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Foley v. Interactive Data Corp.
Citations: 765 P.2d 373; 47 Cal. 3d 654; 254 Cal. Rptr. 211; 3 I.E.R. Cas. (BNA) 1729; 1988 Cal. LEXIS 269Docket: L.A. 32148
Court: California Supreme Court; December 29, 1988; California; State Supreme Court
Daniel D. Foley, the plaintiff, filed a wrongful discharge lawsuit against his former employer, Interactive Data Corporation, after being terminated. In his second amended complaint, Foley presented three legal theories: (1) wrongful termination in violation of public policy, referencing Tameny v. Atlantic Richfield Co.; (2) breach of an implied-in-fact contract that promised discharge for good cause, citing Pugh v. See's Candies, Inc.; and (3) tortious breach of the implied covenant of good faith and fair dealing, referencing Cleary v. American Airlines, Inc. The trial court sustained a demurrer, leading to a judgment for the defendant, which was upheld by the Court of Appeal. The appellate court reasoned that Foley did not adequately allege a breach of public policy, his claim for breach of the covenant to discharge for good cause was barred by the statute of frauds, and his claim regarding the good faith covenant lacked necessary employment duration and formal termination procedures. Upon review, the Supreme Court of California agreed with the Court of Appeal's conclusion regarding the public policy claim but determined that Foley had sufficiently alleged a breach of an oral or implied-in-fact contract, which was not barred by the statute of frauds. The court also held that the covenant of good faith and fair dealing is applicable in employment contracts, allowing for contract but not tort damages in cases of breach. The facts included Foley's employment history with the defendant, starting as an assistant product manager in 1976. Defendant required plaintiff to sign a 'Confidential and Proprietary Information Agreement' as a condition of employment, which prohibited competing for one year post-termination and mandated disclosure of all computer-related innovations for the same period. Additionally, the agreement required plaintiff to assign all rights to such inventions to defendant for one year following termination, without specifying grounds for termination. Over nearly seven years, plaintiff received multiple salary increases, promotions, and accolades, including being named consultant manager of the year in 1979 and branch manager in 1981, with his salary reaching $56,164 and a merit bonus of $6,762 shortly before his dismissal in March 1983. Plaintiff alleged that defendant's officers provided oral assurances of job security based on adequate performance, leading him to forgo other job opportunities. Defendant maintained written 'Termination Guidelines' that outlined grounds for discharge and a mandatory seven-step procedure applicable to all employees, including plaintiff. Plaintiff believed he would not be terminated without good cause based on these representations. The situation leading to his discharge involved plaintiff disclosing concerns about his new supervisor, Robert Kuhne, who was under FBI investigation for embezzlement. Plaintiff reported these concerns to his former supervisor, Richard Earnest, who discouraged him from discussing it. Subsequently, Kuhne informed plaintiff of an impending performance-based termination and offered a transfer which would avert demotion. However, after a week, Kuhne presented an ultimatum: resign or be fired, without offering the promised performance plan. Defendant demurred to all claims, and after plaintiff submitted amended pleadings, the trial court upheld the demurrer, dismissing all claims, a decision affirmed by the Court of Appeal. Each claim will be examined further. Plaintiff's claim of wrongful discharge is based on Labor Code section 2922, which establishes that employment without a specified term is 'at will,' allowing termination by either party with or without cause. However, this right is constrained by public policy to prevent coercion into illegal activities or actions detrimental to the public interest. The principle was articulated in Petermann v. International Brotherhood of Teamsters, where a union agent was fired for refusing to testify falsely. The Court of Appeal overturned a lower court's ruling, asserting that discharging an employee for declining to commit perjury violates public policy. Similarly, in Tameny v. Atlantic Richfield Co., the court recognized a tort action for wrongful discharge when an employee was terminated for refusing to engage in illegal conduct, specifically price fixing. The court emphasized that employer demands for illegal actions breach fundamental legal duties and that actions for wrongful discharge do not rely solely on contract terms but on public policy protections against unlawful practices. Both cases highlight that employees have recourse for damages when terminated for refusing to violate the law. A contractual relationship does not prevent an injured party from pursuing tort remedies if an employer's termination of an employee violates public policy. The Court of Appeal in Koehrer v. Superior Court articulated that wrongful discharge is rooted in a legal duty for employers to adhere to public policy, rather than contractual terms. There is no valid distinction in wrongful termination cases based on public policy violations between at-will employees and those with fixed-term contracts. Other jurisdictions, like Wisconsin, have created a public policy exception to the at-will doctrine but focused on contract remedies, such as reinstatement and backpay, to address wrongful discharges. In contrast, California’s Tameny analysis views these wrongful discharge claims as tort actions, emphasizing the employer's legal duty to avoid terminating employees who refuse to engage in illegal activities, independent of the employment contract. The court highlighted that even in the absence of a specific statute against such terminations, public policy necessitates protecting employees who act in compliance with the law. This public policy is considered well-established and widely accepted. In Tameny, the employee claimed wrongful termination for refusing to engage in illegal conduct as instructed by his employer. The court clarified that while an employer generally has the right to terminate at-will employees, this right may be restricted by statute or public policy considerations. The Court of Appeal specified that to establish a Tameny claim, a plaintiff must allege retaliation for asserting statutory rights, refusing to commit an illegal act, or that the termination violated a statute. Other cases suggested that public policy grounds for wrongful discharge don't necessarily have to stem from statutory or constitutional provisions. The court did not resolve whether Tameny claims must be based solely on statutory or constitutional policies, nor whether non-legislative sources can support such claims. It emphasized the need to assess whether the termination contravened public policy benefiting the public, rather than just the employer or employee. The plaintiff alleged wrongful discharge for failing to report potential embezzlement, asserting a duty to inform the employer. However, the court noted that no statute explicitly requires reporting such information, nor does any statute prevent termination for doing so. Although the 1872 Civil Code addressed master-servant duties, it was unclear if the obligation to report information fell under its provisions. The court found no substantial public policy that prevented an employer from terminating an employee for fulfilling this duty, as past rulings on Tameny claims typically aimed to protect public interests, such as reporting criminal behavior or unsafe practices. Since the employee's duty to disclose primarily served the employer's private interests, it did not invoke the protections of Tameny. The Court of Appeal upheld the trial court's decision to sustain the demurrer without leave to amend regarding the plaintiff's first claim. The plaintiff's second cause of action claimed that his nearly seven years of employment with the defendant created an implicit "oral contract" prohibiting termination without good cause. The trial court upheld a demurrer without leave to amend, citing insufficient facts to establish such a contract and asserting that enforcement would be precluded by the statute of frauds. The Court of Appeal affirmed this decision, focusing on the statute of frauds. Civil Code section 1624(a) invalidates agreements not performable within one year unless documented in writing. In *White Lighting Co. v. Wolfson*, the court determined that the statute applies only to contracts that cannot be performed within a year. The court found that an indefinite employment contract could be performed within a year unless its terms explicitly prohibited completion within that timeframe. The Court of Appeal relied on *Newfield v. Insurance Co. of the West*, which suggested that an alleged contract allowing only the employee to terminate would violate the statute of frauds. The court reasoned that the employment relationship must either allow both parties to terminate at will—making it compliant with the statute—or restrict the employer's ability to terminate, which would then invoke the statute. The court noted that even if the oral agreement implied "permanent" employment conditional on performance, it could still be completed within a year since either party could terminate the agreement. Judicial precedents consistently hold that such contracts do not fall under the statute of frauds. Other jurisdictions also support the notion that a good-cause termination clause does not render an employment contract unenforceable under the statute, affirming that if termination can occur within one year, the contract is performable within that timeframe, irrespective of its potential duration. Interpreting the complaint's allegations liberally, it is concluded that the contract could potentially be performed within one year, contradicting the defendant's claim that it could not. The defendant's challenge to legal precedents is dismissed in light of a historical context where courts have clarified that if a contract could be fully executed within a year under certain contingencies, it does not fall under the statute of frauds. Notably, a 1897 Massachusetts ruling upheld an oral agreement for 'permanent employment,' rejecting the employer's argument that it violated the statute of frauds. The California Legislature, aware of such precedents when enacting Civil Code section 1624 in 1872, intended for the statute to apply only to contracts that are inherently incapable of being performed within a year. In this case, since the plaintiff could have either terminated the employment or been discharged for cause within a year, the contract is not governed by the statute of frauds, and its oral or implied nature does not hinder enforcement. Regarding the nature of the plaintiff's claims, although he frames his case as one for breach of an oral contract, he does not specify exact terms preventing termination without cause. Instead, he relies on a course of conduct and oral representations that fostered a reasonable expectation of job security, indicating a breach of an implied-in-fact contract. The Court of Appeal did not address the adequacy of these allegations due to a misapplication of the statute of frauds but expressed criticism of prior rulings that undermine established principles of employer-employee contracts. The defendant argues against the precedent allowing wrongful discharge claims based on implied-in-fact contracts, advocating instead for express contract provisions requiring good cause for termination, backed by independent consideration. The court affirms the relevance of the Pugh case, which established that implied promises can limit an employer's ability to terminate an employee arbitrarily. In Pugh, the plaintiff, who had a long tenure with the defendant, was assured job security based on loyalty and performance, and the court found sufficient evidence for a jury to conclude that an implied promise existed. The court notes that the Pugh ruling has been widely accepted and followed in various jurisdictions, indicating a trend towards recognizing implied contractual terms that limit at-will employment. It emphasizes the principle of freedom of contract, where employers and employees can agree to terms regarding employment duration and termination grounds. According to Labor Code section 2922, a presumption of at-will employment exists unless there is an express agreement outlining termination conditions. However, this presumption can be challenged by evidence indicating an agreement to limit termination power, such as requiring good cause. The court further supports that the absence of explicit contract terms does not automatically imply an at-will employment relationship, as the parties' conduct can reveal implied agreements. The defendant's position—that employment security agreements should not be enforced without independent consideration and clear mutual assent—lacks support in modern contract law, which has evolved beyond such limitations. The court sees no reason to deviate from general contract principles in the context of employment agreements. Special limitations on the enforceability of employment security agreements emerged in the late 19th century, specifically concerning contracts promising 'permanent' employment. In the case of Lord v. Goldberg (1889), it was established that such promises create an employment relationship of indefinite duration, terminable only for a valid reason. Subsequent cases reinforced the notion that contracts for permanent employment are interpreted as indefinite and terminable at will by either party, unless there is evidence of separate consideration or terms suggesting a contrary intention. The Pugh court clarified that imposing a requirement for separate consideration would contradict general contract principles, which do not evaluate the adequacy of consideration. An employee’s promise or provision of services can support an employer's commitments regarding wages and protection from arbitrary dismissal. In addition to consideration, the existence and terms of an employment agreement can be determined by factors such as employer policies, employee tenure, and employer communications indicating job security. According to Labor Code section 2922, absent an express or implied agreement, employment is terminable at will. However, enforceable expectations regarding employment duration or termination grounds are not diminished by this statute. The presumption of at-will employment can be rebutted by evidence of an agreement implying indefinite continuation pending specific events, such as employer dissatisfaction or just cause for termination. The Court of Appeal's view that employment security agreements are inherently detrimental to employers is rejected, as such agreements can enhance employee loyalty and productivity. Allowing implied terms in employment contracts aligns with general contract law principles, maintaining the at-will rule while acknowledging the validity of such agreements. Defendant argues that any implied promise to discharge only "for good cause" lacks adequate evidentiary support based on the factors cited by the plaintiff, referencing Pugh. This argument is rejected for multiple reasons. First, the duration of plaintiff's employment, nearly seven years, is sufficient for a court to find the existence of an implied contract, contrary to defendant's assertion that the period is too short. Establishing an implied contract depends on the totality of circumstances, including the parties' conduct and context, rather than solely on ambiguous language. The plaintiff presented claims of oral assurances of job security and consistent promotions, contributing to a reasonable expectation of discharge only for good cause. Second, an allegation that the employer breached written "Termination Guidelines" implies limitations on the employer's at-will discharge authority and can support a breach of contract claim. Case law supports that a trier of fact may infer an agreement based on the employee's reliance on company policies. Examples include personnel guidelines and performance evaluations that suggest a promise not to terminate without good cause. Finally, unlike the plaintiff in Pugh, the current plaintiff claims to have provided valuable consideration by signing a non-compete agreement, indicating a mutual intention for an ongoing relationship with restrictions on the employer's ability to terminate. This additional consideration may strengthen the argument for an implied contract regarding termination. Plaintiff has presented facts suggesting the existence of an implied-in-fact contract that restricts the defendant's ability to terminate him without cause, which could overcome the presumption established by Labor Code section 2922. In reviewing the demurrer, these facts are assumed true, allowing the plaintiff to seek proof of the alleged breach of this implied contract. Additionally, the plaintiff claims a tortious breach of the implied covenant of good faith and fair dealing in employment contracts, seeking tort remedies rather than solely contractual ones. This request is based on precedents that recognize the need for tort remedies in employment termination cases. While contract law aims to enforce the parties' intentions, tort law serves broader social policy purposes. The covenant of good faith and fair dealing, rooted in contract law, requires parties to act in good faith and is recognized in most jurisdictions. Historically, breaches of this covenant have been addressed through contract remedies, focusing on compensation for the injured party rather than punishment for the breaching party. The scope of this covenant is determined by the purposes of the contract involved and serves as a mechanism to address gaps in contractual obligations. The good faith doctrine is utilized by courts to fulfill the intentions of parties and safeguard their reasonable expectations in contracts. A breach of this duty typically leads to contract damages based on the breach's nature and standard principles. However, an exception exists for insurance contracts, where a breach of the implied covenant can result in tort actions. California courts have established this exception, notably in Comunale v. Traders General Ins. Co., which recognized an implied covenant of good faith and fair dealing in contracts, ensuring that neither party harms the other's right to benefit from the agreement. In Crisci v. Security Ins. Co., the courts allowed insured individuals to seek tort damages for emotional distress caused by the insurer's breach. The court in Gruenberg v. Aetna Ins. Co. clarified that the duty to adhere to this implied covenant exists regardless of the insurer's actions regarding claims. If an insurer unreasonably withholds payment, it may face tort liability. In Egan v. Mutual of Omaha Ins. Co., the court outlined reasons for allowing tort recovery in insurance contexts, emphasizing that the insured seeks protection rather than commercial advantage. Insurers, as providers of a quasi-public service, have obligations that extend beyond reasonable coverage expectations, including elements of decency and humanity. This relationship is inherently imbalanced, with the insurer often holding superior bargaining power, a notion reiterated in subsequent cases and scholarly discussions advocating for tort remedies in employment contexts, beginning with Cleary v. The American Federation of State, County and Municipal Employees. The Cleary court's decision to allow both tort and contract damages for a breach of the implied covenant was heavily influenced by insurance cases, specifically Egan and Comunale, without a thorough comparative analysis of insurance and employment relationships. The court inadequately referenced previous California employment cases, noting a vague suggestion from Coats v. General Motors Corp. regarding the employer's duty to demonstrate good faith in terminations, while neglecting that Coats only involved contract damages. Similarly, the court's reliance on Tameny dictum, which indicated potential tort remedies for breaches of the implied covenant, was misplaced as it was based on insurance law precedents and limited out-of-state cases, such as Monge and Fortune, which restricted recovery to contract damages. The majority of jurisdictions either expressly denied or implicitly rejected tort damages for breaches of the implied covenant in employment contexts. Both Tameny and Cleary overlooked that imposing tort liability for such breaches was unprecedented in employment law. The Cleary court's decision failed to critically assess the implications of extending tort remedies from insurance to employment scenarios. The court's analysis in 36 Cal.3d 752 emphasizes that while all contracts imply a covenant of good faith and fair dealing, the assertion that a breach of this covenant universally leads to tort action lacks clarity. The court noted that tort actions for breach of this covenant in insurance arise from the unique relationship between insurer and insured, suggesting that similar relationships might warrant comparable legal treatment. The court referenced Tameny, indicating that a breach of this covenant in employment contexts might also lead to tort remedies, though this suggestion was tentative. Subsequent Court of Appeal cases have generally failed to adequately evaluate the ramifications of their decisions, often rejecting claims of breach based on the specifics of the cases or relying too heavily on prior dicta. Specific cases, such as Koehrer and Khanna, attempted some analysis but did so on unexamined assumptions regarding the covenant's role and the permissibility of tort damages. The Ninth Circuit adopted the reasoning from Koehrer and Khanna but did not rigorously scrutinize the foundational aspects of these lower court decisions. Koehrer concluded that if an employer wrongfully denies good cause for discharge without a good faith belief in such cause, it may constitute a tortious act, allowing for a breach of the implied covenant claim. Koehrer expanded the cause of action from Seaman's, which was limited to contract existence denial, to include tort claims related to contract terms, specifically the requirement of good cause for termination. This extension raised the possibility of claiming tort damages for breaches of any contract term, without assessing whether tort remedies were suitable in employment contexts. The Khanna case similarly utilized Tameny and Cleary to explore factual grounds for breach of the implied covenant without addressing the appropriateness of the remedy, focusing instead on whether the employer acted in bad faith to undermine the employee's contract rights. The Huber case followed suit, favoring the approach taken in Koehrer and Khanna without further justification for tort remedies. The underlying issue in these cases is the uncritical application of insurance principles to employment law, which fails to consider the distinct policies of tort and contract law and the differences between insurer/insured and employer/employee relationships. When a court enforces the implied covenant, it protects the fulfillment of contractual promises rather than a broader societal duty of the employer. The distinction between "ex delicto" (tort) and "ex contractu" (contract) obligations is crucial, as breaching the covenant of good faith is fundamentally a contractual breach. The reliance on insurance law principles represents a significant departure from traditional contract law, necessitating careful examination before extending these principles to employment claims. The "special relationship" test from insurance law has been proposed as a framework for evaluating the appropriateness of tort remedies in employment contexts, highlighting the inapplicability of insurance-specific legal principles to commercial contracts. Commentators suggest that tort remedies for breach of the covenant should not be universally applied in commercial contexts, but public policy may warrant such remedies under specific conditions. Four criteria must be met for applying the tort of bad faith to commercial contracts: (1) one party holds a superior bargaining position, allowing them to dictate contract terms; (2) the weaker party seeks the contract primarily for essential services or financial security rather than profit; (3) there is a trust-based relationship where the weaker party relies on the stronger party; and (4) the stronger party engages in conduct that undermines the weaker party's contractual rights. There's an indication that a tort remedy could be acknowledged in employment contexts, albeit with limitations. However, others argue that employment relationships differ significantly from insurance contexts, citing the lack of universal bargaining inequality in employment, the absence of fiduciary duties akin to those in insurance, and the non-public nature of employers compared to insurance companies. Critiques of the 'special relationship' test highlight its lack of principled decision-making, with concerns that it could lead to tort claims in nearly any contract case. Additional commentary points out that the model does not adequately justify tort liability for legal conduct, fails to clarify the scope of tort duties related to good faith, and inadequately distinguishes between different types of contract breaches, potentially leading to unfair punitive damages. A "special relationship" akin to that between insurer and insured does not exist in the typical employment context to justify a tort action for breach of the implied covenant. Even if such a model were deemed suitable for expanding tort recovery, the economic circumstances faced by an employee after wrongful termination differ significantly from those of an insured dealing with a bad faith insurer. An insured often cannot seek alternative coverage for already incurred losses, while a wrongfully terminated employee is expected to actively search for new employment to mitigate damages. The employer-employee dynamic does not involve the same protective intent or public service role as the insurer-insured relationship. Employers do not contractually provide protection against economic harm, and the interests of employers and employees generally align, as employers benefit from retaining good workers. This contrasts with the insurer-insured relationship, where financial interests are often opposed. Therefore, the justification for imposing additional disincentives on employers does not match the necessity seen in the insurance context, where conflicting financial interests create a more significant need for legal protections. The Legislature has a basis for providing employees with additional protections, but extending judicially created relief for employment relationships is less necessary. The employment relationship does not closely resemble that of insurer and insured, which diminishes the justification for introducing new tort remedies. Economic policy concerns, the separation of tort and contract law, and existing protections against wrongful termination already in place for employees are significant factors. However, the impacts of employment termination may warrant further remedies for certain wrongful discharges. Existing employment laws that limit an employer’s right to terminate based on discrimination or the exercise of employee rights demonstrate a legislative recognition of the employment relationship's importance and the need for protecting public policies within this context. The push for extending tort remedies arises from perceptions that traditional contract remedies fail to adequately address breaches, comparisons between protections for nonunion and union employees, economic changes leading to job displacement, and increased awareness of anti-discrimination laws. The question remains how courts should navigate these issues without departing from established contract law principles, as doing so could significantly affect employment dynamics, costs, and job availability. Such decisions involve substantial policy implications more appropriately suited for legislative action. Furthermore, the scope of at-will employment has been significantly influenced by state and federal regulations, including laws on workers' compensation, anti-discrimination, fair labor standards, and minimum wage, challenging the traditional at-will employment doctrine. Unionization of a portion of the domestic workforce significantly affects employment termination law, as the rights of these workers upon termination are primarily dictated by collective bargaining agreements. Professor Gould argues that the evolving common law surrounding wrongful discharge has created a challenging environment for both employers and employees, with unpredictable jury decisions and limited employee benefits due to the complexities of lengthy litigation and restrictive legal doctrines. He proposes arbitration as a more effective alternative, noting the limited effectiveness of tort actions in addressing employee protection inadequacies. Furthermore, Professor Putz and co-author Klippen argue that tort liability is not an effective solution for bad faith defenses in commercial contract disputes, suggesting instead that contract damages be made adequate by allowing prevailing plaintiffs to recover attorney fees when the breaching party unreasonably denies liability. Other commentators advocate for expanded recoverable contract damages or propose restrictions on the application of tort damages. This divergence of opinions highlights a common belief in the inadequacy of current compensation while also revealing significant disagreement about the appropriateness of tort remedies for contractual breaches. The text emphasizes that the employment relationship is fundamentally contractual, advocating for contractual remedies to remain the exclusive relief for breaches of the implied covenant of good faith and fair dealing in employment, absent legislative changes. Predictability in employment contract consequences is essential for commercial stability, and it is crucial that employers retain discretion in employee dismissals without the constant threat of tort recovery for every case. The difficulty of defining "deserving" cases for tort relief further complicates matters. Professor Summers describes "good faith" as a term lacking a universal meaning in contract law, serving primarily to delineate various forms of bad faith in specific contexts. In tort actions stemming from employee discharge, disputes often arise regarding the employer's subjective intentions, making resolutions at the demurrer or summary judgment stage uncommon. The standards set forth in Koehrer and Khanna do not effectively limit an employee's ability to pursue actions post-termination. A breach of the implied covenant of good faith and fair dealing occurs when an employer acts in bad faith outside the contract while intending to undermine the employee's contract rights. However, the courts' definitions allow for a broad interpretation, where ordinary contract breaches could be framed as bad faith actions. This ambiguity complicates the assessment of employer motives and runs contrary to the statutory limitations on compensatory and exemplary damages in contract breaches. The formulations suggest that the implied covenant in employment contracts could receive more protection than breaches of express or implied-in-fact promises, which only warrant contract damages. The Koehrer court acknowledged the challenge in distinguishing between contract breaches and legally imposed obligations but failed to recognize that, traditionally, the breaching party's motive does not impact the damages recoverable for breach of the implied covenant. The reliance on "bad faith" to define tort damages introduces uncertainty, allowing nearly any discharge to be claimed as bad faith. Emphasizing contract remedies may be a more effective solution for wrongful termination claims, balancing employee protections against the potential destabilization of the business environment. While acknowledging employee concerns regarding arbitrary discharges and the inadequacy of contract remedies, these issues are prevalent in contract law overall. Various remedies for breach of contract are highlighted, including increased damages, attorney fees, expedited dispute resolution methods like arbitration, and tort remedies, which are subject to contention. The text emphasizes the confusion arising from looking beyond contract law for solutions, citing legislative obligations that align with broader social policies. Citing Justice Kaus in *White v. Western Title Ins. Co.*, it suggests that tort recovery may not effectively address issues outside of insurance contexts, indicating that legislative intervention may be necessary. The plaintiff is permitted to pursue a cause of action based on an implied-in-fact contract that allows discharge only for good cause, which is not barred by the statute of frauds. However, the claim for breach of public policy under *Tameny* is dismissed, as the alleged facts do not support a violation of public policy. Additionally, tort remedies for breach of the implied covenant of good faith and fair dealing are deemed unavailable for employees claiming wrongful discharge. The Court of Appeal's judgment is affirmed regarding the dismissal of claims related to public policy and tortious breach but reversed concerning the implied-in-fact contract claim, remanding the case for further action. Justice Broussard concurs partially, agreeing on the dismissal of the public policy claim and supporting the breach of contract claim but expressing concern over the majority's approach, which he views as neglecting adequate remedies for wrongfully discharged employees and potentially destabilizing existing legal protections. The majority's opinion limits recourse to contract claims, acknowledging that traditional damages may fall short in providing sufficient compensation. A significant number of commentators have proposed that addressing perceived inequities in contract damages may require expanding the types of recoverable damages in breach of contract cases. However, the authors agree that these issues should not be resolved in the current case. They affirm that traditionally, recoverable damages in contract actions are limited to those foreseeable to the parties at the time of contracting, which typically excludes damages for mental or emotional distress. Exceptions exist if the parties anticipated that a breach would cause such distress, as illustrated by several cases: in Allen v. Jones, the court allowed recovery for emotional distress when a funeral home breached a contract concerning cremated remains; in Ross v. Forest Lawn Memorial Park, recovery was permitted for distress caused by a breach involving grave protection; and in Wynn v. Monterey Club, the court deemed emotional distress potentially foreseeable from a breach affecting a marriage. The authors note that while these precedents have not yet been applied to wrongful discharge cases, there is evidence that employers often know that a bad faith discharge can lead to significant emotional distress. Thus, applying existing precedents could provide remedies for such injuries. Furthermore, the authors critique the majority's mischaracterization of the plaintiffs' position regarding wrongful discharge law. The majority holds that analyzing contract law principles is essential when considering extending tort remedies for wrongful termination, concluding that focusing on contract remedies is the best approach. However, the dissent argues that the case is about maintaining existing remedies rather than expanding them, emphasizing that the defendants and majority seek to limit remedies. The dissent insists on preserving the tort cause of action for bad faith discharge, asserting that such a cause is well-established in California common law. Key points include: 1. A tort remedy for bad faith discharge is a recognized aspect of California law. 2. Established precedents for tort actions in insurance cases support extending similar tort recovery to bad faith discharge. 3. The existence of a contractual cause of action for wrongful discharge does not preclude a tort action for bad faith. 4. It is illogical to abolish the tort cause of action based on the argument that significant changes in remedies should be left to lawmakers. The dissent references Tameny v. Atlantic Richfield Co. as foundational for recognizing tort actions for wrongful discharge and highlights cases like Cleary v. American Airlines and Crosier v. United Parcel Service, which affirm the dual nature of wrongful discharge claims. Cleary established that a plaintiff could have a cause of action for wrongful discharge in both tort and contract, while Crosier and Shapiro further discuss the application of these principles in specific cases. A tort action for breach of a commercial contract is permissible only if the breaching party, in bad faith, denies the contract's existence. Tort remedies in insurance cases are broader due to the unique relationship between insurer and insured, suggesting that other similar relationships may warrant similar legal treatment. The court previously indicated that breaching the covenant of good faith and fair dealing in employment might also lead to tort remedies, as these relationships share characteristics with insurance contracts. In Rulon-Miller v. IBM Corp., the court upheld a jury's finding of bad faith discharge when an employee was terminated under the pretext of a conflict of interest, which was not substantiated. Subsequent cases like Wallis and Wayte reinforced the idea that employer-employee relationships possess traits akin to insurance contracts, especially regarding bad faith actions, such as refusal to pay benefits. Khanna v. Microdata Corp. established that a tort claim arises when an employer acts in bad faith outside the contract, intending to undermine the employee's rights. This principle was reaffirmed in Gray v. Superior Court, where a worker fired based on a false performance report could pursue a tort claim. Koehrer v. Superior Court, summarized in a dissenting opinion, is also recognized as a significant case regarding bad faith discharge. A tort cause of action for bad faith discharge can arise when an employer claims good cause for termination without probable cause and in bad faith, as noted in Koehrer. The Court of Appeal in the current case adopted a restrictive interpretation, requiring plaintiffs to allege facts similar to those in Cleary, such as 18 years of employment and a violation of specific guidelines, to establish a valid tort claim. Despite this limitation, there are eight unanimous Court of Appeal decisions that support a tort action for bad faith discharge, leading to the Ninth Circuit's recognition of such a cause of action under California law. The Ninth Circuit found the tort action is not restricted to Cleary-like cases, referencing Koehrer and Khanna to affirm broader applicability. Numerous legal commentators agree that a tort cause of action for bad faith discharge is well-established in California common law. This consensus has prompted employers to adjust personnel policies and insurers to modify premium calculations, reflecting reliance on this legal doctrine. A substantial number of cases are ongoing in California courts based on the assumption that such a tort action exists. The majority of justices do not dispute prior precedents but caution against changing established law without acknowledging the reliance on it. They argue that the current ruling fundamentally alters California law by eliminating an established cause of action, contrary to claims of making a conservative decision. A dissenting opinion challenges the majority's rejection of a tort action for bad faith discharge of an employee, arguing that the analogy to tort actions in insurance cases is justifiable despite the majority's claims of significant differences between the two contexts. The dissent maintains that the distinctions cited by the majority, particularly regarding economic benefits of retaining employees versus paying out claims, are not fundamentally different when considering long-term business viability. It argues that both insurers and employers can act arbitrarily without facing consequences unless damages exceed short-term profits. Furthermore, the dissent refutes the majority's point on the ability of discharged employees to mitigate damages, emphasizing that many cannot, particularly long-term employees or those in specialized roles. The dissent also contends that the public interest in deterring arbitrary employment contract breaches is as significant as that for insurance contracts. Lastly, it asserts that the majority overlooks the commonality in seeking financial security between insured individuals and employees, suggesting that employment contracts are more analogous to insurance contracts than commercial contracts, emphasizing a general rule rather than exceptions. The key issue is whether an employment contract resembles an insurance contract or a commercial contract. It is argued that employment contracts are more akin to insurance contracts because individuals seek employment for security and peace of mind rather than merely for financial gain. Employment provides essential elements like status, reputation, and financial stability, which are crucial for fulfilling future obligations and accessing benefits like pensions and health insurance. Therefore, limiting damages for wrongful termination to lost income is insufficient, as the consequences of bad faith actions by employers can be severe, similar to those faced by insured individuals. Unlike commercial contracts, which are typically negotiated between parties of equal strength for profit, employment and insurance contracts involve a significant reliance on good faith, with the latter providing security and well-being. The text concludes that prior judicial decisions appropriately likened the employer-employee relationship to the insurer-insured dynamic and distinguished it from commercial contracts. Furthermore, it asserts that the existence of a breach of contract action does not preclude a tort action for bad faith, challenging the view that bad faith breaches are merely contractual violations. The covenant of good faith and fair dealing is a legal obligation, distinct from the terms of a contract, as noted by Justice Kaufman. The majority's reasoning against tort recovery in insurance cases has been previously rejected by the court. There is a crucial distinction between a contract action for wrongful discharge and a tort action for bad faith discharge. A wrongful discharge suit does not primarily rely on the covenant but on other contractual provisions that limit an employer's at-will discharge rights, which may include requirements for good cause or specific conditions like production quotas or grievance hearings. In tort actions for bad faith discharge, the wrongful nature of the discharge must first be established, after which the focus shifts to societal interests in deterring arbitrary or malicious conduct rather than merely enforcing contractual provisions. The majority's criticism of tort remedies for being different from contract remedies overlooks the fundamental purpose of tort law. They argue that abolishing tort remedies would enhance damage predictability, yet unpredictability is inherent in many tort actions, including those for emotional distress, similar to negligence or product liability cases. While the majority claims that defining "deserving" cases for tort relief is challenging due to the subjectivity of good faith, a clear criterion exists: an employer acts in bad faith if they do not believe they have a legal right to terminate the employee. Contrary to the majority's assertion, a breach of contract does not necessitate a finding of bad faith, highlighting a misunderstanding in their position. The distinction between contract and tort lies in the nature of the employer's belief regarding their right to discharge an employee. A discharge made in good faith, based on the employer's belief in legal justification, contrasts with a deliberate violation of the employee's rights. The text critiques the majority's reliance on a traditional contract law perspective, which does not differentiate between good faith and bad faith breaches, arguing that this view is misplaced. The author contends that tort law recognizes these distinctions and is necessary for addressing wrongful discharges. The majority's stance, which seemingly equates the damages owed by employers who act maliciously with those who believe they have a legitimate right to terminate, is deemed illogical. The author argues that abolishing tort remedies for bad faith discharge while suggesting that legislative action is preferable creates a contradiction, as the majority acknowledges the inadequacy of traditional contract remedies yet fails to clarify existing tort law. Instead, they reject it, undermining established legal precedents regarding wrongful discharge. The Court reverses a prior decision from the Court of Appeal and overrules seven other unanimous decisions regarding the same issue. This change will lead to reversals in about ten additional cases that recognized a tort cause of action for bad faith discharge. The Court adopts a new rule limiting damages for workers discharged in bad faith to contract damages, a rule that has been criticized by commentators and deemed inadequate by the majority. Following this significant alteration of California law, the responsibility for legislative change shifts from well-organized employers and insurers to unorganized workers, who now face inadequacies in damages for bad faith discharge that did not previously exist. The Legislature had previously considered similar issues when bills aimed at abolishing tort remedies for bad faith discharge were introduced but not enacted, indicating a lack of intent to eliminate such remedies without adequate replacements. The majority's decision, which follows a recent ruling that abolished tort claims for bad faith settlement practices by insurers, undermines protections for consumers and workers while extending tort immunity to insurers and employers for bad faith actions. This shift imposes the burden of legislative change on the vulnerable consumer and worker, contrary to the common law's purpose of protecting the weaker party in disputes. Justice Kaufman expresses dissent regarding the breach of the implied duty of good faith and fair dealing in employment, asserting that such breaches may warrant tort remedies, citing historical precedent established in Comunale v. Traders General Ins. Co. The excerpt critiques the majority's characterization of the covenant of good faith and fair dealing as merely a contractual term aimed at enforcing promises. Instead, it emphasizes that this duty is imposed by law, not derived from the contract itself, highlighting its nonconsensual nature. The duty of good faith and fair dealing is meant to reflect societal norms rather than the specific agreements between parties. Tort actions, which enforce these legal duties based on social policy, justify the extension of tort remedies for breaches of good faith. The court has previously recognized the heightened duty of insurers, noting that insurance contracts inherently create an imbalance of power favoring the insurer. The insured seeks protection rather than commercial advantage, underscoring the importance of this legal duty in safeguarding societal interests against harm from nonconsensual conduct. In the common law tradition, courts have developed a "bad faith" doctrine applicable beyond insurance contexts, allowing for tort actions based on breaches of the duty of good faith and fair dealing in contracts that exhibit characteristics akin to the insurer-insured relationship, such as public interest, adhesion, and financial dependency. Recent California Court of Appeal decisions acknowledge that willful and malicious discharge from employment can lead to tort remedies, reinforcing that the criteria for tort actions in insurance cases are even more applicable in employment scenarios. However, the majority opinion ultimately rejects the analogy between insurance and employment relationships, arguing that employees can seek alternative employment, unlike insured individuals who face economic dilemmas, asserting that employers do not provide economic protection and that the interests of employers and employees are often aligned rather than at odds. These positions are criticized for presenting an unrealistic view of the employment relationship and for failing to establish necessary standards of decency in that context. The court emphasizes that establishing standards for employment relationships is a critical judicial obligation, not judicial legislation. It argues against the notion that the employment relationship is less susceptible to abuse than the insurer-insured relationship. The employee's reliance, dependency, and vulnerability to the employer create a significant power imbalance that worsens over time, undermining any initial bargaining strength. The court stresses that employment is primarily sought for financial security, which is more vital than insurance, and that wrongful termination causes greater emotional distress than denied insurance claims. It contends that the principles of justice and equity should extend to employment situations, countering the majority's view that such legal remedies are legislative matters and that concerns about increased litigation should prevent recognition of employee rights. The court dismisses these arguments, asserting historical precedent against them and referencing People v. Pierce to support its position. The excerpt articulates the essential role of courts in the evolution and maintenance of common law, emphasizing that courts should not relinquish this responsibility. It highlights the common law as a dynamic system, rooted in broad unwritten principles shaped by societal needs and advancing civilization. Judicial evolution of common law is crucial, as demonstrated by cases where courts have made significant legal changes, such as abolishing sovereign immunity (Muskopf v. Corning Hospital Dist.) and the doctrine of contributory negligence in favor of comparative negligence (Li v. Yellow Cab Co.). These decisions underscore the court's duty to adapt the common law in response to reason and equity, rather than deferring to legislative action, thus reinforcing the notion that the judiciary is the primary driver of legal evolution within the common law framework. The excerpt conveys a clear message that the vitality of common law relies on the courts' proactive engagement with legal principles. A married individual whose spouse suffers injury due to a third party's negligence can pursue a loss of consortium claim, as established in previous landmark cases that also eliminated interspousal immunity for negligent torts. These decisions involved complex choices among competing social and economic policies, highlighting ongoing debates about the economic efficiency and political implications of tort remedies for wrongful employment termination. Notably, the majority's reliance on such arguments to justify judicial abstention is criticized; courts should uphold common law rather than defer to political branches or expert opinions. The dissent counters the majority’s assertion that bad faith liability is unmanageable, referencing prior rulings that reject this premise. It emphasizes that courts are capable of adjudicating bad faith termination cases based on established guidelines. The dissent further clarifies that under the Koehrer standard, an employer is not liable for simply disputing a discharge's legality if they act in good faith. However, if the employer claims good cause for termination without a reasonable belief in its existence, this constitutes a tortious breach of the implied covenant of good faith and fair dealing, allowing for legal recourse. The dissent argues that wrongful discharge claims should only arise from willful and malicious actions, asserting the adequacy of existing standards to differentiate between legitimate contract breaches and those motivated by bad faith. A pleading alleging bad faith discharge can be supported under the referenced standards, as denial of such claims risks an influx of litigation. However, this concern is deemed unfounded, akin to the court's reasoning in Klein v. Klein, where spousal immunity for negligent torts was abolished. The court emphasized that it should not dismiss a valid claim based on fears of future frivolous lawsuits. Each case should be evaluated on its own merits, regardless of the volume of claims, particularly highlighting the pressing societal need for legal recourse in cases of malicious termination. The majority opinion reflects apprehension regarding judicial overreach, suggesting that courts should exercise restraint in their law-making role. However, it is argued that judicial responses to evolving social needs do not violate institutional boundaries. The dissenting opinion, voiced by Justice Mosk, aligns with Justices Broussard and Kaufman, but disagrees with their view in part I of the majority opinion. Mosk advocates for the duty of employees to report wrongdoing, such as embezzlement, to uphold the company's integrity, countering the notion that such action is solely for the employer's benefit. Advising a state-created corporation about the employment of an individual potentially involved in a felony is deemed beneficial for society and is protected under public policy. Labor Code section 1102.5(b) prohibits employer retaliation against employees who disclose information to law enforcement regarding suspected legal violations. It is inconsistent to allow retaliation when an employee reports concerns directly to their employer instead of going to a public agency. The law and public policy are relevant in both scenarios. Following a discharge in September 1983, the plaintiff's former supervisor pleaded guilty to embezzlement, raising questions about the motivations attributed to the plaintiff, including alleged attempts to undermine the supervisor and a rejection of a transfer opportunity. However, these counterclaims are not considered in the current appeal, which proceeds on the assumption that the allegations in the complaint are true. Various federal and state statutes limit at-will employment, preventing discharge for specific reasons such as union activities or discrimination based on protected characteristics. California courts have upheld the principle that at-will employees cannot be discharged in violation of public policy, as evidenced by several case precedents. Contracts for illegal purposes are generally unenforceable. In cases like Tameny, an employee may be terminated for refusing to engage in illegal acts that violate public policy. The nature of the employment relationship—whether at will or contractual—is irrelevant; the focus is on protecting public interest by preventing employers from imposing illegal conditions on employment. The excerpt cites Labor Code section 1102.5, which prohibits retaliation against employees disclosing information about violations of statutes or regulations. The Tameny case underscores that a public policy basis for a wrongful termination claim must be firmly established and substantial. Other jurisdictions echo this requirement for a clearly mandated public policy. Furthermore, if an employer and employee agree that the employee need not report adverse information about a co-worker, such an agreement would not violate public policy, highlighting the absence of a public interest in that scenario, unlike previous wrongful termination cases where public interests were at stake and could not be overridden by private agreements. In Tameny v. Atlantic Richfield Co., a contract requiring an employee to violate antitrust laws was deemed void due to public policy, while in Petermann v. Teamsters Local 396, a provision mandating perjury was also invalidated. In the current case, the employer's decision to terminate an employee for not disclosing information does not constitute a violation of fundamental employer duties, as parties can agree to limit disclosure obligations. The relevant case, Read v. City of Lynwood, involved a city employee who protested a contract award and faced termination; while the dismissal of her suit was reversed for further examination of her position's elimination, her Tameny claim was upheld as invalid. Contracts allowing at-will employee departure but restricting employer discharge rights are enforceable, as shown in Pugh v. See's Candies, where mutuality of obligation is not required if consideration is present. The statute of frauds defense, not previously raised in Pugh or Cleary, would defeat claims based on oral or implied promises of discharge for cause if the employee served less than a year, potentially undermining long-term employees' claims. The Court of Appeal in Gray noted a conflict between Newfield and White Lighting, opting not to follow Newfield pending the current appeal's outcome. Newfield represents a minority view on the enforcement of oral employment contracts, while the majority view holds that such contracts are enforceable under the statute of frauds if the employee can terminate or be discharged for cause within one year. The Ninth Circuit's decision in Robards v. Gaylord Bros. Inc. supports that the statute of frauds does not bar breach of employment contract actions under California law. In contrast, the case of Phillippe v. Shappell Industries illustrates that Civil Code section 1624(d) requires written agreements for certain real estate transactions and that licensed brokers cannot use estoppel against a statute of frauds defense in recovering commissions under oral agreements. The statute of frauds must be assessed based on the parties' intentions at the agreement's inception, not retrospectively. The original intent must indicate that the agreement cannot be fully performed within one year. The Court of Appeal's retrospective approach misinterprets this requirement by shifting from a "possibility of performance" to a "probable expectations" test. The ruling in Newfield is disapproved to the extent it conflicts with this opinion. Additionally, the plaintiff claims that the defendant's "Guidelines for Termination" required good cause for discharge, which the plaintiff believed applied to him. However, without alleging an express agreement regarding these guidelines, the plaintiff cannot establish a breach of an oral contract. The Restatement Second of Contracts clarifies that intent to make a promise can be shown through various means, including written or oral communication. Finally, the Michigan Supreme Court's analysis in related cases questioned whether an employment contract labeled as "permanent" was subject to at-will termination by the employer. Courts have been evaluating the conditions under which an employee may be terminated, focusing not solely on the at-will doctrine but on the specifics of termination rights within employment agreements. Recent cases, such as *Shapiro v. Wells Fargo Realty Advisors*, indicate that an express written provision affirming at-will status can preclude claims for implied modifications to employment agreements. In the case at hand, the plaintiff's complaint includes two documents: one prohibiting competition during employment and another mandating the assignment of computer-related innovations for one year post-termination. These documents do not specify grounds for discharge, which may align with an implicit promise of termination only for good cause based on the employer's policies. The court does not address the potential damages in a wrongful discharge claim, as the plaintiff's specific damages and supporting evidence are not under consideration. Certain breaches of contract can be economically advantageous, permitting a party to evaluate the gains from breaching as outweighing the losses incurred by the other party. Outside California, few cases have recognized tort damages for breaches of the covenant of good faith and fair dealing in employment contexts. Notably, the Nevada Supreme Court in *K Mart Corp. v. Ponsock* allowed tort damages for bad faith termination aimed at undermining retirement benefits. Other cases in Illinois and Montana also suggest the potential for tort liability, contingent upon the employer's actions creating a reasonable expectation of job security for the employee. Generally, the covenant is seen as inherent in all employment contracts. The Montana standard resembles criteria for determining an implied-in-fact contractual term that prohibits discharge without just cause. Following the Dare decision, the Montana Legislature introduced a new statute addressing discharge remedies. The case Hall v. Farmers Ins. Exchange suggests potential damages beyond contractual remedies, yet it ultimately restricted damages to the expected future income the plaintiff was entitled to receive. Various states, including Alaska and Kansas, have explicitly denied tort damages for breaches of the implied covenant in employment contexts, limiting recovery to contract damages. Courts have consistently rejected the application of the implied covenant to at-will employment contracts. Although Justice Broussard mentioned a consensus favoring tort liability for breaches of the covenant, no definitive ruling from this court has established such a cause of action. The court retains the authority to overrule lower court decisions and clarify the law, indicating a willingness to address the issue rather than leave it unresolved. A unicameral legislative veto over executive agency decisions has been ruled unconstitutional, infringing upon the separation of powers and impacting nearly 200 veto-type procedures established over the past 50 years. Justice White's dissent argued that the longstanding practice of Congress relying on the legislative veto weighed in favor of its constitutionality, asserting that the Court's interpretation of the law did not constitute a radical change as suggested by Justice Broussard. In Wallis v. Superior Court, the Court of Appeal analyzed the distinctions between an insurance contract and ordinary commercial relationships, concluding that employment contracts have inherent inequalities, justifying tort relief for employees. Factors included the employee's financial vulnerability and lack of skills, the employer's awareness of this position, and the inadequacy of ordinary contract damages to deter breaches. Employees are protected from discriminatory discharges based on age, sex, race, religion, and for exercising certain rights, with tort relief available for terminations against public policy. Legislative bodies have the authority to gather evidence and hold hearings on discharge policies. Specific jurisdictions have enacted laws to protect employees: Puerto Rico mandates backpay and additional compensation for unjust discharges; the Virgin Islands stipulates grounds for termination with remedies; Montana's "Wrongful Discharge From Employment Act" outlines wrongful discharge scenarios including retaliation against public policy violations and failure to provide good cause post-probation. Remedies for wrongful discharge are limited to wages and fringe benefits for a maximum of four years post-discharge, including interest. Punitive damages require clear and convincing evidence of employer fraud or malice and are not available for common law claims due to statutory preemption. Many European and Western countries have established job protection laws and alternative dispute resolution methods. Over the past 75 years, workplace legislation has aimed to promote unionization, establish minimum economic entitlements, combat discrimination, protect employee health and safety, and ensure retirement security for workers. The damages for employment contract breaches are generally predictable, but the rising costs of litigation, particularly in California wrongful termination cases, have alarmed the business community, with jury awards often exceeding attorney settlement demands significantly. Employers express concern that increased liability may undermine their management control and flexibility in responding to economic changes. The good faith performance doctrine supports market functions, but the proposed test for tortious breach highlights challenges in proving bad faith, as it requires subjective and objective evaluations that are difficult to distinguish. Despite potential restrictions on damages recovery, the test does not effectively limit litigation initiation for discharges, and punitive damages are considered inappropriate in this context. The argument for imposing tort liability centers on providing better compensation for victims of bad faith conduct. However, it contends that punitive damages are inappropriate for breaches of the implied covenant of good faith and fair dealing, as tort damages are sufficient for remedying inadequate compensation and deterring breaches. The approach proposed resembles efforts to expand contract damages for adequate compensation. Jurors often render large awards based on personal fairness standards rather than legal standards, which complicates the determination of employer motives for discharge. Unlike collective bargaining agreements that filter grievances, the suggested tort action lacks entry-level limitations. In breach of covenant cases, a plaintiff must show an agreement to terminate only for good cause and that the employer acted without good cause, but recent formulations add a "bad faith" element without clarifying how it differs from contract damages. For at-will employment, a claim of discharge without good cause contradicts the nature of at-will contracts and could nullify Labor Code section 2922. The implied covenant does not guarantee continued employment, as it merely protects the agreed benefits of the contract, and there is no agreement for good cause termination in at-will relationships. The court emphasizes that the obligations of the implied covenant depend on the contract's nature and the parties' legitimate expectations. Obligations arising from contracts differ from those imposed by law, necessitating careful examination to ascertain whether an alleged breach constitutes a tort or a breach of contract. The implied covenant of good faith and fair dealing ensures parties receive the benefits of their agreements, and denying these benefits constitutes a breach of this implicit duty. Prior cases allowing tort actions for breaches of this covenant are disapproved. The court has not yet addressed whether its ruling will apply retroactively or prospectively, as this issue was not raised by the parties. There are concerns regarding emotional distress damages that may not be foreseeable at contract formation, yet could occur later due to reliance on the employment. The precedents do not support punitive damages for bad faith breaches, which some believe are necessary to deter wrongful conduct. A dissenting opinion argues that tort remedies should be more expansive in employment cases due to the potential severe harm to an employee's reputation and future employment opportunities. The court also acknowledged ongoing reviews of several cases related to tort remedies for bad faith discharge, with previous appellate rulings supporting such remedies. Ponsock, a forklift driver with a decade of service, was terminated for using a damaged can of spray paint to paint his forklift, an act previously overlooked for other employees. His firing was justified by claims of "defacing" company property and "stealing" paint. After losing his job, Ponsock struggled to find work, ultimately securing a laborer position at half his former salary, forcing him to sell his home at a loss. Traditional contract damages would not adequately address his financial losses or emotional distress, nor would they deter arbitrary employer actions. The employer would owe Ponsock the wage difference, but due to the ability to replace him with a lower-paid worker, could potentially benefit from the wrongful termination. The excerpt also highlights the imbalance of bargaining power in both insurance and employment contracts, noting that this has led to a general rule favoring the insured in disputes. Although contracts, including at-will employment agreements, include an implied covenant of good faith and fair dealing, arbitrary termination does not constitute a breach of contract. The discussion emphasizes the importance of predictable damages in commercial contexts but argues that this should not apply to employer-employee relationships, where termination can cause broader harm. Additionally, the text points out that tort law incorporates subjective elements like malice and bad faith, and some suggest courts should evaluate the reasonableness of employer actions. Despite the majority's decision to eliminate the cause of action, concerns about false pleading of bad faith are considered exaggerated, as plaintiffs still retain contractual remedies. The text critiques a legal majority's position that restricts plaintiffs from including valid tort claims in their complaints while aiming to eliminate false tort claims. It argues that many cited commentators do not address tort remedies for employees directly, focusing instead on commercial contracts or at-will employee rights. Most commentators acknowledge the insufficiency of contract damages and suggest alternatives, indicating opposition to the majority's proposal to abolish tort damages without a substitute. The text highlights inconsistency in the majority's stance, noting they imply that courts could expand contract damage measures without legislative action, which raises concerns over employee remedies. The majority's disapproval of the case Cleary v. American Airlines and its subsequent cases is mentioned, along with a misleading comparison of decisions from other jurisdictions regarding tort causes of action, with a slight majority supporting such actions when excluding a California-based case. The majority's analysis includes a broad range of decisions, notably those that contradict California law by asserting the absence of an implied covenant of good faith in at-will employment contracts. These decisions do not address whether tort damages can be awarded for bad faith breaches of contracts that prohibit termination without good cause. In total, there are 13 cases supporting a tort cause of action compared to 3 cases that reject it; this count excludes approximately 10 additional cases that have been depublished due to pending reviews. The text references proposed legislation on wrongful discharge and insurance bad faith, illustrating ongoing legal discourse. Commentators argue that the term "implied covenant" is misleading and suggest that "duty" more accurately represents the obligation of good faith and fair dealing in contract enforcement, as supported by the Restatement Second of Contracts, section 205, which states that all contracts impose this duty on the parties involved. The excerpt also recalls the rejection of sovereign immunity, leaning on previous rulings that dismantled tort immunity for charitable organizations, suggesting a judicial trend towards accountability.