Do it right: terminating employees means paying careful attention to employment law.

The general rule in California is that employment is "at will," meaning that employees may be terminated for any reason with or without prior notice. But if that is the case, then why are there so many wrongful termination lawsuits? This article explains some of the exceptions to the at-will policy and how to prevent wrongful termination suits.

The first category of exceptions to the at-will rule concern violations of public policy. This means that a company may not terminate an employee if doing so violates a statute. The statutes most commonly at issue are those that prohibit discrimination on the basis of sex, race, national origin, disability and other protected categories. At-will employment does not give license to employers to discriminate or retaliate on an otherwise impermissible basis.

Employers also are liable when they retaliate against employees for exposing their company's violations of law or for exercising their rights under the law.

For instance, an employer cannot terminate an employee for "blowing the whistle" on illegal conduct of the company. The company also cannot terminate or retaliate against an employee for exercising a legal right, such as voting.

Breach of contract claims comprise the second category of exceptions to the at-will presumption.

Employment contracts may be written or oral, but there are many circumstances in which the parties have not signed a contract--or decided orally that there is a contract with specified terms.

Nevertheless, a court could find that there is an "implied-in-fact" contract.

An employment contract can be implied in fact when the employee has enjoyed longevity at the company and the employer has, over the course of many years, made statements or undertaken acts that suggest the employee will only be terminated for cause.

"Cause" usually means a serious breach of performance or obvious grounds for termination, such as theft or dishonesty.

Statements that support a finding of an implied contract include promises about promotions and future ownership interests in the company. Sometimes employer statements like, "You are like family" or "You have a future here," coupled with raises and promotions, form the beginnings of an implied contract claim.

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Implied contracts are determined on a case-by-case basis after examining a combination of factors, such as longevity, promotions, raises, assurances, actions or communications by the employer.

An employer can protect itself against an implied contract claim by requiring employees to sign a statement acknowledging at-will employment. Consideration is required to support an at-will acknowledgment signed by an existing employee. Moreover, it is illegal to terminate an employee for refusal to sign an at-will agreement.

An at-will statement and acknowledgment also should be included in the employment application and employee handbook. The handbook should mention the at-will statement in numerous places, including the section on discipline and termination.

Courts have held that a signed acknowledgment by employees that they are an at-will employee will trump any argument that there is an implied-in-fact contract.

What else can an employer do to prevent wrongful termination or discrimination lawsuits (or do damage control)? Here are some key items:

EDUCATE THE STAFF ABOUT DISCRIMINATION LAWS

California law requires that all employers provide information about harassment laws, including sexual harassment. By doing so, a defense can be raised by employers in situations where a non-supervisor has harassed an employee, but the employer did not know and could not have known about the harassment.

If the staff has been educated about harassment laws and the employer responds properly to internal complaints, an employer can successfully defend this kind of lawsuit.

DOCUMENT PERFORMANCE ISSUES

It is an all-too-common scenario for an employer to wait to bring performance issues to the attention of an employee, only to have the employee file a workers' compensation claim, or announce pregnancy just as the employer was about to disclose the performance issues.

It is very difficult to terminate someone who has job protection under the law, such as those who have been injured on the job, without a strong showing of business necessity. Performance issues should be dealt with promptly.

While it is not usually required to give warnings to employees before terminating them if they are at-will employees, it's usually wise to do so. The employer will look like a fair and conscientious company if it has given chances to the employee to improve.

You must think about how the company will look to a jury.

FOLLOW THE PROCEDURES IN YOUR EMPLOYEE HANDBOOK

One of the great benefits of the employee handbook is that it brings even-handedness and consistency to how employees are treated. That is, only if the procedures are followed. Do not let your handbook collect dust on the shelf.

REVIEW A CHECKLIST BEFORE TERMINATING AN EMPLOYEE

Ask these questions: Has this employee been warned and appropriately disciplined? Are you aware of any harassment or retaliation directed at this employee? Have all claims of harassment been investigated? Has the employee's personnel file been documented with all performance issues?

It is beyond the scope of this article, but you also should consider if the employee has been appropriately categorized as an exempt or non-exempt employee for purposes of the rules for overtime pay and meal and rest periods. If not, a lawyer should be consulted before terminating an employee who may be due back overtime pay.

CONSIDER USING A RELEASE AGREEMENT

A release agreement provides that the employee releases all potential claims against the company related to the employment, except workers' compensation and unemployment insurance claims, neither of which can be waived by law.

A release agreement is valid only if employees receive severance pay that they are not otherwise entitled to. So, if your company's policy is to pay all employees one week's pay upon termination, then an employee would have to be paid more than one week's pay for the release to be valid.

While there is no perfect way to prevent wrongful termination suits, attention to employment laws will minimize the risk to companies.

BY OLIVIA GOODKIN, ESQ 

Olivia Goodkin, Esq., is an employment law attorney at Los Angeles-based Rutter Hobbs & Davidoff Incorporated. You can reach her at [e-mail].