The California Supreme Court has ruled that a written at-will policy trumps an employee’s claim of an implied agreement to terminate only for cause, where that agreement is based only on longevity, raises and good reviews.

In the case of Guz v. Bechtel National, Inc., (case no. S 062201, decided October 5, 2000) the justices ruled that an employee whose job was eliminated due to a reorganization could not claim an “implied in fact” contract for something other than at will employment, even though he had worked there 23 years, and even though the president of his division testified that generally, employees are not fired without cause.

At the same time, the Court ruled that a company’s written policies, whether in a handbook, procedures manual or memo distributed to employees, can become part of the contract of employment if employees see them that way. Those policies, if not properly written, can modify the company’s right to fire employees at will.

The Court also reaffirmed that an employee who sues for breach of contract is limited to contract damages, even if he or she also alleges that the firing was done in bad faith.

Finally, the case holds that an employee who alleges age discrimination must do more than challenge the employer’s stated reasons for the termination.  Even if the plaintiff can show that the employer is lying about the reasons for the termination, the employee must show some evidence that discrimination formed at least part of the basis for the decision to fire.  “The statutes do not prohibit lying, they prohibit discrimination,” declared the Court.

Employers reviewing their handbooks will want to be sure that each of their policies is consistent with the right to terminate employees for any reason or no reason.  Wherever possible, there should be clear language restating the right to terminate at will, to prevent employees from claiming they understood an implied agreement to the contrary.

This language might appear in your Review Policy (and perhaps on the review form itself):

“The review process is intended to enhance and improve the performance of employees.  The company makes no promise that an employee who is given a plan of corrective action will continue to be employed for any length of time, whether or not he or she complies with the plan.  By the same token, excellent reviews and merit raises, and long years of service, while they speak highly of an employee’s value to the company, do not create a promise of future employment for any particular length of time and do not change the at-will employment relationship.  Company reserves the right to terminate any employee at any time and for any reason or for no reason, pursuant to Labor Code section 2922.”

You might want to include this language in your Discipline Policy:

“This disciplinary policy is a guideline only.  The company may respond to individual situations as it sees fit, whether or not that response conforms to these guidelines.  The company reserves the right to take any action it determines appropriate, up to and including termination, at any time, whether or not it determines that a policy violation has actually taken place, and whether or not it is the first or a subsequent violation.”