Under the California Labor Code there are two basic types of employment: employment for a specified term (in excess of one month); and indefinite or “at will” employment. At will employment is terminable by either party, upon notice to the other. California case law had held that the employer’s right to terminate an employee “at will” includes the right to unilaterally change the terms of the employment agreement, i.e., the right to demote the employee, or reduce the employee’s compensation.

Stated another way, the “at will” doctrine means that absent an employment contract or agreement to continue employment for a specific period of time, an employee can be terminated with or without cause. Does this mean that an employee can be terminated, demoted, or denied promotion for any reason whatsoever? It most certainly does not.

Prohibited Employment Practices

A host of employment practices are prohibited under the law. Included among such practices is the making of an employment decision concerning the hiring, firing, demotion and/or promotion of an employee on an improper basis, or for a reason prohibited by law. An employee cannot be terminated in response to, or as retaliation for, the employee’s standing up for or seeking to enforce his or her statutory rights-to compensation, for example. And an employee cannot be terminated, demoted or denied promotion on any prohibited discriminatory basis-because of characteristics of the employee that place the employee in a “protected” class or group.

Classes Protected From Discrimination in Employment

Certain groups or classes of individuals are described under the law as being “protected.” An employer is prohibited from making any employment decision or taking any employment action based upon an employee’s or prospective employee’s membership in the protected group or class. The groups and classes which are so protected are ever-expanding, and today specifically include individuals who are not actual members of the group or class, but who are believed or suspected by the employer to be so. In addition to the traditional prohibited discriminatory bases of race, sex, nationality and religion, individuals are today protected from discriminatory employment practices based upon their age, sexual orientation and physical, medical and psychological conditions.

Tortious Discharge in Violation of Public Policy

If a member of a protected class is terminated for discriminatory reasons, or if an employee is terminated for seeking to enforce his or her legal rights, the employee may have a cause of action against the employer for tortious discharge in violation of California’s public policy. California law construes such a termination to be not just a breach of contract, but a “tort,” for which the damages and remedies are greater in number and amount. Whistleblower claims, claims involving wage and hour disputes, and discrimination claims are among those that are frequently brought in conjunction with a claim for tortious discharge in violation of California’s public policy. Such a claim has nothing to do with whether or not the employment is “at will,” and the employee’s status as an “at will” employee is no defense to bringing it.

Employment Laws Not Uniformly Applicable

Not all employers are subject to all of the same employment laws. For example, small employers are exempt from having to provide certain leave and accommodations which are required to be provided by large employers; and religious organization employers are exempt from certain discrimination laws that apply to other employers.

Any employer who has any doubts about his or her legally mandated duties and responsibilities, and any employee who has any questions about his or her legally protected rights, should contact the California Employment Law offices of Virginia H. Gaburo & Associates to learn what laws, duties and rights apply to them.

Under California law, an employment contract is a contract by which an employer engages an employee to do something for the benefit of the employer or a third person. Employment contracts can be either express or implied. An express contract is one the terms of which are set forth in words, which can be either written or oral. An implied contract is one the terms of which are manifested by conduct.

An employment contract can be used to address the term or time period of the employment, and other important aspects of the employment relationship: job duties, compensation, performance incentives, benefit plans and programs, property rights with respect to inventions and patents, etc. Three types of provisions which are frequently included are non-competition clauses, confidentiality/trade secret clauses, and arbitration clauses.

Non-Compete Clauses and Agreements

During the course of employment an employee has the duty not to compete with the employer’s business, in any way whatsoever. After termination of employment, an employee, like anyone else, cannot compete with the former employer “unfairly.” In the context of an employment contract, or termination of employment agreement, employers frequently seek to obtain the employee’s agreement not to do specific things which the employer contends would constitute unfair competition. At the present time, and outside the context of the sale of a business or the dissolution of a partnership, the enforceability of such clauses or agreements in California is unknown. What is known is that any contract, clause or covenant by which anyone is restrained from engaging in a lawful profession, trade or business is to that extent void; and that the list of things which an employee cannot legally be required to agree to refrain from doing is ever-increasing.

The enforceability of any specific non-compete clause, covenant or agreement must be addressed on a case-by-case basis. The likelihood with respect to any non-compete clause drafted more than two years ago is that it is unenforceable.

Confidentiality/Trade Secret Clauses

Confidentiality and trade secret clauses and agreements are siblings of and overlap with non-compete clauses and agreements. Again, during employment, the employee cannot use or disclose the employer’s confidential information or trade secrets for any purpose whatsoever, other than in the furtherance of the employer’s business. After termination, the employee cannot use or disclose the employer’s confidential information or trade secrets for improper purposes or unfairly. And again, and in California, any contract, clause or covenant by which anyone is restrained from engaging in a lawful profession, trade or business is to that extent void.

What we know is that an employer’s legitimate trade secrets will be protected from any improper use or disclosure by a former employee and by anyone else under a vast body of statutory and case law outside of and other than the employment context. Whether an employer can legitimately seek to protect any other contended “confidential” information, or impose any other restrictions upon a former employee’s use or disclosure of the same is unknown, and is doubtful.

Arbitration

Employment agreements to arbitrate disputes, and arbitration clauses within employment contracts are now commonplace. When a dispute arises between the parties, whether or not such arbitration agreements or clauses will be enforced by a court depends upon a number of factors developed by California case law. The agreement or clause must not be either “procedurally” or “substantively” “unconscionable.” Some of the specific provisions which must be included are: the employer’s agreement to pay all of the costs of arbitration; the allowance of discovery; the requirement of a written decision by the arbitrator; and the employee’s right to appeal the decision to a judge of the California Superior Court.

If you have entered into an employment contract, and if you have questions about the effectiveness or enforceability of any of its clauses or provisions, contact the California Employment Law offices of Virginia H. Gaburo & Associates to have your employment contract reviewed, and to get suggestions as to how it might be revised.