Court Opinion

ID: 9541602
Source: CourtListenerOpinion
Date Created: 2023-08-07 16:27:03.866082+00
Date Added: 2024-06-11T15:03:54.803650
License: Public Domain

Opinion
CHIN, J.
—We granted the request of the United States Court of Appeals for the Ninth Circuit for an answer to the following certified question of law under rule 29.5 of the California Rules of Court:1 “Once an employer’s unilaterally adopted policy—which requires employees to be retained so *6long as a specified condition does not occur—has become a part of the employment contract, may the employer thereafter unilaterally [terminate][2] the policy, even though the specified condition has not occurred?” We conclude the answer to the certified question is yes. An employer may unilaterally terminate a policy that contains a specified condition, if the condition is one of indefinite duration, and the employer effects the change after a reasonable time, on reasonable notice, and without interfering with the employees’ vested benefits.
I. Background
A. Certification
Rule 29.5(a) provides that we may answer questions of law certified to us by a federal court of appeal (or the court of last resort of any state), provided the certifying court requests the answer, the question may be determinative of a cause pending in the certifying court, and the decisions of the California Courts of Appeal or this court provide no controlling precedent concerning the certified question. Rule 29.5(b) sets forth the required contents of a certification request. Rule 29.5(c) requires the certifying court to furnish this court with relevant briefs and other materials.
Rule 29.5(f) states: “The California Supreme Court shall have discretion to accept or deny the request for an answer to the certified question of law. In exercising its discretion the court may consider: HQ (1) factors that it ordinarily considers in deciding whether to grant review of a decision of a California Court of Appeal or to issue an alternative writ or other order in an original matter; [IQ (2) comity, and whether answering the question will facilitate the certifying court’s functioning or help terminate existing litigation; flO (3) the extent to which an answer would turn on questions of fact; and fl[] (4) any other factors the court may deem appropriate.”
The three factors set forth in rule 29.5(a) are met here. The Ninth Circuit has requested that we answer the question it posed; our answer to the *7question will determine the matter before that court. No California case has considered whether or how an employer can modify or cancel a unilaterally implemented employment policy.
The factors outlined in rule 29.5(f) also support our decision to accept the request for an answer to the certified question. The issue presented is important to California courts as well as to the Ninth Circuit, because it involves a significant question of employment contract law. We can expect the issue to arise in our courts, due in part to our opinion in Scott v. Pacific Gas & Electric. Co. (1995) 11 Cal.4th 454 [46 Cal.Rptr.2d 427, 904 P.2d 834] (Scott). Scott held that unilaterally created employment policies are enforceable, but also concluded that “employers have the capacity to alter their policies and practices so as not to create unwanted contractual obligations.” (Id. at p. 472.) Scott left open the question how employers can terminate or modify an existing policy, the focus of our inquiry here. Thus, litigation over how employers can terminate or modify employment policies is likely to follow. (Rule 29.5(f)(2).)
B. Facts
In 1986, Pacific Bell issued the following “Management Employment Security Policy” (MESP): “It will be Pacific Bell’s policy to offer all management employees who continue to meet our changing business expectations employment security through reassignment to and retraining for other management positions, even if their present jobs are eliminated. fl[] This policy will be maintained so long as there is no change that will materially affect Pacific Bell’s business plan achievement.”
In January 1990, Pacific Bell notified its managers that industry conditions could force it to discontinue its MESP. In a letter to managers, the company’s chief executive officer wrote: “[W]e intend to do everything possible to preserve our Management Employment Security policy. However, given the reality of the marketplace, changing demographics of the workforce and the continued need for cost reduction, the prospects for continuing this policy are diminishing—perhaps, even unlikely. We will monitor the situation continuously; if we determine that business conditions no longer allow us to keep this commitment, we will inform- you immediately.”
Nearly two years later, in October 1991, Pacific Bell announced it would terminate its MESP on April 1, 1992, so that it could achieve more flexibility in conducting its business and compete more successfully in the marketplace. That same day, Pacific Bell announced it was adopting a new layoff *8policy (the Management Force Adjustment Program) that replaced the MESP but provided a generous severance program designed to decrease management through job reassignments and voluntary and involuntary terminations. Employees who chose to continue working for Pacific Bell would receive enhanced pension benefits. Those employees who opted to retire in December 1991 would receive additional enhanced pension benefits, including increases in monthly pension and annuity options. Employees who chose to resign in November 1991 would receive these additional enhanced pension benefits as well as outplacement services, medical and life insurance for one year, and severance pay equaling the employee’s salary and bonus multiplied by a percentage of the employee’s years of service.
Plaintiffs are 60 former Pacific Bell management employees who were affected by the MESP cancellation. They chose to remain with the company for several years after the policy termination and received increased pension benefits for their continued employment while working under the new Management Force Adjustment Program. All but eight of them signed releases waiving their right to assert claims arising from their employment under the MESP or its termination.
Plaintiffs filed an action in federal district court against Pacific Bell and its parent company, Pacific Telesis Group,3 seeking declaratory and injunctive relief, as well as damages for breach of contract, breach of fiduciary duty, fraud, and violations of the Employee Retirement Income Security Act (ERISA) (29 U.S.C. § 1000 et seq.). The parties filed countermotions for partial summary judgment before conducting discovery. The district court granted summary judgment in Pacific Bell’s favor against the 52 plaintiffs who signed releases. In an unpublished opinion, the Ninth Circuit affirmed the district court’s judgment in this respect.
The district court granted summary judgment on the breach of contract claim in favor of the eight plaintiffs who did not sign releases. It held that even if an employer had the right unilaterally to terminate a personnel policy creating a contractual obligation, that right would not apply in cases where the original employment policy incorporated a term for duration or conditions for rescission, absent stronger evidence of the employees’ assent to the policy modification than their continued employment. The court concluded that Pacific Bell could not terminate its MESP unless it first demonstrated (paraphrasing the words of the MESP) “a change that will materially alter Pacific Bell’s business plan achievement.”
*9Thereafter, the parties entered into a stipulation providing in part, that Pacific Bell “elected not to present any further evidence in this action with respect to the question of whether there has been ‘a change that will materially alter Pacific Bell’s business plan achievement’ . . . and agreed that summary judgment may be entered in favor of the eight remaining Plaintiffs on the issue of liability for their claims of breach of contract by breach of the MES policy . . . On May 5, 1997, the district court entered an order approving the stipulation and entered judgment in plaintiffs’ favor on the issue.
Pursuant to the parties’ agreement, the court certified for interlocutory appeal the issue whether Pacific Bell breached the MESP, and the Ninth Circuit accepted the interlocutory appeal. In a published opinion, the Ninth Circuit stated its certification request and noted that our answer to the certified question would determine the remaining portion of the case pending before it. (Asmus v. Pacific Bell (9th Cir. 1998) 159 F.3d 422, 423-425.) The court agreed to abide by our answer. (Id. at p. 425.)
II. Discussion
A. California Employment Law
We held in Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654 [254 Cal.Rptr. 211, 765 P.2d 373] (Foley), that an implied-in-fact contract term not to terminate an employee without good cause will rebut the statutory presumption of Labor Code section 2922 that employment for an indefinite period is terminable at will. (47 Cal.3d at p. 677.) The Foley court observed that the trier of fact can infer an agreement to limit grounds for an employee’s termination based on the employee’s reasonable reliance on company policy manuals. (Id. at pp. 681-682.) In Scott, we stated that, in light of Foley, we could find “no rational reason why an employer’s policy that its employees will not be demoted except for good cause, like a policy restricting termination or providing for severance pay, cannot become an implied term of an employment contract. In each of these instances, an employer promises to confer a significant benefit on the employee, and it is a question of fact whether that promise was reasonably understood by the employee to create a contractual obligation.” (Scott, supra, 11 Cal.4th at p. 464.) Both Scott and Foley emphasized that employment policies, manuals, and offers were not exempt from the rules governing contract interpretation. (Scott, supra, 11 Cal.4th at p. 469; Foley, supra, 47 Cal.3d at p. 681.)
In some cases, an employer adopts a no-layoff policy or provides employees with an employment security policy in order to earn the employees’ *10loyalty in exchange for granting them job security. This exchange is fair and it may, depending on the facts, provide the basis for an enforceable unilateral contract, i.e., one in which the promisor does not receive a promise in return as consideration. (1 Witkin, Summary of Cal. Law (9th ed. 1987) Contracts, § 213, pp. 221-222; see Befort, Employee Handbooks and the Legal Effect of Disclaimers (1991/1992) 13 Indus. Rel. L.J. 326, 342.)
In a unilateral contract, there is only one promisor, who is under an enforceable legal duty. (1 Corbin on Contracts (1993) § 1.23, p. 87.) The promise is given in consideration of the promisee’s act or forbearance. As to the promisee, in general, any act or forbearance, including continuing to work in response to the unilateral promise, may constitute consideration for the promise. (1 Witkin, Summary of Cal. Law, supra, Contracts, § 213, p. 221; 2 Corbin on Contracts (1995) § 5.9, pp. 40-46; Rest.2d Contracts, §§ 71, 72; Civ. Code, § 1584.)4
As a Court of Appeal observed, “Of late years the attitude of the courts (as well as of employers in general) is to consider [employment security agreements] which offer additional advantages to employees as being in effect offers of a unilateral contract which offer is accepted if the employee continues in the employment, and not as being mere offers of gifts. They make the employees more content and happier in their jobs, cause the employees to forego their rights to seek other employment, assist in avoiding labor turnover, and are considered of advantage to both the employer and the employees.” (Chinn v. China Nat. Aviation Corp. (1955) 138 Cal.App.2d 98, *1199-100 [291 P.2d 91] (Chinn) [employer’s agreement to pay severance benefits becomes enforceable unilateral contract if employee accepts benefit offer by continuing employment]; see also Lang v. Burlington Northern R. Co. (D.Minn. 1993) 835 F.Supp. 1104, 1106 [continued employment constitutes acceptance of arbitration policy added to employment manual after employment commenced]; Hunter v. Sparling (1948) 87 Cal.App.2d 711, 723 [197 P.2d 807] [continuing services of employee is adequate consideration for employer’s promise to pay future pension].)
The parties agree that California law permits employers to implement policies that may become unilateral implied-in-fact contracts when employees accept them by continuing their employment. We do not further explore the issue in the context here, although we note that whether employment policies create unilateral contracts will be a factual question in each case. (Chinn, supra, 138 Cal.App.2d at pp. 99-100.) The parties here disagree on how employers may terminate or modify a unilateral contract that has been accepted by the employees’ performance. Plaintiffs assert that Pacific Bell was not entitled to terminate its MESP until it could demonstrate a change materially affecting its business plan, i.e., until the time referred to in a clause in the contract. Pacific Bell asserts that because it formed the contract unilaterally, it could terminate or modify that contract as long as it did so after a reasonable time, gave affected employees reasonable notice, and did not interfere with the employees’ vested benefits (e.g., pension and other retirement benefits). Even if we were to require additional consideration, Pacific Bell contends it gave that consideration by offering enhanced pension benefits to those employees who chose to remain with the company after the modification took effect. Both parties rely on cases from other jurisdictions to support their respective positions.
B. Other Jurisdictions
Because there is no case in point on the present question in this state, the parties each rely on the rule as stated in other jurisdictions to support their particular views.
Pacific Bell points to the rule in the majority of jurisdictions that have addressed the question whether and how an employer may terminate or modify an employment security policy that has become an implied-in-fact unilateral contract. Regardless of the legal theory employed, the majority of other jurisdictions that have addressed the question conclude that an employer may terminate or modify a contract with no fixed duration period after a reasonable time period, if it provides employees with reasonable notice, and the modification does not interfere with vested employee benefits. (See, e.g., Elliott v. Board of Trustees (1995) 104 Md.App. 93 [655 *12A.2d 46, 51] (Elliott); In re Certified Question (1989) 432 Mich. 438 [44N.W.2d 112, 120, 121, fn. 17] (Bankey); Sadler v. Basin Elec. Power Coop. (N.D. 1988) 431 N.W.2d 296, 300; Fleming v. Borden, Inc. (1994) 316 S.C. 452 [450 S.E.2d 589, 595] (Fleming); Ryan v. Dan’s Food Stores, Inc. (Utah 1998) 972 P.2d 395, 401; Progress Printing Co., Inc. v. Nichols (1992) 244 Va. 337 [421 S.E.2d 428, 431] (Progress Printing); Gaglidari v. Denny’s Restaurants, Inc. (1991) 117 Wn.2d 426 [815 P.2d 1362, 1367] (Gaglidari); Leathem v. Research Found. of City Univ. (S.D.N.Y. 1987) 658 F.Supp. 651, 655.)
Most of these courts refer to general contract law in deciding whether an employer may terminate or modify an employment contract. They reason that because the employer created the policy’s terms unilaterally, the employer may terminate or modify them unilaterally with reasonable notice. (See, e.g., Elliott, supra, 655 A.2d at p. 51; Fleming, supra, 450 S.E.2d at p. 595; Progress Printing, supra, 421 S.E.2d at p. 431; Gaglidari, supra, 815 P.2d at p. 1367; but see Bankey, supra, 443 N.W.2d at pp. 119-120 [relying on public policy grounds, not contract theory, to allow employer to terminate discharge-for-cause policy with reasonable notice].)
Fleming indicated that of the three possible approaches to the termination question, it favored the majority approach as the one most consistent with unilateral contract principles. (Fleming, supra, 450 S.E.2d at pp. 594-595.) The first approach—to allow termination without notice at any time before completion of the contract—struck the Fleming court as too harsh. (Ibid.) That approach is now considered obsolete in California. (Drennan v. Star Paving Co. (1958) 51 Cal.2d 409, 414 [333 P.2d 757].) Fleming also rejected an alternative minority model that would impose bilateral concepts on a unilateral contract to require mutual assent and additional consideration to support the termination. (Fleming, supra, 450 S.E.2d at p. 595.) The court settled on the majority approach after recognizing that the employer-employee relationship is not static. Fleming stated that “[e]mployers must have a mechanism which allows them to alter the employee handbook to meet the changing needs of both business and employees.” (Ibid.)
As plaintiffs observe, a minority of jurisdictions today hold that an employer cannot terminate or modify a unilateral employment contract without the employees’ express knowledge and consent. (See Torosyan v. Boehringer Ingelheim Pharm. (1995) 234 Conn. 1 [662 A.2d 89, 99]; Brodie v. General Chemical Corp. (Wyo. 1997) 934 P.2d 1263, 1268; Robinson v. Ada S. McKinley Community Services (7th Cir. 1994) 19 F.3d 359, 364.) Like the dissent, they reason that any termination or modification of a unilateral employment contract requires additional consideration and acceptance by the *13affected employees, because their only choices in light of a pending termination would be to resign or to continue working. (See, e.g., Demasse v. ITT Corp. (1999) 194 Ariz. 500 [984 P.2d 1138, 1145] (Demasse).)
Most recently, in Demasse, the Ninth Circuit certified a question to the Arizona Supreme Court whether a layoff seniority provision (stating that the company will lay off junior employees ahead of senior employees) may be unilaterally modified to permit the employer to lay off employees without regard to seniority status. (Demasse, supra, 984 P.2d at p. 1140.) The employee handbook reserved the employer’s right to amend, modify, or cancel it. When the employees received the handbook, they signed an acknowledgement that they understood and would comply with its provisions. (Id. at p. 1141.) Four years later, the employer modified the layoff policy to base it not on seniority status, but on employee “ ‘abilities and documentation of performance.’ ” (Ibid.) The plaintiffs were employees whom the company laid off 10 days after the new policy took effect. They sued in federal district court, alleging they were laid off in breach of an implied-in-fact contract. (Ibid.)
After the district court found that the employer unilaterally could alter its handbook, the Ninth Circuit certified the question to the Arizona Supreme Court. That court concluded that, although most handbook terms are merely descriptions of the employer’s present policies, some could create implied-in-fact contracts, depending on the parties’ intent. (Demasse, supra, 984 P.2d at p. 1143.) The court adopted the minority rule, holding that once a handbook policy becomes an implied-in-fact contract, the employer cannot unilaterally modify it. (Id. at p. 1144.) Any change requires mutual assent, with continued employment being inadequate consideration for the change. (Id. at p. 1145.) The court was concerned the employer could alter the contract terms and, on the same day, fire the employee, rendering the original contract illusory. (Id. at p. 1147.) It rejected Arizona precedent holding that the employer provided consideration for the change by continuing to provide jobs, and the employees manifested their assent by continuing to work. (Ibid.)
Vice Chief Justice Jones’s dissent aptly rejected the notion that in order to free itself of future obligations, the company would be required to provide employees with a wage increase or other bonus amounting to new consideration. To do so, the dissent reasoned, would incorrectly impose a bilateral principle on the unilateral relationship, leaving the employer unable to manage its business, impairing essential managerial flexibility, and causing undue deterioration of traditional employment principles. (Demasse, supra, 984 P.2d at p. 1156 (dis. opn. of Jones, V. C. J.); see also Fleming, supra, 450 S.E.2d at p. 595.)
*14In preferring the more reasonable majority rule, the dissent also found unsatisfactory the Demasse majority’s reasoning that employers not wanting to be bound by a handbook’s terms are simply free never to issue one in the first place. As the dissent observed, “employers may be unilaterally forced by economic circumstance to curtail or shut down an operation, something employers have the absolute right to do. When the employer chooses in good faith, in pursuit of legitimate business objectives, to eliminate an employee policy as an alternative to curtailment or total shutdown, there has been forbearance by the employer. Such forbearance constitutes a benefit to the employee in the form of an offer of continuing employment. The employer who provides continuing employment, albeit under newly modified contract terms, also provides consideration to support the amended policy manual.” (Demasse, supra, 984 P.2d at p. 1155 (dis. opn. of Jones, V. C. J.).) We agree with the Demasse dissent’s thoughtful analysis and find its application of contract principles to the question before it reflected in our own state’s developing case law and scholarly treatises. (See, e.g., Scott, supra, 11 Cal.4th at p. 472; 1 Witkin, Summary of Cal. Law, supra, Contracts, § 233, p. 241.)
We turn now to plaintiffs’ several arguments that would restrict Pacific Bell’s right to terminate or modify its MESP.
C. Application of Legal Principles
1. Consideration
Plaintiffs contend that Pacific Bell gave no valid consideration to bind the proposed MESP termination and subsequent modification. According to plaintiffs, when Pacific Bell unilaterally terminated the contract to create a new contract with different terms, it left its employees with no opportunity to bargain for additional benefits or other consideration. The parties’ obligations were unequal, and hence, there was no mutuality of obligation for the change.
We disagree.  The general rule governing the proper termination of unilateral contracts is that once the promisor determines after a reasonable time that it will terminate or modify the contract, and provides employees with reasonable notice of the change, additional consideration is not required. (1 Witkin, Summary of Cal. Law, supra, Contracts, § 228, p. 236.) The mutuality of obligation principle requiring new consideration for contract termination applies to bilateral contracts only. (Ibid.) In the unilateral contract context, there is no mutuality of obligation. (Ibid.) For an effective modification, there is consideration in the form of continued employee *15services. (Ibid.) The majority rule correctly recognizes and applies this principle.5 (See ante, at pp. 11-14.)  Here, Pacific Bell replaced its MESP with a subsequent layoff policy. Plaintiffs’ continued employment constituted acceptance of the offer of the modified unilateral contract. As we have observed, a rule requiring separate consideration in addition to continued employment as a limitation on the ability to terminate or modify an employee security agreement would contradict the general principle that the law will not concern itself with the adequacy of consideration. (Foley, supra, 47 Cal.3d at p. 679.)
The corollary is also true. Just as employers must accept the employees’ continued employment as consideration for the original contract terms, employees must be bound by amendments to those terms, with the availability of continuing employment serving as adequate consideration from the employer. When Pacific Bell terminated its original MESP and then offered continuing employment to employees who received notice and signed an acknowledgement to that effect, the employees accepted the new terms, and the subsequent modified contract, by continuing to work. Continuing to work after the policy termination and subsequent modification constituted acceptance of the new employment terms. (See Pine River State Bank v. Mettille (Minn. 1983) 333 N.W.2d 622, 626-627 [continued employment is sufficient consideration for employment contract modification].)
2. Illusoriness
Plaintiffs alternatively claim that Pacific Bell’s MESP would be an illusory contract if Pacific Bell could unilaterally modify it. Plaintiffs rely on the rule that when a party to a contract retains the unfettered right to terminate or modify the agreement, the contract is deemed to be illusory. (See 1 Witkin, Summary of Cal. Law, supra, Contracts, § 234, p. 241.)
Plaintiffs are only partly correct. Scholars define illusory contracts by what they are not. As Corbin observes, “if a promise is expressly made conditional on something that the parties know cannot occur, no real promise has been made. Similarly, one who states T promise to render a future performance, if I want to when the time arrives,’ has made no promise at all. It has been thought, also, that promissory words are illusory if they are conditional on some fact or event that is wholly under the promisor’s control and bringing it about is left wholly to the promisor’s own will and discretion. This is not true, however, if the words used do not leave an unlimited option to the one using them. It is true only if the words used do not in fact purport *16to limit future action in any way.” (2 Corbin on Contracts, supra, § 5.32, pp. 175-176, fns. omitted.) Thus, an unqualified right to modify or terminate the contract is not enforceable. But the fact that one party reserves the implied power to terminate or modify a unilateral contract is not fatal to its enforcement, if the exercise of the power is subject to limitations, such as fairness and reasonable notice. (See id. at p. 177; 1 Witkin, Summary of Cal. Law, supra, Contracts, § 233, p. 241.)
As Pacific Bell observes, the MESP was not illusory because plaintiffs obtained the benefits of the policy while it was operable. In other words, Pacific Bell was obligated to follow it as long as the MESP remained in effect. Although a permanent no-layoff policy would be highly prized in the modern workforce, it does not follow that anything less is without significant value to the employee or is an illusory promise. (See Bankey, supra, 443 N.W.2d at pp. 119-120.) As long as the MESP remained in force, Pacific Bell could not treat the contract as illusory by refusing to adhere to its terms; the promise was not optional with the employer and was fully enforceable until terminated or modified. (2 Corbin on Contracts, supra, § 5.32, p. 177.)
3. Vested Benefits
Plaintiffs next allege that the MESP conferred a vested benefit on employees, like an accrued bonus or a pension. But as Pacific Bell observes, no court has treated an employment security policy as a vested interest for private sector employees. (See Bankey, supra, 443 N.W.2d at p. 121, fn. 17 [vested rights concept cannot be stretched to include obligations created by employer’s written policy statements applicable to general workforce].) In addition, plaintiffs do not allege that Pacific Bell terminated its MESP in bad faith. Although we agree with plaintiffs that an employer may not generally interfere with an employee’s vested benefits, we do not find that the MESP gave rise to, or created, any vested benefits in plaintiffs’ favor.
4. Condition as Definite Duration Clause
Plaintiffs alternatively contend that a contract specifying termination on the occurrence (or nonoccurrence) of a future happening, in lieu of a specific date, is one of definite duration that cannot be terminated or modified until the event occurs. (See Wittmann v. Whittingham (1927) 85 Cal.App. 140, 145 [259 P. 63] [contract to deliver shares of stock when stock dividends or profits had paid note is contract of definite duration]; La Jolla Casa deManana v. Hopkins (1950) 98 Cal.App.2d 339, 348 [219 P.2d 871] [contracts specified to last until “ ‘termination of the present war’ ” and *17until plaintiff “ ‘can reasonably build a home for herself’ ” are contracts for definite duration].) Because Pacific Bell declared that it would maintain its MESP “so long as” its business conditions did not substantially change, plaintiffs, like the dissent, assert that the specified condition is automatically one for a definite duration that Pacific Bell is obliged to honor until the condition occurs.
Contrary to the view of plaintiffs and the dissent, a “specified condition” may be one for either definite or indefinite duration. Indeed, both plaintiffs and the dissent fail to recognize that courts have interpreted a contract that conditions termination on the happening of a future event as one for a definite duration or time period only when “there is an ascertainable event which necessarily implies termination.” (Lura v. Multaplex, Inc. (1982) 129 Cal.App.3d 410, 414-415 [179 Cal.Rptr. 847]; see also Bradner v. Vasquez (1951) 102 Cal.App.2d 338, 344 [227 P.2d 559].)  As Pacific Bell observes, even though its MESP contained language specifying that the company would continue the policy “so long as” it did not undergo changes materially affecting its business plan achievement, the condition did not state an ascertainable event that could be measured in any reasonable manner. As Pacific Bell explains, when it created its MESP, the document referred to changes that would have a significant negative effect on the company’s rate of return, earnings, and “ultimately the viability of [its] business.” The company noted that if the change were to occur, it would result from forces beyond Pacific Bell’s control, and would include “major changes in the economy or the public policy arena.” These changes would have nothing to do with a fixed or ascertainable event that would govern plaintiffs’ or Pacific Bell’s obligations to each other under the policy. Therefore, the condition in the MESP did not restrict Pacific Bell’s ability to terminate or modify it, as long as the company made the change after a reasonable time, on reasonable notice, and in a manner that did not interfere with employees’ vested benefits. (See, e.g., Consolidated Theatres, Inc. v. Theatrical Stage Employees Union (1968) 69 Cal.2d 713, 731 [73 Cal.Rptr. 213, 447 P.2d 325] [contract for indefinite duration terminable after a reasonable time on reasonable notice].)
The facts show that those conditions were met here. Pacific Bell implemented the MESP in 1986, and it remained in effect until 1992, when the company determined that maintaining the policy was incompatible with its need for flexibility in the marketplace. The company then implemented a new Management Force Adjustment Program in which employees whose positions were eliminated would be given 60 days to either find another job within the company, leave the company with severance benefits after signing a release of any claims, or leave the company without severance benefits. *18The employees were provided with a booklet entitled Voluntary Force Management Programs detailing the new benefits the company provided following the MESP cancellation.
Thus, the MESP was in place for a reasonable time and was effectively terminated after Pacific Bell determined that it was no longer a sound policy for the company. Contrary to the dissent, Pacific Bell did not engage in behavior that one could characterize as “manipulative” or “oppressive.” (Dis. opn., post, at p. 20.) Employees were provided ample advance notice of the termination, and the present plaintiffs even enjoyed at least two more years of employment and corresponding benefits under a modified policy before they were eventually laid off. In sum, Pacific Bell maintained the MESP for a reasonable time, it provided more than reasonable notice to the affected employees that it was terminating the policy, and it did not interfere with employees’ vested benefits. The law requires nothing more.
III. Conclusion
As discussed, our employment cases support application of contract principles in the decision whether an employer may unilaterally terminate an employment security policy that has become an implied-in-fact unilateral contract. (See, e.g., Foley, supra, 47 Cal.3d at pp. 678-679.) Under contract theory, an employer may terminate a unilateral contract of indefinite duration, as long as its action occurs after a reasonable time, and is subject to prescribed or implied limitations, including reasonable notice and preservation of vested benefits. (1 Witkin, Summary of Cal. Law, supra, Contracts, §§ 233-234, pp. 240-241.) The facts clearly show that employees enjoyed the benefits of the MESP for a reasonable time period, and that Pacific Bell gave its employees reasonable and ample notice of its intent to terminate the MESP. The company also did not at any time interfere with employees’ vested benefits in effecting the MESP termination. In addition, the employees accepted the company’s modified policy by continuing to work in light of the modification. Therefore, in response to the Ninth Circuit’s certification request, we conclude that we should' answer as follows: An employer may terminate a written employment security policy that contains a specified condition, if the condition is one of indefinite duration and the employer makes the change after a reasonable time, on reasonable notice, and without interfering with the employees’ vested benefits.
Baxter, J., Brown, J., and Haller, J.,* concurred.

All further references to rules are to the California Rules of Court unless otherwise indicated.

Pursuant to our authority under rule 29.5(g) to restate or clarify “[a]t any time” the Ninth Circuit’s certified question, we have substituted the word “terminate” for the Ninth Circuit’s word “rescind” in the question certified to this court. The reason for the substitution is that the courts below and the parties discuss this action in terms of Pacific Bell’s ability to terminate, or otherwise change, its policy, rather than “rescind” it as that term is legally defined. A contract rescission is a statutorily governed event that extinguishes a contract as if it never existed. Rescission is effected by the parties’ mutual consent or mistake, failure of consideration, illegality, or other public purpose. (Civ. Code, §§ 1688, 1689.) The word substitution best reflects the decisions below and does not in any way affect the parties’ legal analysis.

Pacific Telesis Group, which issued a policy substantially similar to the one Pacific Bell issued, is not directly involved in the certification request because it did not hire or lay off any of the employees remaining in this action. For purposes of economy, therefore, we refer to defendants only as Pacific Bell.

An employment contract in which the employer promises to pay an employee a wage in return for the employee’s work is typically described as a unilateral contract. Scholars observe, however, that it is not always easy to determine whether an offer creates a unilateral or bilateral contract. (1 Corbin on Contracts, supra, § 1.23, pp. 93-94.) Indeed, the distinction between the contract types often exaggerates the importance of the particular bargain compelling performance without commitment. “In response to these concerns, the Restatement (Second) of Contracts has abandoned the terms ‘unilateral’ and ‘bilateral,’ without, however, abandoning the concepts behind them.” (Id. at § 1.23, p. 94.) In the Restatement Second of Contracts, the unilateral contract is preserved in the phrase, “Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance . . . .” (Rest.2d Contracts, § 45(1).)
Most legal scholars, however, prefer to rely on the traditional terminology to distinguish between the two types of offers and promises because the use of unilateral contract analysis has been growing in recent years, particularly in employment cases. (1 Corbin on Contracts, supra, § 1.23, p. 95.) As one scholar observed, “Sometimes innovation does not take the form of a new substantive rule but rather of a new perspective on the problem, reflected in the substitution of a new terminology or analysis for a traditional one. For example, the Restatement (Second) abandons the terms ‘unilateral’ and ‘bilateral’ as descriptive of contracts
.... There is no way to assess the extent to which such innovations in terminology and analysis portend innovations of substance.” (Farnsworth, Ingredients in the Redaction of the Restatement (Second) of Contracts (1981) 81 Colum. L.Rev. 1, 5-6, fns. omitted.) In this case, we retain the distinction between unilateral and bilateral contracts.

Curiously, the dissent sides with the minority of jurisdictions that chose to ignore these traditional rules governing unilateral contract termination or modification.

 Associate Justice of the Court of Appeal, Fourth Appellate District, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.