A new case from the Sixth Appellate District certified for publication on November 22, 2013, reiterates that an employer’s promises of bonuses and other benefits may be actionable even if the terms of such agreements are not perfectly spelled out or reduced to writing.
In Moncada v West Coast Quartz Corp., H03728 (Santa Clara County Sup. Court Case No. 110CV169097), the Court considered whether plaintiffs adequately stated a cause of action for breach of contract and others on the following facts.
Plaintiffs were three key employees of West Coast Quartz Corp. They sued West Coast and its two individual shareholders, alleging that the company and its officers repeatedly promised plaintiffs that, if they stayed with the company, they would be paid bonuses sufficient for the employees to retire on, once the company was sold. After five years and many promises to plaintiffs, the company sold for approximately $30 million. Plaintiffs passed on many job offers and relocation opportunities based on the defendants’ promises, but no bonuses were paid.
The Court of Appeals held that plaintiffs sufficiently alleged a cause of action for a breach of contract, fraud, and promissory estoppel. The Court found that the terms of the contract as alleged were not so vague as to render the promise unenforceable, despite defendants’ argument to the contrary. The Court quoted from the line of cases establishing principles of contract law, that “[i]n considering expressions of agreement, the court must not hold the parties to some impossible, ideal, or unusual standard. It must take language as it is and people as they are. All agreements have some degree of indefiniteness and some degree of uncertainty. … Moreover, “the law leans against the destruction of contracts because of uncertainty and favors an interpretation which will carry into effect the reasonable intention of the parties if it can be ascertained.”1 The Court found that, in this case, a jury could easily determine (1) whether bonuses were paid at all and (2) what their amounts should be by “using standard formulae and actuarial tables.”2
This case is good news for employees and a reminder to employers that promises to employees may be legally enforceable as a valid contract, whether or not they’re expressed in writing, if the terms are reasonably certain, i.e. the terms provide a basis for (1) determining the existence of a breach and for (2) giving an appropriate remedy.3 This applies to promises of bonuses, stock and other reasonably certain and quantifiable benefits. This case is also a cautionary tale for the shareholders, who may become personally liable for such promises, regardless of the corporate shield, for fraudulently inducing (lying to) employees to get them to work or suffer other detriment.
1. Moncada v West Coast Quartz Corp., California, 6th Appellate District, H03728, certified for publication 11/22/13, p. 8, 9;
2. Id at p. 10
3. Id at p. 8