I. Introduction
The California Labor Code states that “[a]n employment, having no specified term, may be terminated at the will of either party on notice to the other.” [1] An employer may terminate an at-will employee at any time without any prior notice or cause. [2] Similarly, an at-will employee may quit the job without any notice or cause. This flexibility is intended to ensure that neither party is forced to continue an employment relationship against their will, which is important to maintaining the personal nature of the employer-employee relationship. [3] Some exceptions exist to overcome the presumption of at-will employment and protect employee’s rights. This article discusses at-will employment and explores the potential protections in place for employees in employment contracts, the implied covenant of good faith and fair dealing, statutes, and public policy.
II. At-Will Employment
Many—but not all—employer-employee relationships are at-will. This is the default presumption when an express or implied employment agreement exists and does not address the end of the employment relationship. This presumption essentially leaves an at-will employee with no recourse against their employer after termination.
A. No Cause Required
Barring any implied or express contractual obligations, an at-will employment relationship is terminable at any time without cause. [4] “With or without cause” in the context of at-will employment means that either the employer or the employee can terminate the employment relationship at any time without providing a reason or justification for the termination. [5] In an at-will employment relationship, both the employer and the employee can terminate the agreement for any lawful reason or for no reason at all without incurring legal liability. [6] However, even in an at-will relationship, an employer cannot terminate an employee for reasons that violate the law or public policy. Thus, an employee may have a wrongful discharge claim against an employer if the termination is illegal.
B. No Advance Notice Required
California Labor Code § 2922 states that “An employment, having no specified term, may be terminated at the will of either party on notice to the other.” [7] Thus, California law only requires that “notice” be given without any mention of timing. Neither the employer or the employee is required to provide advance notice of their decision to terminate the employment agreement. In other words, an employee can quit a job and walk away the same day, and an employer can fire an employee and require them to leave the workplace the same day. While advance notice is not required, it does impact the employer’s obligation to pay the employee’s final wages when the employee quits or resigns. For more information on this topic, read our article on Final Paycheck Law.
1. Employer Does Not Have to Give Advance Notice before Terminating an At-Will Employee
The employer does not have to give an at-will employee advance notice of a termination, but California law does require the employer to provide some notice and pay the employee right away. If an employer discharges an employee, the wages earned and unpaid at the time of discharge are due and payable immediately. [8] In other words, an employer that lays off or fires an employee—regardless of the cause for the termination—must provide the employee’s final paycheck immediately. [9] This means the employee must receive their final pay on the same day of the termination. If an employer willfully fails to pay the final wages of a terminated employee on time, the employee’s wages will continue to accrue daily for up to 30 days as a penalty against the employer. [10] However, specific provisions of the California Labor Code apply to certain types of employees, such as those in the motion picture industry, print shoot employees, and events employees, who are entitled to receive payment of wages by the next regular payday following termination. [11]
2. At-Will Employee Does Not Have to Give Advance Notice before Quitting
When quitting or resigning, an at-will employee is not required to provide the employer with two weeks’ notice—or any advance notice at all. However, when an employee receives their final paycheck depends on how much advance notice was given to the employer of the employee’s resignation. If an employee provides the employer with at least 72 hours of notice, the employer must provide the employee with their final paycheck on their last day of work. [12] On the other hand, if an employee does not provide the employer with at least 72 hours of notice, the employer must provide the employee with their final paycheck within 72 hours of the last day of employment. [13] Employees who quit without providing 72 hours of notice are entitled to request that their final paycheck be mailed to them, and the date of mailing is considered the date of payment. [14] If an employer willfully fails to pay the final wages of the former employee within the required timeframe, the employee’s wages will continue to accrue up to a maximum of 30 days as a penalty against the employer. [15]
Although not required, an employee may want to consider providing their employer with advance notice before quitting or resigning. Providing the standard two-weeks’ notice may be viewed favorably by a future employer. Further, providing advance notice can help maintain professional relationships, keep reputations intact for professional references, and maintain eligibility for rehire with the employer.
III. Employment Agreements
An employment contract is the agreement between the employer and the employee that outlines the terms and conditions of employment that both the employer and the employee must follow. Of note, an employment contract may specify that the employment is at will. However, an employment contract may also specify employment terms—such as the length of the agreement or grounds for termination—which indicate that the employment is not at will. While there is a strong presumption for at-will employment, “[t]his presumption of at-will employment may be overcome by evidence of an express or implied agreement.” [16] An express or implied employment agreement has the power of limiting the employer’s right to terminate. [17] The importance of proving an express or implied employment agreement is that a terminated employee may have a legal claim against the employer if the termination violates the employment agreement whereas an at-will employee has no recourse.
A. Express Employment Agreement
An express employment agreement—or contract—may, for example, specify the length of the employment period, specify causes for termination, or require “good cause” for termination. If the employer and employee have made no express oral or written agreement specifying the length of employment or the grounds for termination, an at-will employment agreement is presumed. [18] However, if there is evidence of an express agreement that limits the employer’s right to terminate, the agreed upon conditions must be met before termination can occur. [19]
1. Express Employment Contract Specifies Causes for Termination
An employment contract may list specific situations where the employer can terminate an employee. These express terms can be provided through written or oral agreement. [20] If the contract outlines circumstances when an employer can fire an employee and the employer fires an employee for a reason that’s not in the contract, the employee may pursue a claim of wrongful termination based on a breach of contract against the employer. [21]
2. Express Employment Contract Requires Good Cause for Termination
Another “example of a contractual departure from at-will status is an agreement that the employee will be terminated only for good cause.” [22] In this type of employment agreement, the employer’s power to terminate is limited by requiring termination to be based only on good cause, rather than without cause. [23]
B. Implied Employment Agreement
As discussed, the presumption of at-will employment can also be overcome by evidence of an implied employment agreement. An implied employment agreement is not explicitly stated like an express employment agreement; rather, it is inferred from the circumstances, which includes the conduct, situation, or mutual relations of the parties. [24] The employee bears the burden of proving an implied employment contract when there is no express agreement. [25] Courts look to certain factors to assess whether an implied employment contract exists, and these factors are “the personnel policies or practices of the employer, the employee's longevity of service, actions or communications by the employer reflecting assurances of continued employment, and the practices of the industry in which the employee is engaged.” [26]
For example, an employee handbook that includes procedural protections for discharge may indicate an implied employment agreement exists. [27] This is because an employer’s “adoption of specific procedures for adjudicating employee grievances” indicates the “employer's acceptance of responsibility for refraining from arbitrary conduct.” [28] In other words, the procedures could be evidence that the employer cannot terminate an employee without cause. On the other hand, an express at-will agreement that is signed by the employee generally cannot be overcome by proof of an implied contrary understanding. [29]
But proving an implied employment contract takes more than just showing any of these factors exist. “[T]he California Supreme Court has cautioned that not every vague combination of Foley factors, shaken together in a bag, necessarily allows a finding that the employee had a right to be discharged only for good cause. Rather, courts examine the totality of circumstances so as to enforce the actual understanding of the parties to an employment agreement.” [30] For example, mere longevity of service, regular promotions, favorable performance reviews, and salary increases, without more, do not necessarily imply an employer’s intent to relinquish its at-will termination rights. [31] The employee must “demonstrate the existence of an actual mutual understanding on particular terms and conditions of employment” and when the evidence “logically permits conflicting inferences, a question of fact is presented.” [32] For example, in evaluating an employee’s statement that he was told he’d always have a job with the employer, the court looks at the whole picture—such as the seniority of the person making the statement and the circumstances at the time the statement was made—to assess whether an implied employment contract might exist. [33]
IV. Good Cause
in the Context of Implied and Express Employment Agreements
“Good cause” in the context of express agreements is generally defined by the specific terms set forth in the contract itself. The parties to an express contract can negotiate and explicitly define what constitutes “good cause” for termination, and this definition will govern the employment relationship. [34]
In contrast, in the context of implied employment contracts, California case law defines the term “good cause,” as “fair and honest reasons, regulated by good faith on the part of the employer, that are not trivial, arbitrary or capricious, unrelated to business needs or goals, or pretextual.” [35] This requires the employer’s decision to terminate to be supported by substantial evidence gathered through an adequate investigation, which includes notice of the alleged misconduct and a chance for the employee to respond. [36] Thus, the employer’s decision to terminate must balance its interest in operating its business efficiently and profitably with the employee’s interest in continued employment. [37] This means that an employer’s discretion in making termination decisions is substantial but not unrestricted. [38] A few examples of good cause include employee misconduct, illegal activities, absenteeism, poor performance, or a business slowdown.
V. Implied Covenant of Good Faith and Fair Dealing
Another potential path to employer liability for termination that may be derived from the circumstances is the implied covenant of good faith and fair dealing. “The covenant of good faith and fair dealing, implied by law in every contract, exists merely to prevent one contracting party from unfairly frustrating the other party's right to receive the benefits of the agreement actually made.” [39] Although this protection may be inherent in every contract, its application in the context of employment termination is severely limited.
First, there must be a contract between the employee and employer. “Where there is no underlying contract there can be no duty of good faith arising from the implied covenant.” [40] Further, this implied covenant “cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms of their agreement.” [41] So unlike an implied employment contract, this implied covenant cannot override an at-will employment arrangement to require good cause for a termination—it cannot create a new right beyond the contract terms.
Instead, this protection is limited to a situation where an employer terminates an employee to deny the employee’s contractual rights in the employment agreement. If an employer falsely claims there was good cause for an employee’s termination–without probable cause and in bad faith–the employer has wrongfully interfered with the employee’s contractual rights and breached the implied covenant of good faith and fair dealing. [42] For example, an employer that acts in bad faith and terminates an employee to avoid paying a bonus or commission earned under the employment agreement may have breached the implied covenant of good faith and fair dealing.
In California, this path to employer liability for a wrongful discharge of an at-will employee may apply in a breach of contract claim but not a tort claim. [43]
VI. Statutory Protections for At-Will Employees
Under public policy, an employee cannot be punished for exercising fundamental rights or fulfilling legal obligations. For example, California protects an employee’s right to take leave to vote. [44] serve as a juror [45] and to appear in court. [46] While employers have broad discretion to fire an at-will employee, the termination must be legal. Several laws—both federal and state—specifically protect employees from wrongful discharge. If an employer violates one of these laws, the employee may have a lawsuit against the employer despite the at-will nature of the employment. The following laws are some of the most common wrongful termination laws that an at-will employee can use to sue the employer for wrongful termination.
A. Anti-Discrimination Laws
Title VII of the Civil Rights Act [47] and California Fair Employment and Housing Act [48] both prohibit discriminating against an employee based on their membership in a protected class. Under the broader California law, these protected classes are:
-
Ancestry, national origin
- Religion, creed
- Age (40 and over)
- Disability, mental and physical
- Sex, gender (including pregnancy, childbirth, breastfeeding or related medical conditions)
- Sexual orientation
- Gender identity, gender expression
- Medical condition
- Genetic information
- Marital status
- Military or veteran status [49]
These federal and state laws protect employees from termination based on illegal discrimination by employers.
B. Whistleblower Statutes
Employers may not terminate or otherwise retaliate against an employee for reporting an employer’s illegal or unsafe activities to the appropriate authority—also known as “whistleblowing.” California Labor Code § 1102.5 is the main law that protects employees from employer retaliation for reporting an employer’s violation or refusing to participate in an illegal activity. In addition, numerous federal laws protect whistleblowers from employer retaliation. Some of these federal laws are The Whistleblower Protection Act, [50] protecting federal employees who report violations, fraud, waste, abuse or dangers to public health or safety; the Sarbanes-Oxley Act, [51] protecting employees of publicly traded companies who report fraud or violations of Securities Exchange Commission regulations; and the Occupational Safety and Health Act, [52] protecting employees who report workplace safety and health concerns. For a detailed discussion on this topic, visit our article on Whistleblower Protections.
C. National Labor Relations Act
The National Labor Relations Act (NLRA) protects union employees who use their collective bargaining rights. [53] Wrongful termination under the NLRA encompasses a range of activities, including participation in concerted activities, refusal to commit unfair labor practices, filing charges or giving testimony under the Act, and engaging in union organizing efforts or discussions about working conditions. [54]
D. Protected Leaves of Absence
Both federal and California laws protect employees from employer retaliation for taking family or medical leave (including pregnancy leave) [55] and for using military leave. [56] California employers cannot terminate employees for using their paid sick leave. [57] With Kin Care Leave protection, California employees can use their accrued sick leave to attend to a family member’s illness without fear of retaliation. [58] Pregnancy disability leave is another form of protected leave under California law, allowing employees disabled by pregnancy, childbirth, or related medical conditions to take up to four months of leave. [59] California also provides up to five days of protected bereavement leave. [60] Further, California law protects employees using their leave for school-age childcare activities, [61] taking organ and bone marrow donation leave, [62] and—for volunteer firefighters, reserve peace officers, and emergency rescue personnel—emergency duty leave. [63] Additionally, for employers of 25 or more employees, California law protects employees who are victims of violence or crime, as well as those with affected family members, by allowing them to take time off to seek relief or medical care. [64]
VII. Public Policy Protections for At-Will Employees
Even if a statutory protection against a wrongful discharge does not apply, an at-will employee may have a cause of action against an employer for wrongful termination under common law. Common law is based on court decisions. The “courts have recognized that an employer's traditional broad authority to discharge an at-will employee ‘may be limited by statute...or by considerations of public policy.’” [65] This is because without a public policy exception in place, an employer could threaten an at-will employee with discharge “to coerce employees into committing crimes, concealing wrongdoing, or taking other action harmful to the public weal.” [66] However, courts have emphasized that public policy considerations must be clearly defined to limit judicial policymaking and ensure that employers are conscious of their obligations. [67]
For example, an at-will employee who is terminated for refusing to give false testimony under oath as directed by the employer may be entitled to civil relief for a wrongful discharge. [68] “[E]ven in the absence of an explicit statutory provision prohibiting the discharge of a worker on such grounds, fundamental principles of public policy and adherence to the objectives underlying the state's penal statutes require the recognition of a rule barring an employer from discharging an employee who has simply complied with his legal duty and has refused to commit an illegal act.” [69]
To further illustrate, “an employer's authority over its employee does not include the right to demand that the employee commit a criminal act to further its interests, and an employer may not coerce compliance with such unlawful directions by discharging an employee who refuses to follow such an order.” [70] For example, an at-will employee who is fired for refusing to participate in his employer’s illegal price-fixing scheme and suffers damages as a result of the termination may have a civil action against the employer for wrongful discharge. [71]
VIII. Conclusion
When an employment relationship has no specified term, California law presumes the employment is an at-will employment relationship. An employer may terminate an at-will employee at any time without advance notice or cause. Similarly, an at-will employee may quit their job without advance notice or cause. That said, an at-will employee still has legal protections in place for a wrongful or illegal termination of employment.