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You can negate the at-will employment relationship and create a promise to terminate only for “just cause” through a written or oral contract. “Cause” means a fair and honest cause or reason that you act on in good faith.1 For example, in Stokes v. Dole Nut Company, a California Court of Appeal ruled that an employee creating a competing business constitutes a lack of loyalty and creates conflicts of interest that are just cause for termination.2
Employees seek attorneys to represent them when they feel they have been treated unfairly. By treating all employees fairly, you have a better chance of avoiding wrongful termination litigation. “Fairness” means making reasonable work rules, applying them evenhandedly, giving employees warnings and a chance to improve, listening to their side of the story and investigating the circumstances before making a snap judgment to terminate.
In Guz v. Bechtel National, Inc., the California Supreme Court strengthened at-will employment against claims of implied contracts.3
If an employer maintains an explicit policy of at-will employment, an employee generally cannot claim that an “implied” contract existed only to terminate for good cause. The court explained that the mere existence of an employment relationship does not create an expectation that the employment will continue or that it will end only with good cause. According to the court, “longevity, raises, and promotions are their own rewards for the employee’s continuing valued service” but do not, in and of themselves, guarantee future employment. If an employer maintains an explicit at-will policy, an implied contract of employment will be found only if the employer created, through words or conduct, a specific understanding that employment will be terminated only for good cause.
Based on this case, it is important to maintain an employee handbook with a strong statement that employment is at-will, and can be terminated at any time with or without cause and with or without notice. The rest of the handbook should not contain policies that would contradict employment at-will status, such as a progressive discipline policy that promises a certain number of warnings prior to termination, or a policy that requires employees to give two weeks’ notice prior to leaving.
1. R.J. Cardinal v. Ritchie, 218 Cal. App. 2d 124 (1963)
2. Stokes v. Dole Nut Company, 41 Cal. App. 4th 285 (1995)
3. Guz v. Bechtel National, Inc., 24 Cal. 4th 317 (2000)
4. Guz v. Bechtel National, Inc., 24 Cal. 4th 317 (2000)