In Dore v. Arnold Worldwide, Inc., the California Supreme Court was asked to determine whether “at will” employment really means “at will” employment. Most of us who work in California have known for a long time that “at will” means the employment relationship can be ended by the employer or the employee for any reason, at any time. In fact, the Legislature codified this concept in Labor Code section 2922, which provides that California employees are presumed to be at will. Despite these truisms, the employee in Dore attempted to wordsmith his employer’s at-will language — and it almost worked.

The Challenged “At-Will Employment” Agreement

Brook Dore was employed in Colorado with an advertising agency as regional account director. He described his employment with the advertising agency as “long-standing” and “secure.”

In late 1998, Dore became interested in relocating to Los Angeles and discussed a transfer with his employer. After doing so, Dore learned of an open position with Arnold Worldwide, Inc., formerly known as Arnold Communications, Inc. (“AWI”). The job was based in Los Angeles, and Dore interviewed for it.

Dore claims AWI’s management made many representations to him during his interviews that led him to believe any employment he was offered with the company would be terminable only for “cause.” The management’s alleged representations included that: (1) AWI had landed a new automobile account and needed someone to handle it on a “long-term” basis; (2) if hired, Dore would “play a critical role in growing the agency”; (3) AWI was looking for a “long-term fix, not a Band-Aid;” and (4) AWI employees were treated like “family.”

All went well during the interview process and AWI offered Dore the job in April 1999. In addition to including compensation and benefits information, Dore’s offer letter also described a 90-day “assessment” period, made a reference to “annual” reviews and stated that, after the 90-day assessment period, Dore and his supervisor would discuss making him an officer of the company.

In a separate paragraph, the offer letter included the following “at-will” employment language, which was central to the dispute being considered by the Court in Dore:

Brook, please know that as with all of our company employees, your employment with [AWI] is at will. This simply means that [AWI] has the right to terminate your employment at any time just as you have the right to terminate your employment with [AWI] at any time.

The Legal Dispute: What Does “At Will” Mean?

Dore was discharged by AWI in August 2001. He sued the company, in part, based on breach of an implied-in-fact contract. Dore essentially claimed that AWI’s alleged pre-employment representations (i.e., that he would have a “long-term” role with the company and be part of the AWI “family”) established an implied-in-fact contract that he only could be terminated for “cause” äóñ despite the plain and simple “at will” language in his offer letter. Dore further argued that the references in his offer letter to a 90-day assessment period and an annual review further implied he only could be terminated for “cause.”

AWI took the opposite position that the “at will” language in Dore’s offer letter precluded the formation of an implied-in-fact contract. AWI filed a motion for summary adjudication of this claim and prevailed. Dore appealed, and the Court of Appeal reversed the decision.

When AWI appealed the decision to the California Supreme Court, the Court focused its decision on one central issue: was the language in AWI’s offer letter to Dore that his employment was “at will” sufficiently clear that a jury was not required to decide what the offer letter meant? Put another way, did the additional language in AWI’s offer letter to Dore explaining that “at will” meant AWI had the right to terminate his employment “at any time” äóñ without reference to whether “cause” was required äóñ imply AWI had relinquished the right to terminate Dore without cause?

The Court: “At Will” Means “At Will”

The Supreme Court first noted that the courts of appeal had issued differing rulings regarding whether a provision in an employment contract providing for termination “at any time,” without more, could be interpreted as allowing for the existence of an implied-in-fact agreement that a termination could only be for “cause.” The Court then held that such a provision does not change the essential meaning of the term “at will,” which is clear and unambiguous.

The Court based its ruling, in part, on Labor Code section 2922, which codifies the presumption of “at will” employment. Section 2922 says, “[e]mployment, having no specified term, may be terminated at the will of either party on notice to the other.” The Court noted that although the language used in section 2922 makes no explicit reference to whether “cause” is required for a termination of at-will employment, the California Supreme Court long-ago explained in Guz v. Bechtel that “at-will” employment could be terminated at “any time, without cause, and for any reason or no reason.” The Court further noted that Dore’s offer letter included language that was very similar to the language used in section 2922, and that it would “make no sense” to adopt some meaning for “at will” other than what it previously had been defined to be.

The Supreme Court also made clear that Dore’s allegations of pre-employment representations by AWI were insufficient to render the at-will provision in his offer letter vague and ambiguous. Therefore, Dore could not argue that an implied-in-fact agreement of “for cause” termination existed between the Company and him. The Court reasoned that, even if true, none of the representations could support an inference that Dore reasonably understood that anything in AWI’s offer letter was consistent with a promise not to terminate him except for cause.

Given the unambiguous offer letter, the Court also dispatched Dore’s claim that he was defrauded into accepting employment. In the Court’s view, given the terms of the offer letter, it would have been “unreasonable” for Dore to rely on any representation inconsistent with the plain at-will language in the letter.

Advice for Employers

After the Dore decision, California employers should consider the following steps to protect the at-will employment relationship with their employees.

• Be explicit when drafting at-will employment language for offer letters and use phrases such as: “[y]our employment with the Company is at will. This means you or the Company may terminate your employment at any time, with or without notice or cause.”
• Include at-will language in all offer letters, and require that offer letters be signed by every prospective employee with an explicit acknowledgment that he or she understands the at-will provision. Offer letters also should include “integration” clauses that leave no room for the argument that other pre-employment promises were made to employees. Finally, employers should specifically include a provision requiring any modifications to the terms and conditions of employment (the offer letter) to be in writing and signed. At-will language should be included in handbooks and applications as well.
• Avoid the temptation to make promises during the recruiting process that cannot be kept. The benign desire to “sell” an organization as a good place to work can result in misunderstandings and lawsuits in this area.
• Train those employees involved in the hiring process regarding pre-employment representations, lawful and unlawful interview questions, and other employment law issues attendant to recruiting new employees.
• During litigation, employees (like Dore) sometimes argue “cause” is required for a termination after a “probationary period” expires. Therefore, employers should carefully consider and discuss with legal counsel whether probationary or assessment periods are necessary, or even useful. Policies regarding such periods also should be reviewed by legal counsel to avoid inadvertent promises that “cause” will be required for any termination after a probationary or assessment period expires.