Asmus v. Pacific Bell

United States Court of Appeals for the Ninth Circuit · 2000 · Contracts

Contractsemployment contractwritten employment security policyindefinite durationreasonable timereasonable noticevested benefitssummary judgment

Facts

Eight plaintiffs had prevailed on summary judgment in the district court on a breach of contract claim based on Pacific Bell's termination of its Management Employment Security Policy (MESP). The MESP was a written employment security policy that contained a specified condition but did not have a fixed period of duration. Pacific Bell terminated the policy after giving notice. The court also stated that the termination did not interfere with vested employee benefits.

Issue

Whether, under California law, Pacific Bell could terminate its written Management Employment Security Policy where the policy was of indefinite duration, termination occurred after reasonable notice, and vested employee benefits were not affected.

Rule

An employer may terminate a written employment security policy that contains a specified condition if the condition is of indefinite duration and the employer makes the change after a reasonable time, on reasonable notice, and without interfering with the employees' vested benefits.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In San Diego, Sierra Harbor Logistics issued a written policy stating that supervisors would be discharged only if their division was permanently eliminated. The policy did not state any end date. Nine years later, the company revoked the policy after giving supervisors 60 days' written notice, and no already-earned benefits were reduced.

Under the governing rule, are the supervisors likely to prevail on a breach of contract claim based solely on the revocation of the policy?

Explanation. The majority adopted the rule that an employer may terminate a written employment security policy containing a specified condition if the condition is of indefinite duration and the employer acts after a reasonable time, on reasonable notice, and without interfering with vested benefits. Here, the policy had no fixed duration, the employer waited years, gave notice, and did not disturb vested benefits, so revocation is permissible. (Derived from Asmus v. Pacific Bell (n.d.).)