We fired an employee, thinking he was “at will,” but now he claims we made an oral promise that he could be fired only for cause. We’ll fight this one in court, but how do we keep from having misunderstandings like these? —Martin B., HR Manager in San Francisco
Despite a strong presumption in favor of the at-will standard, California courts may find that an employer’s oral “promise” has created an implied contract. A court will generally look at the totality of the circumstances, including the oral promise; the employer’s personnel policies or practices; the employee’s length of service; employer actions and communications that seem to ensure continuing employment; and regular industry practices.
In one case decided by the California Supreme Court, for example, an employee’s having received numerous oral assurances of job security and consistent promotions, salary increases, and bonuses was sufficient evidence to prove that he could not be discharged except for cause.
Although an isolated or casual remark regarding employment will rarely, if ever, change an otherwise at-will relationship, employers should still be cautious because such a remark combined with other circumstances could create a different contractual relationship. Managers and supervisors should be educated about the at-will standard and instructed to refrain from making any contrary representations.
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Employee Handbooks
It is also possible for policies and statements in employee handbooks related to job security, progressive discipline, performance reviews, etc., to alter the at-will nature of employment. That’s because California courts have held that such statements and policies can create an implied contract. Accordingly, employers should draft handbooks with the following guidance in mind to avoid undermining at-will status:
- Use nonmandatory language (e.g., “guidelines” for discipline versus “rules” or “policy”).
- Avoid references to “probationary” or “permanent” employees. Using the word “probationary” may imply that after an employee gets beyond an initial period, you must have cause to fire him or her.
- Include an at-will statement and a contract disclaimer clarifying that the handbook is not a contract at the beginning of the handbook and also as part of certain policies, such as disciplinary policies. Here is a sample at-will statement: At [Company], employment is at will. This means that [Company] or the employee may terminate employment at any time, with or without cause or notice. This at-will employment relationship exists, regardless of any written statements or policies contained in this
[employee handbook] or any other Company documents, or any verbal statement to the contrary. This
at-will provision cannot be modified except in a written agreement, signed by a company officer and
the employee, specifying a clear intent to alter the at-will nature of the employment relationship. - Have employees sign a statement acknowledging that they received a copy of the handbook, that their employment is at will, and that the handbook does not create an employment contract. Make sure you keep the signed acknowledgement in the employee’s personnel file.
—CELA Editors