Friday, August 4, 2006
S.C. Strengthens Employers’ Right to Terminate Without Cause
By a MetNews Staff Writer
An employment contract stating that the employment is “at will” and defining that to mean the employment may be terminated “at any time,” without saying more, allows the employer to terminate the employment without cause, the state’s Supreme Court ruled yesterday.
The court agreed with Los Angeles Superior Court Judge Jane L. Johnson, who granted summary judgment for Arnold Worldwide, Inc in a suit brought against it by Brook Dore, and reversed this district’s Court of Appeal, which found that the written agreement did not negate the possible existence of an implied-in-fact agreement not to terminate without good cause.
Dore was living and employed in Colorado when he began employment discussions with AWI, which was seeking to fill a management supervisor position in its Los Angeles office.
Dore alleged that during negotiations he was told that AWI had landed a new automobile account and needed someone to handle it on a long-term basis, that he would “play a critical role in growing the agency,” that AWI was looking for “a long-term fix, not a Band-Aid,” and that AWI employees were treated like family.
After Dore accepted an oral employment offer in April 1999, AWI sent him a confirmation letter stating:
“Brook, please know that as with all of our company employees, your employment with Arnold Communications, Inc. is at will. This simply means that Arnold Communications has the right to terminate your employment at any time just as you have the right to terminate your employment with Arnold Communications, Inc. at any time.”
Dore signed and returned the letter. After AWI terminated his employment in August 2001, allegedly without cause, Dore filed suit.
In granting AWI’s summary judgment motion, Johnson found that Dore could not establish the existence of either an express or an implied-in-fact agreement that his employment was terminable only for cause.
On appeal, Dore argued that, although his contract said his employment could be terminated “at any time,” it was ambiguous because it did not say whether such termination had to be for cause or could be without cause. He argued that he was led to believe that there was an implied-in-fact agreement that he could only be discharged for cause.
The Court of Appeal agreed with Dore, reasoning that, by defining “at will” as meaning the employment could be terminated at anytime, without stating explicitly whether cause was required, AWI impliedly gave up its right to terminate without cause.
But Justice Kathryn M. Werdegar, writing for the Supreme Court, said:
“We disagree with Dore that the verbal formulation ‘at any time’ in the termination clause of an employment contract is per se ambiguous merely because it does not expressly speak to whether cause is required. As a matter of simple logic, rather, such a formulation ordinarily entails the notion of ‘with or without cause.’”
The justice explained:
“For the parties to specify—indeed to emphasize—that Dore’s employment was at will (explaining that it could be terminated at any time) would make no sense if their true meaning was that his employment could be terminated only for cause. Thus, even though AWI’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.”
“Dore’s admission he signed AWI’s letter stating his employment was at will and terminable at any time as a matter of law defeats any contention that he reasonably understood AWI to have promised him long-term employment.”
The justice noted that there may be cases where an employment contract appears unambiguous on its face, but may have latent ambiguities revealed by extrinsic evidence, and thus require a different result.
Los Angeles attorney Clay Robbins III of Magana, Cathcart & McCarthy, who represented Dore before the Supreme Court, told the MetNews the court’s opinion reversed 20 to 30 years of case law finding implied-in-fact employment agreements. The opinion gives the “green light to employers to give misleading information,” to make promises and then break them by “inartfully and incompletely defining terms” in a written contract, he said.
He called it a “bait and switch.”
Robbins said that AWI never gave Dore a “real reason” for letting him go, but said there were rumors that things were “not working out.”
Chief Justice Ronald George and Justices Joyce L. Kennard, Ming W. Chin and Carlos R. Moreno concurred in Werdegar’s opinion.
Justice Marvin R. Baxter, in a concurring opinion joined by Justice Carol A. Corrigan, said he could not join in the majority’s endorsement of case law standing for the rule that a contract clear on its face may have latent ambiguities revealed by extrinsic evidence. He said he was “open to undertaking . . . a comprehensive reexamination” of such case law.
Moreno, noting that Werdegar’s opinion addressed cases involving provisions allowing termination upon notice, wrote a concurring opinion in which he said:
“In my view, a provision that allows for termination ‘upon notice’ does not, by itself, shed light on whether the parties intended an at-will employment contract, or a relationship terminable only for cause. I concur in the majority opinion with the understanding that it takes no position on this issue.”
Robert M. Mason III of the Los Angeles firm Bergman & Dacey, who represented AWI before the Supreme Court, did not return the MetNews’ call.
The case is Dore v. Arnold Worldwide, Inc., 06 S.O.S. 4078.
Copyright 2006, Metropolitan News Company