Progressive Discipline Policies Can Undermine At-Will Employment

Barnes and Noble was recently handed a defeat by the California Court of Appeals for the Sixth Circuit. The employer terminated a manager working at one of its stores relying on the presumption of at-will employment in California. The employee sued Barnes and Noble for wrongful termination alleging that there was an implied contract for employment between her and Barnes and Noble (among other claims). The employer succeeded in convincing the trial court to throw out the employee’s case. But the employee appealed.

The California Court of Appeals reversed the trial court’s decision, and its main basis for doing so was the existence and application of the company’s progressive discipline policy.

During the plaintiff’s employment Barnes and Noble consistently followed a progressive disciplinary policy. The policy was described in detail in the company’s employee handbook. Managers were told that they would be disciplined by Barnes and Noble if they terminated employees without following the steps of the progressive discipline policy, even though the policy included a statement that the company could exercise its discretion to skip disciplinary steps. Barnes and Noble’s witnesses had difficulty remembering any cases in which an employee was terminated without first adhering to the progressive discipline policy.

The plaintiff was terminated without following the steps of Barnes and Noble’s progressive discipline policy.

In reversing the trial court’s ruling that extinguished the plaintiff’s case, the Court of Appeals indicated that there were triable issues of fact relating to the “actual understanding” between the parties as to the nature of their employment relationship. In other words, the Court of Appeals held that the trial court was wrong to decide with such certainty that no implied contract existed between the plaintiff and Barnes and Noble. According to the plaintiff, the implied contract prohibited her from being terminated unless there was good cause to do so.

Although plaintiff’s initial complaint did not rely on Barnes and Noble’s progressive discipline policy, the Court of Appeals relied on the policy and the company’s strict adherence thereto, to reach the conclusion that there might have been an agreement between Barnes and Noble and the plaintiff that she could only be terminated for good cause or by way of the steps outlined in the company’s progressive discipline policy.

In the current climate, California courts seem to be searching for avenues that will allow them to override the statutory presumption of at-will employment. Employers should be aware that the existence of a progressive discipline policy puts them at risk of losing the at-will employment presumption if they terminate an employee without strictly adhering to the policy.

Perhaps it is better in this landscape not to have a progressive discipline policy at all.

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