HR Management & Compliance

Personnel Policies: New Case Flags How Your At-Will Agreements May Be Vulnerable; Review Your Practices

The basic rule in California is that employees can quit or be fired at any time, with or without cause. If you’re like most employers, you’ve reinforced this concept by including “at-will” statements in your employee handbooks and application forms. But you could find yourself on the wrong end of an employee lawsuit if your policy manual contains common, but often little-noticed, provisions that could be viewed as contradicting the usual at-will rule. As one California employer recently learned, the risk is even greater when a long-term, successful worker is laid off.

Long Tenure Ends With Reorganization

For 22 years, John Guz was a management information supervisor for Bechtel Corporation in San Fran- cisco. During that time, he was given six major promotions, 17 merit raises, and a special award recognizing excellent work performance. Throughout his Bechtel career, he always received positive reviews.

Following a change in management, Bechtel transferred the duties of Guz’s division to another group. Guz was informed he was being laid off due to a workload reduction.

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Employee Says Good Cause Needed

Guz, who was 49, sued Bechtel for wrongful termination and age discrimination. He argued that the length of his service, his consistent pay raises, and Bechtel’s written policies on discipline and layoffs all created an unwritten promise that he wouldn’t be terminated without good cause.

Bechtel asked the court to throw out Guz’s case before trial, claiming he was an at-will employee who could be terminated at any time without cause. To support its position, Bechtel pointed to a provision in its personnel policy stating that workers “have no employment agreements guaranteeing continuous service and may resign at their option or be terminated at the option of Bechtel.”

Personnel Policies Cause Problems

But the California Court of Appeal ruled that this language, by itself, was not enough to prove Guz could be terminated so easily.3 That’s because two other provisions in Bechtel’s policy manual could be seen as creating an implied promise of continued employment.

First, the court pointed out that Bechtel had a written, progressive discipline policy that said employees would receive notice of performance problems and an opportunity to correct deficiencies before termination. That provision could be interpreted as a promise not to fire an employee without a good reason.

Second, Bechtel’s manual stated that preference would be given to long-term employees during a layoff. This undermined the company’s contention that it retained the right to terminate workers at any time for any reason.

To make matters worse for Bechtel, the president of Guz’s division testified that the company’s practice was to terminate workers only when there was good cause to do so. And Guz argued Bechtel did not have a legitimate business reason for eliminating his department and firing him.

Three Steps To Take Now

The court observed that long-term employment and promotions by themselves will rarely change a person from an at-will employee to one who can only be terminated for cause. But Bechtel’s conflicting personnel policies opened the door for Guz to now try to convince a jury that his history with Bechtel combined with its policies created an implied promise not to lay him off without a good reason.

The ruling highlights how your policies can inadvertently jeopardize a worker’s at-will status-and put you at risk for an expensive wrongful termination lawsuit. Here are three easy ways to protect yourself:


  1. Coordinate paperwork. To help ensure your policies are consistent, reiterate at every opportunity that workers are hired at-will, such as in employment agreements, employee handbooks, application forms, and written job offers. Have workers sign and date any form or agreement that contains an at-will statement. Also include a provision stating that an employee’s at-will status can’t be changed except by written agreement between you and the worker.


  2. Eliminate progressive discipline. Promising progressive discipline may seem like a fair and reasonable way to respond to performance problems, but it can also limit your right to fire, suspend, or take other action. Instead, your policy should give you the right to discipline employees “up to and including termination” without first resorting to less severe measures.


  3. Use caution when restructuring. Bechtel argued that even if Guz could only be fired for good cause, this was irrelevant because it had a legitimate business reason for restructuring his department and terminating him. But the company still got into trouble because its policy obligated it to base layoff decisions on seniority. To sidestep this complication, it’s best not to tie your hands by agreeing in advance to follow a last-hired, first-fired approach.


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