CA Supreme Court Ruling on "At-Will Employment" and Wrongful Termination Claims

If you are a California employer, this ruling could potentially affect you. In fact, because this ruling is precedent-setting, it could very likely affect employers across the nation.

Do you issue offer letters to new employees? Does that offer letter include the phrase "at-will employment"? If not, you should immediately look into revising your offer letter, employment job applications and employee handbooks to include that language. Doing so, according to a recent ruling by the California Supreme Court, "will defeat a claim of wrongful termination based upon a cause of action for breach of contract. Dore v. Arnold Worldwide, Inc., 06 C.D.O.S. 7078 (August 3, 2006). "

What is At-Will Employment? Also called "employment at will" and "hired at will", this phrase means that employment is considered indefinite and voluntary for both employer and employee, and that either party may end the relationship at any time. An employee may quit for any, or even no, reason. An employer may generally layoff or fire employees at any time for any reason, no reason, or even unfair reasons. There are some exceptions in some states - for example, some states require that you at least show "good cause" for laying off or firing employees. You should contact your state's labor office to determine the requirements in your state.

In the Dore case above, the plaintiff sued his employer for, among other claims, breach of contract. He stated that the offer letter he received was not clear and unambiguous, because although it stated that the company could terminate him "at any time," it did not state that they could terminate him "without cause." He cited comments that he had been told during his transfer interview process - such as being told that he would "play a critical role in the agency" and that the company was looking for a "long-term" fix. In addition, he was told that the company "treated its employees like family." He must have felt like a disowned relative, then, when he was terminated two years later.

However, the Court rejected his claim, and in their opinion, stated that "the use of the phrase "at-will" was sufficient in and of itself."

This is an important ruling for California employers. This case proves the importance of carefully crafting employment-based communications to affirm the at-will nature of the job. Without this wording, terminated employees will have the ability to pursue wrongful discharge claims based upon the theory of breach of contract. Take steps today to save your company from such lawsuits!