Key Points

  • The presumption against retroactivity bars applying the 2022 amendment to A.R.S. § 38-1102 to at-will employment agreements signed before its Sept. 24, 2022 effective date.
  • The Legislature made no express declaration of retroactivity, and the amendment's just-cause provisions are substantive rather than procedural.
  • An employer's contractual right to terminate at will vests when the agreement is executed, because the term is assertable as a defense from that moment.
  • The court rejected Blunt's argument, drawn from Demasse v. ITT Corp., that at-will employment renews each day, and distinguished civil rights and minimum wage laws in kind, mechanism and reach.
  • The court did not reach the Ninth Circuit's second and third certified questions and returned the matter to that court.

The Arizona Supreme Court held on Oct. 9 that a 2022 amendment to the state's Peace Officers' Bill of Rights, which now bars police officers and their employers from contracting around the law's job protections, does not reach at-will employment agreements signed before the amendment took effect on Sept. 24, 2022.

Justice Cruz wrote for a unanimous court in a case brought by Brian Blunt, a Gilbert Police Department commander whom the Town of Gilbert fired after a 2023 investigation without a pre-termination hearing. The court held that the town's right to fire Blunt without cause vested in 2021, when he signed an offer letter accepting at-will status in exchange for a raise.

The ruling answers the first of three questions that the U.S. Court of Appeals for the Ninth Circuit certified to the court after Blunt appealed. Under the decision, the amendment governs only agreements executed on or after its effective date, and officers who waived just-cause protection under the earlier statute remain bound by those terms.

The Peace Officers' Bill of Rights provides that "[a] law enforcement officer is not subject to disciplinary action except for just cause." Just cause requires notice of the conduct standards, discipline that is job related and proportionate, and proof by a preponderance of the evidence. The law also provides notice and an opportunity to be heard before termination, and the opportunity for a post-termination appeal.

Until 2022, the statute said it "does not preempt agreements that supplant, revise or otherwise deviate from the provisions of this article." The Legislature rewrote that section to say the law "outlines the minimum rights given to peace officers in this state" and to protect only agreements that "supplement or enhance" those rights.

Blunt's 2021 offer letter allowed either side to end the relationship at any time, with or without cause. In 2023, after employee complaints, the town hired an outside firm to investigate him, and Blunt refused to participate unless he received the underlying materials. The town fired him, denied his requests for the investigation report and a pre-termination hearing, and did not respond to his request for an appeal.

Blunt sued in state superior court for a writ of mandamus that would force the town to rescind his termination until it provided a hearing and an appeal. After the defendants removed the case, a federal district court dismissed it with prejudice. That court found that Blunt had no constitutionally protected employment interest because his contract made him an at-will employee and the amendment did not apply retroactively.

Arizona law provides that "No statute is retroactive unless expressly declared therein." The parties agreed that the Legislature made no such declaration in the 2022 amendment, but they disagreed over whether the affected rights had vested. The town argued that its contract rights vested when the agreement was signed. Blunt contended that the town's power to fire him at will was only a contingent interest until a disciplinary action began.

The court sided with the town. A right vests, the court said, quoting its own 1986 precedent, when "it is actually assertable as a legal cause of action or defense or is so substantially relied upon that retroactive divestiture would be manifestly unjust." For a statute regulating the terms parties may contract for, the opinion said, the relevant event is contract formation.

Cruz applied that test to Blunt's 2021 agreement. "The at-will employment term was assertable from execution: Had the Town discharged Blunt the next day and had he sued, the Town could have raised his at-will status as a complete defense," Cruz wrote. The court also held that the just-cause provisions are substantive rather than procedural, because "the just-cause guarantee itself creates and defines a substantive right, not merely a method of redress."

Blunt had relied on Demasse v. ITT Corp., a 1999 decision, to argue that at-will employment consists of an ongoing series of contracts for "a day's work for a day's wages." On that theory, his at-will term was void when the town fired him. The court read Demasse to describe how parties may modify a term by mutual assent and consideration. Cruz wrote that Demasse "does not suggest that an unchanged term must be re-ratified with each day of continued performance, nor that either party may alter the term unilaterally."

The court also rejected Blunt's argument that a ruling for the town would destabilize civil rights and minimum wage laws, which apply to conduct under contracts formed before those laws took effect. Those laws, Cruz wrote, "differ from the POBR amendment in kind, in mechanism, and in reach." Civil rights statutes exist independent of any agreement, the court said. A sub-minimum-wage term is unenforceable from inception, so voiding it presents no retroactivity question.

The earlier police statute, by contrast, expressly allowed parties to contract around its protections, so Blunt's at-will term was valid when made. The court added that the just-cause requirement "governs a defined group—peace officers—and a single bargained-for term about whether disciplinary action can only be taken with just cause." Even as an at-will employee, the court said, Blunt retains protection against discharge for a reason that contravenes public policy.

Chief Justice Timmer, Vice Chief Justice Lopez and Justices Bolick, Beene, Montgomery and King joined the opinion. Steven J. Serbalik of Steven J. Serbalik, P.L.C. argued for Blunt. Aaron D. Arnson of Refine Legal PLLC argued for the town.

Because its response to the first question was dispositive, the court did not reach the Ninth Circuit's two other questions. Those questions asked whether the amendment voids Blunt's contract and, if so, whether that result would violate the Arizona Constitution's Contract Clause. The court returned the matter to the Ninth Circuit, which will decide Blunt's appeal of the dismissal.