California Labor Code Section 2922
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 employment for a period greater than one month."
This statute creates a presumption that an employer may terminate its employee at will, for any reason or no reason. ( Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 350 (Guz).)
The employee has the burden to prove that the employment was not at will. ( Haycock v. Hughes Aircraft Co. (1994) 22 Cal.App.4th 1473, 1492.)
The statutory presumption of at-will employment under Labor Code section 2922 does not apply where the parties have enforceable expectations concerning either the length of employment or the grounds or manner of termination. (Chin et al., Cal. Practice Guide: Employment Litigation (The Rutter Group 2001) 4:45, p. 4-5.)
Thus, the presumption of at-will employment may be overcome by evidence of either an express or an implied-in-fact agreement limiting the employer's termination rights. (Guz, supra, 24 Cal.4th at pp. 336-337; Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654, 675, 254 Cal. Rptr. 211, 765 P.2d 373 (Foley).)
"An implied contract is one, the existence and terms of which are manifested by conduct." (Civ. Code, 1621.) An implied-employment contract implies a promise to refrain from arbitrary dismissal, i.e., not to discharge without good cause. ( Foley, supra, 47 Cal.3d at p. 679; Khajavi, supra 84 Cal.App.4th at p. 58.) Such a contract may be proved by a course of conduct, which includes oral representations. ( Guz, supra, 24 Cal.4th at pp. 336-337; Foley at pp. 680-681.) No independent consideration need be established for the employer's promise not to terminate without good cause. The employee's performance supports the employer's promise both to pay and to refrain from arbitrary termination. ( Asmus v. Pacific Bell (2000) 23 Cal.4th 1, 10-11, 999 P.2d 71.)
The test of whether an implied-in-fact contract not to terminate without good cause exists is whether such agreement is shown by the parties' acts and conduct " ' "interpreted in the light of the subject matter and of the surrounding circumstances." ' " ( Foley, supra, 47 Cal.3d 654, 681.) Such circumstances may include the employer's personnel policies and practices, the employee's length of employment, promotions and salary increases, assurances by the employer, and industry custom and practice. (See Guz, supra, 24 Cal.4th at pp. 336-337, 341-342; Foley, at pp. 680-682.) "Every case thus turns on its own facts. Where there is no express agreement, the issue is whether other evidence of the parties' conduct has a 'tendency in reason' (Evid. Code, 210) to demonstrate the existence of an actual mutual understanding on particular terms and conditions of employment." (Guz, at p. 337.)
"An express contract is one, the terms of which are stated in words." (Civ. Code, 1620.)
The presumption of at-will employment may be overcome by an express written or oral agreement limiting the employer's power to terminate. (Chin et al., Cal. Practice Guide: Employment Litigation, supra, 4:46, p. 4-5; see Khajavi v. Feather River Anesthesia Medical Group (2000) 84 Cal.App.4th 32, 38 (Khajavi) oral employment agreement for a specified term.)
Such an express agreement may specify either the length of employment, i.e., employed for a fixed term, or the grounds for termination. (Chin et al., supra, 4:46, p. 4-5.)
Labor Code section 2924 provides:
"An employment for a specified term may be terminated at any time by the employer in case of any willful breach of duty by the employee in the course of his employment, or in the case of his habitual neglect of his duty or continued incapacity to perform it."
An employment contract for a specified term may be terminated only for an employee's "willful breach of duty," "habitual neglect of duty" or "continued incapacity to perform." ( Khajavi, supra, 84 Cal.App.4th at p. 57.) This rule applies only when the employment agreement sets forth the length of employment. (See Lenk v. Total-Western, Inc. (2001) 89 Cal.App.4th 959, 969-970 employment agreement stating performance review to be completed after 12 months' employment cannot be interpreted as guaranteeing minimum one year of employment.)