Implied-in-Fact Promise Not to Discharge Without Good Cause: What California Employers Need to Know

Introduction

California law presumes most employees are “at-will”—meaning they can be terminated at any time, for any lawful reason (Lab. Code § 2922). However, this at-will status can be modified by a promise, even implied, that employees will only be fired or demoted for “good cause.” It is critical for employers to understand how workplace conduct, policies, and communications can unintentionally create such implied contractual obligations.

What Is an Implied-in-Fact Promise?

Even without an express written or oral agreement, California courts may find that a set of circumstances reasonably led an employee to believe they could only be terminated or demoted for good cause. Such a promise can be implied from:

• Employer’s policies or practices

• Long tenure of employment

• Positive performance evaluations, raises, promotions, or commendations

• Employer statements or actions that assure or suggest job security

• Any other relevant facts or conduct

(Foley v. Interactive Data Corp., 47 Cal.3d 654, 680; Guz v. Bechtel Nat’l, Inc., 24 Cal.4th 317, 336–37.)

Factors Courts Consider

No single factor—like long service or regular promotions—alone establishes a good-cause requirement. Instead, courts look at the totality of circumstances (Guz, 24 Cal.4th at 341–42). Every aspect of the working relationship, official policies and handbooks included, can be crucial. For example, explicit “at-will” disclaimers in employment contracts or handbooks usually, but not always, prevent implied promises (Guz, 24 Cal.4th at 340 n.10; Faigin v. Signature Group Holdings, Inc., 211 Cal.App.4th 726, 739).

When Implied Promises Cannot Exist

If there is an express written agreement that employment is at-will, an implied contract with contradictory terms is generally not recognized (Faigin, 211 Cal.App.4th at 739).

Beyond Discharge: Demotion and Adverse Actions

Employer policies or practices can create implied protections against adverse actions such as demotion—not just termination (Scott v. Pac. Gas & Elec. Co., 11 Cal.4th 454, 464).

How Employers Can Minimize Risk

• Always use clear, written “at-will” language in employment contracts and handbooks.

• Regularly update and distribute all employment policies.

• Avoid making verbal or written assurances of permanent employment unless intended.

• Train managers never to undermine at-will status through informal promises or comments.

• Document all performance issues and discussions about employment status.

• Be consistent: inconsistent communication or favoritism can make courts more likely to find an implied-in-fact promise.

Bottom Line

California’s courts closely scrutinize workplace conduct and communication. To protect your business, be vigilant with documentation, clear language, and consistent policies. Review employment contracts, handbooks, and manager training regularly to avoid unintentionally creating job security guarantees.

Citations:

Lab. Code § 2922; Civ. Code §§ 1619–1621; Stillwell v. The Salvation Army, 167 Cal.App.4th 360 (2008); Guz v. Bechtel Nat’l, Inc., 24 Cal.4th 317 (2000); Foley v. Interactive Data Corp., 47 Cal.3d 654 (1988); Faigin v. Signature Group Holdings, Inc., 211 Cal.App.4th 726 (2012); Scott v. Pac. Gas & Elec. Co., 11 Cal.4th 454 (1995); Popescu v. Apple Inc., 1 Cal.App.5th 39 (2016); CACI No. 2403.