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Prepared By: Melissa C. Marsh, Los Angeles Employment Attorney
Written: March 2009

Are Your Employees Really At-Will?

Do you present new hires with an offer letter of employment? Does your offer letter of employment state that the new employee is subject to the employer's "at-will employment" policy? If not, you should immediately look into revising your employee offer letter, employment job application, and your employee manual to include "at will" language.

In California all employees are presumed to be "at-will." In other words, the employee is free to quit at any time, and the employer is free to terminate the employee at any time, for any reason or no reason, so long as the termination is not for an illegal reason. California Labor Code §2922 provides:

"An employment, having no specified term, may be terminated at the will of either party on notice to the other."

The at will doctrine, however, does have two limitations. First, at will employees may not be terminated absent "good cause" if there is an express or implied contract creating such an expectation. Second, an at-will employee cannot be terminated if the reason behind the termination is discriminatory, or retaliatory.

First Exception to the At Will Doctrine – Express or Implied Contract.

The lack of a properly drafted employee offer letter, a poorly drafted employee contract, and the employer's employee policies each can lead an employee to sue for, and a court to find, wrongful termination. Although employees are presumed to be at will, an employer may make oral or written representations to their employees regarding job security, or set forth certain procedures that must be followed before an employee will be terminated. Absent a clearly written offer letter of employment, or contract, stating that an employee's employment is at will, a California court may view these oral or written representations as creating an implied employment contract pursuant to which the employer can be sued for wrongful termination, absent good cause.

This was the case in Toscano v. Greene Music, 124 Cal.App.4th 685 (2004), where the California Forth District Court of Appeal held that a job applicant who quits an at-will job to accept another at-will position may recover lost future wages from the employer who presented the job offer and withdrew it if the employee who accepted the job offer (relied on the promised job offer) can prove lost earnings by "substantial evidence." The court reasoned that promissory estoppel (reasonable reliance on a promise, here the job offer) entitles a plaintiff who quits a job to recover the "lost future wages" the employee can prove s/he would have earned from his or her former at-will employer had the plaintiff not relied on the promised employment and remained at his former job.

California employers should make sure all newly hired employees sign an employee offer letter that sets forth: (1) the employee's title and position, (2) the starting salary, or hourly wage; (3) the expected start date; (4) any benefits the employee will be entitled to; and (5) that the employment is at will followed by a clearly written explanation of what that means and how the at will relationship can be altered in the future.

Employee Policies contained in an employee manuals (handbook) should also clearly set forth the at will nature of employment. In addition, wherever an employee policy mentions the possibility of discipline or possible termination, the policy should reaffirm the at will nature of the employment. In addition, employee contracts and policies should avoid calling the first 90 days of employment a “probationary period,” and instead should refer to the period as “introductory” or “orientation.”

Improperly prepared employee manuals, handbooks and policies can defeat the "at-will" nature of the employment relationship by creating an "implied-in-fact" employment contract. Although an employer is not required by law to have an employee manual or handbook, they are typically recommended if prepared by a licensed employment law attorney. Oftentimes, however, I see employee handbooks prepared from a CD, form book, or unknown online source, and unfortunately these standard clauses often benefit the employees more than the employer. If you have one of these type of handbooks, we strongly suggest you have it reviewed by an attorney.

Second Exception to the At Will Doctrine - Public-Policy

Under the at will doctrine, a California employer can fire an employee for any reason without notice. The employee's job performance is immaterial. However, that unfettered right to fire is limited. California Employees can sue for wrongful termination if the employee is fired for a reason that explicitly goes against California's public policy. Typically these claims fall into one of two categories: (1) retaliation and (2) discrimination.

Retaliation.

Although a California employer has wide latitude in deciding to fire an employee, the employer cannot fire, or terminate, an employee for refusing to commit a crime, for whistle-blowing (complaining to a state agency about the employer's wrongful conduct or failure to follow safety regulations), or for taking advantage of the benefits prescribed by California law for such things as family and medical leave, or workers compensation. That is known as retaliation.

Discrimination.

While a California employer can fire an employee simply because s/he dislikes they way you dress, he cannot fire you because you dress like a Muslim. That would be discrimination. To put it another way, an employer can fire an employee simply because s/he can't get along with the employee, but the employer cannot fire an employee if the reason for the acrimony is the employee's accent, race, age, gender, sexual orientation, or physical limitations. Similarly, an employer cannot discriminate against an employee for such things as: refusing to acknowledge, or complaining about, untoward sexual conduct (sex discrimination), requesting a reasonable accommodation due to a disability (disability discrimination), deciding to come to work as the opposite gender (gender discrimination), or his or her age (age discrimination).

Damages from such retaliatory and discriminatory conduct can be astronomical, and often result in a large punitive damage award.

5 Ways To Preserve Your At-Will Employer Status

1. Have a written at will policy. If an employer wants to preserve the right to terminate "at will," then the employer should maintain a written "at will" policy in at least six different places, including: (1) the employment application, (2) the offer of employment letter; (3) the employee handbook or manual; (4) the employee acknowledgment form for receipt of handbook; (5) in employee written performance evaluations; and (6) in any employee progressive discipline forms, i.e. warnings.

The policy must clearly state that employment is "at will", that employees can terminate their employment at any time, and that the employer can terminate employment at any time, with or without cause and with or without notice. It is also important to have an integrated at will policy that is acknowledged by all employees, and which states that all prior agreements are superseded by the at will policy.

2. Do not make any representations of continued employment. Employers, managers and supervisors must not make any representations of guaranteed employment for any specified period of time. Statements such as, "no one is ever fired here," or "the company only terminates for a good reason" are contrary to "at will" employment. Those representations can be viewed as company practices, and have as much force and effect as a written policy.

3. Do not have a mandatory progressive discipline policy. Employers should not have a mandatory progressive discipline policy, which requires that certain disciplinary steps be taken before termination. If there is such a policy, there is the implication, and an expectation, that the employer can only terminate, if and only if, it follows every step of progressive discipline.

4. Review the Employee Handbook. Most employers already have "at will" provisions in their employee handbooks. Other loosely-drafted handbook provisions, however, can undermine "at will" employment policies. For example, a provision requiring a progressive discipline policy may be interpreted as a contract requiring the employer to use that policy fully before terminating any employee. A court could now decide that such a policy overrides the "at will" agreement.

5. Provide "Consideration" to Present Employees. It is probably legally sufficient for employers to bind their current employees to the terms of an "at will" policy simply by distributing copies of the policy to them. Yet some courts may require employers to give employees something more tangible than "continued employment" in exchange for accepting "at will" employment. Because of this, consider distributing the policy in connection with some tangible employee benefit, such as the annual bonus. For all new hires, add an at-will provision to your employee offer letter.

Tips for Mitigating Problems in Your Employee Manual

1. Give yourself flexibility: For example, do not say "employees who fail to perform their jobs in a satisfactory manner will be so advised and given an opportunity to improve their performance." Instead say "employees who fail to perform their jobs in a satisfactory manner will be so advised, and where management considers it appropriate, given an opportunity to improve their performance."

2. Keep the promises you make: Courts may view the handbook as part of an implied contract. Remember that your company's failure to follow a policy might be a breach of contract. Deviations should be documented, and supported by verifiable legitimate, business reasons.

3. Be absolutely consistent: Make sure that all of your employment policies are consistent with your "at will" policy.

What California Employers Should Do.

Fine-tuning your practices and having your employee handbook reviewed by a local corporate-business or employment law attorney for potential inconsistencies will help protect your "at will" employer status, and reduce the risk of litigation.

California employers should regularly review their employment related documents, including employment ads, job applications, employment offer letters, employment contracts, employee manuals and handbooks (especially the discipline provisions), and their termination policies and practices, including any severance agreements. California employment laws constantly change, and California employers who fail to have their employment practices reviewed and revised by a licensed corporate business attorney, or employment law attorney, are likely to take a trip through our judicial system.

A large part of our employment law practice consists of counseling employers who seek to comply with new state and federal employment laws, providing human resource training, and providing essential contracts and employee policies to prevent employee lawsuits. To schedule a consultation about preparing an employee offer letter of employment, employee contract, or written employee policies contact employment law lawyer, Melissa C. Marsh at 818-849-5206 or via email at MMarsh .

Related Articles:

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• 5 Most Common Hiring Mistakes Made By California Employers
• How to Legally Perform an Employee Background Check in California
• California Requires All Businesses to Report the Hiring of New Employees and Independent Contractors

California Employment Law attorney, Melissa C. Marsh, is based in Sherman Oaks and West Hollywood, and is available to serve small and midsize businesses throughout Los Angeles County, including: West Hollywood, Miracle Mile, Beverly Hills, Century City, Santa Monica, Burbank, North Hollywood, Valley Village, Toluca Lake, Studio City, Sherman Oaks, Van Nuys, Encino, and Woodland Hills.

© 2009 Melissa C. Marsh. All Rights Reserved.

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