Free Appendix - District Court of California - California

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11 Cal. App. 4th 1657, *; 15 Cal. Rptr. 2d 173, **; 1992 Cal. App. LEXIS 1509, ***; 93 Cal. Daily Op. Service 108
"For every wrong there is a remedy." ( Civ. Code, §

3523.) "Where one of two innocent persons must suffer
by the act of a third, he, by whose negligence it happened, must be the sufferer." (Civ. Code, § 3543.) In this

3 Because we conclude that FNS can state an
unjust enrchment claim, we need not consider

FNS's argument regarding the trial cour's statement of decision. In addition, we find no abuse

case, FNS, through no fault of its own, lost its security in
Sunrise's propert. (* 1671) Sunrise had no legitimate

claim to ths previously secured portion of the propert, and arguably knew or should have known it did not own all of the propert. Nonetheless, it sold the propert and
pocketed all of

of discretion in the trial court's decision to deny
Sunrise attorney's fees. Finally, given the result

we reach, Sumise is obviously not entitled to attorney's fees on appeaL.

the proceeds. Given these circumstances,

ths may prove to be a classic case of

unjust enrichment.

(***25) Cottle, Actig P. J., and Premo, J., concured.

The judgment is reversed. Costs on appeal to FNS. 3

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EXHIBIT 15

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1 of 2 DOCUMENTS

DANIEL D. FOLEY, Plaintiff and Appellant, v. INTERACTIVE DATA CORPORATION, Defendant and Respondent
L.A. No. 32148

Supreme Court of California
47 CaI. 3d 654; 765 P.2d 373; 254 CaI. Rptr. 211; 1988 CaI. LEXIS 269; 3 I.E.R. Cas. (BNA) 1729; 110 Lab. Cas. (CCH) P55,978

December 29,1988

PRIOR HISTORY: Superior Cour of Los Angeles
County, No. C488289, Ricardo A. Torres, Judge.

The Supreme Cour affumed that porton of the
Cour of Appeal's judgment affumng the dismissal of the employee's causes of action alleging a discharge in
breach of public policy and a tortous breach of the im-

DISPOSITION: Accordingly, that porton of the
judgment of the Cour of Appeal affumng the dismissal
of plaintiffs causes of action alleging a discharge in
breach of public policy and a tortous breach of the im-

plied covenant of good faith and fair dealing. It reversed

that porton of the judgment affumng the dismissal of
the cause of action alleging an implied-in-fact contract

plied covenant of good faith and fair dealing is affumed. That porton of the judgment of the Cour of Appeal af-

not to discharge except for good cause and remanded.
The cour held that there is no substantial public policy
prohibitig an employer from discharging an employee
for reportg information relevant to his employer's in-

fumg the dismissal of the cause of action alleging an
implied-in-fact contract not to discharge except for good
cause is reversed, and the case is remanded for action
consistent with the views expressed herein. 43

terest, and thus the Cour of Appeal properly upheld the trial cour's ruling sustaining the employer's demurer
without leave to amend to the employee's cause of action
for tortous discharge in contravention of public policy.

43 We do not reach the issue of the retroactive or prospective application of our opinon. The
partes have not briefed or argued the question

The cour also held that the employment agreement did
not fall withn the statute of frauds provision of Civ.

and we wil deal with the matter in a later case
when we have the benefit of the views of counseL.

Code, § 1624, subd. (a) (agreements not to be performed

within one year), even if considered to be modified by a
promise not to dismiss the employee except for good

SUMMARY:

cause, and thus the fact that it was an implied or oral
agreement was not fatal to its enforcement. Furer, the

CALIFORNIA OFFICIAL REPORTS SUMMARY
An employee who had informed his employer that his supervisor was under investigation by the Federal Bureau of Investigation for embezzlement was termnated and brought an action against the employer for wrongful discharge, alleging a tort cause of action based

cour held, an employee's promise to render services, or

his actual rendition of services over time, may support an
employer's promise both to pay a partcular wage and to

on discharge in violation of public policy, a contract
cause of action for breach of an implied-in-fact promise

refrain from arbitrary dismissal, and thus the employee had pleaded facts sufficient for the jury to find an implied-in-fact contract limiting the employer's right to discharge him arbitrarily, notwithstanding the absence of evidence of independent consideration for an express
contractual dismissal provision.

to discharge for good cause only, and a tort cause of action for breach of the implied covenant of good faith and fair dealing. The trial cour sustained a demurer without
leave to amend and entered judgment for the employer.

Finally, the cour held, the trial court properly sustained tÌÌe employer's demurer to the employee's cause

(Superior Cour of Los Angeles County, No. C488289, Ricardo A. Torres, Judge.) The Cour of Appeal, Second Dist., Div. Two, No. B009001, affumed.

of action for tortous breach of the implied covenant of good faith and fair dealing, since the employment relationship is not suffciently similar to that of insurer and
insured to warrant judicial extension of tort remedies.

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The court held that contract remedies offer the most appropriate method for expanding available relief for

wrongful termnations. (Opinon by Lucas, C.J., with Panelli, Arguelles and Eagleson, Jl, concuring. Separate concuring and dissenting opinons by Broussard and Kaufman, JJ. Separate dissenting opinon by Mosk, l)

ployment -- Actions for Wrongful Discharge -- Termination in Contravention of Public Policy -- Requiring Employee to Participate in Unlawful Conduct --

(4) Employer and Employee § 9 -- Contracts of Em-

Basis for Action. --If an employer and employee enter

into a contract in which the employee agrees to perform

an ilegal act, and either part breaches, the cours wil
HEADNOTES
not enforce the contract. However, where the employer requires the employee to perform an act in contravention

CALIFORNIA OFFICIAL REPORTS HEADNOTES

Classified to Californa Digest of Offcial Reports, 3d
Series

of public policy and then termnates the employee for failure to do so, or penalizes the employee for acting in
accordance with law, the natue of the employee's relationship with the employer, whether at wil or contrac-

tual, is essentially irelevant. What is vindicated through

(1) Appellate Review § 128 -- Scope and Extent -Rulings on Demurrers. --Where an appeal arises from a judgment entered after the trial cour sustained the defendant's demurer, the reviewing cour must assume the
trth of all properly pleaded material allegations of the

the employee's tort cause of action is not the term or
promises arising out of the partcular employment relationship involved, but rather the public interest in not

permttng employers to impose as a condition of employment a requirement that an employee act in a manner contrary to fudamental public policy.

complaint in evaluating the validity of the decision below.

ployment -- Duration and Termination -- Presumption as to At-wil Status. --The presumption of Lab.

(2) Employer and Employee § 8 -- Contracts of Em-

ployment -- Actions for Wrongful Discharge -- Terwhere, in an action for wrongful discharge, a statute or constitutional provision is asserted, the cour must stil
inquire whether the discharge is against public policy and affects a duty that inures to the benefit of the public at large rather than to a partcular employer or employee.

(5) Employer and Employee § 9 -- Contracts of Em-

mination in Contravention of Public Policy. --Even

Code, § 2922 (employment having no specified term

may be termated at wil of either part), may be superseded by a contract, express or implied, limiting the em-

ployer's right to discharge the employee. Absent any contract, however, the employment is "at will" and the employee can be fired with or without good cause. But
the employer's right to discharge an "at wil" employee is

(6a) (6b) Employer and Employee § 9.2 -- Contracts

still subject to limits imposed by public policy, since
otherwise the threat of discharge could be used to coerce employees into commtting crimes, concealing wrongdoing, or taking other action harml to the public weaL.

of Employment -- Actions for Wrongful Discharge -Pleading -- Termination in Contravention of Public Policy -- Employee's Reporting of Information Rele-

vant to Employer's Interest. --In an action for a
wrongful discharge of an at-wil employee who was discharged after he had informed his employer that his supervisor was under investigation by the Federal Bureau of Investigation for embezzlement, the trial cour properly sustained the employer's demurer without leave to amend to the employee's cause of action for tortious dis-

ployment -- Actions for Wrongful Discharge -- Tering Employee to Participate in Unlawful Conduct. -A tort action for wrongful discharge may lie if the employer conditions employment upon required participa-

(3) Employer and Employee § 9 -- Contracts of Em-

mination in Contravention of Public Policy -- Requir-

tion in unlawful conduct by the employee. The cause of action is not dependent on an express or implied promise in the employment contract, but rather reflects a duty
imposed by law upon all employers in order to implement the fudamental public policies embodied in the

charge in contravention of public policy. There is no substantial public policy prohibiting an employer from
discharging an employee for reportg informtion rele-

vant to his employer's interest, whether or not the employee's duty of ordinary care imposed under Lab. Code,
§ 2854, subsumes a separate duty to make such reports.

state's penal statutes. Furher, the existence of the contractual relationship does not bar an injured part from
seeking relief through tort remedies when the employer's

discharge of an employee contravenes the dictates of
public policy.

(7) Appellate Review § 128 -Scope and Extent -- Rulings on Demurrers. --In reviewing a judgment following the sustaining of a demurer without leave to amend,
the cour must accept the trth of the matters pleaded and

take into account the possibility of amendment consistent with that pleading.

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47 Cal. 3d 654, *; 765 P.2d 373, **; 254 Cal. Rptr. 211, ***; 1988 CaL. LEXIS 269
(8a) (8b) Frauds, Statute of § 3 -- Agreements Not to

Be Performed Within a Year -- Possibilty of Performance Within a Year -- Prospective Analysis of
Applicabilty of Statute. --Civ. Code, § 1624, subd. (a)

plied or oral agreement was not fatal to its enforcement.
(Disapproving Newfield v. Insurance Co. of the West

(1984) 156 CaL.App.3d 440 (203 CaLRptr. 9) to the ex-

writing), applies only to those contracts that by their term cannot possibly be performed within one year.
Furher, the applicability of the statute of frauds must be
analyzed prospectively, based on the intentions of the parties and the term of the agreement at the time it is

(agreement not to be performed within a year must be in

tent that it is inconsistent with the holding that an implied or oral employment contract that may not be term-

nated except for good cause is capable of performnce within one year and thus is not subject to the statute of
frauds.)

made. To fall withi the words of the provision, therefore, the agreement must be one of which it can trly be said at the very moment it is made, ths agreement is not
to be performed withn one year.
(9) Employer and Employee § 5 -- Contracts of Em-

Employment -- Actions for Wrongful Discharge --

(13) Employer and Employee § 9.2 -- Contracts of

Pleading -- Breach of Implied Contract. --In an action for wrongful discharge, plaintiffs cause of action was one for breach of an implied-in-fact contract rather than
for breach of an oral contract as alleged in the complaint,

ployment -- Mutual Duties and Rights -- Termination. --A contract that limits the power of the employer with respect to the reasons for termnation is no less enforceable because it places no equivalent limits upon the

where he did not allege explicit words by which the parties agreed that he would not be termated without good
cause, but instead alleged that a course of conduct, in-

cluding various oral representations, created a reasonable
expectation to that effect.

power of the employee to quit his employment. If the requirement of consideration is met, there is no addi-

tional requirement of equivalence in the values exchanged, or mutuality of obligation.

(14a) (14b) (14c) (14d) (14e) (14f) Employer and Employee § 9.2 -- Contracts of Employment -- Actions for Wrongful Discharge -- Pleading -- Breach of Implied Contract -- Independent Consideration for
Dismissal Provision. --An at-will employee's promise

Performed Within a Year - Possibilty of Performance Within a Year. --If a condition termnating a contract may occur withi one year of its making, then the contract is performble within a year and does not fall
within the scope of the statute of frauds. This is tre even

(10) Frauds, Statute of § 3 -- Agreements Not to Be

to render services, or his actual rendition of services over
time, may support an employer's promise both to pay a

particular wage and to refrain from arbitrary dismissal. Thus, in an action for wrongful discharge, the employee
pleaded facts suffcient for a jur to find an implied-infact contract limiting the employer's right to discharge

though performnce of the contract may extend for
longer than one year if

the condition does not occur.

him arbitrarily, notwithstanding the absence of evidence of independent consideration for an express contractual
dismissal provision. The employee's length of employ-

(11) Statutes § 46 -- Construction -- Presumptions -Legislative Intent -- Previous Judicial Construction. -When the Legislatue enacts language that has received

defintive judicial constrction, it must be presumed that
the Legislatue was aware of the relevant judicial decisions and intended to adopt that constrction. This pre-

ment -- six years and nine months -- was suffcient time for conduct to occur on which a trier of fact could find
the existence of an implied contract. Furher, repeated

oral assurances of job security and consistent promo-

sumption gains fuher strength when it is clear that the
Legislatue was explicitly informed of the prior constrction.

tions, salary increases and bonuses during the employ-

ment term contributing to a reasonable expectation that discharge would not occur except for a good cause, were
circumstances that could be used to find an implied

agreement to that effect, as was the employee's signing

Performed Within a Year - Possibilty of Performance Within a Year -- Employment Contract. --An employment contract could have been performed within o,ne year of its making, even if considered to have been modified by a promise to discharge an at-wil employee
for cause only, since the employee could have termated

(12) Frauds, Statute of § 3 -- Agreements Not to Be

of a noncompetition agreement.

ployment -- Duration and Termination -- Dismissal
Provision -- Enforceabilty. --An employer and em-

(15) Employer and Employee § 8 --Contracts of Em-

his employment withi that period, or the employer
could have discharged the employee for cause. Thus the
contract did not fall within the statute of frauds (Civ.

ployee are free to agree to a contract termable at wil or subject to limtations. Their agreement wil be enforced
so long as it does not violate legal strictues external to

Code, § 1624, subd. (a)), and the fact that it was an im-

the contract, such as laws affecting unon membership and activity, prohibitions on indentued servitude, or the

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many other legal restrictions that place certain restraints on the employment arrangement.

(21a) (21b) (21c) (21d) Employer and Employee § 9 --

Contracts of Employment -- Actions for Wrongful

Discharge -- Breach of Implied Covenant of Good
(16) Contracts § 28 -- Construction and Interpretation -- Intention of Parties -- Implied Contracts. -Cours seek to enforce the actual understanding of the parties to a contract, and in so doing may inquire into the
Faith and Fair Dealing -- Tort Remedies. --The em-

parties' conduct to determne if it demonstrates an implied contract. It must be determned as a question of fact whether the parties acted in such a manner as to provide

ployment relationship is not suffciently similar to that of inurer and insured to warrant judicial extension of additional tort remedies, in view of the countervailing concerns about economic policy and stability, the judicial

the necessary foundation for an implied contract, and
evidence may be introduced to rebut the inerences and

separation of tort and contract law, and the numerous protections against improper termations already afforded employees. Thus, in an action for wrongful termnation of an at-wil employee who was discharged after he had informed his employer that his supervisor was
under investigation by the Federal Bureau of Investiga-

show that there is another explanation for the conduct.
(17) Contracts § 14 -- Consideration -- Single Consideration for Several Promises. --A single and undivided

consideration may be bargained for and given as the

agreed equivalent of one promise or of two promises or of many promises.

tion for embezzlement, the trial cour did not err in sustainng the employer's demurer without leave to amend to the employee's cause of action for tortious breach of the implied covenant of good faith and fair dealing. Tort remedies are not available for breach of the implied covenant in an employment contract; contract remedies
offer the most appropriate method for expanding available relief for wrongful termations. (Disapproving

ployment -- Determination of Existence and Content of Agreement. --In the employment context, factors
agreement, including the personnel policies or practices of the employer, the employee's longevity of service,
actions or communications by the employer reflecting

(18) Employer and Employee § 4 Contracts of Em-

Cleary v. American Airlines, Inc. (1980) 111 Cal.App.3d

apart from consideration and express term may be used to ascertain the existence and content of an employment

443 (168 Cal.Rptr. 722) and its progeny, to the extent
that they permt an employee's cause of action seeking

tort remedies for an employer's breach of the implied covenant of good faith and fair dealing.)

assurances of continued employment, and the practices
of

the industr in which the employee is engaged.

73; Am.Jur.2d, Master and Servant, § 62.)

(See Cal.Jur.3d (Rev), Employer and Employee, §

ployment -- Duration and Termination -- Dismissal
Provision -- Existence of Implied Agreement.

(19) Employer and Employee § 8 -- Contracts of Em-

(22) Damages § 15 -- Measure of Damages -- For
Breach of Contract. --The distinction between tort and contract is well grounded in common law, and divergent objectives underlie the remedies created in the two areas. Whereas contract actions are created to enforce the inten-

Oblique language wil not, standing alone, be suffcient to establish an implied agreement not to discharge an atwil employee except for good cause; instead, the totality

of the circumstances determnes the natue of the contract. Agreement may be shown by the acts and conduct of the parties, interpreted in the light of the subject matter and of surounding circumstances.

tions of the partes to the agreement, tort law is primarily designed to vindicate social policy. Cours traditionally have awarded damages for breach of contract to compensate the aggreved part rather than to punsh the breaching part.

Employment -- Actions for Wrongful Discharge -Pleading -- Breach of Employer's Termination Guidelines. --An allegation of breach of written "Termnation Guidelines" implying self-imposed limitations on the employer's power to discharge at will may be suffcient
to state a cause of action for breach of an employment contract.

(20) Employer and Employee § 9.2 -- Contracts of

plied Covenant of Good Faith and Fair Dealing. -ment. Because the covenant is a contract term however,

(23) Contracts § 44 -- Performance -- Breach -- Im-

Every contract imposes upon each part a duty of good

faith and fair dealing in its performnce and its enforcecompensation for its breach has almost always been limited to contract rather than tort remedies. As to the scope of the covenant, the precise natue and extent of the duty imposed by such an implied promise wil depend on the
contractual puroses.

(Right to discharge allegedly "at-wil" employee as
affected by employer's promulgation of employment

policies as to discharge, note, 33 A.L.R.4th 120.)

tions -- Damages -- Breach of Implied Covenant of Good Faith and Fair Dealing. --An exception to the

(24) Insurance Contracts and Coverage § 137 -- Ac-

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rule that only contract damages are available for breach of the implied covenant of good faith and fair dealing is
applicable in the context of insurance contracts, where,

for a variety of policy reasons, cours have held that
breach of the implied covenant wil provide the basis for an action in tort.

JUGES: Opinion by Lucas, C. J., with Panelli, Arguelles and Eagleson, JJ., concuring. Separate concurring and dissenting opinons by Broussard and Kaufmn,
JJ. Separate dissentig opinon by Mosk, J.

OPINION BY: LUCAS

ions of California Courts of Appeal -- Power of Supreme Court to Overrule. --Trial cours are bound by
the decisions of the Cour of AppeaL. But decisions of the

(25) Courts § 40.5 -- Doctrine of Stare Decisis -- Opin-

OPINION
Corporation (defendant) fired plaintiff Daniel D. Foley, an executive employee, he fied this action seeking compensatory and punitive damages for wrongful discharge. In his second amended complaint, plaintiff asserted three
distict theories: (1) a tort cause of action alleging a dis-

(*662) (**374) (***212) After Interactive Data

lower appellate cour are in no way binding upon the

state Supreme Cour, which is free at any time to overrule lower cour interpretations of questions of law and
reach a different conclusion.

(26) Contracts § 44 -- Performance -- Breach -- Implied Covenant of Good Faith and Fair Dealing -Purpose of Covenant. --An allegation of breach of the

implied covenant of good faith and fair dealing is an allegation of breach of an "ex contractu" obligation, namely one arising out of the contract itself. The covenant of good faith is read into contracts in order to protect the express covenants or promises of the contract,

not to protect some general public policy interest not
directly tied to the contract's puroses.

charge in violation of public policy ( Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167 (164 Cal.Rptr. 839, 610 P.2d 1330, 9 A.L.R.4th 314)), (2) a contract cause of action for breach of an implied-in-fact promise to discharge for good cause only (e.g., Pugh v. See's Candies, Inc. (1981) 116 Cal.App.3d 311 (171 Cal.Rptr. 917) (all references are to ths case rather than the 1988 posttial decision appearig at 203 Cal.App.3d 743)), and (3) a cause of action alleging a tortous breach of the implied covenant of good faith and fair dealing (e.g., Cleary v. American Airlines, Inc. (1980) 111 Cal.App.3d 443 (168

Cal.Rptr. 722)). The trial cour sustained a demurer
without leave to amend, and entered judgment for defendant.

Employment -- Actions for Wrongful Discharge -Damages -- Mitigation. --The wrongfully termnated employee must, in order to mitigate damages, make reasonable efforts to seek alternative employment.

(27) Employer and Employee § 10 -- Contracts of

The Cour of Appeal affumed on the grounds (1) plaintiff alleged no statutorily based breach of public
policy suffcient to state a cause of action pursuant to

COUNSEL: Gilbert & Sackmn, Gilbert, Cooke & Sackman, Steven J. Kaplan and Robert W. Gilbert for
Plaintiff and Appellant.

Lyne G. McGinns, Joseph Posner, Kenneth J. Sargoy,
Fred M. Blum, Sargoy & Blum, Paul Hoffman, Gary

Wiliams, Wylie A. Aitken, Victoria De Goff, Douglas de Vries, John Gardenal, John R. Hilsman, Ian Herzog, Peter Hinton, Harvey R. Levine, Leonard Sacks, Robert

Tameny; (2) plaintiffs claim for breach of the covenant to discharge only for good cause was barred by the statute of frauds; and (3) plaintiffs cause of action based on breach of the covenant of good faith and fair dealing failed because it did not allege necessary longevity of employment or express formal procedures for termnation of employees. We granted review to consider each of the Cour of Appeal's conclusions.
(*663) We will hold that the Cour of Appeal properly found that plaintiffs particular Tameny cause of ac-

Steinberg, John C. McCarthy and Cliff Palefsky as
Amici Curiae on behalf of Plaintiff and Appellant.

tion could not proceed; plaintiff failed to allege facts
showing a violation of a fundamental public policy. We

Proskauer, Rose, Goetz & Mendelsohn, Robert V.

wil also conclude, however, that plaintiff has sufficiently alleged a breach of an "oral" or "irplied-in-fact"
contract, and that the statute of frauds does not bar his

Kuenzel, Steven G. Drapkin, Jeffrey A. Bermn and
Harold M. Brody for Defendant and Respondent.

claim so that he may pursue his action in this regard.
Finally, we wil hold that the covenant of good faith and fair dealing applies to employment contracts and that breach of the covenant may give rise to contract but not
tort damages.
Facts

Latham & Watkins, Josel E. Krischer, Deanna P. George,
Michael J. Breing, Paul, Hastings, Janofsky & Walker,

Paul Grossman, Paul W. Crane, Jr, Mary Craig Calkns and Michele M. Dosoer as Amici Curiae on behalf of
Defendant and Respondent.

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(1) Because this appeal arose from a judgment entered after the trial cour sustained defendant's demurer,

"we must, under established (***213) principles, assume the trth of all properly pleaded material allega-

visor, Vice President Richard Earnest. During the previous year defendant had hired Robert Kuhne and subsequently named Kuhne to replace Earnest as plaintiffs immediate supervisor. Plaintiff learned that Kuhne was

tions of the complaint in evaluating the validity" of the
decision below. ( Tameny v. Atlantic Richfield Co., supra, 27 Ca1.d 167, 170; (**375) Alcorn v. Anbro Engineering, Inc. (1970) 2 CaL.3d 493, 496 (86 CaL.Rptr.

88,468 P.2d 216).

curently under investigation by the Federal Bureau of Investigation for embezzlement from his former employer, Bank of America. i Plaintiff reported what he knew about Kuhe to Earnest, because he was "worried about working for Kuhne and having him in a supervisory position. . ., in view of Kuhne's suspected criminal
conduct." Plaintiff asserted he "made ths disclosure in the interest and for the benefit of his employer," alleg-

According to the complaint, plaintiff is a former employee of defendant, a wholly owned subsidiary of

Chase Manhattan Bank that markets computer-based decision-support services. Defendant hired plaintiff in June 1976 as an assistant product manager at a startng
salary of $ 18,500. As a condition of employment defendant required plaintiff to sign a "Confidential and Pro-

edly because he believed that because defendant and its parent do business with the financial community on a confdential basis, the company would have a legitimate
interest in knowing about a high executive's alleged prior criminal conduct.

prietary Informtion Agreement" whereby he promised
not to engage in certain competition with defendant for

one year after the termnation of his employment for any
reason. The agreement also contained a "Disclosure and

1 In September 1983, after plaintiffs discharge, Kuhe pleaded guilty in federal cour to a felony
count of embezzlement.

Assignment of Informtion" provision that obliged plaintiff to disclose to defendant all computer-related informtion known to him, including any inovations, inventions

In response, Earnest allegedly told plaintiff not to
discuss "ruors" and to "forget what he heard" about

or developments pertainng to the computer field for a period of one year following his termation. Finally, the agreement imposed on plaintiff a contiuing obligation
to assign to defendant all rights to his computer-related

inventions or innovations for one year following termation. It did not state any limitation on the grounds for
which plaintiffs employment could be termnated.
Over the next six years and nie months, plaintiff
received a steady series of salary increases, promotions, bonuses, awards and superior performnce evaluations.

Kuhne's past. In early March, Kuhne informed plaintiff that defendant had decided to replace him for "performance reasons" and that he could transfer to a position in another division in Waltham, Massachusetts. Plaintiff was (***214) told that ifhe did not accept a transfer, he

might be demoted but not fired. One week later, in
Waltham, Earnest informed plaintiff he was not doing a
good job, and six days later, he notified plaintiff

he could

In 1979 defendant named him consultant manager of the year and in 1981 promoted him to branch manager of its

(**376) continue as branch manager if he "agreed to go on a 'performance plan.' Plaintiff asserts he agreed to consider such an arrangement." The next day, when Kuhne met with plaintiff, purortedly to present him with a

Los Angeles offce. His annual salary rose to $ 56,164
and he received an additional $ 6,762 merit bonus two

wrtten "performnce plan" proposal, Kuhe instead informed plaintiff he had the choice of resigning or being
fired. Kuhne offered neither a performnce plan nor an
option to transfer to another position. 2

days before his discharge in March 1983. He alleges defendant's offcers made repeated oral assurances of job security so long as his performance remained adequate.

(*664) Plaintiff also alleged that during his employment, defendant maintained wrtten "Termnation

Guidelines" that set forth express grounds for discharge and a mandatory seven-step pretermnation procedure.

Plaintiff understood that these guidelines applied not only to employees under plaintiffs supervision, but to
him as well. On the basis of these representations, plaintiff alleged that he reasonably believed defendant would not discharge him except for good cause, and therefore
he refrained from accepting or pursuing other job oppor-

2 Throughout its brief, defendant refers to a number of counterallegations. In particular, defendant alleges that plaintiffs tre motive was an "attempt to oust his supervisor" and that plaintiff rejected an "opportty to transfer laterally to a
new position at company headquarters" before his discharge. Since ths appeal arises on demurer, however, we must assume the trth of the allegations in the complaint, and so these alleged facts are not properly before us.

tuities.
The event that led to plaintiffs discharge was a private conversation in January 1983 with his former super-

(*665) Defendant demured to all three causes of action. After plaintiff fied two amended pleadings, the trial cour sustained defendant's demurer without leave to amend and dismissed all thee causes of action. The

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Cour of Appeal affrmed the dismissal as to all three
counts. We will explore each claim in tu.

workers' compensation claims or in violation of
state civil rights statutes, significantly circum-

scribe the at-wil doctrine. (See Mauk, Wrongful
i. Tortious Discharge in Contravention of

Public Policy

Discharge: The Erosion of ioa Years of Employer Privilege (1985) 21 Idaho 1. Rev. 201,

We tu first to plaintiffs cause of action alleging he was discharged in violation of public policy. Labor Code
section 2922 provides in relevant part, "An employment, having no specified term may be termnated at the will of either part on notice to the other. . . ." (2) This pre-

226-227, fns. 109-1 10 (hereafter Mauk).

Petermann v. International Brotherhood of Teamsters (1959) 174 CaL.App.2d 184 (344 P.2d 25), first

sumption may be superseded by a contract, express or
implied, limiting the employer's right to discharge the

stated the foregoing principle. There, (*666) the plaintiff, a unon business agent, alleged he was discharged
when he refused to testify falsely to a state legislative

employee. ( Strauss v. A. L. Randall Co. (1983) 144
CaL.App.3d 514,517 (194 CaL.Rptr. 520); Drzewiecki v.

commttee. The trial cour granted judgment on the
pleadings to defendant. The Cour of Appeal found the (***215) plaintiff was an employee-at-wil (see Lab.
Code, § 2922) but noted that "the right to discharge an employee under such a contract may be limited by statute

H & R Block, Inc. (1972) 24 Cal.App.3d 695, 703 (101
CaL.Rptr. 169); see also cases cited in part II(B) of ths

opinon, post, p. 680 et seq.) Absentany contract, how-

ever, the employment is "at wil," and the employee can be fired with or without good cause. J But the employer's right to discharge an "at will" employee is stil subject to

Cal.App.2d at p. 188.) (**377) Overrling the trial
cour, the Cour of Appeal declared: "It would be obnox-

(citations) or by considerations of public policy." (174

limits imposed by public policy, since otherwse the threat of discharge could be used to coerce employees
into commtting crimes, concealing wrongdoing, or taking other action harml to the public weaL. 4

ious to the interests of the state and contrary to public

policy and sound morality to allow an employer to discharge any employee, whether the employment be for a designated or unspecified duration, on the ground that the employee declined to commt perjur, an act specifically enjoined by statute." ( /d., at pp. 188-189.) 5

3 For a discussion of the origin of the employment-at-will doctrine, and its subsequent evolu-

tion through legislation and judicial decision, see generally Blades, Employment At Wil vs. Individual Freedom: On Limiting the Abusive Exercise of Employer Power (1967) 67 Colum. 1. Rev. 1404, 1416-1419; Blurosen, Settlement of Disputes Concerning the Exercise of Employer Disciplinary Power; United States Report (1964)
18 Rutgers 1. Rev. 428, 432-433; Comment, Em-

5 A number of Californa decisions have followed Petermann to bar discharge of at-wil employees in violation of state policies governng

labor-management relations. ( Montalvo v.
Zamora (1970) 7 CaL.App.3d 69 (86 CaL.Rptr.
401); Wetherton v. Growers Farm Labor Assn.

(1969) 275 Cal.App.2d 168 (79 Cal.Rptr. 543);

ployment-At-Wil -- Employers May Not Discharge At-Wil Employees For Reasons That Vio-

Glenn v. Clearman's Golden Cock Inn, Inc.

(1961) 192 CaL.App.2d 793 (13 CaL.Rptr. 769).)

late Public Policy (1986) Ariz. St. L.J. 161, 164167; Note, Protecting At Wil Employees Against
Wrongful Discharge: The Duty to Terminate

(3) Similarly, Tameny v. Atlantic Richfield Co.,
supra, 27 CaL.3d 167, 178, declared that a tort action for
wrongful discharge may lie if

the employer "(conditions)

Only in Good Faith (1980) 93 Harv. 1. Rev. 1816, 1824-1828 (hereafter Protecting At Wil
Employees). 4 Even where employment is at wil, numerous

employment upon required partcipation in unlawful
conduct by the employee." In Tameny, the plaintiff al-

federal and state statutes already impose express

limitations on the right of an employer to discharge at wil. Legislation, ranging from the Na-

leged he was fired for refusing to engage in price fixing in violation of the Cartght Act and the Sherman Antitrst Act. ( Id., at p. 170.) We held the tral cour erred in sustainig Atlantic Richfield's demurer to plaintiffs tort
action for wrongful discharge. Writing for the majority, Justice Tobriner concluded that "an employer's authority

tional Labor Relations Act (29 U.S.c. §
158(a)(1),(3),(4) (precluding discharge for union

over its employee does not include the right to demand

activity, protected concerted activity, fiing
charges and testifying under the act)) to title VII
of the Civil Rights Act of 1964 (42 U.S.C. §§

that the employee commt a criminal act to fuher its interests. . . . An employer engaging in such conduct
violates a basic duty imposed by law upon all employers,

2000e-2, 2000e-3(a) (prohibiting discharge on the basis of race, color, religion, sex or national origin or for exercising rights under the act)), and

and thus an employee who has suffered damages as a result of such discharge may maintain a tort action for
wrongful discharge against the employer." ( /d., at p.
178.)

state statutes precluding discharge for filing

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Tameny arose from facts quite similar to Petermann; in both cases, an employee was discharged for his refusal

term or promises arising out of the particular
employment relationship involved, but rather the public interest in not permtting employers to impose as a condition of employment a requirement
that an employee act in a manner contrary to fun-

to violate a penal statute. The plaintiff in Petermann, however, had framed his complaint in contract, and
sought only back wages; the Tameny plaintiff sought tort
damages. In upholding the claim in Tameny, we ex-

damental public policy.

plained that the cause of action was not dependent on an
express or implied promise in the employment contract,

(**378) (***216) Other state cours have on occasion failed to draw the distinction between contract-

"but rather reflects a duty imposed by law upon all employers in order to implement the fundamental. public

policies embodied in the state's penal statutes." (27
Ca1.d at p. 176.) We noted also that the existence of a contractual relationship would not bar an injured part
from seeking relief (*667) though tort remedies when
the "employer's discharge of an employee contravenes
the dictates of

based causes of action and those based on policies extrinsic to the term of the agreement. For example, the
Wisconsin Supreme Cour adopted a "narrowly circumscribed public policy exception" to the employment-at-

wil doctrine. Nonetheless, it relied on the fact that the remedies usualIy available for wrongful discharge under
the relevant statutes were limited to contractual reme-

public policy." ( /d., at pp. 175, 177.) 6

dies, such as reinstatement and backpay, to conclude that
such contractual remedies "are the most appropriate

6 We observed that cours in Californa and sis-

ter states had shown a wilingness to grant tort
damages in such instances. (See Tameny, 27
Ca1.3d at p. 177; Kouff v. Bethlehem-Alameda Shipyard (1949) 90 Cal.App.2d 322 (202 P.2d

remedies for public policy exception wrongful discharges since the primary concern in these actions is to
make the wronged employee 'whole.''' ( Brockmeyer v.

1059).)

Dun & Bradstreet (1983) 113 Wis.2d 561 (335 N.W.2d 834,840-841).)
This characteriation of the natue of the action con-

Sumrizing this authority, the Cour of Appeal in
Koehrer v. Superior Court (1986) 181 Cal.App.3d 1155

trasts with our Tameny analysis, in which we deemed the

explained, the theoretical reason for labeling the discharge wrongful in such cases is not based on the term and conditions of the contract, but rather arises out of a duty implied in law on the part of the employer to conduct its affairs in compliance with public policy. . . .
wrongful termnation for reasons violative of fudamen-

(226 Cal.Rptr. 820), stated at page 1166: "As Tameny

public-policy-based cause of action as "ex delicto," or
arising "from a breach of duty growing out of

the (*668)

contract," rather than "from a breach of a promise set
fort in the contract" or "ex contractu." (27 Ca1.d at p.

175.) As we explained, "an employer's obligation to re-

frain from discharging an employee who refuses to
commt a crimial act does not depend upon any express
or implied "'(promises) set forth in the (employment)

(There) is no logical basis to distiguish in cases of

tal principles of public policy between situations in
which the employee is an at-wil employee and (those) in
which the employee has a contract for a specified term.
(4) (See rn. 7.) The tort is independent of the term of employment." 7

contract'" (citation), but rather reflects a duty imposed by law upon alI employers in order to implement the fun-

damental public policies embodied in the state's penal statutes. As such, a wrongful discharge suit exhbits the
classic elements of a tort cause of action." ( ¡d., at p.

176.) Thus, the Wisconsin cour focused on contract
remedies on the assumption that the underlying interest
was to compensate the employee, whereas Californa

7 A comparison of the manner in which contracts for ilegal puroses are treated is useful.
(See e.g., Civ. Code, §§ 1441, 1598, 1608, 1667.)

cases have focused on the general social policies being
advanced by recognition of the public-policy-based

If an employer and employee enter into a contract in which the employee agrees to perform an ile-

cause of action.

gal act, and either part breaches, the cours wil
not enforce the contract. In the Tameny situation,
however, tyicalIy the employer requires the em-

ployee to perform an act in contravention of pub-

lic policy and then termnates the employee for failure to do so, or penalizes the employee for acting in accordance with law. When such a termination occurs, the natue of the employee's re-

lationship with the employer, whether at wil or contractual, is essentialIy irelevant. What is vindicated through the cause of action is not the

In Tameny, because there was no statute specificalIy barring an employer from termnating an employee who refused to act ilegalIy, the cour was required to consider whether, without the authority of an express prohibition on the reasons for discharge, the plaintiffs action could proceed. We concluded that "even in the absence of an explicit statutory provision prohibiting the discharge of a worker on such grounds, fudamental principles of public policy and adherence to the objectives underlying the state's penal statutes require the recognition of a rule barring an employer from discharging an employee who

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has simply complied with his legal duty and has refused to commt an ilegal act." (27 Ca1.3d at p. 174, fu. omitted.) The public policy to which we looked thus was one about which reasonable persons can have little disagreement, and which was "firmy established" at the time of
discharge. 8

employee. For example, many statutes simply regulate conduct between private individuals, or impose requirements whose fulfilIment does not implicate fundamental public policy concerns. Regardless of whether the existence of a statutory or constitutional link is required under Tameny, disparagement of a basic public policy must
be alIeged, and we tu now to determning whether

8 We also quoted with approval Petermann

's

plaintiff has done so here.

statement that "'(the) public policy of this state as

reflected in the Penal Code sections referred to above would be seriously impaired if it were to be held that one could be discharged by reason of his refusal to commt perjur.'" ( Petermann, supra, 174 Cal.App.2d at p. 189, quoted in

Tameny, supra, 27 Ca1.d at p. 173.)
The employee in Tameny claimed his termation

(6a) In the present case, plaintiff alIeges that defendant discharged him in "sharp derogation" of a substantial public policy that imposes a legal duty on employees to report relevant business information to management. An employee is an agent, and as such "is required to disclose to (his) principal alI informtion he has relevant to the subject matter of the agency." (2 Witki, Sumary of CaL. Law (9th ed. 1987) Agency & Employment, § 41, p. 53; see Loughlin v. /dora Realty Co.

was based on his refusal to engage in statutorily forbidden conduct at his employer's behest. We mentioned

generalIy that an employer's ability to discharge at wil
'''may be limited by statute. . . or by considerations of

(1968) 259 CaL.App.2d 619, 629 (66 Cal.Rptr. 747);
Jolton v. Minster Graf & Co. (1942) 53 CaL.App.2d 516,

522 (128 P.2d 101). (7) (See rn. 9.), (6b) Thus, plain-

public policy.''' (27 Ca1.d at p. 172.) Several subse-

quent Cour of Appeal cases have limited our holding to policies (***217) derived from statute. (See Shapiro v.
Wells Fargo Realty Advisors (1984) 152 Cal.App.3d

tiff asserts, if he discovered inormation that might lead his employer to conclude that an employee was an embezzler, and should not be retained, plaintiff had a duty
to communcate that informtion to his principaL. 9
9 Defendant disputes ths characteriation of

467, 477 (199 Cal.Rptr. 613); Gray v. Superior Court
(1986) 181 Cal.App.3d 813, 819 (226 Cal.Rptr. 570);

Tyco Industries, Inc. v. Superior Court (1985) 164

plaintiffs motives and conduct. In reviewing a
judgment folIowing the sustainig of a demurer without leave to amend, however, we must accept
the trth of the matters pleaded (see ante, pp.

Cal.App.3d 148, 159 (211 Cal.Rptr. 540). (**379) The Cour of Appeal in the present case asserted, "(to) successfulIy plead a cause of action under the (Tameny)

theory, plaintiff must alIege that he was termated in retaliation for assertng his statutory rights, or for his refusal (*669) to perform an ilIegal act at the request of the employer, or that his employer directly violated a statute by disrnssing him."

662-663), and take into account the possibility of

amendment consistent with that pleading. (
Blank v. Kirwin (1985) 39 Ca1.3d 311,318 (216
Cal.Rptr. 718, 703 P.2d 58).)

At least three other Cour of Appeal decisions addressing the issue of where policy giving rise to an action may be found have concluded in dicta that public policy, as a basis for a wrongful discharge action, need not be policy rooted in a statute or constitutional provision. (See

(*670) It is unclear whether the alIeged duty is one founded in statute. No enactment expressly requires an employee to report relevant informtion concernng other employees to his employer, and none prohibits discharge
of the employee for so doing. \0 The 1872 Civil Code, however, attempted to codify the common law of masterservant relations; its provisions, now in the Labor Code, provide that "(one) who, for a good consideration, agrees to serve another, shalI perform the service, and shalI use ordinary care and diligence therein, so long as he is thus

Koehrer v. Superior Court, supra, 181 Cal.App.3d 1155,

1165, 1167; Garcia v. Rockwell Internat. Corp. (1986) 187 Cal.App.3d 1556, 1561 (232 CaL.Rptr. 490); Dabbs

v. Cardiopulmonary Management Services (1987) 188
CaL.App.3d 1437, 1443-1444 (234 CaL.Rptr. 129).)

We do not decide in this case whether a tort action alIeging a breach of public policy under Tameny may be based only on policies derived from a statute or constitutional provision or whether nonlegislative sources may

employed." (Lab. Code, (***218) § 2854.) It is not clear whether the duty to communicate relevant inform-

tion is subsumed under the statutory duty of ordinary
care, or is a separate duty not codified by the 1872 Legis-

latue.

provide the basis for such a claim. (5) Even where, as here, a statutory touchstone has been asserted, we must stilI inquire whether the discharge is against public policy and affects a duty which inures to the benefit of the
public at large rather than to a particular employer or

10 By contrast, Labor Code section 1102.5,
subdivision (b) prohibits an employer from retaliating "against an employee for disclosing information to a governent or law enforcement

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agency, where the employee has reasonable cause

of

the partes. For example, in Tameny, supra, 27

to believe that the informtion discloses a violation of state or federal statute, or violation or

CaL.3d 167, a contract provision purorting to ob-

ligate the employee to comply with an order of
the employer directing the employee to violate
the antitrst laws would clearly have been void as

noncompliance with a state or federal regulation."

(**380) Whether or not there is a statutory duty requiring an employee to report informtion relevant to
his employer's interest, we do not find a substantial public policy prohibiting an employer from discharging an employee for performng that duty. \I Past decisions recogning a tort action for discharge in violation of public policy seek to protect the public, by protecting the employee who refuses to commt a crime ( Tameny, supra,
27 Ca1.3d 167; Petermann, supra, 174 Cal.App.2d 184),

against public policy, and in Petermann, supra, 174 CaL.App.2d 184, a contract provision which

purorted to obligate the employee to commt
perjur at the employer's behest would just as ob-

viously have been invalid. Because here the employer and employee could have agreed that the
employee had no duty to disclose such informa-

who reports crinal activity to proper authorities (
Garibaldi v. Lucky Food Stores, Inc. (9th Cir. 1984) 726 F.2d 1367, 1374; Palmateer v. International Harvester

tion, it cannot be said that an employer, in discharging an employee on this basis, violates a
the protection of

fundamental duty imposed on alI employers for the public interest.

Co., supra, 421 N.E.2d 876, 879-880), or who discloses other ilegal, unethical, or unsafe practices ( Hentzel v.
Singer Co. (1982) 138 Cal.App.3d 290 (188 Cal.Rptr.
159, 35 A.L.R.4th 1015) (workig conditions hazardous

13 The Californa case most closely in point is
Read v. City of Lynwood (1985) 173 CaL.App.3d 437 (219 Cal.Rptr. 26). Plaintiff, a city employee,
protested the award of a city contract to a developer who, she had heard, had once attempted to

to employees)). No equivalent public interest bars the discharge of the present plaintiff. \2 When (*671) the duty of an employee to disclose inormtion to his employer serves only the private interest of the employer,

bribe a felIow employee. That protest and other actions led the city to eliminate plaintiffs regular
position and to termate her employment. The

the rationale underlying the Tameny cause of action is
not implicated. \3

Cour of Appeal reversed a dismissal of her suit
for fuer consideration of questions relating to

the elimination of her position, but upheld dismissal of the Tameny cause of action.

11 As noted, Tameny insisted that the public
policy basis for the cause of action must be
"firy established" (27 Ca1.3d at p. 172), "fu-

damental" ( id., at p. 176), and "substantial" (
id., at p. 177, quoting Harless v. First Nat. Bank

We have discovered no case upholding a cause of action on facts comparable to the present
case.

in Fairmont (1978) 162 W.Va. 116 (246 S.E.2d
270)). Cases of other jurisdictions similarly re-

We conclude that the Cour of Appeal properly up-

quire a "clearly mandated public policy." (See,
e.g., Palmateer v. International Harvester Co.

held the tral cour's ruling sustaining the demurer without leave to amend to plaintiffs first cause of action.
II. Breach of Employment Contract

(1981) 85 Ill.d 124 (421 N.E.2d 876, 878);

Parnar v. Americana Hotels, Inc. (1982) 65 Hawaii 370 (652 P.2d 625,630-631); Thompson v.

St. Regis Paper Co. (1984) 102 Wn.2d 219 (685 P.2d 1081, 1088-1089); Adler v. American Standard Corp. (1981) 291 Md. 3 (432 A.2d 464,

Plaintiffs second cause of action alIeged that over the course of his nearly seven years of employment with defendant, the company's own conduct and personnel

policies gave rise to an "oral contract" not to fire him
without good cause. The trial cour sustained a demurer

472-473).
12 The absence of a distinctly "public" interest

in this case is apparent when we consider that if
an employer and employee were expressly to agree that the employee has no obligation to, and

should not, inform the employer of any adverse informtion the employee learns about a felIow employee's background, nothg in the state's
public policy would render such an agreement

without leave to amend on two grounds: that the complaint did not state facts suffcient to give rise to such contract, and that enforcement (***219) of any such contract would be barred by the statute of frauds. The Cour of Appeal affirmed, relying on the latter ground alone. We consider both grounds, discussing the statute
of frauds issue first.

void. By contrast, in the previous cases asserting a discharge in violation of public policy, the public interest at stake was invariably one which could not properly be circumvented by agreement

(**381) A. Statute of Frauds Defense
Civil Code section 1624, subdivision (a), invalidates "(an) agreement that by its term is not to be performed within a year from the making thereof' unless the con-

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tract "or some note or memorandum thereof, (is) in writing and subscribed by the party to be charged or by the
part's agent." (8a) In White Lighting Co. v. Wolfon

(1963) § 152, pp. 13-17; see Chinn v. China Nat.

Aviation Corp. (1955) 138 CaL.App.2d 98 (291
P.2d 91); Toussaint v. Blue Cross & Blue Shield

(1968) 68 CaL.2d 336 (66 CaL.Rptr. 697, 438 P.2d 345), we held that this portion of the statute of frauds "applies only to those contracts which, by their term, cannot possibly be performed within one year." ( /d., at p. 343.) In that case the employee alleged the breach of an express oral agreement whereby the defendant promised to em-

of Mich. (1980) 408 Mich. 579, 600 (292 N.W.2d

880)." As we shalI discuss fuher in the next portion of the opinion, there is no reason why standard contract principles should not apply in
the employment context.

ploy him on a "permnent" basis and pay him a fixed commssion on an (*672) "anual basis." We concluded
that the trial cour erroneously sustained the defendant's demurer because, although the agreement contemplated employment on a "permnent" basis, the statute does not
apply to an employment contract of indefinite duration
"uness its term foreclose the employee's completion of

15 Although the statute of frauds defense was not argued or even anticipated in Pugh, supra, 116 CaL.App.3d 311, or Cleary, supra, ILL
Cal.App.3d 443, we note that the rule of Newfield, as applied to plaintiff, would indirectly cir-

cumvent those cases by holding that any claim
based on the breach of an oral or implied promise
to discharge only for cause is unenforceable

the performnce of the contract withn one year. . . ." (
/d., at p. 341.)

uness the employee has been employed for less

Relying exclusively on its own decision in Newfield
v. Insurance Co. of

the West (1984) 156 CaL.App.3d 440

than one year. Because Cleary had 18 years service and Pugh 32, both their claims would have been defeated by an affirmative defense based on
Newfield's view of the statute of frauds.
Newfield is ireconcilable with the rule in White

held that plaintiffs alIeged employment contract, if
modified to include a promise to discharge him for cause
only, is barred by the statue of frauds. Neither Newfield

(203 CaL.Rptr. 9), the Cour of Appeal here nevertheless

nor the opinon below distinguishes, or even cites, the
rule in White Lighting, supra, 68 Cal.2d 336. The ra-

tionale of both opinons is sumed up in the folIowing
passage from Newfield: "(AlIegedly) only (employee)

Lighting. 16 Even if the original oral (**382) (***220) agreement had expressly promised plaintiff "permnent" (*673) employment termnable only on the condition of his subsequent poor pedormance or other good cause, such an agreement, if for no specified tenn could possibly be completed within one year. (See White Lighting,
supra, 68 Ca1.2d at pp. 343-344.) Because the employee

had the right to termate the contract. (9) (See rn. 14.)
Equality or justice between the partes would no longer
exist in this alleged kind of oral contract. \4 (para.) Ap-

can quit or the employer can discharge for cause, even an

agreement that strictly defines appropriate grounds for
discharge can be completely performed withi one year -

pelIant cannot have it both ways. Either his employment

relationship was a contract in which both parties had equal rights to termate at wil (in which case it was not
in violation of the statute of frauds), or it was a contract where the employer did not have the right to termnate at
wil, and there was a reasonable expectation of employ-

- or within one day for that matter.

16 The Cour of Appeal in Gray v. Superior
Court, supra, 181 Cal.App.3d 813, 822, noted the
confict between Newfield and White Lighting

ment for more than one year (in which case the statute of
frauds does apply, barring this action)." (156 CaL.App.3d
at p. 446.) 15

14 We observe there is nothing intrsicalIy un-

fair or uncommon about a contract that permts the employee to leave at wil, but limits the em-

ployer's right of discharge. As explained in
Pugh, supra, 116 CaL.App.3d 311,325, "A con-

and, pending our decision in the present appeal, declined to follow Newfield. Another Cour of Appeal decision, Steward v. Mercy Hospital (1987) 188 Cal.App.3d 1290, 1295 (233 Cal.Rptr. 881), declared that Newfield represented a miority view, and held that under the majority view enforcement of an oral employment contract was not barred by the statute of frauds if, within one
year, the employee could termnate the contract or be discharged for cause.

tract which limits the power of the employer with

respect to the reasons for termnation is no less
enforceable because it places no equivalent limits upon the power of the employee to quit his employment. 'If the requirement of consideration is

We also note that the Ninth Circuit recently held in Robards v. Gaylord Bros., Inc. (9th Cir. 1988) 854 F.2d 1152, 1154-1155, that under Cali-

met, there is no additional requirement of . . .
equivalence in the values exchanged, or "mutuality of obligation. '" (Rest.2d Contracts, § 81 (Tent.
Draft No.2, 1965); 1A Corbin on Contracts

forna law the statute of frauds would not defeat
an action for breach of an employment contract.
Our cours have consistently held that such con-

tracts are not within the statute of frauds. (See, e.g.,

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Plumlee v. Poag (1984) 150 CaL.App.3d 541 (198

Cal.Rptr. 66); Bondi v. Jewels by Edwar, Ltd. (1968) 267 CaL.App.2d 672 (73 CaL.Rptr. 494); Wescoatt v.
Meeker (1944) 63 CaL.App.2d 618 (147 P.2d 41); Lloyd

agreement with an agent or broker, or other person to purchase, selI, or lease real estate for over

a year, or to find a purchaser or selIer or a lessee or lessor for a lease of more than one year be in

v. Kleefisch (1941) 48 CaL.App.2d 408 (120 P.2d 97).) Decisions from other states uniformy hold that a goodcause termnation clause does not render an employment
agreement unenforceable under the statute of frauds.
(E.g., Weiner v. McGraw-Hil, Inc. (1982) 57 N.Y.2d

writing. As we observed in Philippe, "The
Cours of Appeal have consistently held, with two narrow exceptions not present here, that a licensed broker may not assert estoppel against a statute of frauds defense in an action to recover a commssion under an oral employment agree-

458 (457 N.Y.S.2d 193, 443 N.E.2d 441, 33 A.L.RAth 1101); Toussaint v. Blue Cross & Blue Shield of Mich.

(1980) 408 Mich. 579 (292 N.W.2d 880); Hardison v. A.H Belo Corp. (Tex.Civ.App. 1952) 247 S.W.2d 167.) (10) These authorities support the generaI rule that if a condition termnating a contract may occur within one

ment." (43 Ca1.3d at p. 1260.) The histories of subdivisions (a) and (d) of section 1624 have
taken very different courses and the two subdivisions apply in different circumstances.

year of its making, then the contract is performble
within a year and does not falI withn the scope of the statute of frauds. This is tre even though performnce of the contract may extend for longer than one year if the
condition does not occur. (See generalIy, 1 Witkn,

68 Ca1.2d 336, folIows a long line of precedent. In
Massachu(**383) 1897, the Supreme Judicial Cour of setts rejected an employer's contention that the statute of frauds invalidated an oral agreement for "permnent em-

(***221) The decision in White Lighting, supra,

Summary of CaL. Law (9th ed. 1987) Contracts, § 282, p.

ployment" so long as the plaintiff, an enameler, performed his work satisfactorily. The majority, including Chief Justice Field and Justice Holmes, rejected the em-

274.)

Other cours have pointed out that within a year an

employee such as plaintiff could have (1) been discharged for cause (see, e.g., Rowe v. Noren Pattern and
Foundry Co. (1979) 91 Mich.App. 254 (283 N.W.2d

ployer's defense. "It has been repeatedly held that, if an
agreement whose pedormnce would otherwise extend beyond a year may be completely performed within a

713)); (2) retied, died or voluntarily left employment
(see, e.g., Martin v. Federal Life Ins. Co. (1982) 109

year on the happening of some contigency, it is not
within the statute of frauds. (Citations.) In this case, we
say nothing of other contigencies. The contract would

IlApp.3d 596 (440 N.E.2d 998)); or (3) been termated if declinng profitability compelIed a general layoff or
cessation of business altogether (see, e.g., Stauter v.

have been completely performed if the defendant had
ceased to carr on business within a year." ( Carnig v.

Carr (1897) 167 Mass. 544 (46 N.E. 117, 118).)
(8b) The Legislatue, which in 1872 enacted Civil

Walnut Grove Products (Iowa 1971) 188 N.W.2d 305). "Interpretig the alIegations of the complaint liberalIy, as
we must, we cannot say as a matter of law that the contract. . . could not be (*674) performed within a year." ( Plumlee v. Poag, supra, 150 CaL.App.3d 541,549.)

precedent limiting the reach of the one-year provision of the statute of frauds.
Code section 1624, was aware of

The Code Commssioners' notes specificalIy advised that

Defendant attacks these precedents as performg
"legalistic gymastics," and calIs instead for enforcement of Civil Code section 1624 according to the fair import of its language. That proclamation ignores a considerable piece of history. More than 60 years ago a British cour declared that "(it) is now two centuies too late to ascertain the meaning of (the statute of frauds) by applying one's own mind independently to the interpretation of its

"in a similar statute in New York these words have been
constred as applying only to contracts which cannot

possibly be executed withn a year, under any contingency. . . . To brig a contract within the statute relating

to parol agreements, not to be performed within one year, it must appear to be necessarily incapable of performance within that time." (Italics in originaL.) 18 (*675)

language. Our task is a much more humble one; it is to
see how that section has been expounded in decisions

(11) When the Legislatue enacts language that has received defmitive judicial constrction, we presume that
the Legislatue was aware of the relevant judicial deci-

and how the decisions apply to the present case." (
Hanau v. Ehrlich (1911) 2 K.B. 1056, 1069.) 17

sions and intended to adopt that constrction. (See
Buchwald v. Katz (1972) 8 Ca1.3d 493, 502 (105

Cal.Rptr. 368, 503 P.2d 1376). This presumption gains fuher strength when, as in this case, it is clear that the
Legislatue was explicitly informed of the prior constrction.

17 Compare, for example, our decision in Phillippe v. Shappell Industries (1987) 43 CaL.3d
1247 (241 Cal.Rptr. 22, 743 P.2d 1279). There,

we were calIed on to apply Civil Code section 1624, subdivision (d), which requires that an

18 A second source of confict with White
Lighting concerns the Cour of Appeal's use of a

151

Case 5:07-cv-04808-JF

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