Understanding At-Will Employment

Understanding At-Will Employment

by Diane Faulkner, May 2020

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At-will employment is a fine and scary concept all at the same time. In one respect, it represents great freedom for employees and employers to control their own fates. If an employee wants to move on or if an employer wants to cut ties with an employee, all they need to do is say goodbye. In another respect, employees and employers are at the whim of each other, and that can produce some feelings of uncertainty in the relationship.

Understanding at Will Employment

That's the environment for all US employees and employers everywhere save Montana, where the at-will doctrine applies only up to the first six months of employment. After that time, the relationship metamorphoses into for-cause. Montana's Wrongful Discharge From Employment Act (WDFEA) was enacted "to balance the employer's need for protection from poor employee performance or bad behavior." Under the WDFEA, after a no more than a six-month probationary period, an employer may discharge an employee for poor performance or bad behavior. (MT Code Sec. 39-2-901).

It's important for both employers and employees to understand what at-will employment is and how it works, as well as what lawful and unlawful termination practices look like. Here is everything you need to know.

What Is At-Will Employment?

"At-will employment simply means an employee can be dismissed for any reason, good or bad, fair or unfair, as long as it is not an unlawful reason," explains Matthew Stefany, senior associate attorney with Tampa-based Allen Norton and Blue. "Those who are not employed at-will, such as those employed under a contract, can generally only be dismissed for certain reasons as defined in the agreement. Such limitations on traditional at-will employment allow for challenges to whether the dismissal was justified without having to demonstrate it was illegal," he explains.

What Are Unlawful Reasons for Termination?

Just because an employment relationship is at-will doesn't mean that the employee doesn't have rights. "That's a common misconception," Aaron Tandy, partner, attorney, and head of employment law section for Miami-based Pathman Lewis, LLP says. "Just because I'm at-will doesn't mean you can ask me to go and work in an unsafe environment." All the federal, state, and local labor laws apply to an at-will (and for-cause) working relationship.

The usual rights to negotiate a raise, apply for worker's compensation, participate in protected activities, and be free from discrimination, etc., all apply to the at-will relationship.

What Are Lawful Reasons for Termination?

While no reason needs to be given by an employer to terminate an employee, typical reasons are poor performance or bad behavior. Atypical reasons can be something akin to, "I don't like you," or "you're so attractive, my wife thinks I might have an affair with you." And remember, no notice need be given. An employer can simply come in one day and terminate the relationship with no explanation.

In the current environment, with the advent of the novel coronavirus, lack of work is the most common reason.

Are There Any Exemptions to At-Will?

At-will employment contracts can be modified. For example, a contract may be for a specified number of months or years or allow termination for-cause only. "Typically," the National Conference on State Legislature (NCSL) explains, "US companies negotiate individual contracts with high-level employees. Collective bargaining agreements usually provide that represented employees may only be terminated for cause."

There are some states that recognize exemptions to the at-will doctrine.

Public Policy Exemption. This is the most widely recognized exemption. It protects employees against employment actions that violate a public interest. There are four categories within the public policy exemption:

  • Refusing to perform an act prohibited by state law, e.g., refusing an employer's request to commit perjury at a trial.
  • Reporting a violation of the law, e.g., reporting an employer's fraudulent accounting practices or use of child labor.
  • Engaging in acts that are in the public interest, e.g., joining the National Guard or performing jury duty.
  • Exercising a statutory right, e.g., filing a claim under the state workers' compensation law.

Implied Contract Exemption. Forty-one states and the District of Columbia recognize implied contracts, which can be created in several ways, e.g., "We need good people, you have a job for life," or "You always have a chance to correct your behavior." Employee handbooks, practices, or other written assurance may also create an implied contract.

Implied Covenant of Good Faith and Fair Dealing. A minority of states recognize this exemption and judicial interpretations vary from requiring just-cause to prohibiting terminations motivated by malice or bad faith, e.g., firing an older employee to avoid paying retirement benefits.

Though most employers can terminate employees for no reason, that doesn't mean they should. They should have some process by which employees can rely on to salvage their jobs or else the employer will gain a bad reputation among the labor pool. Likewise, employees who quit willy-nilly will gain an unfavorable reputation among employers.

To ensure the at-will relationship is clear, clearly note the relationship in an employee handbook, and have the employee sign off on having received it. If there is any question of whether the at-will doctrine applies, it's best to contact a reputable employment attorney.