Chapter 10:
The Significance of "At-Will" Employment in California

Updated as of June 2006

California employers are presumed to be at-will employers. The California Labor Code (Section 2922) is the official statement of at-will employment in California. It reads in its entirety:

"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."

Employment at-will means that an employer can terminate an employee with or without cause, or with or without notice. In fact, an employer can terminate an employee for no reason at all. The fact that an employer can discharge an employee on an at-will basis clearly does not mean that an employer is wise to do so. The reason for a discharge from employment, for example, cannot be one that violates public law. Employers should recognize, then, that the right to terminate "at-will" is limited and the "at-will" presumption is rebuttable by a showing of a preponderance of evidence which demonstrates the employment relationship was not contractual or only for good cause. Furthermore, employees subject to a collective bargaining agreement or an employment contract are not employed on an "at-will" basis. This exception means that these employeess terms and conditions of employee cannot be changed for any reason or for no reason.

Lawsuits for wrongful discharge which challenge an employer's right to terminate an employee at-will are successful on the basis of three legal theories. The courts have recognized these exceptions to the at-will doctrine in their legal opinions:

  1. Public policy
  2. Expressed or implied contracts
  3. Implied covenants of good faith and fair dealing

Public policy means public law. When an employer discharges an employee from employment, the employer must be certain that the discharge does not violate laws against unlawful harassment, whistleblowing, and discrimination at both the federal and state levels. An over reliance on the strength of at-will statements can work to the employer's detriment.

Express or implied contracts. Well-crafted policies and related documents are generally effective in protecting employers from the contract and implied covenant exceptions, but are not effective in protecting employers from the public policy exceptions. At-will statements should be "integrated agreements". This means that no other agreements supercede the terms and conditions of the at-will agreement unless specifically agreed to in writing and signed by the president or other designated company official.

Implied covenant of good faith and fair dealing. This involves situations where an employee can demonstrate that his/her employment relationship was contractual and that the employer had limited itself to discharges of employment only for good cause.

We recommend that legal counsel specializing in employment law review your at-will statement(s). We further recommend that at-will statements be included in a number of employment related documents including but not limited to the following:

  • Employment applications;
  • Offers of employment; and
  • Separate statements signed and dated by the employee at the point of hire.

In the employee handbook and policy manual, at-will statements should be incorporated into:

  • Management rights section;
  • Discipline policy;
  • Performance Evaluation; and
  • Compensation plan

With these facts in mind, the following serves as an integrated sample at-will statement:

I, the undersigned, hereby agree to the terms and conditions of employment of this company as consideration for my employment. I understand that employment with this company is at-will. This means that employment is for no specific term and that my employment may be terminated with or without cause and with or without notice either at my option or at the option of the company. I understand that this agreement is fully binding and final and that no employee can change the at-will status of my employment in this integrated agreement. I agree that my at-will status can be altered only if another written agreement is signed by the company president or designee and myself, with the expressed intent to change my at-will status.

A progressive discipline policy may include the following at-will language to clarify that a progressive discipline policy does not negate the at-will intent of the employer.

The company reserves the right to discipline employees when circumstances warrant. As previously stated, the employee or the employer may terminate the employment relationship at will at any time with or without cause or with or without notice. Not withstanding this at-will employment relationship, the company may, at its discretion, utilize a system of progressive discipline. The use of progressive discipline is not a company obligation to its employees. This system of discipline may include verbal counseling, one or more written counseling memos, suspension without pay or termination. The company shall retain the right to use or not use progressive discipline at its discretion, or to deviate from this formal system of discipline.

A word of caution is appropriate here. Some employers include policy language that indicates that none of the statements in the HR policy manual are binding. While a statement of this type seems to be an effective method of preventing contracts of employment, this kind of statement invalidates the at-will statement as well. We, therefore, recommend the "integrated at-will statement" instead.


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