At-Will Getting Closer to What it Means

The California Supreme Court determined recently that the at-will provisions of employment in California are really at-will. In the case of Dore vs. Arnold Worldwide Inc. the court clarified that the provision is enforcable based on its plain meaning.

From the Thelen and Reid newsletter:

Defendant Arnold Worldwide, Inc. (AWI), an advertising agency, recruited plaintiff Brook Dore for a management supervisor position. During the interview process, Dore claimed AWI executives told him they needed someone to handle a new account on a “long-term” basis and that he would “play a critical role” in the agency if hired. Dore learned during the interviews that certain people at AWI had been employed for long periods, and he was told the agency treated its employees “like family.” Dore received a verbal offer for the position, which he accepted.

AWI later sent Dore a letter confirming the terms of his employment. The letter stated, among other things, that Dore would have a “90 day assessment” at which time objectives would be set for evaluating his performance at an “annual review.” He would then also have the “opportunity to discuss consideration for being named an officer” of AWI. In a separate paragraph, the letter stated, “Brook, please know that as with all of our company employees, your employment with [AWI] is at will. This simply means that [AWI] has the right to terminate your employment at any time . . . .” The letter requested that Dore sign and return it to AWI to signify his acceptance of the terms stated, which he did.

Over two years later, AWI terminated Dore’s employment. Dore then sued AWI asserting various claims, including breach of contract and breach of the implied covenant of good faith and fair dealing. Dore alleged that AWI’s oral statements, conduct and documents established an “implied-in-fact” contract which prohibited AWI from terminating his employment except for cause. The trial court disagreed and granted summary judgment in AWI’s favor, ruling that AWI’s letter was enforceable as an express written contract of “at will” employment. Dore appealed the ruling, which the Court of Appeal reversed. AWI then sought review by the California Supreme Court.

The Supreme Court’s Decision

In a unanimous decision, the California Supreme Court reversed the Court of Appeal and affirmed the dismissal of Dore’s claims. The Court confirmed the principle that a clear and unambiguous at will provision in a written employment contract, signed by the employee, cannot be overcome by evidence of a prior “implied-in-fact” contract requiring good cause for termination.

The Court then addressed Dore’s argument that AWI’s letter was ambiguous because the letter defined “at will” only by reference to when his employment could terminate (“at any time”), and was silent on the issue of cause. On this point, California appellate courts have issued conflicting decisions over whether an employment contract providing for termination “at any time,” without more, can be interpreted as allowing an implied agreement requiring cause for termination. The Supreme Court resolved this conflict in the law, stating that the formulation “at any time” in a termination clause is not “per se ambiguous,” rather, “[a]s a matter of simple logic, . . . such a formulation ordinarily entails the notion of “with or without cause.”

Turning to the facts of the case, the Supreme Court concluded the language of AWI’s letter agreement with Dore was unambiguous. The Court noted that Dore had read, signed and understood the terms in the letter, which plainly stated his employment was “at will.” The Court observed that the letter defined that term using language similar to California Labor Code section 2922, which states an “employment, having no specified term , may be terminated at the will of either party on notice to the other.” The Court reasoned it would make no sense for the parties to emphasize Dore’s employment was “at will” if their true meaning was to require cause for his termination. Finally, the Court rejected Dore’s argument that his evidence of AWI’s verbal statements and conduct, as described above, rendered the letter ambiguous.

The Impact of Dore v. Arnold Worldwide For Employers

Dore offers employers several important lessons:

Take care to ensure that job applications, offer letters, personnel policies, employment contracts, and related agreements with employees are drafted in a manner that preserves “at will” employment. Not only should these documents contain clear at will provisions, but other provisions that may expressly or impliedly negate at will employment should be avoided.

Managers and human resources personnel should not make verbal statements to applicants and employees which could be interpreted as inconsistent with at will employment.

Have your at will provisions reviewed by legal counsel to ensure they are enforceable.

Score this one a win. It doesn’t happen very often. Particularly here in California.