Most workers in California are employed at will, which means they can be fired at any time for most any reason. They generally have no contractual right to keep their jobs or to sue for damages if terminated. However, there are circumstances in which a contract can be implied from employer conduct, including communications, policies and practices.

An implied contract can be formed based on the contents of an employee handbook or other policy documents provided by the employer. These can establish certain standards of employee performance and behavior may outline disciplinary procedures to be followed before termination. The California Supreme Court has recognized that statements made in an employee handbook can lead to an implied contract if an employee reasonably relies on these statements as commitments from the employer.

For instance, if an employee handbook outlines a specific sequence of disciplinary actions (e.g., verbal warning, written warning, suspension, and then termination) or states that employees will not be fired without "just cause," these provisions might be interpreted as altering the at-will nature of employment. The key factor is whether the language used in the handbook or policy documents is sufficiently clear to imply a promise that certain procedures will be followed before termination can occur.

California courts have set precedents in cases such as Foley v. Interactive Data Corp., where the state Supreme Court recognized that implied contracts can restrict an employer’s ability to terminate an employee at will. However, the court in Guz v. Bechtel National Inc. emphasized the importance of the employer’s intent and the clarity of the document language in determining whether such policies create binding obligations.

To raise a colorable claim of wrongful termination under the theory of an implied contract, an employee must demonstrate:

1. Existence of clear and mandatory policies — The employee must show that the employer's policies were clearly articulated and suggested a promise of specific treatment in disciplinary or termination processes.

2. Reasonable reliance — The employee needs to prove that they reasonably relied on these policies. This reliance must be justifiable, based on the employer’s consistent application of the policies or explicit assurances given to the employee.

3. Breach of the implied contract — The employee must demonstrate that the employer failed to adhere to the policies as outlined, thereby breaching the implied contract. For example, if an employer skips steps in the disciplinary process that were promised in the employee handbook, this could constitute a breach.

4. Damages — The employee must show that they suffered damages as a result of the breach. This could include lost wages, emotional distress, and other related damages.

To prevent wrongful termination claims, employers must be careful to avoid language that an employee could reasonably rely upon as setting up standards of compliance with company policies and norms of behavior. It may not be sufficient for the employment simply to include a declaration that nothing in the handbook or other document shall be deemed to create contractual rights. The court will construe the handbook or document as a whole as well as the employer’s overall history of conduct in coming to a decision on the existence of an enforceable contract.

Garcia & Gurney, A Law Corporation in Pleasanton, California works to keep employers in and around Alameda and Contra Costa counties compliant with all applicable laws. For advice and representation in any employment law matter, contact us online or call us at 925-468-0400.