When Can You Sue for Breach of Contract?
Suddenly losing your job due to an employer’s breach of contract can be devastating. Even a failure to receive promised or implied benefits may prove damaging if you were depending on them. Fortunately, you have legal recourse, especially if the original contract was written down and signed by both parties.
An employment contract is a formal agreement protected by law. If your employer violates that agreement, you can sue them for damages.
If you’re based in or around Los Angeles and your employer has breached your contract, call Rubin Law Corporation at 310-956-4065. We’ll make sure your employer (or former employer) respects your legal rights.
What Is an Employment Contract?
An employment contract is any agreement, whether written, oral, or implied, that outlines the responsibilities of both parties in association with the employee’s job. Often, the employer also promises specific additional benefits, or implies their existence as part of the contract.
It can be difficult to enforce implied or oral contracts, but we can easily enforce written contracts signed by both parties.
When Does a Breach of Contract Occur?
If your employer fires you before the end of your contract, or if they fail to deliver on other promises made or implied by the contract, then they are in breach of contract.
You don’t have to sue your employer if they’re willing to negotiate a beneficial severance agreement with you. (We can also help you negotiate such a settlement agreement.)
But if you can’t settle, it’s time to go to court.
Breaches of written contracts are rare, because they’re easy to prove and enforce. When such breaches occur, they tend to do so at high levels and can be worth millions. Breaches of oral and implied contracts are much more common.
What Counts as a Contract Breach in California?
Most contracts include provisos covering:
- Pay rate
- Length of employment
- Duties of the employed and the employer
- Contingencies for workforce reduction, including severance payments
Any failure to meet these conditions constitutes a breach under California law, which provides remedies for each of the above provisos.
Can I Sue for Breach of an Implied Contract?
Yes, you can. Implied contracts count as legal substitutes for written or oral contracts, created by the actions of the parties involved. They can therefore be treated like written contracts. An implied contract may completely replace a written contract or may pick up where a written contract leaves off. In addition to the provisos defined above, it may include policies or conditions like:
- Length of service (seniority)
- Disciplinary policy
- Fringe benefits
- Assumptions the employer will not fire you without good cause
California is an at-will employment state: that is, your employer can fire you for any reason except discrimination against you. This makes make it harder to sue for breach of implied contract. However, in almost every case, an implied contract presumes your employer will not fire you without just cause. If you feel your employer has wrongfully terminated you, even if they claim cause, you can sue for breach of contract. You can also sue if they ignore seniority, discipline you unduly, or fail to provide implied benefits.
Can I Sue for Breach of an Oral Contract?
You can, but it’s difficult. An oral employment contract is legally binding in California but can be very hard to prove. You can use witness testimony, written documentation, receipts, paystubs, and actions of the employer that affirm the contract in a suit for breach. Otherwise, the court will have to judge between the differing stories of you and your employer.
We recommend you never do business on a handshake and an oral promise of employment. Get a written document, signed by both you and your employer.
When Does an Employee Enjoy the Benefits of an Implied Contract?
Pugh v. See’s Candies, Inc.
In general, if an employee is without a signed contract, or the contract is silent as to what may give rise for termination, the law will treat the employee as “at-will”. In other words, the employer may terminate the employee at any time for any reason, other than an unlawful one.
However, under certain circumstances, an employee may overcome the presumption that his/her employment is “at-will” by demonstrating that an implied contract not to terminate without good cause exists.
In Pugh v. See’s Candies, Inc., the California Court of Appeal held that an implied contract not to terminate without good cause could be shown by the acts and conduct of the parties interpreted in light of the circumstances.
In Pugh, the terminated employee pointed to factors such as the length of employment (32 years), commendations and promotions, lack of criticism of work, oral assurances that if he was loyal and performed well his job was secure, and the company’s general practice of not terminating without good cause. Id.
You May Be Able to Challenge Termination by Proving There Was an Implied Contract
Since the Pugh decision, numerous employees have successfully challenged their termination by proving the existence of an implied contract not to terminate without cause.
In a recent case handled by The Rubin Law Corporation, an executive-level employee was hired to create and implement a business plan to promote growth of a small family-owned company. Through the executive’s guidance, the company took an entirely new direction.
Operations improved, sales improved and revenue more than doubled during his employment. The business became so successful the employer opened a sister company, contributing additional revenue. The employer repeatedly assured the executive that he was “part of the family” and that the company would award him generously for his hard work.
He received several raises, and the company granted additional commission on the ever-increasing sales. He received praise and commendation for his contributions and was led to believe that his job was secure. After four years, the control of the company was passed to the owner’s children. The executive was shortly thereafter terminated without cause.
Our firm argued that the employer’s actions over the executive’s four years of employment had created an implied contract not to terminate without cause. The executive’s termination breached the implied contract, making the employer liable for damages.
Negotiations resulted in a pre-litigation settlement. The executive received fair compensation for his damages without filing a complaint in court.
How Can an Employer Establish “Good Cause” to Fire an Employee?
Cotran v. Rollins Hudig Hall Int’l Inc.
How can an employer establish “good cause” to fire an employee with whom it maintains a written or implied 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 three factors to make this determination. The employer must:
- Act in good faith
- Conduct an appropriate investigation
- Have reasonable grounds for believing that the employee engaged in misconduct
We recently dealt with a case involving Cotran.
Our client was a long-term employee of a company that fired him 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 10 declarations against our client. The company used each of these materials to justify a “good cause” termination.
Case closed in favor of the company? Not exactly.
We Were Able to Show Lack of Good Faith and Bias
Applying Cotran, we obtained substantial evidence in discovery demonstrating that the company’s investigations were not in good faith and tainted with bias. We were able to show that:
- Interview questions were specifically designed to elicit negative responses concerning our client
- The investigator basically bullied and intimidated his interviewees
- The company did not present our client with the evidence acquired against him and did not provide 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.
An Employment Lawyer Can Help You With Your Breach of Contract Case
Whether your employment contract is written, implied, or oral, you have the right to sue for breach in California. This applies whether your employer has wrongfully terminated you or denied promised or implied benefits. You’ll need an attorney who’s an expert in California employment law to handle your case.