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At-Will Employment Remains Alive in California
By Stuart W. Miller
[August 2006]
A new decision by the California Supreme Court confirms the importance of using well drafted employment at-will language in employment agreements.
In Dore v. Arnold Worldwide, Inc., Dore alleged that before he was hired by Arnold Worldwide, Inc. (AWI), various officers and employees of AWI told him that if hired, he would “play a critical role in growing the agency;” that AWI was looking for “a long-term fix, not a Band-Aid;” and that AWI employees were treated like family.
Subsequently, Dore received a job offer letter from AWI, stating in part: “Brook, please know that as with all of our company employees, your employment with [AWI] is at will. This simply means that [AWI] has the right to terminate your employment at any time just as you have the right to terminate your employment with [AWI] at any time.” Dore signed the letter and then began his employment with AWI.
AWI terminated Dore more than two years later. Dore then sued AWI for breach of contract and breach of the implied covenant of good faith and fair dealing, among other claims. Dore argued that the representations noted above led him reasonably to understand that he had an implied contract, which provided that he would not be discharged except for cause.
California Labor Code Section 2922 states: “An employment, having no specified term, may be terminated at the will of either party on notice to the other. Employment for a specified term means an employment for a period greater than one month.” Dore argued that the letter agreement did not create an at-will employment relationship because the letter did not state his employment would be terminable “without cause.”
The California Supreme Court disagreed, and thereby resolved a conflict among various Districts of the California Court of Appeal. The Supreme Court stated that, “as a matter of simple logic,” the phrase “at any time” “ordinarily entails the notion of ‘with or without cause.’” The Court added that, “[f]or the parties to specify – indeed to emphasize – that Dore’s employment was at will (explaining that it could be terminated at any time) would make no sense if their true meaning was that his employment could be terminated only for cause. Thus, even though AWI’s letter defined ‘at will’ as meaning ‘at any time,’ without specifying it also meant without cause or for any or no reason, the letter’s meaning was clear.” Based on that conclusion, the Court held that there was no triable issue of fact regarding Dore’s claims for breach of contract and breach of the implied covenant of good faith and fair dealing.
The California Supreme Court’s decision confirms the importance of including well drafted at-will language in job offer letters and employment agreements, emphasizing that employment is at-will and that the employer may terminate employment at any time, with or without cause. Even though the Court held that the “with or without cause” element was not essential, it is wise to include that phrase. Well drafted at-will language also should be included in employment application forms (preferably just above the employee’s signature line), in employee handbooks, and in forms by which employees acknowledge receipt of the handbook.
The Supreme Court’s decision involved assurances by an employer that allegedly were made before the employee signed an at-will hire letter. However, employment litigation often involves an allegation that, sometime after the employee signed an at-will hire letter, someone in management told the employee, in substance, that the employee would have a job with the company as long as the employee performed satisfactorily. In that case, the previously signed hire letter may not, as a matter of law, bar a breach of contract claim. To help protect employers against such claims, the hire letter should include not only well drafted at-will language but also a statement that the at-will relationship may not be changed except by a writing signed by the president of the company (or some other senior company official identified in the hire letter by job title).
At-will provisions do not, of course, protect California employers against “public policy” wrongful termination claims alleging race, age, disability, gender, national origin, sexual orientation or other forms of illegal discrimination, or termination because the employee blew the whistle on allegedly illegal conduct by the employer. However, well drafted at-will language may, in many cases, protect California employers against claims for breach of an implied-in-fact contract or breach of the implied covenant of good faith and fair dealing.
For more information about employment at-will or other California employment law issues, please contact:
This Advisory is a publication of the Employer Services Department of Davis Wright Tremaine LLP. Our purpose in publishing this Advisory is to inform our clients and friends of recent developments in employment law. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may be given only in response to inquiries regarding particular situations.
Copyright © 2006, Davis Wright Tremaine LLP.
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