Don't Shoot Your Business in the Foot With Your Employee Handbook
Most employers and human resource directors are familiar with the concept of at-will employment, but may not know the statutory basis. In California, at-will presumption comes from a short and simple Labor Code. Section 2922 provides:
“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.”
A contract that is for a specific term is by definition not an at-will agreement. If you hire an employee under a one-year contract, then you have agreed to employ that person for one year. You thus need cause to fire the employee prior to the expiration of the contract. Terminating without cause would be a breach of the agreement.
Any employee that does not have a contract for a specified term is thus presumed to be at-will. An employer does not need a contract stating that the employee is at-will or even a document signed by the employee acknowledging he is at-will. At-will employment is the default, absent a contract to the contrary. The mistake employers make is to do something to defeat the at-will presumption, and employee handbooks are fertile ground for such mistakes.
The pendulum swings with judicial interpretations of employee handbooks. At one time, employee handbooks were the bread and butter of employment attorneys, who used them to create employment contracts that defeated the at-will presumption. If the handbook provided for a disciplinary process, and the employee relied on that representation, it was argued that an implied contract had been created by the handbook. So, if the handbook provided that no employee would be terminated without first receiving a written warning, then it was a breach of the agreement if the employee was fired with no warning. Businesses responded by printing on page one of their handbooks that the handbook was not an agreement, and that the company was not required to follow its own policies.
That approach is effective only to a point. The courts are mindful and open to the mixed message argument. A classic misstep involves creating a probationary period. If your handbook states that an employee is probationary for their first 90 days at the company, then what do they become on day 91? The classic meaning of “probation” is a test period, where the employee can be fired without cause. Be definition, then, after that 90 days, cause will be required.
It is not enough that your employee handbook states that all employees are at-will, and that it is not at agreement, if there are still internal inconsistencies. After all, if your handbook states that employees can be terminated without cause, and then goes on to set forth what constitutes cause for termination, why should the first statement be elevated over the latter? You and/or your attorney should review every clause and make certain they are all consistent and achieve the intended result.
Next time, a few more handbook provisions that have tripped-up employers.
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