At Will Employment States: Everything You Need to Know
The basic exceptions that several states make available concern an exception due to public policy, implied contracts as well as a covenant of good faith. 9 min read
At-Will Employment States
In the United States, all states are formally recognized as at-will employment states. But, many states place limitations on at-will employment, which is in addition to the federal laws that apply to all states. The basic exceptions that several states make available concern an exception due to public policy, implied contracts, as well as a covenant of good faith.
The exception pertaining to public policy available in several states happens to be very similar to those federal requirements. Employees are free to pursue the exception at both the state and federal levels. The states of Florida, Alabama, Louisiana, Georgia, Nebraska, Maine, New York, and Rhode Island are the only states that do not currently allow for the public policy exception.
The implied contract exception is applicable in states in which employers have required their employees sign at-will employment contracts but still include contractual language or a statement in an employee handbook that employees can only be terminated for good cause. The implied contract exception is currently broadly applied in the United States. The states of Delaware, Florida, Georgia, Indiana, Louisiana, Massachusetts, Missouri, Montana, North Carolina, Pennsylvania, Rhode Island, Texas, and Virginia are the only states that do not currently recognize the exemption.
Which States Have the Covenant of Good Faith Exception?
The covenant of good faith happens to be one of the broadest exceptions as it requires employers to only terminate employees for good cause, even if handbooks or employment contracts are silent on that requirement. The covenant of good faith may be the narrowest exception of the three but remains the broadest in application. The states of Alabama, Alaska, Arizona, California, Delaware, Idaho, Massachusetts, Montana, Nebraska, Utah, and Wyoming currently recognize this exemption.
An at-will employee may have his/her employment terminated at any moment for any legal reason. For the most part, if an employer decides to terminate you, you may be left with limited legal rights to overturn your job termination. As such, many prospective and newly hired employees are often surprised when reading in a job application, employment contract, or employee handbook that their employment will be "at will."
If you are an employee who is working under the terms and conditions of an employment contract, the contract will dictate the circumstances under which your employer can terminate your employment. For example, if an employee has a two-year contract that states that he/she can be terminated during the contract term only for committing a crime, then he/she cannot be considered an at-will employee. Therefore, if he/she is terminated for any reason not specified in the contract, he/she may well have a legal claim against the employer for breach of contract.
An employee handbook may also be a contract depending on the analysis of state law. However, it may be that only certain handbook matters will be considered part of the contract. Employees should certainly consult their state legal doctrine to determine if the state would consider employee handbook language to be a contract between employers and employees.
If you are not an employee operating under an employment contract, you are considered to be an at-will employee. While employment at-will allows your employer to terminate your employment for most reasons, you are also permitted to resign or leave your employment without reason. In every state (other than Montana), employers are free to adopt at-will employment policies.
Can You be Classified as an At-Will Employee?
The respective state employment laws generally presume that employees are hired to be at-will employees, but place the onus on employees to demonstrate otherwise. Employees often resort to providing documentation evidencing their employment classification as at-will or verbal statements made by an employer to demonstrate otherwise.
Most employers go to great lengths to detail in the new hire documentation provided to employees that all employees are classified as at-will. Any employee may peruse their employment-related documents to determine if he/she has signed any document that detailed the employment as at-will. If an employee has not signed any document detailing the nature of the at-will employment, the employee should check workplace policies, procedures, or any other documentation that may mention the classification of the employment as at-will.
Bear in mind that if the employee’s human resources manual or other employment documentation states that employees may be terminated at any time, these indications are likely sufficient to demonstrate that your employer has adopted an at-will policy.
A large majority of employers have adopted policies requiring an adequate rationale for termination. These same employers may provide employees with examples of some reasons in which they may be terminated. If your employer currently maintains such policies, as an employee, you are allowed to avail yourself of these protections.
If your employer either during the hiring process or in the scope of your employment states that you will be classified as an at-will employee, your employer may most certainly rely on this fact as justification that you had been provided adequate notice that the employer will have the right to terminate your employment.
At-Will Employee Rights
It is important to highlight that even though you may have been classified as an at-will employee, your employer can only terminate your employment for legal reasons under the law. For example, your employer is subject to various laws that prohibit them from discrimination in the workplace, and thus you, as an employee, cannot be terminated as a result of such physical characteristics, like skin color, ethnicity, gender, or religious beliefs.
Similarly, employees cannot be terminated because they have complained about any activities that violate state or federal law that they have observed in the workplace (e.g. discriminatory conduct or sexual harassment). In addition, you can also not be terminated for participating in activities that are an extension of your legal rights. Thus, if an employee needed to take a leave due to family issues or was required to complete military service or vote in a state election, the employee could not be subject to termination as a result.
At-Will Employment Agreements
Many employers, in an attempt to provide protection for their ability to terminate employees on an at-will basis, will require prospective employees and newly hired employees to complete an acknowledgement form indicating their understanding that they are an employee at-will with the employer. These types of statements may be placed in a wide variety of employment documentation (such as written offer of employment) that the employer expects the employee will sign for recordkeeping purposes.
When You Should Sign an At-Will Agreement
In theory, employees are not required to sign an at-will agreement to commence employment with an employer. However, most federal and state courts have concluded that employers have the ability to terminate (or decide not to extend an offer) if an employee refuses to sign such documentation. As a result, most employees feel as though they are left with little to no choice but to acknowledge that they are classified by the employer as an at-will employee. That said, even though your options may be limited in terms of the classification, this still doesn't mean your employer will utilize your at-will status as a basis to terminate you without having good reasoning.
The more practical employers understand that there is little to gain by terminating employees arbitrarily. So, instead of terminating employees without cause, the employers are often motivated to handle issues with their employees before availing themselves of the ability to terminate. Moreover, employers will typically want to work with the employees to solve any problems or issues. Performance improvement plans are a very popular method of documenting problems or issues and identifying those areas in which the employee must improve.
Think Again Before Signing an Employment Agreement
If you are an employee who has taken their employer’s word when they promised you continued employment and the continued promise was a factor in your decision to accept the job, you should be wary or cautious of signing an at-will agreement. If your employer promised that you would be afforded a certain amount of time to learn all aspects of your job and that promise was a factor in your acceptance of the role, you may want to consider not signing an agreement that classifies you as at-will if it may be in conflict with the promise you received. The reason to be careful about signing an at-will agreement in this case is that most courts will treat a signed at-will agreement as ironclad, no matter the promises made to you by your employer.
If your employer has requested that you show your understanding of your at-will status in writing, but the document you are signing is contradictory to the promises made to you, ask about this contradiction before signing any documentation. If the employer stands by its promises, you should ask that they put such promises in writing. If the employer is reluctant to act in accordance with these promises, you may want to obtain counsel; more specifically, if you left another job based on these promises.
Employment Contract Defined
An employment contract is a standard agreement signed by an employer and its employee that lays out the necessary details surrounding a job opening. By signing the contract, an employee will be bound by the contract. There are multiple types of employment contracts in the marketplace. Employees can be asked by their employers to sign a variety of employment contracts. The employer will determine which contract applies based on their determination of the employee’s role and responsibility within the organization.
The following eight elements may not be present in a standard employee contract agreement:
- Confidentiality agreements are generally used to ensure that an employee does not divulge confidential or proprietary information outside the employer’s walls.
- Non-compete clauses or agreements require an employee to agree to a restriction that will limit the employee’s ability to work in a similar capacity for a competitor. In addition, employees are also restricted from participating in a business that would be in direct competition with their previous employer.
- Inventions ownership language requires an employee to acknowledge that any inventions developed during employment are the property of the employer.
- Exclusive employment language requires that the employee restrict his/her work to the company and they refuse to engage an employer in a similar function while the employee is currently employed via contract with their current employer.
- An additional compensation clause requires that an employee not be entitled to any extra cash or non-cash compensation should he/she become an elected officer or a committee member.
- Termination clause language allows either party of the contract the ability terminate their employment relationship. This would generally include situations in which the employee can no longer perform his/her job responsibilities due to a physical incapability.
- Arbitration language is found in a contract to ensure that the employee will agree to resolve any issues with employer arbitration or mediation mechanisms, rather than a court of law.
- Laws of a state language asserts that should any conflict between an employee and employer result in a lawsuit, that lawsuit will be conducted based upon the laws the state selected by the contract, regardless of the location in which it was filed.
My Employer is Asking Me to Sign All Kinds of Documents
When applying for and accepting employment, you will likely be asked to read and sign numerous documents. These documents will often comprise the company policies and handbooks. Employers will likely document in one of these sources that employees will be classified as at-will. Be prudent and review these documents to identify any reference to the fact that you are an at-will employee. Even if the documents lack the specific "at-will" language, any language that implies that your employment can be terminated at any moment will represent "at-will” employment. Generally, you will still likely be considered an at-will employee even if the words are not explicitly written in the documents. If you signed any of these employment documents, you have thus agreed and acknowledged your understanding that you may be terminated at any moment. Be sure to keep this in mind when negotiating with your prospective employer.
How Do I Know If I Have a Claim for Wrongful Termination?
An employer can break many state and federal labor laws when they wrongfully terminate an at-will employee. This likely results because the employer has no legal right to discriminate, even if the employee has signed an at-will employee agreement upon starting their employment.
Laws enacted prohibit discrimination based on many categories. Discrimination based on an employee’s race, gender, date of birth, and religion are a few examples of the prohibited categories.
Discrimination does not form the basis of all claims of wrongful termination. If your employer terminates your employment as a result of retaliatory conduct because you have exercised a legal right, you may have a wrongful termination claim of action. Additionally, if an employer attempts to terminate your employment based on your refusal to partake in illegal activities, you may succeed with a claim of wrongful termination. The damages available to an employee who has filed a claim of wrongful termination can include compensatory and punitive damages as well as attorney’s fees.
If you need help understanding at-will employment, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent to its site. Lawyers from UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.