When an employer and employee sign an employment contract, the terms of employment must follow the terms of the employment contract. If the employer terminates the employee contrary to the terms of the contract, the employee may be able to sue the employer for wrongful termination.
But what if the employer and employee have not signed a contract? Usually in this case, the employment relationship is governed by the employment-at-will rule. This rule gives broad discretion to each party to terminate the employment relationship. Employers can discharge employees for any reason not specifically prohibited by law under California's employment-at-will rule.
Just because there is no express agreement on paper between an employer and employee does not mean that no employment contract exists, however. Under some circumstances, California courts have found that an implied employment contract exists. If other evidence points to a shared understanding of employment terms, the court may decide that an implied contract exists even if nothing is in writing.
For example, if an employee's manager tells the employee that the employee will remain employed if the employee makes a sufficient number of sales per month, or if the employee handbook says this, the court may rule that an implied contract exists that restricts the power of the employer to discharge the employee.
In order for an implied contract to exist, there must be more than employment longevity or raises and promotions offered. Evidence of good performance by itself does not prove that an implied contact exists between employer and employee. There should be evidence of the parties' agreeing to binding limits on the employer's right to terminate employment.