At-Will Doesn’t Mean Risk-Free: Why Terminations Still Require Caution

The default in California is that employees are “at-will,” meaning either the employer or employee can terminate employment without cause or advance notice. However, many employment law professionals will tell you, in reality, “at-will” employment is much more nuanced. Intuitively, many California employers realize that when terminating an at-will employee, it is still important to have a justification for the decision, documentation of the performance concern or policy violation, as well as assess legal risk.

So, what does at-will employment really mean in California?

The Default, But There Are Exceptions

While at-will employment is the default, there are exceptions. Before terminating an employee, it is critical to confirm their status.

Common exceptions to the at-will relationship include:

• Union employees covered by collective bargaining agreements (CBAs);
• Many public employees, covered by CBAs or “memorandum of understandings” (MOUs), and/or statutory rights, such as the Public Safety Officers and Firefighters Procedural Bill of Rights;
• Executive-level employees or others who have entered into employment agreements with their employers

These employees may have additional rights, such as only being terminated “for cause,” or procedural rights, including advance notice and opportunities to challenge disciplinary action or a termination decision.

You Can Accidentally “Undo” At-Will Employment

Employers must be careful they don’t accidentally “undo” the at-will employment relationship. This can happen even without a written agreement, such as when employers imply a guarantee of continued employment or promise specific rights in their handbook policies, offer letters, or even verbally.

One example is when employers implement progressive discipline policies without careful wording. These types of policies often cause confusion about at-will status when employers promise escalating disciplinary action in pre-defined steps (e.g., verbal warning, written warning, suspension, termination). If you do have one of these policies, ensure it is explicit that employees are still at-will, and the company reserves the right to apply whatever type of discipline it deems appropriate, up to and including termination.

Employers can also minimize confusion risks with strong handbook policies outlining the at-will nature of employment and designating one person, such as the President or CEO, as the only one authorized to alter the at-will relationship, in writing.

Termination Must Be for a Lawful Reason

Even when employees are at-will, that doesn’t mean terminating them is risk-free. This is because employers are only allowed to terminate employees based on lawful reasons, whether at-will or not. Examples of lawful reasons include that the employee is having performance issues or violated company policy, or for financial or budgetary reasons, such as a layoff.

Some examples of “unlawful” reasons include terminating or disciplining an employee because they filed a complaint, took a protected leave, requested a reasonable accommodation, got injured on the job, or engaged in protected activity, such as discussing wages, hours, and working conditions with coworkers. Employers also can’t discriminate against employees based on a protected status, such as race, religion, gender, disability, etc. There are around 20 different protected classes under California’s Fair Employment and Housing Act.

This is why one of the first things an employer should consider is whether the termination could be perceived as unlawful. For example:

• What if you have an employee who is having performance issues, but you’ve just found out they have a serious medical condition requiring leave, and they provided a medical certification?
• What if all of the employees you selected for a department layoff are women, when you have an equal number of men and women?

Prior to a termination decision, employers should also review the employee’s personnel file, performance reviews, and disciplinary records. A strong record and history of performance issues and/or policy violations may help demonstrate that the termination is based on a lawful reason. On the other hand, a lack of documentation may make defending the decision more difficult.

When California Will Presume Retaliation

In certain circumstances, if you take adverse action against an employee following their protected activity, it will be presumed you retaliated, meaning the company will have the burden of proving it didn’t retaliate if a claim is filed. Labor Code sections 98.6, 1102.5, and 1197.5 create a rebuttable presumption of retaliation when an employer takes an adverse action (e.g., discipline, negative performance review, termination, etc.) against an employee within 90 days of them engaging in certain protected activity, such as making a wage-and-hour complaint.

Don’t Forget About Cal-WARN

And, that’s not all! Sometimes advance notice of termination is required, even for your at-will employees. Under Cal-WARN, for covered employers with 75 or more employees, you may be required to provide employees advance written notice prior to major employment losses, such as a mass layoff, relocation, or facility closure.

CEA Has You Covered

California HR compliance can be a lot. Take a sigh of relief knowing that CEA’s HR advisors are here to support you.