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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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Editor: Ross Runkel, Professor of Law Emeritus. email Ross@LawMemo.Com, Phone 503-399-8028. Copyright LawMemo, Inc. Employment Law Memo emails designed for lawyers.  Expert summaries of decisions from all federal and state appellate courts.  Direct link to full text.  Click here for free 4-week subscription