Drzewiecki v. H & R BLOCK, INC.
24 Cal. App. 3d 695, 1972 Cal. App. LEXIS 1162, 101 Cal. Rptr. 169 (1972)
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Rule of Law:
A contract for employment for an indefinite period is not terminable at the will of the employer if the contract contains an express or implied condition to the contrary, such as a provision allowing termination only for cause, even if not supported by consideration other than the services to be rendered.
Facts:
- In December 1958, Raymond Drzewiecki was hired by H & R Block, Inc. as an income tax preparer.
- In March 1959, H & R Block offered Drzewiecki a position to manage a new branch office in a city of his choosing, and he selected Fresno, California.
- On April 21, 1959, Drzewiecki and H & R Block executed a written employment agreement which provided him a 75% share of the net profits.
- The agreement stated it was for two years and would automatically renew from year to year, specifying that H & R Block could give notice of termination 'only in the case of second party improperly conducting the business.'
- Over the next several years, Drzewiecki's management expanded successfully to 23 branch offices.
- In 1967, H & R Block sought to reduce manager compensation by proposing a new contract, which Drzewiecki refused to sign.
- After Drzewiecki refused the new contract, H & R Block terminated a separate agreement he had for Stockton and imposed restrictions on his Fresno operation.
- On December 11, 1968, H & R Block notified Drzewiecki that the Fresno contract was terminated.
Procedural Posture:
- Raymond Drzewiecki (plaintiff) filed an action against H & R Block, Inc. and related corporations (defendants) in the Superior Court of Fresno County, a state trial court.
- The cause was tried by a judge sitting without a jury.
- The trial court found that the Fresno contract employed Drzewiecki for so long as he properly conducted the business and could not be terminated by H & R Block except for cause.
- The trial court found H & R Block wrongfully terminated the contract and awarded Drzewiecki damages of $386,086.75.
- Both parties appealed from the judgment to the California Court of Appeal. H & R Block are the appellants on the primary issue of terminability, and Drzewiecki is the respondent.
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Issue:
Does a contract for an indefinite period of employment that expressly limits the employer's right to terminate to instances where the employee 'improperly conduct[s] the business' remain terminable at the will of the employer because it is not based on consideration other than the services rendered?
Opinions:
Majority - Gargano, J.
No. A contract for permanent employment is not terminable at the will of the employer if it contains an express or implied condition to the contrary, even if it is not based upon consideration other than the employee's services. The general rule that permanent employment contracts are terminable at will is a rule of construction, not a rule of substance, and it must yield to the parties' contrary intent. Here, the contract explicitly stated that the employer could terminate 'only' for cause, demonstrating a clear intent to foreclose the right to terminate at will. To interpret this express 'for cause' provision as meaningless would violate fundamental principles of contract construction, which require giving effect to the intentions of the parties as demonstrated by the language used and the circumstances of the agreement. The nature of the contract, which involved profit-sharing and building a business in a new territory, further supports the conclusion that a long-term, for-cause employment relationship was intended.
Analysis:
This decision solidifies the principle in California law that the presumption of at-will employment is rebuttable and can be overcome by the express terms of an employment contract. It moves away from a rigid, formalistic requirement for separate consideration to support a for-cause termination provision, instead focusing on the parties' demonstrated intent. The case empowers employees by affirming that specific contractual language limiting an employer's termination rights will be enforced as written. This reinforces the importance of careful contract drafting and directs courts to interpret employment agreements based on their plain language and the context of the business relationship, rather than relying on default legal presumptions that may contradict the parties' actual agreement.
