Some employees have tried to get around their at-will status by claiming long service and repeated promotions created an implied agreement that they would only be terminated for good cause. Now the California Supreme Court has made clear that this argument won’t fly. However, the court left the door open for a person’s at-will employment to be challenged if your written policies have the effect—even if unintended—of contradicting your right to discharge employees without cause. We’ll analyze the decision and suggest ways to make sure you don’t inadvertently tie your hands when it comes to making termination decisions.
Employee Laid Off
John Guz worked for Bechtel Corp. in San Francisco for 22 years, receiving steady raises, promotions and favorable reviews. But he was laid off at age 49 during a reduction in force.
Guz sued Bechtel for wrongful termination, claiming that despite Bechtel’s written at-will policy, there was an implied agreement that he wouldn’t be terminated without good cause.
Guz cited his long service and good performance along with a company executive’s statement that Bechtel’s general practice was to terminate employees only for a good reason. Plus, Guz pointed to two of Bechtel’s written personnel policies—one providing for progressive discipline before termination and the other containing layoff procedures based on an objective employee ranking system.
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Lengthy Tenure Doesn’t Matter
Bechtel countered that its personnel policies expressly stated that employees had no guarantee of continuous employment and that workers could resign at their option or be terminated by Bechtel.
The Supreme Court said that Guz’s long, successful service didn’t establish an implied promise to terminate only with cause. Plus, according to the court, a single company official’s statement that Bechtel’s practice was to fire workers only for a good reason didn’t prove that it had altered its right to discharge Guz at will.
Policies Create Problems
However, and most importantly, the court said that an employee’s at-will status could be changed by statements in an employer’s written personnel documents. The court said that even if you have a general at-will disclaimer like Bechtel did, your written policies could create an understanding that you will make termination decisions in accordance with those policies.
The court sent the case back to the lower court to consider whether Bechtel failed to follow its written layoff procedures during the reduction in force.
No Evidence Of Age Discrimination
Guz also contended that he was terminated because of his age, noting that the two employees Bechtel retained were the youngest in his unit. But the court said that there was no evidence that age had anything to do with Guz’s discharge. It pointed out that Bechtel had several legitimate business reasons for choosing to terminate Guz.
3 Steps To Take Now
This ruling serves as an alert that your written policies could inadvertently change a worker’s at-will status and lead to a costly wrongful termination lawsuit. Here are three ways to avoid disputes:
- Maintain consistent policies. Reiterate at every opportunity that employment is at will. Have employees sign an acknowledgment of at-will status in application forms and written job offers, and spell out the policy in employee handbooks. Be sure to specify that the person’s at-will status can’t be modified except in a written agreement signed by an officer of the company. Also state that if any of your policies conflict with an employee’s at-will status, the at-will provisions will prevail.
- Review written policies. Avoid making statements in personnel manuals or elsewhere specifying steps you will follow in making layoff decisions, promising progressive discipline, or otherwise limiting your right to terminate.
- Document termination decisions. Carefully record your reasons for layoffs, including why you selected one employee rather than another.