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Scope of At Will Employment in California

Employers often assume that just because employees in California are generally “at-will,” they can be fired at any time for absolutely no reason. This thinking can sometimes get them into trouble, and a quick call to their legal counsel – before terminating an employee – would be advisable.

So, just what does at will employment mean in California?

Generally, employment is presumed to be at-will, meaning that the employment relationship can be terminated at any time by either employer or employee, with or without cause (this presumption is codified under Labor Code, Section 2922). However, there are a number of exceptions that limit an employer’s absolute freedom to terminate an employee (which, if ignored, could result in litigation for among others “wrongful termination”):

First, Title VII of the Civil Rights Act (Title VII) and the California Fair Employment and Housing Act (FEHA) forbid employers from terminating employees because of their race, national origin, sex, age, disability, marital status, sexual orientation, medical condition or religion.

Second, an employee may not be terminated in violation of a fundamental state or federal public policy; there are 4 specific categories for which an employee’s actions are protected: (1) refusal to violate a statute; (2) performance of a statutory obligation; (3) exercise of a statutory right or obligation; and (4) reporting a statutory right for the public’s benefit).

Third, contractual agreements (oral or written) can limit an employer’s ability to terminate an employee without good cause. An agreement to terminate an employee only for “good cause” does not have to be in writing, and can be established based on an oral assurance by, e.g., a manager, that the employee is entitled to continued employment. They are referred to as implied-in-fact contracts.

The California Supreme Court has defined factors to determine if there is an implied-in-fact contract: (a) the employer’s personnel polices and practices; (b) the employee’s length of service; (c) actions or communications by an employer on assurances to the employee of his or her continued employment (evidenced by raises, bonuses, promotions and general lack of criticism or job evaluations); and (d) the practice in the industry in which the employee is engaged.

To avoid creating an implied-in-fact contract, an employer should adopt policies and procedures that stress the “at-will” nature of its employee employment status (such as by defining the at-will relationship in its job applications, offer letters, employment agreements and employee handbooks).

There has been significant litigation on whether a specific “at-will” provision is ambiguous or creates a doubt on the employment status of an employee. Recently, in Dore v. Arnold Worldwide Inc., 2006 DJDAR 10153 (August 3rd 2006), the California Supreme Court concluded that an employee was at-will, even though the employer did not specifically define at-will employment to include the ability to terminate the employment relationship “without cause.”

Dore is a good case for employers.

Nevertheless, while Dore confirms an employer’s ability to terminate an “at-will” employee – provided termination does not violate the 3 exceptions listed above – caution should still abound. For example, managers should be instructed by employers not to make affirmative statements to employees (for example, as a method of encouragement) that “you do not have to worry about your job;” “you wont be let go like your predecessor because you are doing such a good job,” or similar statements that would provide an expectation of continued employment.

If you have any questions, you should consult with your employment and labor lawyers, or feel free to contact us.