Advance Notice in At-Will Contracts: California (article 2/3)

As stated in our previous article about notice in at-will contracts, it is possible to have an at-will relationship while nevertheless requiring advance notice of termination.

In California, the term “at will” is described in Cal Lab Code § 2922.

An employment, having no specified term, may be terminated at the will of either party on notice to the other. Employment for a specified term means an employment for a period greater than one month.

In Bionghi v. Metro. Water Dist., 70 Cal. App. 4th 1358, 1364 (Cal. App. 2d Dist. 1999), the plaintiff, a consultant, sued the defendant entity for breach of a consultancy agreement. The agreement stated the following regarding the right to terminate:

“The Agreement may be terminated by [the MWD] hereto 30 days after notice in writing to Consultant of such termination”.

The defendant terminated giving 30 days’ notice. The plaintiff did not contest that notice was given. However, she claimed that the contract also required “cause” in order to terminate. The Court of Appeal in the case stated that the trial court “found that the contract was not reasonably susceptible to the meaning [plaintiff] urged, and that parol evidence was thus not admissible, and granted summary adjudication to the [defendant]”. The Court of Appeal went on to say “We agree with the trial court. The termination clause is clear and unambiguous. With the words “The Agreement may be terminated by [the MWD] hereto 30 days after notice in writing,” it provides that the only condition for termination is 30 days’ notice, and allows termination with or without cause”.

In the later case of Bernard v. State Farm Mutual Automobile Ins. Co., 158 Cal. App. 4th 304, 309 (Cal. App. 3d Dist. 2007), the Court of Appeal for the Third District resolved conflicting decisions at the Court of Appeals level. Bernard involved an agency contract which stated, i.a., that, if the plaintiff’s contract was terminated, the plaintiff was entitled upon request to a review in accordance with the termination review procedures approved by the Board of Directors of the Companies, as amended from time to time. The Court in Bernard stated:

“In its recent decision in Dore [1], the California Supreme Court resolved a conflict in the Courts of Appeal “over whether a provision in an employment contract providing for termination … upon specified notice is, without more, reasonably susceptible to an interpretation allowing for the existence of an implied-in-fact agreement that termination will occur only for cause.” (Dore, supra, 39 Cal.4th at p. 389.) For our purposes, the Court of Appeal conflict featured in Dore pitted the decision in Wallis v. Farmers Group, Inc. (1990) 220 Cal. App. 3d 718 [269 Cal. Rptr. 299] (Wallis), which concluded that such a termination-notice provision is reasonably susceptible [***7] to this interpretation, against the decision in Bionghi, supra, 70 Cal.App.4th 1358, which concluded it is not. Dore sided with Bionghi and disapproved Wallis, which spells trouble for Bernard here. (Dore, supra, 39 Cal.4th at p. 394, fn. 2.)…[…] Under Dore, then, the termination provision here stating in full that “You or State Farm have the right to terminate this Agreement by written notice delivered to the other or mailed to the other’s last known address” is not reasonably susceptible to an interpretation requiring good cause for termination.

The Court in Bernard also declined to hold that the review procedure that State Farm offered was enough to require that State Farm could only terminate for cause.

Practice Points

– Neither a written document nor a requirement to give advance notice will automatically turn an “at-will” relationship into one “for cause”.

Don’t give mixed messages. Employers should be careful not to inadvertently change the “at-will” status into one “for cause” by making promises about future employment and disciplinary procedures. This can happen through, for example, reviews or employee handbooks, which, if handled incorrectly, can give the employee the belief that employment will continue unless he/she does something serious that constitutes “cause” to terminate.

Be clear from the beginning. Employers should state unambiguously to employees at the hiring stage of the relationship that the employment is at-will and they should be consistent in this message throughout the employment relationship.

Each case is unique so you should consult an attorney in your state to determine which termination and notice rights and obligations you have as an employer or employee.

See also: Advance Notice in At-Will Contracts in general and in New York.

 


  1. Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384 [46 Cal. Rptr. 3d 668, 139 P.3d 56]