Breach of Contract

How can an employer establish "good cause" to fire an employee with whom it maintains a written or implied-in-fact contract not to terminate unless for cause? Cotran v. Rollins Hudig Hall Int'l Inc. is the leading employment case dealing with precisely that question. In simple terms, Cotran looks at 3 factors to make this determination: the employer must (1) act in good faith, (2) conduct an appropriate investigation, and (3) have reasonable grounds for believing that the employee engaged in misconduct.

The RLC recently dealt with a case involving Cotran. Our client was a longterm employee of a company who was fired because certain colleagues accused him of being divisive and creating a hostile work environment. Prior to his termination, the company hired an outside investigator, initiated two separate investigations, conducted 30+ interviews, and obtained over ten declarations against our client. Each of these materials was used by the company to justify a "good cause" termination. Case closed in favor of the company?

Not exactly. Applying Cotran, the RLC obtained substantial evidence in discovery demonstrating that the company's investigations were not in good faith and tainted with bias. The RLC was able to show that: interview questions were specifically designed to elicit negative

responses concerning our client, the investigator basically bullied and intimidated his interviewees, and, importantly, that our client was not presented with the evidence acquired against him and afforded an adequate opportunity to present his side of the story. Each of these facts, among others, weighed heavily against the neutrality of the company's investigations.

Prior to initiating a lawsuit, the company flat-out refused to engage in any settlement discussions. Ultimately, however, the company was compelled to settle the case just short of trial. Our client recovered a significant settlement in several multiples of his annual salary.

Defamation

A longstanding staple of California's Civil Code is the prohibition against defamation.

Although the statutory and case law surrounding defamation is many and complex, the basic premise of defamation law is that it is unlawful for one to injure the reputation of another through publication of false statements, either orally (e.g. slander) or in writing (e.g. libel). In

McCoy v. Hearst Corporation, the California Supreme Court addressed the importance of this principle head on, stating,

"Good character, or reputation, consists of the general opinion of people respecting one. It is built up by a lifetime of conduct. It is probably the dearest possession that a man has, and once lost is almost impossible to regain. The possession of a good reputation is conducive to happiness in life and contentment.

The loss of it, . . . brings shame, misery, and heartache."

The damaging effects of defamation are illustrated best by a previous RLC case. In 2007, a former bookkeeper of a statewide organization was fired after she discovered and reported that the director of the organization had misappropriated funds. A flurry of organizational in-fighting ensued between two factions in the company - one who wanted the director out and the other who wanted him in. The Board of Directors initially fired the director only to have its decision reversed pursuant to protests by the company's members. Our client was caught in the middle of this crossfire and immediately became the object of the director's scorn.

Upon reinstatement, the director fabricated performance criticisms against our client, terminated her based on those trumped-up charges, and then mailed the termination letter to everyone in the company, thereby attempting to undermine her professional competence. He also called an organization-wide townhall meeting to deny the charges made against him. The circumstances of the termination were again brought up at this meeting.

This news had a devastating impact on our client. She avoided public places and isolated herself in her home for several months out of fear that she would be ridiculed by those who heard of her termination. Despite a hard-fought litigation, the parties were able to resolve the matter at mediation to our client's satisfaction. She has since undertaken part-time work and is enjoying time with her family. The director ultimately resigned from the company during the pendency of the case.