Thirty-five years ago, the President of the American Management Association described the corrosion of the practice of at-will employment and the employer’s rights to fire employees without any reason, warning or explanation. The question Thomas Horton raised in the strongly-worded diatribe was how to balance the employer’s need to fire an employee against the need to treat workers fairly and responsibly. “An organization must have the right to terminate incompetent personnel. Indeed, it has the obligation to its shareholders to do so. It must have the right to reduce its workforce in hard times if that is what it needs to do to survive.”
While employment-at-will is predominant throughout the United States, barring Montana, the concept of at-will employment remains one of the most misunderstood legal terms in employment law today. If an employee is told during the hiring process or after accepting the job that they are an at-will employee, then the employer has every right to rely on that statement in legal processing, as proof that the employee may be fired without cause.
The HR Digest’s Guide to At-Will Employment explains employment-at-will, including the major exceptions to the at-will doctrine, its pro-employee benefits, and more.
Who does at-will employment apply to?
All employers regardless of size or shape.
What does at-will employment mean?
By definition, at-will employment means that both the employer and the employee are entering the employment relationship based on a mutual agreement that either can terminate the relationship at either time without mutual consent. The employer has the right to terminate an employee at any time and for any or no reason. In the same vein, the employee has the right to terminate their employment at any time for any or no reason.
There are no predefined legal requirements in terms of notice periods either. This means that either party can end the employment relationship without any prior notice.
At-will employment also means that an employer can change the terms of the employment relationship any point with no prior notice and no consequences. For example, an employer can alter compensation, terminate benefits, or reduce paid time off. In simple terms, the at-will employment policy leaves employees with no immunity against unannounced pay cuts, a limited or on-call work schedule depending on the employer’s needs, and arbitrary and sudden dismissal.
However, employers and employees need to understand that courts and legislature have created exceptions to the above definition.
This at-will employment guide is designed to provide you a list of all the ways at-will employment is limited so you can minimize the risk of getting sued.
However, employers and employees need to understand that courts and legislature have created exceptions to the above definition. This at-will employment guide is designed to provide you a list of all the ways at-will employment is limited so you can minimize the risk of getting sued. Here are the three major exceptions to the U.S. at-will employment doctrine. These exceptions typically vary by state.
i. Public Policy Exception
Under this exception, an employer cannot terminate an employee in violation of the well-established public policy of a state or a state statute or federal statute. For example, in many states an employee may not be terminated for filings a workers’ compensation claim after an on-the-job injury. Other retaliation-protected actions include:
- Filing a discrimination or harassment lawsuit
- Being a whistleblower regarding unsafe or illegal workplace practices
- Refusal to perform illegal activities
- Participating in a workplace investigation
- Discussing the working environment or compensation and overtime practices
- Taking legally protected leave from work
- Requesting accommodation for a disability
Many states bar employers from terminate employees for refusal to violate the law at the employer’s behest. Criteria for what violates public policy varies from state to state.
ii. Implied Contract Exception
Under the implied contract exception, an employer may not fire or discharge an employee where an implied contract has formed between an employer and employee. A writer instrument expressing the employment relationship will not exist. Thus, it is difficult to prove the terms of an implied contract and the burden of proof is generally on the terminated employee.
Implied contracts are commonly seen where an employer’s handbooks or policies states that an employee will not be fired except for good cause as it lays out a process for firing. If the employer fires the employee in violation of an implied employment contract, the employer may be found liable for breach of contract.
In Arizona, Delaware, Florida, Georgia, Indiana, Louisiana, Massachusetts, Missouri, Montana, North Carolina, Pennsylvania, Rhode Island, and Virginia, at-will employment doesn’t apply if there’s an implication that a contract exists.
iii. Implied Covenant of Good Faith and Fair Dealing
The purpose of the implied covenant of good faith and fair dealing is to ensure that parties act with honesty and faithfulness to an agreed common purpose and consistency with the justified expectations of the other party. Under the implied covenant of good faith and fair dealing, an employer may not fire or discharge an employee in bad faith or terminate an employee when the termination is motivated by malice.
This holds true in all but 11 states: Alabama, Alaska, Arizona, California, Delaware, Idaho, Massachusetts, Montana, Nevada, Utah and Wyoming.
Other common caveats and exceptions to at-will employment are as follows:
The terms of at-will employment doesn’t apply anywhere in the United States if employees are fired due to discrimination based on membership in a protected class, including race, gender, religion, color, gender, pregnancy, national origin, age, disability or sexual orientation.
The terms of at-will employment doesn’t apply anywhere in the United States if employees are fired due to discrimination based on membership in a protected class such as sex, gender, race, religion, color, or national origin; violation of the Americans with Disabilities Act; and termination in violation of the Age Discrimination in Employment Act.
v. Refusal to commit an illegal act
Under this exception, an employer cannot fire or discharge an employee for refusing to do something illegal at the behest of the company or for reporting illegal activity.
vi. Retaliation against union members
At-will employment does not apply if an employer terminates an employee for union action, such as going on strike.
vii. Unionized jobs
A collective bargaining agreement (also known as CBA) may exempt union workers from at-will employment.
As seen here, firing or terminating an at-will employee is not always as easy as it may seems. Employers must remember that some at-will employment states have more rigid requirements. Be sure to check federal, state and local laws before making any hiring or firing decision.
Good things about At-Will Employment
In the United States, the at-will employment structure makes it clear there is no master-servant relationship and long gone are the days of indentured servitude. The pro-employee structure of at-will employment allows employees the freedom to quit at any time without advance notice. Contract workers, however, may be required to fulfil their obligations, or pay a monetary penalty in lieu of leaving early without giving substantial notice before quitting. Another benefit is that at-will employees aren’t subject to non-compete agreements. This allows employees to accept offers of employment from other companies within the industry, without a waiting period or restrictions on geography.
At-will employment contracts are preferable for small-business owners who anticipate fluctuating staff needs or simply want to release employees who aren’t working out, without giving them prior notice or warning. Employers don’t require good cause for termination, barring Montana, which mandates that good cause must be provided to any at-will employee who has served probationary period.
Do I have to sign the at-will employment agreement?
Theoretically, you are not compelled to sign the at-will agreement. However, courts in the United States have consistently held that the employer can fire or discharge you or even refuse to hire you if you refuse to sign the at-will agreement.
Take caution if you do sign the at-will employment agreement based on the employer’s comments about guaranteed continuous employment when you first accepted the job offer. If you find yourself in this situation, ask your employer about the discrepancy between the guaranteed employment and the at-will agreement. If the employer chooses to uphold the guaranteed employment, ask that it be put into writing.
Which states are at-will employment states?
Nearly every state in the United States and the District of Columbia recognize at-will employment. Barring Montana; where, employers can only terminate an employee without cause during the initial probationary period.
Right to work vs at-will employment?
Oftentimes, the term “right-to-work” is used interchangeably with the phrase “employment at-will” as we fail to understand the key difference. The right-to-work doctrine, which was established in the National Labor Relations Act (NLRA) of 1935, allows employees the option to refrain from engaging in collective activity such as join a union or pay union dues, as a condition of employment. For example, Arizona is a right-to-work state where employees are not required to be members of a union or pay union fees to get hired. In other states, a person applying for a job where employees are unionized could be required to join the union as a requirement of being hired.
Under the employment-at-will doctrine, both the employer and employee can terminate the relationship for any reason or no reason at all, and at any time without consequence. In this type of employment relationship, the employer cannot terminate an employee for an illegal reason, such as termination based on discrimination as seen above.
What is the opposite of at-will employment?
Contract employment is the opposite of at-will employment. It outlines all aspects of the employment relationship, including the employee’s roles and responsibilities, work hours, salary and benefits, and length of employment.
Statutory Protections for Employees
State and federal laws protect employees from being discriminated against in hiring or firing. These categories of statutory protections include race, gender, age, national origin, ethnicity, pregnancy, disability, religion, family status, sexual orientation (in some states), and veteran status. In addition, a verbal assurance that employees will not be fired without cause may also hold up in special circumstances, although the burden of proof is generally on the employees.
The Debate around Right to Work Laws
At-will employment is one of the most hotly debated issues relating to employment laws. Those in favor of at-will system believe that if they monitor their system regularly they will be safe from employee lawsuits. However, employment lawsuits related to at-will employment is on the rise today with a large percentage of cases landing on court dockets. Thomas Horton’s skepticism around at-will employment stands true in cases where poor management practices are responsible for the increased litigation.
Do you have questions about employment at will or anything else related to HR within your company? You may drop your query in the comment box below!