ ” (Khajavi v. Feather River Anesthesia Medical Group (2000) 84 Cal.App.4th 32, 57 [100 Cal.Rptr.2d 627], internal citations omitted.)

•“Unlike a wrongful discharge based on an implied-in-fact contract, an employee who has a contract for a specified term may not be terminated prior to the term’s expiration based on an honest but mistaken belief that the employee breached the contract: Such a right would treat a contract with a specified term no better than an implied contract that has no term; such a right would dilute the enforceability of the contract’s specified term because an employee who had properly performed his or her contract could still be terminated before the term’s end; and such a right would run afoul of the plain language of Labor Code section 2924, which allows termination of an employment for a specified term only ‘in case of any willful breach of duty … habitual neglect of … duty or continued incapacity to perform it.’ Termination of employment for a specified term, before the end of the term, based solely on the mistaken belief of a breach, cannot be reconciled with either the governing statute’s text or settled principles of contract law.” (Khajavi, supra, 84 Cal.App.4th at pp. 38–39.)

•Good 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.’ ” (Khajavi, supra, 84 Cal.App.4th at p. 58, internal citations omitted.)

•“An employer is justified in discharging his employee, when the latter fails to perform his duty, even though injury does not result to the employer as a result of the employee’s failure to do his duty.” (Bank of America National Trust & Savings Ass’n v. Republic Productions, Inc. (1941) 44 Cal.App.2d 651, 654 [112 P.2d 972], internal citation omitted.)

•“To terminate an employment without the expiration of its contractual term ‘there must be good cause.’ The grounds for terminating such an employment are stated in Labor Code section 2924. … It is therefore not every deviation of the employee from the standard of performance sought by his employer that will justify a discharge. There must be some ‘wilful act or wilful misconduct …’ when the employee uses his best efforts to serve the interests of his employer.” (Holtzendorff v. Housing Authority of the City of Los Angeles (1967) 250 Cal.App.2d 596, 610 [58 Cal.Rptr. 886], internal citation omitted.)

•“ ‘Willful’ disobedience of a specific, peremptory instruction of the master, if the instruction be reasonable and consistent with the contract, is a breach of duty—a breach of the contract of service; and, like any other breach of the contract, of itself entitles the master to renounce the contract of employment.” (May v. New York Motion Picture Corp. (1920) 45 Cal.App. 396, 403 [187 P. 785].)

•“An employment agreement that specifies the length of employment (e.g., two years) limits the employer’s right to discharge the employee within that period. Unless the agreement provides otherwise (e.g., by reserving the right to discharge for cause), the employer may terminate employment for a specified term only for [the grounds specified in Labor Code section 2924].” (Chin et al., California Practice Guide: Employment Litigation, Ch. 4-A, Employment Presumed At Will, ¶ 4:47 (The Rutter Group)