McLain v. Great American Insurance Companies
208 Cal.App.3d 1476, 4 I.E.R. Cas. (BNA) 501, 256 Cal. Rptr. 863 (1989)
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Rule of Law:
A standardized, pre-printed employment application containing an 'at-will' termination clause is not an integrated contract where it omits key terms of employment, lacks an integration clause, and includes language allowing for future changes to employment conditions, thus permitting parol evidence to establish an implied contract requiring termination only for cause.
Facts:
- In 1984, Don Kustaborder, a manager at Great American Insurance, recruited E. Robert McLain, promising long-term advancement possibilities and that McLain would become a 'permanent' employee after a 90-day probation.
- Relying on these representations, McLain accepted a position at Great American for a lower salary than his previous job.
- Before starting, McLain was required to complete and sign a standardized, two-page employment application form for his personnel file.
- The form contained a provision stating that employment could be terminated 'with or without cause,' and also that the terms of employment could be 'changed, with or without cause,' at any time. McLain testified that he did not read this clause.
- McLain received positive performance reviews, a promotion to casualty claims manager, and several salary increases over the next year and a half.
- In August 1985, McLain complained to senior management about the abusive behavior of his direct supervisor, Rose Ann Herman, toward subordinate employees.
- In October 1985, Great American terminated McLain, citing 'insubordination' for allegedly distributing a confidential memo, an accusation McLain denied.
Procedural Posture:
- E. Robert McLain filed suit against Great American Insurance Companies and others in a state trial court, alleging multiple causes of action including breach of contract and wrongful termination.
- At trial, the court granted the defendants' motion for a directed verdict on McLain's claims for violation of civil rights and wrongful termination in violation of public policy.
- The remaining claims were submitted to the jury, which returned a general verdict in favor of McLain and awarded him $62,000 in compensatory damages.
- Great American Insurance Companies (appellants) appealed the judgment entered on the jury's verdict to the California Court of Appeal.
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Issue:
Does a standardized, pre-printed employment application containing an 'at-will' employment clause constitute a fully integrated contract that bars the introduction of parol evidence to prove an implied agreement requiring good cause for termination?
Opinions:
Majority - Elia, J.
No. A standardized employment application is not an integrated contract when it lacks the hallmarks of a final agreement, and therefore parol evidence is admissible to show the existence of an implied contract requiring termination for cause. The court reasoned that the Great American application was not an integrated contract because several key factors were absent. First, it did not contain an integration clause. Second, it was a brief, standardized, pre-printed form that did not cover essential terms of the employment relationship, such as McLain's salary or position. Most importantly, the application contained contradictory language; while it included an 'at-will' clause, it also expressly stated that the terms and conditions of employment 'may be changed... at any time.' This provision undermines the finality of the 'at-will' clause and suggests the agreement was not intended to be a complete and final expression of the parties' terms. Because the document was not integrated, parol evidence—such as the manager's oral assurances of permanent employment and the company's personnel manual policies—was admissible to establish an implied contract that McLain could only be terminated for cause.
Analysis:
This decision significantly clarifies the limits of at-will employment clauses found in standardized application forms in California. It establishes that the mere presence of such a clause does not automatically create an integrated contract or shield an employer from claims of an implied contract requiring good cause for termination. The ruling emphasizes a 'totality of the circumstances' approach, instructing lower courts to examine the nature of the document, the presence of contradictory terms, and external evidence like oral promises and company policies. This case provides a roadmap for employees to challenge at-will provisions by demonstrating that a pre-printed form was not the complete and final agreement between the parties.
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