At-Will Employment: What Does It Really Mean for Your Business?

Business.com / HR Solutions / Last Modified: April 7, 2017

At-will employment is a default grounds of employment in most sates. Learn more about the specifics surrounding at-will employment, including exceptions to the rule and how you can protect your business when terminating at-will employees.

Many times we hear the term "at-will employment" tossed around to describe a job situation, but what exactly does at-will employment mean? 

At-will employment is basically a type of employment where the employer is free to terminate an employee's employment at any time for any reason or no reason at all. The employer does not need to have good cause for terminating the employee. There is limited recourse for the employee to appeal or fight the termination, and courts generally deny any sort of claims or benefits related to the termination.

However, at-will employment also works the same way on behalf of the employee. The employee is able to leave the job at any time without giving notice or a reason for leaving.

At-will employment is generally the default grounds of employment unless the employer clearly indicates that there are only specific reasons for which an employee can be terminated. It has been affirmed by the U.S. Supreme Court and is legal in all states except Montana, which specifies that employees can only be fired for just cause after they have completed a probationary period.

The advantage of at-will employment is that both the employer and employee can form an employment relationship without feeling like they need to make any sort of long-term commitment to one another. However, it can leave employees feeling they were terminated unjustly and employers feeling frustrated and helpless if an employee walks out with little or no notice.

Exceptions to at-will employment

Now that you have heard at-will employment explained, it's time to learn about the exceptions. There are a few different exceptions to the at-will employment rule that can affect both employers and employees:

Public policy

All states except for Louisiana, Maine, Alabama, Nebraska, Georgia, New York and Rhode Island recognize this exception to at-will employment. It basically states that an employee cannot be terminated for taking action that benefits the public. Examples of such action include reporting a legal violation by an employer - sometimes referred to as "whistleblowing" - and refusing to follow a directive from an employer because carrying out that directive would result in a violation of law. This exception also disallows termination for filing a workers' compensation claim.

Implied contract

If written information about a company's termination policy includes a clear assertion that employees can only be terminated for certain reasons, this information implies an employment contract that may prevent an employee from being terminated except in accordance with company policy. It is also possible that a verbal affirmation from an employer stating that an employee will only be released for certain reasons could be considered a contract if it can be proven. However, the burden for proving this version of an implied contract is entirely the employee's.

Implied-in-law (aka: covenant of good faith and fair dealing)

Some states recognize this at-will employment exception, which is also known as "covenant of good faith and fair dealing." An example of termination that some courts have found to be improper under this exception includes terminating an employee to avoid fulfilling duties to the employee such as paying for healthcare, retirement or commissions.

Statutory

There are protections from termination for employees written into local, state or federal law that are based on certain characteristics. Some of these characteristics include race, age, gender, national origin, family status, religion, pregnancy, disability and sexual orientation. An employer found to have terminated an employee in violation of one of these laws may be accused of discrimination, and the affected employee may have the right to pursue legal recourse against the employer.

Contract

If there is a written contract covering the relationship between the employee and employer, the terms of that contract govern how and when an employee can be terminated. However, the employee is also subject to the contract and may only leave the position in accordance with the terms of the contract.

Because of these exceptions to at-will employment, it is important that an employer follow certain procedures when terminating an at-will employee to avoid being accused of running afoul of these exceptions. 

Suggested best practices for terminating an at-will employee

  • Document what leads to the reason for termination - It is important that an employer keep accurate and thorough records of performance issues and disciplinary steps taken against an employee before the termination.
  • Conduct an investigation - The employer should not terminate an employee without getting the employee's side of the story and thoroughly investigating the issue leading to termination from all parties who have knowledge of it.
  • Give a reason - When terminating an employee, be sure to give a clear and specific reason for the termination. This reason should also be documented as specifically as possible in writing.
  • Don't apologize - Terminating an employee is never fun, but apologizing to the employee implies that something wrong or illegal is taking place. Be firm but polite.
  • Be consistent - It is important that whatever rules and guidelines an employer follows regarding termination are applied equally to all employees. If an employee is terminated for a specific violation of policy, all employees who violate the same policy in the same way should face termination as well.

Consult your attorney if you are concerned about an employee you plan to terminate

In some situations, an employee who is particularly problematic might threaten legal action in the face of termination. Consult your attorney when terminating an employee, particularly one you feel may present a higher risk of legal action post-termination. Additionally, if you have an in-house human resources representative or third-party that assists with hiring and firing of employees, it might be worthwhile to discuss the matter with them as well. This will ensure your business is covered in the event anything goes wrong after termination.

Photo credit: Shutterstock / CAT SCAPE

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