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Good faith and fair dealing: Employment Law 101: #7 of 60
December 12, 2005 by Ross Runkel at LawMemo
Two basic principles of contract law seem inconsistent with each other, and cause courts a problem.
- Employment at-will: The principle that an employer can fire an employee at any time and for any reason and without advance warning. Unless the employer and employee have a different agreement, this usually will be the rule a court will apply.
- Covenant of good faith and fair dealing: The principle that every contract includes an implied duty to act in good faith as to the performance and enforcement of the contract.
[Employment Law 101, published Monday-Wednesday-Friday, is a series designed to give you ideas and help you spot legal issues. It is not a substitute for a good lawyer or thorough research. For the most current developments in employment law court cases, try Employment Law Memo - World's Best.]
Let's say an employer fires Jane because she is a vegetarian. Other than that, Jane has been an excellent employee and the employer has no need to reduce the overall number of employees.
- If a court applies the at-will doctrine by itself, then Jane has no contract claim.
- If a court applies the covenant of good faith and fair dealing, then Jane has a good argument that this was not in good faith.
Courts vary from state-to-state on how to deal with this.
- Some courts say that the covenant of good faith and fair dealing applies to all contracts, including at-will contracts.
- Some courts say that the covenant of good faith and fair dealing is totally inconsistent with the idea of at-will employment, so the covenant of good faith and fair dealing will not be used in these cases.
- This is state law, which varies from state-to-state, so the outcome will depend on which state you're in.
Coming next: Discharge in violation of public policy: Employment Law 101: #8 of 60
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