Is California an At-Will Employment State?

Non-union employees can be fired for many reasons.
••• monkeybusinessimages/iStock/GettyImages

California is an at-will employment state, a fact provided for in California Labor Code Section 2922, which states that employment with no specified term may be terminated at the will of either party on notice to the other. Employment for a specified term means employment for longer than one month. The fact that California is an at-will employment state does not mean that a party can be terminated for any reason. A party cannot be fired for an illegal reason, such as religious discrimination.

Causes for Termination

An at-will employee can be fired for good cause or no cause. Potential causes for termination include one mistake, an unexcused missed day of work, behavior or actions taken off the clock, a dispute with a coworker, or the employee’s choice of clothing. An at-will employee can even be fired because of a lie by a customer or colleague.

Employment Discrimination: What Is Protected?

Both Federal and California employment laws prohibit an individual from being terminated for discriminatory reasons, such as for race, sexual orientation or national origin. California’s laws cover more ground than the federal laws, offering protections for aspects such as gender expression. Both the federal government and the state hold termination for a protected reason to be contrary to public policy. An employee who has suffered unlawful termination can file a complaint with the California Department of Fair Employment and Housing (DFEH). They can also file a civil lawsuit against the employer, claiming damages for the loss of employment.

Nondiscriminatory Unlawful Terminations

It is unlawful for a California employer to terminate an employee as retaliation for the lawful use of medical leave, family leave and sick days. It is also unlawful for an employer to terminate an employee for whistle-blowing, and an employee who is fired for this reason can file a complaint with DFEH, and also file a civil lawsuit against their former employer.t

When a Contract Exists

There is employment for a specified term when there is an employment contract for a period of time longer than a month between at least two parties. California law holds that certain types of contracts must be in writing to be valid. This includes a contract that by its terms is not to be performed within a year from the making.

Employment contracts do not have to be in writing to be valid. However, it is advisable for both an employer and an employee who enter into an employment agreement to ensure that the contract is in writing. This is because the written contract will help parties clear up disputes and can also be a guide for the parties to identify remedies.

Implied Contract vs. Explicit Contract

A contract may be implied by parties’ actions or made explicit in written language. A finder of fact, like a jury or a judge, can look at certain evidence to determine whether a contract was created. Relevant information includes the conduct and relationship of the parties and the circumstances of the case.

When parties create a contract by conduct, it can be just as valid as a contract formed with words. Conduct will create a contract if the conduct of both parties is intentional. The parties must also know or have reason to know that the other party will interpret the conduct as an agreement to enter into a contract.

Independent Contractors and At-Will Employment

An independent contractor performs a task for a client, but is not an employee of the client. This means that the law regarding at-will employment does not have the same effect on an independent contractor. Typically, at any point, the parties to the contract can negotiate ending the contract.

If the contract is for a certain term, and a party ends the contract early, they may be in breach of the terms of the contract. The parties can discuss how they want to resolve concerns arising from one or both parties’ breach. If they cannot agree, the breach may become the subject of a civil lawsuit. The client must pay the independent contractor for the work they have already completed.

Determining Whether Independent Contractor or Employee

At times, the line of whether a person is working as an independent contractor or an employee may be blurred. The California Department of Industrial Relations utilizes language in state law AB 5 to invoke the ABC test. This test allows the hiring entity to distinguish when a worker is an employee or an independent contractor.

A worker is considered an independent contractor if all three of these factors in the employment relationship are present:

  • The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
  • The worker engages in work that is outside the usual course of the hiring entity’s business.
  • The worker is usually performing an independently established trade, occupation or business of the same nature as that involved in the work performed.

Exceptions to At-Will Employment

There are a number of exceptions to at-will employment in California. Public sector employees, or individuals working for the government, may be protected by civil service laws and/or a memorandum of understanding (MOU) between the unions and the agencies that determine disciplines and terminations. As a result, an employer cannot fire a public sector employee or individuals working for the government for any reason if there is a law or MOU preventing the termination.

This does not mean that all public sector employees and individuals working for the government are protected by such laws and MOUs. A public sector employee who has not passed their period of probation may be terminated for any reason. Other exceptions to the at-will employment law are:

  • Employees in unions that adhere to collective bargaining agreements that contain just cause standards for termination.
  • Employees with written employment contracts requiring good cause for termination.
  • Employees of employers who say or do things that override a presumption that an arrangement is at-will employment.

Just Cause Standards for Termination

An employer with a collective bargaining agreement (CBA) in place is usually required to demonstrate that they had just cause to terminate a covered employee. The CBA is a contract and defines just cause in its provisions. A CBA may also use the terms good cause, proper cause or reasonable cause. All of these terms mean the same as just cause.

Just cause typically requires that the employer act fairly and clarify what rules exist. For example, an employer may terminate an employee for failing to follow a rule published in the employee manual. They may not terminate the employee for failing to follow an unspoken rule.

Just cause provisions also typically require that the employer act neutrally and impartially. It is likely that a typical CBA would require an employer to define the penalties for violating a workplace rule. This allows union members to know whether a punishment for a particular employee is equal to that of another employee. A union usually advocates for standard penalties for all employees in similar positions who violate the same rule.

Terminations for Good Cause

An employer has good cause to terminate an employee when they make a decision in good faith and for a fair and honest reason. An employer has substantial discretion to terminate an employee. Yet there may be a concern if the employer’s reasons for the discharge are inconsistent with usual practices or unrelated to the business’ needs.

When the court determines whether an employer had good cause to fire the worker, the finder of fact should balance the employer’s interest in operating the business efficiently and profitably against the interest of the employee in maintaining employment. If the parties have created an implied employment contract where they agreed to a certain meaning of good cause, the court may not need to perform this balancing test. A written contract may specifically define good cause for termination.

Statute of Limitations

A worker who is wronged by an employer’s unlawful termination has to abide by California's statute of limitations for their particular type of case. The statute of limitations sets out the time period in which a lawsuit for a particular type of case can be filed. For example, the statute of limitations for breach of a written contract is four years from the date the contract was breached and the statute of limitations for breach of an oral contract is two years from the date the contract was beached.

A worker can add other causes of action to a wrongful termination lawsuit, such as fraud and personal injury. These claims may have different statutes of limitations. The statute of limitations for a personal injury case is two years from the date the injury occurred, and the statute of limitations for fraud is three years.

Filing Suit Against a Government Agency

A worker who wants to file a lawsuit against a government agency is usually first required to file an administrative claim against the agency. They must file this claim within one year of a breach of the contract, if the cause for the claim is a breach. The agency has 45 days to respond to the claim.

If the agency denies the claim during the 45 days, the individual has six months in which to file a lawsuit. The clock starts running from the date the denial was mailed or personally delivered to the worker. If the worker does not get a rejection letter, they have two years to file from the day the incident occurred.

Lawsuits for Breach of Contract

A worker who wants to file a lawsuit for breach of contract must file a number of documents with the court in the jurisdiction in which they are suing the employer and pay a filing fee. These include the civil case cover sheet; the complaint, or lawsuit itself; the summons and the proof of service; and the causes of action. The plaintiff, the party suing a hiring entity, cannot serve the defendant themselves.

What a Party Can Recover

In a wrongful termination suit, a former employee may be able to recover lost wages and benefits, court costs, attorney’s fees, back pay and wages, compensation for emotional distress and punitive damages to punish willful wrongdoing by the employer. Court costs can include the filing fee and costs to produce evidence through the process of discovery. California does not cap the amount of punitive damages. An employee who brings a claim under federal law such as the Americans with Disabilities Act (ADA) may see a cap on the amount of damages the plaintiff can bring. The amount changes depending on the size of the employer.

Duty to Mitigate Damages

A party who has been terminated from employment is expected to attempt to return to gainful employment. When a party does not try to find another job after a termination, they may not be awarded damages for remaining unemployed. The party is expected to make reasonable efforts to get work. Whether a party acted reasonably to mitigate damages is reviewed under the substantial evidence test.

Related Articles