Discharge in Violation of an Implied Covenant of Good Faith and Fair Dealing

Another basis for wrongful discharge (exception to the at-will doctrine) that has been accepted by the courts in some states is when a discharge occurs under circumstances that violate a covenant of good faith and fair dealing that many consider to be an implied part of any contract, including employment contracts. The implied covenant of good faith and fair dealing requires one party to a contract not to act in such a way as to deliberately attempt to deprive the other party of the benefits that it should legitimately expect to receive from the contract.

Example: An employer transferred the entire six-person crew to another part of its operation without replacing them, and then fired the supervisor (of the crew that was transferred) for not meeting the work group's production quotas. He had no one working for him!

Unless expressly stated in the contract, courts recognize that an agreement is a promise between the parties that they will deal with each other fairly and in good faith. The implied covenant of good faith and fair dealing as a basis for wrongful discharge has not been accepted by a majority of the states.