At-will employment is the default doctrine of California employment law. It defines the most common employment relationship where either party may mutually terminate the relationship without the fear of liability. Under this legal doctrine, any hiring by an employer is presumed to be at will, meaning that the employer is free to discharge the employee for good, bad, or no reason at all, and the employee is equally free to quit or cease appearing at work with or without notice.
In California, there are three major exceptions to the employment-at-will doctrine. The exceptions address terminations that, although they technically comply with the at-will employment doctrine, California legislature or courts have determined are inherently unjust. These three exceptions are explained in greater detail below. Please note, that not every state recognizes all three exceptions. In fact, California is only one of a handful of states that recognizes them all.
Under the public-policy exception to at will employment, an employee can be wrongfully discharged when the termination is against an explicit, well-established public policy of the State. For example, in most States, an employer cannot terminate an employee for filing a workers’ compensation claim after being injured on the job, or for refusing to break the law at the request of the employer. More explicitly, an employer cannot terminate an employee due to race, gender, or a disability. California courts have defined the exception as being anything with the “tendency to be injurious to the public or against the public good.” The majority view is that the underlying public policy may be found in the constitution, statute, or administrative rule. The public-policy exception is the most widely accepted exception, recognized in almost all 50 States.
The second major exception to at will employment is applied when an implied contract is formed between an employer and employee, even though no express, written instrument regarding the employment relationship exists. Although at will employment is typically not governed by a contract, an employer may make oral or written representations to employees regarding job security or procedures that will be followed when adverse employment actions are taken. If so, these representations may create an implied contract for employment.
A common occurrence is that the contents and representations made in employee handbooks could create an implied contract, absent a clear and express waiver. The typical situation involves handbook provisions that state that employees will be disciplined or terminated only for “just cause” or under other specified circumstances, or provisions that indicate that an employer will follow specific procedures before disciplining or terminating an employee. In addition, a hiring official’s or supervisor’s verbal statements and/or behavior towards an employee, such as saying that employment will continue as long as the employee’s performance is adequate, may also create an implied contract.
Covenant of good faith and fair dealing
The rarest exception to at will employment among the states is the covenant of good faith and fair dealing. This concept is a significant departure from the traditional at will employment doctrine. It actually reads a covenant – a promise – into the relationship between employer and employee. That promise is that the employer will not engage in adverse employment action arbitrarily, maliciously, or in bad faith.
In California, the law implies a covenant of good faith and fair dealing in every contract. This is then used by the courts to protect the reasonable expectations of the parties entering into the contract. Thus, the relevant inquiry always will focus on the contract itself, to determine what the parties did agree to.
It exists merely to prevent one contracting party from unfairly frustrating the other party’s right to receive the benefits of the agreement actually made.
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