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At-will employment is a legal concept that means employers can terminate an employee’s contract at any time, for any reason. This creates some practical issues around the termination process and what happens if an employer breaches their contractual obligations during said process.
At-will employment states are those that allow employers to terminate employees at any time, for any reason. There are exceptions and state laws that protect employees from being terminated without cause or notice. Read more in detail here: at-will employment states.
At-will employment indicates that an employer may fire an employee for any lawful reason or no reason at all, as long as the cause for the termination is not discriminatory. In the United States, employment at will is the most common norm; nevertheless, some states have Exceptions or apply a different criteria entirely.
We went to considerable measures to guarantee that this content was accurate. Please get legal assistance if your small company has any queries concerning at-will employment or Exceptions in your state.
Small Business Owners with At-Will Employment
It’s difficult enough to remain compliant throughout the employment and interview process. Managing a small company is complicated enough without having to figure out when and how to fire an employee.
It’s a two-way street when it comes to at-will employment. It gives both employers and workers the flexibility to act in their own best interests by allowing companies to fire employees without cause and employees to quit without cause.
Employers cannot terminate an employment relationship for any reason if it is at-will. If challenged, an employer must be able to demonstrate that the termination was made for a legitimate purpose.
Maintaining At-Will Status
You must ensure that you do not make any long-term promises, beginning with the interview and continuing through the recruiting process.
- Never use the term “permanent” when referring to a job. When referring to a full-time position, many individuals use the word “permanent,” but this might land your organization in legal difficulties if you ever fire an employee.
- Always specify if a position is full-time or part-time.
The inclusion of at-will employment language in your business handbook or employee offer letters is not required by law. However, include at-will reminders in these papers is a smart idea. Here’s an example to get you started:
Your employment with the Company is on an as-needed basis. This implies that your employment is for an indeterminate amount of time and that you or the Company may terminate it at any moment, with or without reason, with or without notice. Nothing in this or any other policy should be construed to change or abolish your employment position with the Company, which is at-will.
What matters most is how your firm functions on a daily basis. Certain corporate words and actions might jeopardize your workers’ right to work at will. For example, if you often inform workers that they are needed on staff for a large project or that you never envision them leaving the organization, such remarks might be seen as overcoming their at-will status.
Exceptions
There are exceptions, as with most legal issues. In the United States, employment at will is the norm, however certain states allow for exceptions.
When a whistleblower or employee engages in protected activity, the employer cannot fire them on the spur of the moment. Tameny v. Atlantic Richfield Co., a California Supreme Court ruling from 1980, gave rise to this exemption. In this case, an employee refused to participate in price fixing as requested by their employer, and the court found that the individual could not be fired under the at-will concept because they were engaging in protected behavior.
While at-will employment permits employers to fire workers for any reason, they must be able to show that they did so without breaking any laws. Employers are prohibited from discriminating against workers based on their sex, race, color, religion, or national origin under Title VII of the Civil Rights Act of 1964. If a firm fires an employee without cause for any of these reasons, they may be held accountable for wrongful termination.
Here are some examples of popular legal safeguards:
- A corporation can’t terminate an employee because she’s expecting a child.
- A company cannot fire an employee who is planning to retire shortly.
- A handicapped employee cannot be fired for requesting reasonable accommodations.
- Because they filed a workers’ compensation claim, an employee cannot be fired.
- If an employee refuses to perform something unlawful, the employer cannot fire them.
All of these scenarios defy the very essence of at-will employment. However, both the federal and state governments have decided that certain instances should be excepted from the employment-at-will clause.
Term and conditions on how and when an employer may fire an employee are often included in collective bargaining agreements. Employees at certain firms are also required to sign employment contracts on a regular basis. Both of these agreements may contain clauses that allow for termination only for good reason, thereby nullifying the at-will concept.
Implied contracts, or ones that aren’t written down but are inferred from corporate comments and actions, might convey the idea that an employee won’t be fired without reason. If you tell an employee that you need them to accomplish a two-year project because you can’t do it without them, you may have created an implied contract. If you fire that individual before the job is finished, they may file a lawsuit against your firm.
In reality, however, courts often ignore lifetime or permanent employment terms. In your offer letters and corporate handbooks, you should always include an at-will provision. This will not protect you on its own, but it may be used in conjunction with other evidence to show that your workers are at-will.
Good faith is that all parties meet in a fair, open manner and agree not to infringe on one another’s rights. A good faith agreement compels an employer to respect the rights of its workers. This implies that if an employee is fired, the employer must have fair cause, or a genuine business justification for doing so.
Companies may also be held accountable in certain areas if they operate in bad faith. For example, if a corporation fires an older employee in order to avoid paying retirement benefits, the company may be acting in bad faith. Companies must be able to establish a genuine business rationale for firing an employee in states that follow the good faith exemption to at-will employment.
Employees of Small Businesses Can Work At Will
Employees who are employed at-will are free to quit the firm at any moment and for any reason. This implies that an employee is free to quit a firm anytime they desire, as long as their employment is not restricted in any way.
However, it also implies that an employer has the right to modify employment responsibilities, perks, and salary at any time. A corporation that did this would very certainly suffer strong reaction from its workers, thus it doesn’t happen very often. Employees must be aware that something may happen, no matter how improbable.
Defeating a Discrimination Charge
At-will employment might also offer a strong legal defense for your organization. You might use the at-will employment theory to defend yourself if a former employee sues you for wrongful termination.
Justification
While not required in every state, it’s good business practice to have Justification to terminate an employee. Not only can it help overcome a charge of discrimination, it can also boost employee morale by showing your team that you’re fair and reasonable, but will take action if an employee isn’t carrying their weight.
Be careful how your managers act leading up to an employee termination. Small businesses can be found liable for terminating an employee without Justification if it’s clear an employee was put on a performance improvement plan that was set up for them to fail.
For example, say you put an employee on a performance improvement plan for documented instances of Performing poorly at work. You give the employee 90 days to meet a project deadline and improve their overall performance, but after 30 days you move up the project deadline and then terminate the employee when they don’t meet the new target. Absent other details, your company probably could not show Justification for this termination and would face legal action.
This is why it’s critical to keep track of staff performance concerns. Having a documented trail showing an employee’s poor performance and the actions your organization takes to assist them can help you justify your choice to fire them.
Common examples of Justification include terminating an employee for:
- Performing poorly at work
- Threatening or harrassing coworkers
- Insubordination
- Dishonesty
- Theft
- Downsizing
- Financial difficulties in the firm
At-Will Employment Laws in Different States
Except for Montana, every state is believed to be an at-will employer. The table below shows the at-will employment information for each state, as well as any exclusions the state may have.
Montana is a unique case.
Passed in 1987, the Montana Wrongful Discharge from Employment Act essentially abolished the at-will employment doctrine in the state, requiring Justification for nearly all employee terminations. The 2021 Montana Legislature has made significant changes to this law that small businesses must know.
Under the original law, Montana employers could only terminate employees at-will during the probationary period, which was set at six months. After that probationary period, employers could only terminate employees for Justification. Under the new changes to this law, however, several key items have changed:
- If an employee has taken a leave of absence, the probationary term is now at least one year, although firms may extend it to 18 months or more.
- Justification now includes termination of employment for repeated violations of a company policy
- When it comes to firing a management or supervisory employee, courts now allow firms “the fullest latitude.”
New York City is an exceptional case.
In New York City, a new law recently went into effect. Called the Justification Bill, the new law requires fast food employers to terminate employees only for Justification. The law also requires employers to engage in progressive disciplinary procedures and prohibits fast food employers from significantly reducing employees’ hours by more than 15% of their regular schedule.
If an employee is dismissed within their probationary period, which lasts 30 days from the start of their job, the law allows for an exemption. Regardless of this exemption, I am certain that this legislation will be challenged.
Exceptions to the State’s At-Will Status
Conclusion
Document, document, document. No matter what state you’re in, terminating an employee who routinely violated company policy or showed Performing poorly at work is less legally tumultuous when you have documentation to back up the termination. Nothing can stop a former employee from suing your company, but having evidence that the termination was legal, and you had Justification to do so will help you overcome any legal challenges.
The “employment-at-will doctrine” is a legal principle that prevents employers from forcing employees to sign contracts. It was created in the United States around the early 1900s. The “employment-at-will doctrine” is not applicable everywhere, and there are exceptions and state laws that may apply. Reference: when was the employment-at-will doctrine created.
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