## Facts

- John Guz worked for Bechtel for about 22 years, receiving promotions, merit raises, and positive reviews; by 1992 he was a financial reports supervisor earning $71,280.
- Bechtel issued Personnel Policy 1101 stating employment was “at will,” while describing notice and opportunity-to-improve procedures for performance-based terminations.
- The policy separately addressed “layoffs” due to reductions in work, reorganizations, or other circumstances, without imposing the performance-termination procedures on layoffs.
- In 1992 Bechtel reorganized and eliminated Guz’s unit, transferring functions elsewhere; Guz was placed on “holding” status and then laid off rather than transferred.
- Guz claimed the stated reason (workload downturn and reorganization) was a pretext to remove him because of age or to avoid progressive discipline.

## Issues

1. Whether Guz produced sufficient evidence to create a triable issue that his layoff was motivated by age discrimination under FEHA.
2. Whether Bechtel’s policies, practices, and Guz’s tenure created an implied-in-fact contract limiting termination to “good cause,” and whether the layoff breached any such limit.
3. Whether the implied covenant of good faith and fair dealing could impose limits on Bechtel’s layoff/reorganization decision beyond the parties’ contract terms.
4. Whether Guz raised a triable claim that Bechtel failed to follow its own written layoff policies in selecting employees for layoff.

## Decision

- The California Supreme Court reversed the Court of Appeal in substantial part and held Bechtel was entitled to summary judgment on Guz’s core claims.
- On FEHA age discrimination, the Court held Guz failed to present sufficient evidence from which a reasonable factfinder could infer discriminatory intent or that the reorganization rationale was a pretext for age bias.
- On implied contract, the Court held there was no triable evidence that Bechtel limited its right to reorganize or eliminate positions; Policy 1101 confirmed at-will status and did not restrict layoffs.
- On the implied covenant, the Court held the claim added no independent substantive limits and could not be used to require “fair” treatment beyond the contract; summary judgment was proper.
- The Court remanded for further consideration of whether Bechtel may have breached its own written layoff procedures, an issue not fully resolved below.

## Legal Principles

- California’s at-will presumption (Lab. Code § 2922) may be rebutted by an implied-in-fact agreement, but longevity, promotions, and positive evaluations alone do not establish a “for cause” limitation.
- Express at-will language in personnel policies may confirm, rather than rebut, the at-will relationship and may preserve employer discretion over reorganizations and position eliminations.
- Distinct employer rules for performance terminations do not automatically apply to layoffs or reorganizations absent a contractual promise restricting layoffs.
- In FEHA discrimination cases evaluated under McDonnell Douglas, an employer’s reorganization can be a legitimate nondiscriminatory reason, and the employee must present substantial evidence of pretext and discriminatory motive to avoid summary judgment.
- The implied covenant of good faith and fair dealing protects contractual benefits but cannot add substantive restrictions or convert at-will employment into a general “good cause” requirement.
- Even where employment is at will, an employer may face liability for failing to follow its own written layoff procedures if those procedures are enforceable and were breached.

## Conclusion

The court held that an at-will employee laid off in a reorganization could not reach trial on implied-contract, implied-covenant, or FEHA age-discrimination theories without evidence that the employer contractually limited its layoff authority or that the stated business reason was a pretext for age bias, while leaving open on remand whether the employer violated its written layoff procedures.


Guz v. Bechtel Nat’l, Inc., 24 Cal. 4th 317 (Cal. 2000)