Breach of Contract

In California the employer-employee relationship is presumed to be at-will.  This means that the employee can terminate his or her relationship with the employer at any time for any reason. Likewise, an employer can terminate its relationship with an employee at any time, for any reason, so long as that reason which is not expressly prohibited by applicable state or federal laws.

It is important to note that some employment agreements do not change the at-will employer-employee relationship. For example, an employer might send a prospective employee a job offer through an email that states:

  • the nature of the job;
  • start date;
  • salary; and
  • that the employment relationship is at-will.

If the employee accepts the contract, an employer-employee relationship will be created. However, this contract does not limit the employer’s or employee’s right to terminate the contract at will.

If you are a large or small business and are facing claims regarding the breach of an employment contract, you should contact an experienced attorney who will address your legal needs and advise you on the best course of action.

Identifying A Breach in an Employment Contract 

In its simplest terms, an employment contract is breached when either party, employer or employee, fails to live up to their end of the agreement. So if the employer, at the time of negotiation, promises to pay an employee $75,000/year, but pays the employee $60,000/year, a breach has occurred. Likewise, if the employee agrees to provide 60 days notice prior to terminating the employer-employee relationship, but only provides 30 days notice, the employee breached the contract.

Recovering Damages

Pursuant to California contract laws, damages constitute a sum of money used to compensate the non-breaching party for any losses suffered as a result of the breach. In the employment context, they are called expectation damages. These damages essentially compensate the injured party for the loss of the bargain.  Had the contract been performed, the injured party would have realized a profit. Depending on who is suing on the underlying employment contract, expectation damages are calculated differently.

  • If the employer is suing the employee because the employee quit prior to fulfilling certain obligations, the employer would typically be entitled to damages for the value of those obligations and the cost of finding a replacement.
  • If the employee is suing the employer due to wrongful termination, the employee would be entitled to the salary he or she would have earned on the job.

However, there are some limitations to recovery.

  • The injured party has a duty to mitigate damages. To obtain a full recovery of damages, California law requires that the employer immediately begin searching for a new employee or the employee must begin to search for a new job. Failure by either party to mitigate damages will limit damages recoverable in a breach of contract lawsuit.
  • If an at-will contract is at issue, the employer will not be liable for damages so long as the employee was not fired for unlawful reasons.
  • Foreseeability will also limit recovery. It is foreseeable that an employer will have to hire a new employee or that an employee will have to find a new job. If the damages are not foreseeable, they will not be considered part of recovery in many cases.
  • An employment contract between the parties can modify damages. Employers and employees are free to negotiate their own terms of an employment relationship, with certain exceptions, so it is important to review any contract which the parties have entered into before determining whether the contract itself allows for certain damages to be recovered in the event of a breach by either party.

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