How might an employer create an “implied-in-fact term” and how could a failure to follow such policies when terminating an employee create a breach of the contract?

Issue: Whether there is an implied covenant in at-will employment.

Facts: Plaintiff John Guz, a longtime employee of Bechtel National, Inc. (BNI), was terminated at age 49 when his work unit was eliminated as a way to reduce costs. At the time he was hired and at his termination, Bechtel had a Personnel Policy (no. 1101) on the subject of termination of employment which explained that “Bechtel employees have no employment agreements guaranteeing continuous service and may resign at their option or be terminated at the option of Bechtel.”

Guz sued BNI and its parent, Bechtel Corporation, alleging age discrimination, breach of an implied contract to be terminated only for good cause, and breach of the implied covenant of good faith and fair dealing.

Decision: The trial court found in favor of Bechtel and dismissed the action. The Court of Appeals reversed and determined that the trial should be permitted to proceed. Bechtel appealed to the Supreme Court of California, which in this opinion reverses the judgment of the Court of Appeals based on a finding that no implied contract exists and remands only for a determination of whether there are any enforceable express contract terms.

The trial court dismissed Guz’s separate claim for breach of the implied covenant of good faith and fair dealing because, on the facts and arguments presented, this theory of recovery is either inapplicable or superfluous. To the extent Guz’s implied covenant cause of action seeks to impose limits on Bechtel’s termination rights beyond those to which the parties actually agreed, the claim is invalid. To the extent the implied covenant claim seeks simply to invoke terms to which the parties did agree, it is superfluous. Guz’s remedy, if any, for Bechtel’s alleged violation of its personnel policies depends on proof that they were contract terms to which the parties actually agreed. The trial court thus dismissed the implied covenant cause of action.