"Simple Logic" Precludes Ambiguity in Offer Letter's at-Will Clause
September 2006
An offer letter containing the phrase "your
employment is at will," which is read, accepted, and signed by an employee "contained
no ambiguity, patent or latent, in its termination provisions," according to
the Supreme Court of California. Additional language in the letter defining
"at will" to mean the employer had the right to terminate employment "at any
time" did not create ambiguity as to whether cause was required.
by Paul
J. Siegel, Esq.
Jackson Lewis
LLP
In the case of Dore v. Arnold Worldwide, Inc.,
No. S124494 (August 3, 2006), the employee's attempt to show there was evidence
of an implied agreement—verbal statements, conduct, and documents—that he would
not be discharged except for cause was unsuccessful.
The decision in this important case involves a critical issue for California
employers when using at-will language in offer letters, job applications, and
other statements in the employment process. With this ruling, the California
high court has said that employers may rely on clearly worded and unambiguous
statements of at-will status, where the individual has understood, agreed, and
accepted the terms. Using additional language to indicate that "at will" means
"at any time" does not, by implication, leave the door open as to whether an
employer must show cause for discharge.
On behalf of the Southern California Chapter of the Association of Corporate
Counsel, Jackson Lewis coauthored an amicus brief with the Atlantic Legal Foundation,
asking the court to adopt a rule that provides solid legal ground for an unambiguous
statement in an offer of employment that the parties agree to "at-will" status
whereby the agreement may be terminated at any time and for any or no reason
by either party. In effect, the court has so ruled.
A Familiar Scenario
When an employee requested a transfer to the employer's Los Angeles office,
he was provided a formal offer letter confirming the transfer and stating the
terms of employment, including commencement date, compensation, and benefits.
The letter also stated there would be a 90-day assessment with a supervisor
and, if satisfactory, the opportunity to be considered to become an officer
of the company. In a separate paragraph, the letter also stated, "Please know
that as with all of our company employees, your employment is at will. This
simply means [the employer] has the right to terminate your employment at any
time just as you have the right to terminate your employment at any time." Admittedly,
the employee "read, signed, understood, and did not disagree with the terms
of the letter."
When the employee was terminated several years later, he sued the employer
alleging breach of contract and breach of the implied covenant of good faith
and fair dealing, along with other claims. He based the allegations on various
oral representations, conduct, and documents that he claimed led him to understand
that he would not be discharged except for cause. The employer objected and
moved to have the case resolved in its favor on a motion for summary judgment,
which the trial court granted. Since the express written contract—the letter—was
controlling, the trial court determined there was no need to consider the evidence
offered by the employee to establish the existence of an implied agreement to
terminate only for cause.
The California Court of Appeal disagreed, and ordered that the case be sent
back to the trial court for further consideration of the breach of contract
and breach of implied covenant claims, among others. The court of appeal based
its ruling on language in the offer letter that defined "at will" in a manner
that referred expressly to the duration of the contract, using the words "at
any time." Even though it acknowledged that the term "at will" normally conveys
an intent that employment may end "at any time without cause," the court nonetheless
reasoned that the language of the letter was ambiguous, and other evidence could
be offered to show that the employer had agreed not to discharge the employee
except for cause.
Supreme Court Finds Letter "Unambiguous"
Reversing the decision of the court of appeal, the Supreme Court of California
said the trial court's ruling was correct. "[The employer's] letter plainly
states that [the employee's] employment was at will," the court stated. Disagreeing
with the employee's argument that the inclusion of "at any time" made the agreement
ambiguous per se, the court reasoned that "simple logic" indicates that "such
a formulation ordinarily entails the notion of 'with our without cause.'"
Acknowledging that a contract may appear unambiguous on its face but contain
a latent ambiguity and that "the meaning of language is to be found in its applications,"
the court found none here. The court noted the employer's language was similar
to that used by the California Legislature in codifying the general rule that
employment is at will. Further, the specific language used by the parties to
state that employment was "at will" would have no meaning if what they really
meant was that employment could be terminated only for cause.
- Even though [the employer's] letter defined "at will" as meaning "at
any time" without specifying it also meant without cause or for any or no
reason, the letter's meaning was clear.
Concluding that the letter "contained no ambiguity, patent or latent, in
its termination provisions," the Supreme Court of California upheld the decision
of the trial court that there were no triable issues of fact with respect to
the breach of contract and breach of the implied covenant of good faith and
fair dealing.
What the Decision Means for California Employers
The supreme court's clear and succinct decision is a relief for California
employers in helping to navigate the treacherous waters of defining the terms
of employment. This decision also addresses the conflict among the courts of
appeal as to whether a provision in an employment contract providing for termination
"at any time" or upon specified notice can be modified by an implied agreement
that termination will occur only for cause.
Further information about Atlantic Legal Foundation and this case may be
obtained by visiting the Foundation's Web site at www.atlanticlegal.org and by contacting President William H. Slattery at whslattery@atlanticlegal.org or Senior Vice President and General Counsel Martin Kaufman at mskaufman@atlanticlegal.org.
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