City of Midland v. O’Bryant
Citation and Court
City of Midland v. O’Bryant, 18 S.W.3d 209 (Tex. 2000)
Facts
O’Bryant and other city employees claimed they were terminated in violation of an implied covenant of good faith and fair dealing. They argued that Texas should recognize, as some other states had, that an implied duty of good faith limits an employer’s ability to discharge at-will employees. The City of Midland maintained that the at-will employment doctrine permitted termination for any reason.
Issue
Whether Texas recognizes an implied covenant of good faith and fair dealing in at-will employment contracts that would restrict an employer’s right to terminate.
Holding
The Texas Supreme Court held that Texas does not recognize an implied covenant of good faith and fair dealing in at-will employment relationships, and affirmed that at-will employees may be discharged for any reason or no reason.
Rule / Doctrine
The implied covenant of good faith and fair dealing does not apply to at-will employment in Texas. The at-will doctrine is the default rule and is not modified by a generalized good-faith obligation absent an express contractual limitation.
Significance
Marks Texas’s rejection of the tort of bad-faith discharge in the employment context, contrasting with states like Massachusetts (see Fortune v. National Cash Register) that imply good-faith duties. Important for understanding the minority versus majority approaches to good faith in at-will employment.