Court Upholds At-Will Nature of Agency Agreement
Posted by Connor J. Moyle
A recent appellate court decision has confirmed that an agreement providing for 1) written notice of termination and 2) a termination review procedure does not alter the at-will nature of the employment relationship. Specifically, in Bernard v. State Farm Mutual Automobile Insurance Co. the court held that a plaintiff could not pursue his contract-based cause of action for wrongful termination because he had an at-will employment relationship with his employer that was terminable at any time.
In that case, the parties had entered into an agreement that contained the following language:
III.A. You or [employer] have the right to terminate this Agreement by written notice delivered to the other or mailed to the other’s last know address.
III.B. In the event we [employer] terminate this Agreement, you are entitled upon request to review in accordance with the termination review procedures approved by the Board of Directors of the Companies, as amended from time to time.
The former employee argued that extrinsic evidence of the contract’s meaning should be admitted because the language was ambiguous. However, the court held that the plain language of the agreement was not reasonably susceptible to an interpretation requiring good cause for termination, and instead interpreted the agreement as having created an at-will employment relationship. The court also held that the termination review procedure referenced in the agreement did not substantively alter the at-will nature of the relationship.
The Bernard decision esssentially confirms that employers may include carefully-drafted provisions for termination notice and review procedures in employment agreements without sacrificing the at-will nature of an employment relationship. If you have any questions about the implications of the Bernard decision for your business, please contact us directly.