California has “employment at will” – What does that mean?

California is an “at-will” state in terms of employment law, which means that most jobs can be terminated by the employer (as well as the employee) at any time. It is not necessary that there be a reason given for ending the employment.

However there are exceptions where at-will firing is unlawful:

Four reasons your employer cannot fire you at-will in California

1. When you have an express or implied contract that prevents your employer from exercising at-will firing.

2. When firing you would violate your employer’s implied covenant of good faith and fair dealing.

3. When firing you would violate an important public policy.

4. When firing you is based on fraudulent misrepresentations.

Here at Shouse Law Group, we have represented countless people who were wrongfully terminated. We can usually achieve a favorable resolution without a trial where you recover back pay and pain and suffering and, in some cases, job reinstatement.

Below, our California labor and employment lawyers answer the following frequently asked questions about wrongful termination lawsuits based on exceptions to the at-will employment rule:

• 1. What is the “at-will” employment rule in California?
• 2. What is the “implied contract” exception?
• 3. What is an implied covenant of good faith and fair dealing?
• 4. What is the “public policy” exception to at-will employment?
• 5. Can I sue my employer for fraud as a result of wrongful termination?
• 6. Can more than one exception to at-will employment apply to my case?
• 7. Can I sue my employer under an exception to at-will employment if I resign?
• 8. How do I bring a lawsuit?
• Additional resources

If you have further questions after reading this article, we invite you to contact us at Shouse Law Group.

1. What is the “at-will” employment rule in California?

At-will employment is a job you or your employer can terminate at any time, for any reason, or no reason at all.

Under California Labor Code 2922, all employment is presumed to be “at-will” unless:

• you and your employer agree otherwise or
• an exception to at-will employment applies.¹

2. What is the “implied contract” exception?

An exception to California’s general rule of at-will employment is where an implied contract has arisen between you and your employer.²

An implied contract is a legally-binding unwritten agreement. The terms of implied employment contracts typically include that you cannot be fired without good cause.

Therefore, your employer probably still had the right under the agreement to fire you for

• poor performance or
• not fulfilling your job responsibilities.

When the implied contract exception applies

The key question we see courts ask is what you and your employer actually intended the terms of the employment relationship to be.³

Sometimes an agreement not to terminate you is the result of an oral (spoken) promise by your employer. Though more often it is implied by the conduct and behavior of your employer.⁴

In our experience, circumstances that show an implied contract exception to at-will employment include:

• Your employer’s general personnel policies and practices;
• The length of time you had worked for your employer;
• Actions or communications by your employer assuring you that you could count on continued employment; and
• Industry practices.⁵
  

Example

Lily has worked as a receptionist for 10 years at a dental office with stellar reviews. The dental group’s employee handbook lists a number of reasons why employees might be terminated, including misconduct and poor job performance.

Lily gets fired with no warning, and one of the owners hires his daughter for the job. Lily may be able to sue her former employer for wrongful termination based on the implied contract exception to at-will employment.

3. What is an implied covenant of good faith and fair dealing?

An implied covenant of good faith and fair dealing is an unwritten promise that all parties to an express or implied contract will act in good faith and deal fairly with each other when carrying out the terms of the agreement.⁶

This covenant can support a wrongful termination claim if your employer acted in bad faith when firing you. From what we see, this typically happens when your employer:

• terminated you in violation of its own personnel policies,
• terminated you in order to keep you from enjoying benefits to which you would have otherwise been entitled under your employment agreement (like a pension or pay already earned), and/or
• lied about the reason you were fired.⁷

Examples

1. An employment agreement provides that the employee can be terminated for poor performance of duties. Then the employee gets fired after dating the supervisor’s ex-girlfriend even though there were no negative performance reviews. The employee may have the right to sue the employer under the exception to at-will employment provided by the implied covenant of good faith and fair dealing.⁸

2. An employee is offered a job that requires them to quit their current job and move to a new city or state. However the employer then fires the new employee before they have had a chance to demonstrate their abilities at the new job.⁹

4. What is the “public policy” exception to at-will employment?

The public policy exception to at-will employment in California labor law allows you to sue your employer when you are fired in violation of an important public policy.¹⁰

In practice, this means you have the right to sue your employer for wrongful termination if they terminate you because you:

• refused to violate a law,
• performed a legal obligation,
• exercised a legal right or privilege, or
• reported an alleged violation of law to the government, law enforcement or a supervisor.¹¹

You can sue on these grounds even if you had no express or implied employment agreement.¹²

Requirements to sue

The major requirements for a wrongful termination lawsuit under the public policy exception to at-will employment are:

1. The policy that you reported a violation of, or refused to violate yourself, must be set forth in a law, constitutional provision, government regulation or mandatory ethical rule;
2. The policy must benefit the public (as opposed to just an individual);
3. The policy must be fundamental and substantial; and
4. The policy must be well-established at the time when you were terminated.¹³

When the public policy exception applies

Policies that California courts have held will support public policy wrongful termination suits include:

• Antitrust laws (for example, if you are fired for reporting to authorities your employer’s antitrust violations),¹⁴
• Laws against sex discrimination and sexual harassment (for example, if you are terminated for refusing to submit to the sexual demands of your supervisor),¹⁵
• Laws against disability discrimination,¹⁶
• Rules of professional conduct for attorneys (for example, if you are fired for refusing to violate these rules),¹⁷ and
• Laws against bribery.¹⁸

However, the public policy exception to at-will employment does not apply when:

• The law in question is minor and trivial and not fundamental and substantial;¹⁹ or
• You are unable to show a clear connection between your actions in support of the law or policy and your termination.²⁰

Example

Armen learns that his company is paying bribes to a city council member in exchange for support for projects they are developing. Armen’s boss wants him to misrepresent these payments in the books, but Armen refuses. A week later, Armen gets laid off.

Armen may have a wrongful termination case against his employer based on the public policy exception to at-will employment.

Specific grounds for legal relief

In addition to the general public policy exception to the at-will rule in California employment law, there are several specific laws (both California and federal) that provide causes of action if you are wrongfully terminated for reasons contrary to public policy. Ones we work with most often include:

• Whistleblower retaliation laws,
• The whistleblower provisions of the federal Sarbanes-Oxley Act,
• Laws against employer retaliation for political activities or speech,
• Laws against retaliation if you complain about or participate in investigations of workplace harassment or employment discrimination,
• Laws against discrimination, retaliation or termination for making a worker’s compensation claim,
• Laws protecting your right to take time off for jury duty, military service, etc., and
• Qui tam retaliation laws.

5. Can I sue my employer for fraud as a result of wrongful termination?

Fraud/misrepresentation is another exception to the rule of at-will employment that may allow you to sue your employer for wrongful termination.

To prove a fraud case against your employer, we need to show that:

1. Your employer misrepresented facts to you (either by lying outright or by concealing or failing to disclose important information);
2. Your employer knew that they were making a misrepresentation;
3. Your employer misrepresented facts in order to persuade you to take a particular action;
4. You relied on the misrepresentations; and
5. You suffered damages as a result.²¹

When the fraud exception applies

The fraud exception to the at-will rule usually arises in cases where your employer made specific promises to you to persuade you to take a job. However, they then violated those promises and eventually terminated you.

You may sue your employer for damages you suffered as a result of accepting the employment in the first place. Though to get damages that arise out of the wrongful termination itself, you would need to rely on another exception to the at-will rule such as the implied contract exception.²²

Example

Andrew moves cross country to work at Rykoff, which lies to Andrew about the company being financially stable. Then Rykoff merges with another company, eliminating Andrew’s job.

Andrew may sue the Rykoff company under the fraud exception to at-will employment. He may receive compensation for the damages he incurred by quitting his former job and moving cross country.²³

6. Can more than one exception to at-will employment apply to my case?

Yes. It is extremely common for more than one exception to the general rule of at-will employment to apply to the wrongful termination cases we handle.²⁴

7. Can I sue my employer under an exception to at-will employment if I resign?

We have seen many cases where people successfully sued their employer under an exception to the at-will employment rule even though they resigned and were not fired. This is due to California wrongful constructive termination (a.k.a. constructive discharge) laws.²⁵

Constructive termination means that your employer knowingly makes working conditions so unpleasant that you have no choice but to resign.²⁶

8. How do I bring a lawsuit?

If you were wrongfully terminated, the first step is often to file a complaint with the California Labor Commissioner, the California Civil Rights Department, or the federal Equal Employment Opportunity Commission (EEOC), depending on the details of your case.

Our employment law attorneys would assist in preparing your paperwork and gathering supporting evidence, such as statements from coworkers describing relevant incidents or records of correspondence with your employer. If the government agency then determines your termination was illegal, it will grant you the right to proceed with a civil lawsuit.

If the lawsuit is successful, the judge may award you damages for lost income as well as emotional distress. In some cases, you can be reinstated to your job. Plus if your employer acted with malice, oppression, or fraud, the judge can even award you punitive damages.

Additional resources

For more information, refer to the following:

1. At-Will Employment – Overview of the state law by the California Chamber of Commerce.
2. At-Will Employment – Article by Workplace Fairness, a nonprofit that provides education on workers’ rights.
3. California Labor Federation – Advocacy group with wrongful termination publications and resources.
4. Labor Notes – News source covering worker rights issues.
5. National Workrights Institute – Research organization focused on employment issues like wrongful termination.

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