At-Will Employment: Everything You Need to Know
At-will employment, known as being fired without cause or termination for any reason, means an employer can contractually terminate an employee for no reason.4 min read
2. Why is it Important to Understand At-Will Employment?
3. Restrictions on At-Will Employment
4. Federal Protection Against At-Will Policies
What Is At-Will Employment?
At-will employment means an employer can contractually terminate an employee for no reason. It may also be referred to as being fired without cause or termination for any reason. An employer can dismiss an at-will employee for any reason, without showing just cause, and without notice or warning.
It is the company's choice whether or not to adopt an at-will employment policy. The concept is so prevalent in the U.S. workplace that courts presume companies use at-will employment practices.
Why is it Important to Understand At-Will Employment?
Most employers will spell out their employment policies in an employee manual or handbook, a contract, or a job application. While it is not a requirement, they often have new hires sign these documents to acknowledge they read and are aware of the policy. An employer can change the job, the benefits, and the terms without notice. Changes may include wages, termination benefits, or adjustment of policies and procedures. State law provides some general protection from at-will termination. Most employers have to provide the following:
- Final paycheck
- Benefits employee is entitled to, such as severance or continued health insurance
- Any statutory benefits, such as unemployment compensation or other forms of government benefits
Employers must not impede the employee's right to bring a wrongful termination lawsuit. If an employer violates the employee's right through discrimination, harassment, or complaining about not receiving any other right, the employee can sue for damages or reinstatement.
Restrictions on At-Will Employment
Public Policy Exception -- If it is against the public's interest, the employer is barred from terminating an employee at will. Examples of public policy situations:
- Refusing to perform an act that the state law prohibits, such as refusing to allow an employee the right to maternity leave.
- Reporting a violation of the law, such as reporting an employer's fraudulent activity.
- Engaging in acts that are in the public interest, such as joining the military reserve.
- Exercising a statutory right, such as filing a worker's compensation claim.
Implied Contract Exceptions -- While the court presumes an employee/employer relationship is at-will, some situations arise that might create an implied contract to the contrary.
- If the employee contract or handbook states the employee can only be terminated for "just cause," or other similar languages.
- The employer makes statements to the employee in contradiction to the at-will principle, such as stating an employee has job security for a particular time period.
Covenant of Good Faith Exception -- Employers are prevented from firing the employee to avoid a stated policy or because of evil intent. For example, if an employee handbook offers the employee retirement benefits after a period of time of working, but the employer fires the employee just before achieving the benefit, they might be required to show cause.
Additional tort-based claims limiting at-will employment include intentional interference with a contract or intentional infliction of emotional distress.
Employee Promise -- If an employer makes statements contradictory to their at-will employment policy and the worker relies on that statement and accepted the job, the employee may have some recourse.
Once terminated, the employee must bring a claim against the company to compel recourse. It is up to the employee to prove that one of these exceptions exist. It may not result in the reclaiming of the employee's job, but the employee might be entitled to compensation and damages.
Collective Bargaining Agreements and Unions -- To battle against powerful employers, unions form to organize workers to offer a collective voice to counter the company's policies or lack of policies. The union negotiates with the company on behalf of the employees for things like fair wages, benefits, hours, leave, and termination policies. Members of a union cannot be terminated without "good cause". The company must complete a predetermined set of progressive disciplinary actions before termination. The goal is to protect the employee from unreasonable termination and offers the employee the opportunity to correct behavior to avoid being fired.
Promissory Estoppel -- An employer can be stopped from firing an employee and required to pay damages if the employee can show the employer made a promise or declaration that was clear, and the employee relied on it.
- This can be proven if:
- It was reasonable for the employee to count on the promise and it was foreseeable the employees would rely on the promise
- Damage to the employee can be measured
- There is legal exception to the at-will presumption
Illegal Discrimination -- Specific state statutes may prohibit employers from discriminating against an employee based on factors such as age, sex, race, and sexual orientation.
Retaliation -- Employers may not fire an employee in retaliation for the employee bringing to light a company's policy or procedure that may be illegal or against public policy. The exception protects and encourages whistleblowers to bring the wrongdoing to light.
Not all states offer the same protection, so check the states labor law for more information.
Federal Protection Against At-Will Policies
- Title IV prohibits employers from discriminating against employees because of sex, race, color, national origin, and religion.
- Family and Medical Leave Act allows employees up to 12 work weeks of unpaid leave for new parents without the threat of losing their job.
- American with Disabilites Act prohibits employers from discriminating against an employee with a disability in all areas of public life. This law includes protection from wrongful termination if the disability does not prevent them from doing their job.
- Age Discrimination in Employment Act protects employees and job applicants from age discrimination.
Government employees cannot be fired without cause. The government, unlike the private sector, has comprehensive policies and procedures relating to hiring and firing to protect the employee. America is the only country that has at-will employment.
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