How a California Employment Contract Changes Employee “AT-WILL” Status

According to the California Labor Code, California is an “at-will” employment state.  This means that absent an agreement, statutory or public policy, an employment relationship can be terminated by either party, at any time, without reason or liability.  This presumption of “at-will” employment can be overcome by three exceptions: express agreement, statutory exceptions, or public policy.

So the question becomes, does an employment contract change an employee’s “at-will” status?  The effect of “at-will” employment is that an employee can
be let go for any reason, at any time.  However, if the employee has a signed employment agreement, this “at-will” status can be changed.

“California At-Will Employment vs. “For Cause”

An employment contract, either written or implied can alter the “at-will” relationship. The employer’s right to terminate an employee can be effected if the employee can show that either through an express or implied contract the employee was assured that they would be employed for a specified period of time.  Also, an employment contract that outlines how and why an employee can be terminated can also cancel out the “at-will” employment status.

“For cause” employment is the opposite of “at-will” employment.  The employer can only terminate an employee for a legitimate reason. In determining whether a “for cause” relationship has been created, courts pay particular attention to whether seniority and longevity in the company create rights against termination, and the general length of employment.

An agreement that guarantees future employment with the company could take the relationship out of “at will” status, for instance.  It is important to note that should the courts need to determine the nature of the employment relationship, they will not only look to the employment agreement and company documentation, but by what was said by the employer.

How to Maintain “At-Will” Employment in California

If you are using employment contracts for your employees and want to maintain “at-will” employment, make sure there is language in the agreement that makes it clear that it is an “at-will” employment relationship.  The clearer you make this, the better off you will be.

Employees often think that if they have an employment contract they are protected from “at-will” firings, which is not the case.  Be diligent in your wording of your agreements. Remember that a disgruntled employee will more than likely take their case, along with a copy of their employment contract to court.

Be aware that language that specifies job term, policies for firing, and future employment sends up a red flag and the employment relationship could be interpreted as “for cause.” Courts often look at the totality of the circumstances, and the employer’s intent in determining a grey area here.  Consistency is the key.