California Is an At-Will State
California’s Labor Code contains a presumption that employees are employed at will. This means that either the employer or the employee may terminate employment at any time, with or without cause or prior notice. This is important for employers because “cause” is defined under California law as “a fair and honest cause or reason, regulated by good faith on the part of the employer.” Employers would be significantly burdened if they had to prove to a court or jury that they acted “fairly” and “in good faith” in every employee termination.
Exceptions to Employment at Will
Exceptions to employment at will include:
- Public-sector employees, most of whom are protected by civil service laws and/or by a “memorandum of understanding” between their union and the agency that addresses discipline and termination.
- Employees represented by unions and covered by a collective bargaining agreement that contains a “just cause” standard for termination.
- Employees (usually executives) who have written employment contracts requiring “good cause” for termination.
- Employees whose employers have said or done things that overcome the presumption of employment at will.
Courts in some cases have found that employer policies or statements of managers have overcome the presumption of employment at will, such that an implied contract to be terminated only for good cause arose. One such policy is a rigid “progressive discipline” policy under which employees cannot be fired until a series of prior warnings and lesser sanctions have been imposed. Managers’ assurances of secure or long-term employment might also be found to overcome the presumption of employment at will in some circumstances.
Reinforcing Employment at Will
California courts will not find employer policies and manager statements to overcome the presumption of employment at will when an employee has signed an express employment-at-will acknowledgment. To retain the freedom to terminate employment without cause that employment at will affords you, therefore, you should do everything you can do to preserve employment at will. This means:
- Include an employment-at-will statement on the employment application and in offer letters so that a prospective employee understands, before leaving another job or moving from out of state, that the new job will be employment at will.
- Have new hires sign an employment-at-will acknowledgment on their first day.
- Include an employment-at-will statement in the employee handbook.
- Avoid rigid progressive discipline policies, and instead say that conduct violations “may lead to disciplinary action up to and including termination of employment.”
- Train managers and supervisors not to make careless assurances of job security during job interviews or in response to questions from employees or applicants.
- When presented with an employment verification form in connection with a mortgage application, do not respond to questions asking about the employee’s prospects for future employment.
The Limits of Employment at Will
Employment at will simply means that an employer cannot be sued for breach of an implied contract requiring a showing of good cause for termination. It does not mean that an employer may not be sued for other employment wrongs, such as discrimination, retaliation, violations of specific statutes (including those protecting whistle-blowers or employees who take family or medical leave) or for terminations that violate public policies set forth in statutes or regulations.
Employers should do everything they can to preserve employment at will. It is not a good idea, though, to tell an employee only that “we are exercising our employment-at-will rights and terminating you.” Because there are so many other grounds for employee lawsuits, you should still be sure to document the reasons for terminating an employee. This includes providing prior warnings, when appropriate, for poor job performance and less serious types of misconduct such as attendance policy violations. These warnings should not be given pursuant to a formal progressive discipline policy but rather simply to establish that misconduct or performance issues occurred and that the employee was put on notice of them, to rebut a later claim that the termination was motivated by an unlawful reason such as discrimination or retaliation.
If you are worried about incurring liability for wrongful termination in California, we encourage you to contact us or give us a call at (916) 306-5415.