Employment: At Will Clauses Alive & Well in California

California employers are breathing sighs of relief thanks to the state Supreme Court's decision, rendered late last week, upholding an at-will clause against a former employee's attack. Dore v. Arnold, opinion issued 8/3/06.

The former employee challenged the at will clause in his contract, claiming it impliedly conferred a right to be terminated only for cause. The contract provision said the relationship was "at will," and went on to explain this means either party may terminate the relationship "at any time." He argued that since the clause referred only to the time of termination ("at any time") and was silent on permissible causes for termination, it did not create a true at will relationship. The court of appeal agreed with his interpretation.

But the California Supreme Court did not. Resolving a conflict in the lower state courts of appeal, it held the contract plainly spelled out that the relationship was at will, and the reference to "time" of termination - without expressly using the words "with or without cause" - did not change that fact. The opinion observed that a clause stating the relationship "could be terminated at any time would make no sense if [its] true meaning was that [the] employment could be terminated only for cause. Thus, even though [the employer's] letter defined `at will' as meaning `at any time," without specifying it also meant without cause or for any or no reason, the letter's meaning was clear."

The court also rejected the employee's attempts to use extrinsic evidence - employer's pre-employment statements of wanting a "long-term fix" and to "build a relationship" - to make the provision ambiguous. Even if this extrinsic evidence were credited, it "would not support an inference that Dore reasonably understood [the] letter as consistent with a promise not to terminate him without cause." LINK TO SLIP OPINION: http://www.courtinfo.ca.gov/opinions/documents/S124494.PDF