47 Cal. 3d 654, 254 Cal. Rptr. 211, 765 P.2d 373
Interactive Data Corporation hired John Foley in June 1976 as an assistant product manager at a starting salary of $18,500. As a condition of employment Foley signed a confidential and proprietary information agreement.1 The company's president told Foley that if he performed his job well he would have a long and rewarding employment with the firm.2
Over the next six years and nine months Foley received steady salary increases, promotions, bonuses, awards, and superior performance evaluations, rising to branch manager of the Los Angeles office with an annual salary of $56,164 plus a merit bonus.3 In January 1983 Foley learned that his new supervisor, Robert Kuhne, was under investigation by the FBI for embezzlement from his former employer, Bank of America.4 Foley reported the information to Vice President Richard Earnest because he was worried about working for Kuhne in a supervisory position.5
Earnest told Foley not to discuss rumors and to forget what he had heard.6 In early March 1983 Kuhne informed Foley that the company had decided to replace him for performance reasons and offered a transfer to another division.7 Foley was later told he could continue as branch manager if he agreed to a performance plan, but when Kuhne met with him the next day Kuhne instead gave Foley the choice of resigning or being fired.8 Foley was discharged on March 13, 1983.9
Foley filed suit against Interactive Data Corporation alleging three causes of action: tortious discharge in violation of public policy, breach of an implied-in-fact contract to terminate only for good cause, and tortious breach of the implied covenant of good faith and fair dealing.10 The superior court sustained the company's demurrer without leave to amend and dismissed the action.11 The Court of Appeal affirmed the judgment.12 The Supreme Court granted review.13
Whether an employee may state a cause of action for tortious discharge in violation of public policy when the policy is embodied in a statute that provides its own remedy?14
Under Tameny v. Atlantic Richfield Co., an employer may not discharge an at-will employee for a reason that violates fundamental public policy.15
No. The existence of a public policy is a question of law, and the policy must be firmly established, delineated in constitutional or statutory provisions, inure to the benefit of the public at large, and be well established at the time of discharge.16
Applying the rule to these facts, Foley reported the facts known to him about the FBI investigation to his employer's officers, but the policy he asserts is not firmly established in statutory provisions as required.17 The Penal Code section cited in the opinion is for child abuse, not this situation, and the policy does not inure to the benefit of the public at large in the manner required for a tort claim.18
The employee may not state a cause of action for tortious discharge in violation of public policy.19
Related opinions on this issue
Justice Kaufman concurred in the judgment on this issue. He wrote separately to emphasize that the tort of wrongful discharge in violation of public policy should be narrowly circumscribed.20 The policy must be one that is firmly established and affects a substantial public interest.21
It must be one that is articulated in constitutional or statutory provisions.22 It must be one that inures to the benefit of the public at large.23 Kaufman stated that the present case does not meet these criteria.24
Joined by Justice Broussard
Justice Mosk dissented on this issue. He would hold that the complaint states a cause of action for tortious discharge in violation of public policy.25 Mosk argued that the policy of encouraging employees to report suspected criminal activity to their employers is one that is firmly established in our law.26
It is a policy that inures to the benefit of the public at large.27 He believed this policy should be protected by tort remedies.28
Justice Broussard concurred in the holding that Foley has not stated a cause of action for discharge in violation of public policy.29 He agreed that the policy of encouraging employees to report suspected criminal activity to their employers is not one that is firmly established in law in a way that supports a tort remedy.30
Whether an action for breach of the implied covenant of good faith and fair dealing in an employment contract may sound in tort only if the employment relationship has the characteristics of a special relationship?31
In Seaman's Direct Buying Service, Inc. v. Standard Oil Co., the court recognized that a tort action for breach of the implied covenant of good faith and fair dealing is available in certain contexts depending on the nature of the relationship between the parties.32
No. The covenant is based on the assumption that the parties are in a relationship in which one party reposes a special trust and confidence in the other.33 Applying the rule to the facts of Foley v. Interactive Data Corp., the employment relationship between Foley and Interactive Data Corporation is not the type of special relationship that gives rise to a tort action.34 Foley was free to seek other employment, and the employer does not have a fiduciary duty to the employee.35 The relationship is not one in which the employee reposes a special trust and confidence in the employer in the same way that a patient is dependent upon a physician or a client upon an attorney.36
The action for breach of the implied covenant of good faith and fair dealing may not sound in tort.37
Related opinions on this issue
Justice Broussard dissented from the majority's conclusion on this issue. He would retain the well-recognized tort cause of action for bad faith discharge.38 Broussard argued that the analogy between the insurance cases, in which a tort cause of action has long been recognized, justifies tort recovery for bad faith discharge in the employment context.39
He maintained that the employment relationship is one in which the employee reposes a special trust and confidence in the employer, making tort remedies appropriate.
Justice Kaufman concurred in the judgment but dissented from part III dealing with breach of the implied duty of good faith and fair dealing.40 He would hold that such a breach in the context of employment termination may give rise to tort remedies.41 Kaufman argued that the duty of good faith and fair dealing is a duty imposed by law, not one arising from the terms of the contract itself, and that the employment relationship satisfies the criteria for tort remedies.42
Joined by Justice Broussard
Justice Mosk dissented on this issue. He disagreed with the majority's conclusion that the employee may not state a cause of action in tort for breach of the implied covenant of good faith and fair dealing in the employment context.43 Mosk argued that the employment relationship is one in which the employee reposes a special trust and confidence in the employer, and the implied covenant should be enforced by tort remedies as well as by contract remedies.44
Whether an employee may state a cause of action for breach of an implied-in-fact contract to terminate only for good cause without alleging that the employer acted in bad faith or without probable cause?45
In Pugh v. See's Candies, Inc., the Court of Appeal held that an employee may state a cause of action for breach of an implied-in-fact contract to terminate only for good cause by alleging facts which, if proved, would establish the existence of such a contract.46
Yes. Such a contract may be implied from the employer's conduct, including its personnel policies and practices, the employee's longevity of service, and the employer's assurances of continued employment.47 Applying the rule to the facts of Foley v. Interactive Data Corp., Foley has alleged that he was told by the company's president that if he performed his job well, he would have a long and rewarding employment with the firm.48 He has alleged that he was promoted twice and received commendations for his performance.49
He has alleged that the company had a policy of not terminating employees without good cause.50 These allegations are sufficient to state a cause of action for breach of an implied-in-fact contract to terminate only for good cause.51 The employee need not allege bad faith or lack of probable cause to state the claim.52
The employee may state a cause of action for breach of an implied-in-fact contract to terminate only for good cause without alleging that the employer acted in bad faith or without probable cause.53
Related opinions on this issue
Justice Broussard concurred in part II of the majority opinion, which upholds plaintiff's cause of action for breach of contract.54 He agreed that the allegations concerning the employer's assurances, the employee's length of service, and the employer's policies are sufficient to survive demurrer.5556 Broussard noted that whether the employer had good cause to terminate is a question for the trier of fact.57
Justice Kaufman concurred in the judgment and in the opinion of the court on this issue. He agreed that the complaint adequately alleges the existence of an implied-in-fact contract to terminate only for good cause.58 The allegations concerning the employer's assurances, the employee's length of service, and the employer's policies are sufficient to survive demurrer.
Kaufman stated that whether the employer had good cause to terminate is a question for the trier of fact.59
Justice Mosk concurred with the majority on this portion of the opinion. He agreed that an employee may state a cause of action for breach of an implied-in-fact contract to terminate only for good cause.60