At-will employment in California
August, 2006
California employers have renewed assurance from the Supreme Court that clear statements regarding an employee's at-will status in offer letters or other employment contracts will be enforced by the courts where the employee has acknowledged he understands and agrees to the terms of employment. In Dore v. Arnold Worldwide, Inc., 2006 WL 2167079 (August 3, 2006), the California Supreme Court rejected an employee's attempt to show evidence of statements and conduct establishing an implied agreement that he would not be terminated except for "cause." The Court found that the employment contract, in this case an offer letter, contained a clear and unambiguous statement of at will status and rejected the plaintiff's proffered evidence to show otherwise.
This decision marks a shift away from broad application of the Court's prior decision in Pacific Gas & E. Co. v. G.W. Thomas Drayages etc. Co., (1968) 69 Cal 2d. 33, which allowed plaintiffs to offer evidence establishing an ambiguity even where the language on its face appeared unambiguous. Here the Court seems to say that such evidence is only permissible when application of the apparently clear language of the contract to the specific facts creates an ambiguity. Pacific Gas & E. Co., and the cases following it, have been a real problem for California employers as it meant that no matter how clear an employment contract's language providing for at-will employment was written, the employer still ran the risk of having the employee introduce evidence of statements, policies or practices which could be viewed as establishing an implied contract requiring "for cause" termination.
What does this mean for California Employers?
California employers can now take some comfort that clear "at will" employment provisions in their employment contracts will be upheld. Also, it is now clear that provision in an employment contract providing for termination "at any time" or upon specified notice cannot be read, alone, as requiring that termination will occur only for cause.
To take advantage of this important ruling, employers must have:
- Clear offer letters stating employment is "at will"
- Employment contracts that state employment is "at will"
- Handbook stating employment is "at will"
- Train supervisors and managers as to the meaning of "at will" and how not to engage in actions that could undermine "at will" status
- Handbook stating no one has the authority to alter "at will" status (except perhaps the CEO in a signed employment contract with certain high level executives).
This case demonstrates the importance of having clear language in offer letters, contracts and policies establishing an at-will status. It also demonstrates the effectiveness of having an employee acknowledge in writing that he read, understood and agreed to the terms of his employment including his at-will status. If you have any concerns regarding the language in your employment contracts or your company handbooks, please contact your employment law attorney.