Wirtz Law Blog

Most employers and employees will agree that if they do not specify the term (or length) of employment, the employment relationship is “at-will”  — that is, either the employer or the employee may end the relationship at any time for any reason (except for terminations in violation of public policy). In fact, California Labor Code Section 2922 creates a presumption that in the absence of a specified term, the employment is at-will. The corollary to this presumption of California law is found in Labor Code Section 2924 — that is, employment relationships for a fixed or specific term can only be terminated for a just cause. However, the California Labor Codes are completely silent about the dilemma created when a contract provides both a fixed or specific employment term and an express provision declaring the employment to be at-will.

In such a case, courts will most likely determine that the express at-will provisions will render the client an at-will employee. The rationale is that express provisions trump implied provisions.  Civ. Code, § 1625; Code Civ. Proc., § 1856. In other words, the express at-will language will trump the inference that just cause for termination is needed because of the specified term. Thus, under California law the implicit term will always yield to an express agreement. Lee v. TRW Inc. (9th Cir. 2005) 143 F. App’x 10. This is true even if the express provision is not contained in an integrated contract. Metoyer v. Chassman (Cal. 2007) 504 F.3d 919.

While there is no California case directly on point at this time, the South Carolina Supreme Court followed this above approach in holding the express at-will provision to control. See Cape v. Greenville County Sch. Dist. (2005) 365 S.C. 316. In Cape, the court recognized that an employment contract for an indefinite term is presumptively terminable at will, while a contract for a definite term is presumptively terminable only upon just cause. However, these are but mere presumptions and the parties are free to alter them through express contracts. In that case, the School District and Mr. Cape entered into a contract for a fixed term of employment, but expressly provided for the employment to be at-will. Id. at 317. Thus, by express contract provision the parties altered the presumption erectile dysfunction with an at-will termination clause. This analysis does not appear to differ significantly from California law.

California’s Labor Codes recognize both the at-will and specified term presumptions, along with the right of parties to contract for a status contrary to the default presumption. Guz v. Bechtel Nat. Inc. (Cal. 2000) 8 P.3d 1089, 1100. The parties are “free to define their relationship including the terms on which it can be ended, as they wish. The parties may reach any contrary understanding otherwise lawful concerning either the term of employment or the grounds or manner of termination.” The most direct case in California answering this question applies New York law, but recognizes that the two jurisdictions do not differ on this issue. See, Anderson v. Savin Corp. (Ct. App. 1988) 254 Cal. Rptr. 627. The contract in that case employed Mr. Anderson for one-year terms, renewable for additional one-year terms, but terminable by “either party in its discretion at any time on 5 days notice.” The court held Mr. Anderson to be an employee terminable at-will. California statutes create a presumption of an at-will employment, rebuttable by two possible conditions: “(1) the contract was supported by consideration independent of the services performed by the employee for his prospective employer; or (2) the parties agreed, expressly or impliedly, that the employee could be terminated only for good cause.”

The lesson here is one to be applied at the beginning of the employment relationship. When drafting employment agreements, there seems to be no predominate purpose in having both a specified term and an express at will provision. Common sense would indicate that the two provisions are in conflict. The better practice is to choose one provision. Make an employee either at will or employed for a specified period. At the end of the day, having both provisions in the contract may simply result in lengthy and expensive conflict resolution procedures.

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