"At will" employment benefits both an employer and an employee by allowing either party to terminate the relationship at any time. Although it is long established that "at will" employment covers termination, does it also envelope demotions, salary decreases and bonus determinations? In a recent decision, a California court ruled that at will employment applies to lesser forms of discipline and to unilateral changes in terms of employment.
In Singh v. Southland Stone, No. B208620 (July 1, 2010), the plaintiff was hired as a manager for internet sales at a rate of $10,000 per month. In order to take the job, he relocated with his family from India. The company informed him that he was hired as an at will employee with no contract rights to ongoing employment. After nine months, the defendant reduced Singh's salary from $10,000 to $5,000 because of its displeasure with Singh's performance. Eight months later, the plaintiff resigned and filed a lawsuit asserting, among other claims, that Southland Stone had breached its employment contract. The trial found in favor of the plaintiff but on appeal, the court reversed.
In its opinion, the Court held that the at will statute, California Labor Code ยง 2922, creates a presumption that employment is at will unless it can be overcome by an express or implied contract. Since the statute presumes that an employee may be discharged at will, it also extends to other forms of discipline and unilateral changes in the terms of employment.
Singh is a positive development for California employers, and reiterates the need for employers to include at will language in offer letters, employment agreements, handbooks, and any other documents. The at will agreement should indicate that it sets forth the entire agreement between the parties, and that it cannot be contradicted except in a written agreement signed by the President or CEO of the employer. With such language in place, employers can feel more comfortable when adjusting terms and conditions of employment, such as compensation. Even with at will language in place, however, employers should strive to give employees as much advance notice as possible of any changes to compensation and benefits. In addition, employers should review applicable documents, such as summary benefit plan descriptions, collective bargaining agreements, or employment contracts, that might place limitations on the ability to change terms.
