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CLAUSE AND EFFECT
For-cause termination clauses, often used by corporations ' including entertainment and media companies ' in employment contracts with corporate executives, typically give an executive a period of time to cure after he or she receives notice from the employer of an alleged contract breach. At-will contracts may simply provide for advance notice before an employee can be discharged. In California, the measure of damages for termination without notice in employment-at-will contracts is income the discharged executive lost during the length of the notice period (eg, 30 days). However, the Court of Appeal of California, Second Appellate Division, recently held in an unpublished opinion addressing a lack of notice required under a for-cause termination clause that the measure of damages should be based on the length of the notice period only if the executive was discharged for grounds specified in the for-cause clause. Hoffman v. Harmony Pictures Inc., B152774 (Dec. 4).
In the case, Ron Hoffman had entered into an agreement in 1993 to work as executive vice-president and head of sales at Harmony Pictures. The employment agreement contained a for-cause termination provision. In 1994, Hoffman orally agreed to continue in the executive position under the terms of the written contract. Harmony Pictures later drafted an at-will employee handbook that it claimed also covered Hoffman. Hoffman filed a breach-of-contract suit after Harmony Pictures fired him in 1997. The production company ceased business operations the following year.
Harmony Pictures claimed that it had fired Hoffman for disrupting relationships with directors. Hoffman disputed the characterization and claimed that he was fired without notice or cause. The trial court found, among other things, that Harmony Pictures had breached the oral employment agreement, which incorporated the terms of the written employment agreement. Hoffman had been promised a minimum of $180,000 per year, plus commissions, but Harmony Pictures argued that Hoffman was only entitled to lost-income during the 30-day notice period provided in the for-cause clause. The trial court awarded Hoffman damages for both 1997 and for 1998 ' the year the employment contract term would have expired. The award for 1997 was based on the difference between what Hoffman actually earned that year and what he estimated he could have earned. The appeals court affirmed, but reduced Hoffman's award for 1998 by $123,000, the amount he had earned during that year for providing similar services to directors as he did while employed by Harmony Pictures.
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