## Facts

- Lawrence M. Cleary alleged he entered an oral employment agreement with American Airlines on December 8, 1958, under which he became a “permanent employee.”
- Cleary alleged the employment relationship included American’s Regulation 135-4, describing procedures and policy for employee grievances and discharge.
- Cleary worked for American for about 18 years and was terminated in 1976.
- He alleged he was discharged without good or just cause, in violation of the implied covenant of good faith and fair dealing and contrary to Regulation 135-4’s promised investigatory and grievance procedures.
- Cleary alleged the termination was motivated by hostility to his union activity and implicated public policy protecting such activity.
- Cleary alleged multiple fellow employees conspired to bring about his discharge and thereby interfered with his employment relationship and induced American to breach the employment agreement.
- The trial court sustained defendants’ demurrers to Cleary’s fifth amended complaint without leave to amend and entered a dismissal; Cleary appealed.

## Issues

1. Whether an employee hired under an oral agreement for an unspecified term could plead wrongful discharge/breach of contract notwithstanding Labor Code § 2922, based on the implied covenant of good faith and fair dealing and the employer’s promulgated grievance and discharge policies.
2. Whether fellow employees could be liable for interference with contractual/business relations and inducement of breach based on alleged concerted efforts to cause the employee’s termination.

## Decision

- The Court of Appeal reversed in substantial part.
- The court held the complaint stated a viable claim against American Airlines for breach of contract/wrongful discharge based on alleged implied limitations arising from Cleary’s long service and American’s discharge/grievance policies.
- The court held Cleary’s allegations that the discharge was retaliatory for union activity further supported proceeding past demurrer on a wrongful discharge theory grounded in public policy.
- The court held the tort theories against certain individual employees were not barred as a matter of law at the pleading stage and should not have been dismissed without leave to amend.

## Legal Principles

- Although employment for an unspecified term is presumptively at will under Labor Code § 2922, the presumption can be overcome by facts showing contractual limitations, including implied terms inferred from the parties’ conduct and employer policies.
- Long and satisfactory service, coupled with employer-promulgated discharge and grievance procedures, may support an implied contractual understanding that termination will occur only for good cause and through fair procedures.
- The implied covenant of good faith and fair dealing may constrain an employer from terminating an employee in bad faith or arbitrarily in a manner that deprives the employee of the contract’s benefits.
- A claim for wrongful discharge may proceed where the pleaded facts support a discharge contrary to public policy, including alleged retaliation for protected union activity.
- Fellow employees are not categorically immune from tort liability for interference with an employment contract; liability may arise if they intentionally cause a breach through improper motives or methods rather than legitimate employer interests.

## Conclusion

The court held that a long-term employee could plead wrongful discharge and breach of an implied employment agreement where employer grievance and discharge policies, together with lengthy service, supported an implied good-cause limitation, and it allowed related interference claims against coworkers to proceed beyond the demurrer stage.


Cleary v. American Airlines, Inc., 111 Cal. App. 3d 443 (Ct. App. 1980)