California Labor and Employment Law

Can My Employer Break My Employment Contract? Can I?

Whenever it comes to contracts, the answer is always the same: it depends on what the contract says. A contract is a contract is a contract. Neither you nor your employer can breach a contract without facing the consequences. That is, unless the contract says it’s ok. This is why it is so important that employees keep copies of any contracts they have signed with their employers. If you don’t have a copy of your contract, your employer is required by law to give you one if you request it. To see how, go to this post.

These are important provisions to look for in your contract:

• At will employment/Termination: In California, employment is presumed to be at will. This means your boss can fire you at any time for any reason (as long as it’s not discriminatory, retaliatory or interfering with your medical leave rights). Your boss could say, “You’re too tall, you’re fired” or “you’re too obnoxious, you’re fired” or “I don’t like you, you’re fired” or . . . well, you get the idea. The contract will usually spell out whether your employment is at will or not. Even if it does, don’t give up. The contract might include other contradictory provisions which say that your boss can’t fire you at will after all. When in doubt, talk to an attorney.
• Arbitration: More and more employment contracts require you to resolve any disputes you might have with your employer before an arbitrator. This is basically the employer’s way of making sure you can’t sue him in court. What’s wrong with arbitration? Arbitrators can charge thousands of dollars, you might be on the hook for part or even all of it, arbitrators rarely give large awards to employees and, worst of all, arbitrators overwhelmingly tend to favor the employer who is more likely to be a source of repeat business over you, the individual whom the arbitrator will likely never see again. Here’s another thing, the clause is often written to require the arbitration to occur in another state.
• Non-compete: Many agreements bar employees who leave the company from working in the same industry for a number of months or years. In California, these kinds of restrictions are not generally enforceable, particularly once the employee has left the company. As a result, most employers won’t try to enforce this clause. Still, it’s worth noting if your contract has this clause.
• Liquidated damages: A few contracts might impose a monetary penalty on a party who breaches a contract. Note, if the penalty is too large, courts might strike the clause as being an unenforceable penalty.

Courts have also held that the terms contained in any employee manuals or employee policies which your employer has are also contractual. For example, if your employer’s policy manual says that you are entitled to bereavement leave and can’t be fired for it, then your employer is contractually bound to honor that commitment.

Finally, if your boss has orally made promises to you, like “you’ll have a job here for as long as you want one”, courts have held that those are oral contracts and are binding on the employer.

If your employer (i) breaks his contract with you, (ii) violates a term of the policy manual or (iii) goes back on his spoken word to you, you may have a legal claim for breach of contract. Legal claims for oral contracts have to be filed in court within 2 years. For written contracts, the time limit is 4 years. [Cal. Civ. Proc. C. sections 337 and 339]. If you think you have a claim, don’t wait – consult an attorney right away.

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1. How to Read an Employment Contract: Part 1
2. How to Read an Employment Contract: Part 2
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4. What Break Periods Am I Entitled To?
5. Tip-Pooling – Can My Employer Take My Tips and How?

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