California Supreme Court Affirms That “At-Will Employment” Means Terminable “Without Cause”

A recent decision by the Supreme Court of California affirmed that an offer of employment described as “employment-at-will” was unambiguous, and left the employer free to terminate the employment relationship at any time, with or without cause. Dore v. Arnold Worldwide, Inc., 39 Cal. 4th 384 (2006).

The plaintiff Brook Dore received a three-page employment offer letter from defendant Arnold Worldwide, Inc. (“AWI”) that listed the terms of its offer, including commencement dates, compensation details, various benefits, and an explanation of the evaluation schedule. In addition, a separate paragraph stated: “Brook, please know that as with all of our company employees, your employment with Arnold Communication, Inc. is at will. This simply means that Arnold Communications has the right to terminate your employment at any time just as you have the right to terminate your employment with Arnold Communications, Inc. at any time.” Dore signed the offer letter signifying his acceptance of these terms.

After AWI terminated Dore’s employment, Dore sued AWI alleging, among other things, breach of contract and breach of the implied covenant of good faith and fair dealing, asserting that AWI lacked cause for the termination. The trial court granted AWI’s motion for summary judgment on the ground that Dore could not establish the existence of either an express or an implied-in-fact agreement that his employment was terminable only for cause. Dore appealed, and the Court of Appeal reversed, finding that the offer letter was not clear and unambiguous with respect to the grounds for termination. Notwithstanding the offer letter’s language that employment was “at will,” the Court of Appeal reasoned that by going on to define the term “at will” to mean that AWI had the right to terminate Dore’s employment “at any time,” AWI impliedly relinquished the right to terminate Dore without cause. AWI’s petition for review by the Supreme Court was granted.

The Supreme Court reversed, finding that the language in the executed offer letter was unambiguous. The offer letter “plainly states that Dore’s employment with AWI was at will” and “at will when used in an employment contract normally conveys an intent that employment may be ended by either party at any time without cause.” The Supreme Court noted that AWI’s additional language defining “at will” did not make the parties’ agreement ambiguous, because the language used by AWI tracked the language used by the California Legislature in California Labor Code § 2922 (which provides that “employment, having no specified term, may be terminated at the will of either party on notice to the other”) and the Court’s prior decision in Guz v. Bechtel National, Inc., 24 Cal. 4th 317 (2000) (where it ruled that “At-will employment may be ended by either party at any time without cause, for any reason or no reason, and subject to no procedure except the statutory requirements of notice”). The Supreme Court concluded that although “AWI’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.”

Although the Dore decision is a victory for California employers, it illustrates the need for strong and unambiguous “at will” language in all statements of employment policy. California employers would be well advised to review the disclaimers contained in their employment applications, offer letters, agreements and personnel manuals. Language which is ambiguous or does not track Labor Code section 2922 and Guz should be revised.