What Are the Limitations To At-Will Employment in California?

You’ve probably heard of at-will employment before. Maybe you saw it as a clause in your employment agreement, or maybe it came up at a time when you were fired or laid off by an employer. In a nutshell, it’s the concept that your employer (or you) can terminate your employment at any time and for any reason or no reason at all.

At-will employment is widely acknowledged and used throughout the United States – so widely, in fact, that only Montana doesn’t recognize it. The basic reason for its existence is to keep employees and employers free from an undesired obligation to work for or employ another party.

Although the presumption in California is that all employment is at-will, there are exceptions.

At-will employment in California is limited by the following:

  • Federal and state employment laws
  • Implied contracts
  • Covenants of good faith and fair dealing

If an ostensibly at-will termination is made for any reason that runs counter to these factors, employees may be able to recover compensation by filing a wrongful termination lawsuit. Let’s take a look at how each of these affects at-will employment.

Federal & State Employment Laws

Even if employment is at-will, an employer’s motivation to terminate cannot be based on an illegal factor. In other words, an employer cannot fire an employee for an illegal reason and attempt to claim that at-will employment protects the decision.

“Any reason” does not protect illegal reasons.

Californians enjoy many protections at work that safeguard protected classes (age, sex, race, religion, skin color, gender identity, and others) from discrimination and retaliation when they report unlawful behavior. An employer would therefore be incorrect in assuming they are protected by at-will employment for firing someone who requested a reasonable accommodation for their disability or for firing a female employee after she reported sexual harassment.

Implied Contracts

Employees may be protected against at-will employment if an implied contract is created between an employee and employer that leads the employee to believe termination at-will would not occur. The implied contract can be written or oral and there is no requirement for a written overarching employment contract to exist for an implied contract to also exist.

If an employee is led to believe through company manuals or conversations with managers that he or she would not be terminated without prior notice, a certain number of warnings, or any other circumstances, an implied contract may be in effect and can be enforced.

Covenant of Good Faith & Fair Dealing

California is among the few states that recognize another important limitation to at-will employment: the covenant of good faith and fair dealing. While not explicitly an employment protection, this legal mechanism permits grounds for plaintiffs to sue when decisions by the other party in a legally binding contract are made in bad faith, arbitrarily, or maliciously.

Like an implied contract, this isn’t exactly easy to prove in a lawsuit because there aren’t any clear statutes to back up a claim. That said, employees who were arbitrarily let go or fired by an employer who explicitly sought to cause them financial harm can argue there was a breach of the covenant of good faith and fair dealing.

Were You Fired At-Will?

Employers who fire or lay off their employees are quick to reference at-will employment clauses in their contracts. Regardless of at-will employment, “any reason or no reason at all” is not the case when an employee is being fired for an illegal reason or in violation of an implied contract or the covenant of good faith and fair dealing.

If you believe you were wrongfully terminated and want to seek legal action against your employer, reach out to the employment law attorneys at Haeggquist & Eck, LLP for help. We offer free consultations to all prospective clients so we can help you assess the validity of your claim and options for taking legal action.

Contact us online or by calling (619) 342-8000 to schedule your free consultation today.



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