HR Management & Compliance

Terminating Employees: California Court Upholds Vague At-Will Clause

A California appeals court has rejected a wrongful termination lawsuit filed by a former State Farm insurance agent, ruling that the insurer could terminate the agent at will under the terms of an agency/employment agreement—even though the agreement didn’t use the term “at will.”

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The court relied on a California Supreme Court decision that an employment contract provision providing for termination upon specified notice cannot, without more, be construed to mean that the employer must have cause to terminate (see the September 2006 issue of the California Employer Advisor for more on this case). Thus, concluded the appeals court, a for-cause requirement could not be read into a contract provision which stated: “You or State Farm have the right to terminate this Agreement by written notice delivered to the other or mailed to the other’s last known address. In the event we terminate this Agreement, you are entitled upon request to a review in accordance with the termination review procedures approved by the Board of Directors of the Companies, as amended from time to time.”

We’ll have more on this new decision in an upcoming issue of the California Employer Advisor.

Additional Resources:

Bernard v. State Farm Mutual Automobile Insurance Co., Calif. Court of Appeals (Dist. 3) No. C052566, 2007

Employment Contracts: California Supreme Court Rules “At Will” Means What It Says; Good News for Employers

Sample At-Will Employment Language

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