Employment Contract Violation: Is Your Employer Liable?

When you start working, you make a contract with your employer. Often, the contract is put in a written agreement of employment that you both sign. Even when there isn’t such a paper, there are some conditions that may be implied in practice or in company policy. Such a contract will lay down the key aspects of your working arrangement, including payment, duties, and expectations. But what happens when your employer breaks their part of the agreement? An Employment Contract Violation occurs when one of the parties fails to live up to their responsibilities as stated in the agreement.

Being aware of your rights when you feel your employer is breaking your contract is essential in protecting your means of survival and professional life in California. The article outlines some of the popular ways an employer could be breaching employment contracts and what to do if you suspect a violation.

Understanding Employment Contracts in California

Employment agreements define the relationship between employer and employee. In California, these can take several forms.

Types of Contracts

• Written Contracts: These are signed documents between the parties that describe exact terms like job title, duties, pay, fringe benefits, time of employment (if not “at-will”), and reasons for firing. They offer the most exact definition of the employment relationship.
• Implied Contracts: Sometimes, even without a signed contract, an employer’s actions, policies (e.g., those in an employee handbook), or long-term promises can give rise to an implied contract. For instance, repeated promises of job security or certain disciplinary practices may imply termination only for “good cause,” perhaps overcoming California’s default “at-will” status. Proving implied contracts can be challenging, however.
• Oral Agreements: While harder to enforce due to proof issues, verbal agreements on specific terms (like salary or a particular bonus structure) can sometimes be legally binding in California.

It’s worth remembering California is generally an “at-will” employment state. That means that employers can normally terminate employees for any reason, or no reason, as long as it isn’t an illegal one (like discrimination or retaliation). However, an valid employment contract (written or implied) can alter this at-will relationship by expressing job duration or limiting termination reasons.

Key Contract Terms

Employment contracts often contain clauses covering:

• Job description and core duties
• Compensation (salary, wages, bonuses, commissions)
• Benefits (health insurance, retirement plans, paid time off)
• Duration of employment (if applicable)
• Conditions and procedures for termination (“good cause” definitions)
• Confidentiality and non-disclosure agreements
• Note: California law generally prohibits non-compete agreements for employees.

Common Ways Employers Commit an Employment Contract Violation

An Employment Contract Violation, or breach, happens when an employer fails to fulfill a material promise made in the contract. Some common examples include:

Failure to Pay Agreed Compensation

This is perhaps the most straightforward breach. According to the California Labor Commissioner’s Office, it includes:

• Paying less than the salary or hourly wage specified in the contract.
• Failing to pay agreed-upon commissions or bonuses according to the contract’s terms.
• Not providing benefits (like health insurance contributions or retirement matches) explicitly guaranteed in the contract.

Unilateral Change in Job Duties/Status

If your contract clearly defines your role, title, or core responsibilities, a significant unilateral change by the employer might constitute a breach. For example:

• Demoting you without cause if your contract specified a particular position.
• Drastically altering your core job duties to something fundamentally different than agreed upon, making performance under the original terms impossible.

Wrongful Termination (Breach of Contract)

While California is an at-will state, a contract can alter this. A breach related to termination occurs if:

• Your contract specifies a fixed term (e.g., one year), and the employer fires you before that term expires without “good cause” as defined within the contract.
• Your contract (written or clearly implied) states you can only be fired for specific reasons (“good cause”), and your employer terminates you for reasons not meeting that contractual standard.
• The employer violates specific termination procedures mandated by the contract (e.g., required warnings or severance pay).

Violating Specific Contractual Promises

Contracts sometimes include unique promises beyond standard pay and duties. Breaches can involve failing to provide:

• Promised specific training or professional development opportunities.
• Agreed-upon resources, equipment, or support staff necessary for the job.
• Stock options, equity grants, or other forms of compensation explicitly detailed in the contract.

Breach of Good Faith and Fair Dealing

California law imposes a covenant of good faith and fair dealing in all contracts. This is that neither party can unreasonably interfere with the other’s right to receive the benefits of the contract. While hard to prove, an employer acting in bad faith to withhold a bonus or exercise a contractual right can violate this implied covenant.

What Constitutes a “Material” Breach?

Importantly, not every trivial deviation from contract terms authorizes legal action. The breach usually must be a “material” breach. A material breach is a fundamental failure going to the heart of the contract, effectively denying the injured party the benefit they bargained for. Failure to pay wages is almost always material. A minor change in reporting structure likely is not. Materiality usually is resolved by legal analysis.

Steps to Take if You Suspect a Violation

If you believe your employer committed an Employment Contract Violation, consider these steps:

Review Your Contract

First, carefully reread your employment agreement (written or documented policies for implied terms). Identify the specific term(s) you believe your employer violated.

Document Everything

Gather all relevant evidence. This includes:

• A copy of your signed contract.
• Pay stubs, commission statements, benefits information.
• Relevant emails, memos, or other communications.
• Performance reviews (past and present).
• Notes on conversations, including dates, times, and attendees.
• Names of potential witnesses.

Communicate (Carefully)

Depending on the situation and your comfort level, you might wish to officially bring the issue to your supervisor’s or HR department’s attention. Do this in writing (email is typically best for the record), concisely describing the issue and referencing the specific contract language. But be cautious about potential retaliation (illegal but not unknown).

Seek Legal Counsel

Most importantly, seek the advice of a seasoned employment attorney prior to taking significant action, such as quitting because of the breach (constructive discharge). A lawyer can look over your contract and proof, discuss your rights under California law, determine whether the breach is material, and recommend the best action to take. According to the California Courts Self-Help Guide, breach of contract cases have specific legal elements that need evaluation.

Potential Remedies for an Employment Contract Violation

If an employer is found to have materially breached an employment contract, potential legal remedies might include:

• Compensatory Damages: This is the most common remedy. It involves payment to compensate you for the financial losses caused by the breach (e.g., unpaid wages, lost bonuses, value of lost benefits).
• Specific Performance: In rare cases, a court might order the employer to actually perform the specific promise in the contract (e.g., issue promised stock options). This is generally not used to force an employer to keep someone employed.
• Rescission and Restitution: This involves canceling the contract and attempting to return both parties to the position they were in before the contract was made.
• Attorney’s Fees and Costs: Sometimes, the contract itself or a specific law might allow the winning party to recover their legal fees from the losing party.

How KAASS LAW Assists with Contract Disputes

Employment contracts are legally binding documents. An employer failing to honor their commitments can significantly impact your career and finances. At KAASS LAW, our attorneys are experienced in handling various Employment law matters in California, including breach of contract claims.

We can meticulously review your employment agreement, analyze the situation for a potential Employment Contract Violation, and advise you on your legal options. Whether through negotiation, mediation, or litigation, we advocate for our clients’ rights. If your employer has violated the terms of your contract, please Contact Us for a confidential consultation.

Conclusion

An employment contract defines mutual obligations. When an employer breaches their promises – whether regarding compensation, duties, job security (if it was specified), or other conditions to which they committed – it constitutes an Employment Contract Breach. Knowing common categories of breaches and knowing your California law rights is crucial. If you feel that your employer has violated your contract, document the event thoroughly and speak with a qualified employment attorney to explore your options.