At Will Employment

April 26, 2008

Last Revised:  May 23, 2012 4:50 PM

Vibrant Life has always had a relationship with staff that is best described within the California laws as an "at will" employment relationship.

In fact the "at will" relationship was the "natural" order of things unless there was some special "other" arrangement covered by a written agreement, such as a "union contract."

This relationship does NOT seem to interfere with a person's right to claim unemployment compensation:

Unemployment Insurance
States administer the unemployment system to provide unemployed individuals with a regular income, for a specified period of time, after the employment relationship ends. The system is funded by state and federal taxes paid by employers. According to federal guidelines, each state determines the scope, coverage of, and eligibility for unemployment insurance.

The eligibility requirements vary among the states; however, most states determine eligibility by four criteria:

The applicant must have earned a minimum amount of wages within a specific period and/or worked for a minimum period in the recent past.
The applicant must register for work with the state unemployment office.
The applicant must be available for work.

The applicant must be actively seeking work.

source

 

It has now come to pass that the old "natural" way of viewing employment now needs to be specifically asserted -- otherwise all sorts of "new customs" seem to have taken on the color of law -- but even now, if you read the laws of California, there is no law or regulation that says an employee is entitled, by law, to any specific "vacation pay." If there is any vacation pay, it is entirely because the employer had announced some "company policy" that provides for it -- as has Vibrant Life.

There is hardly anything more "natural" than sunshine.

This Company Policy has the purpose of establishing the "natural way" relationship between Vibrant Life, as an employer, and each individual staff member as an employee (or partner).

DED Steven Archibald has drafted an agreement form and asking each staff member to sign it, covering the "at will" nature of the employment relationship between that staff member and Vibrant Life.

The Vibrant Life business structure has been as a partnership, but that will be changing to an LLC (Limited Liability Company) which files the same Federal IRS Form 1065 as does a partnership and is handled for many tax and legal purposes just as is a partnership. In a partnership you would have "partners," whereas in an LLC you would usually call them "members."

The continued use of a Partnership structure or an LLC structure raises the question of whether or not 'partners" or "members" of an LLC are also subject to the concept of "At Will." This is covered HERE.

When and as the "Profit Sharing System" is implemented for all or many VL Staff, they will have a status of "some sort of" partner. The "at will" relationship will remain in force for such people.

That "at will" relationship has been validated by the highest Courts in California, as described in the following reference:

An offer letter containing the phrase "your employment is at will," which is read, accepted, and signed by an employee "contained no ambiguity, patent or latent, in its termination provisions."  Additional language in the letter defining "at will" to mean the employer had the right to terminate employment "at any time" did not create ambiguity as to whether cause was required, according to the Supreme Court of California in the case, Dore v. Arnold Worldwide, Inc., No. S124494 (August 3, 2006).  As such, the employee's attempt to show there was evidence of an implied agreement -- verbal statements, conduct, and documents -- that he would not be discharged except for cause was unsuccessful.

The decision in this important case involves a critical issue for California employers when using at-will language in offer letters, job applications, and other statements in the employment process.  With this ruling, the California high court has said that employers may rely on clearly worded and unambiguous statements of at-will status, where the individual has understood, agreed, and accepted the terms.  Using additional language to indicate that "at will" means "at any time" does not, by implication, leave the door open as to whether an employer must show cause for discharge.

On behalf of the Southern California Chapter of the Association of Corporate Counsel, Jackson Lewis co-authored an amicus brief with the Atlantic Legal Foundation, asking the court to adopt a rule that provides solid legal ground for an unambiguous statement in an offer of employment that the parties agree to "at will" status whereby the agreement may be terminated at any time and for any or no reason by either party.  In effect, the court has so ruled.  

A Familiar Scenario

When an employee requested a transfer to the employer's Los Angeles office, he was provided a formal offer letter confirming the transfer and stating the terms of employment, including commencement date, compensation, and benefits.  The letter also stated there would be a 90-day assessment with a supervisor and, if satisfactory, the opportunity to be considered to become an officer of the company.  In a separate paragraph, the letter also stated, "please know that as with all of our company employees, your employment is at will.  This simply means [the employer] has the right to terminate your employment at any time just as you have the right to terminate your employment at any time."    Admittedly, the employee "read, signed, understood and did not disagree with the terms of the letter."

When the employee was terminated several years later, he sued the employer alleging breach of contract and breach of the implied covenant of good faith and fair dealing, along with other claims.  He based the allegations on various oral representations, conduct, and documents that he claimed led him to understand that he would not be discharged except for cause.  The employer objected and moved to have the case resolved in its favor on a motion for summary judgment, which the trial court granted.  Since the express written contract – the letter – was controlling, the trial court determined there was no need to consider the evidence offered by the employee to establish the existence of an implied agreement to terminate only for cause. 

The Court of Appeal disagreed, and ordered that the case be sent back to the trial court for further consideration of the breach of contract and breach of implied covenant claims, among others.  The Court of Appeal based its ruling on language in the offer letter that defined "at will" in a manner that referred expressly to the duration of the contract, using the words "at any time."  Even though it acknowledged that the term "at will" normally conveys an intent that employment may end "at any time without cause,"  the court nonetheless reasoned that the language of the letter was ambiguous, and other evidence could be offered to show that the employer had agreed not to discharge the employee except for cause.   

Supreme Court Finds Letter "Unambiguous"

Reversing the decision of the Court of Appeal, the Supreme Court of California said the trial court's ruling was correct.  "[The employer's] letter plainly states that [the employee's] employment was at will," the court stated.  Disagreeing with the employee's argument that the inclusion of "at any time" made the agreement ambiguous per se, the court reasoned that "simple logic" indicates that "such a formulation ordinarily entails the notion of 'with or without cause'." 

Acknowledging that a contract may appear unambiguous on its face but contain a latent ambiguity and that "the meaning of language is to be found in its applications," the court found none here.  The court noted the employer's language was similar to that used by the California Legislature in codifying the general rule that employment is at will.  Further, the specific language used by the parties to state that employment was "at will" would have no meaning if what they really meant was that employment could be terminated only for cause.  "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."   Concluding that the letter "contained no ambiguity, patent or latent, in its termination provisions," the Supreme Court upheld the decision of the trial court that there were no triable issues of fact with respect to the breach of contract and breach of the implied covenant of good faith and fair dealing. 

What the Decision Means for California Employers

The Supreme Court's clear and succinct decision is a relief for California employers in helping to navigate the treacherous waters of defining the terms of employment.   This decision also addresses the conflict among the Courts of Appeal as to whether a provision in an employment contract providing for termination "at any time" or upon specified notice can be modified by an implied agreement that termination will occur only for cause. 

As noted above, Jackson Lewis co-authored an amicus brief on the appeal with the Atlantic Legal Foundation on behalf of the Southern California Chapter of the Association of Corporate Counsel.  Jackson Lewis will continue to take a lead in discussing the decision and is preparing a detailed analysis of the Dore decision and its implications for employers with employees in California. Source  

 

 

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