Employment At Will: Is It Really as Easy as Firing Someone for No Reason at All?

Written by Stephanie Burford, PHR, HR Manager at Advisor HR.

Introduction

Did you know that 49 out of the 50 states are under the Employment-At-Will Doctrine and Montana is the only state that does not follow at-will employment? Employment at will allows both the employer and employee to call off the employment relationship at any time, for any reason, or no reason at all. From an employee standpoint, it’s really that simple. They can resign any time, for any reason, or no reason at all and that’s it – their employment relationship is over. Does it mean it’s that simple for employers?

Let’s find out!

Background

According to SHRM, employment at will or at-will employment refers to an employment relationship between an employer and an employee, under which either party can terminate the relationship without notice, at any time and for any reason not prohibited by law.

Employment at will is the default employment arrangement with Montana being the only exception. It provides flexibility for both employers and employees but can also have the potential to lead to legal risks if it’s not managed correctly.

It is important to keep in mind that there is often risk associated with termination and sometimes, the risk of termination may be worth the potential liability depending on the situation. The best way to mitigate risk is by documenting and being prepared to provide evidence in the event wrongful discrimination is claimed.

Although At-Will employment is the default employment arrangement between the employer and employee, there are exceptions to the rule based on both the state the employee resides in and employee rights.

Exceptions to Employment at Will

Although you may live in a state that is At-Will, there are several exceptions that limit an employer’s ability to terminate without cause. These exceptions protect employee rights and promote fairness in the workplace.

Let’s dive deeper into these exceptions:

1. Public Policy - 43 out of the 50 states recognize public policy as an exception to employment at will. This is when an employee has been wrongfully terminated when the termination is against a well establish public policy of the state. For example, terminating an employee because they exercised their legal right to take medical leave or terminating an employee who refused to do a task because it was unsafe or illegal is a violation against the Public Policy law. Terminating an employee because you are an employment at will state, will not hold up if they are wrongfully discharged under Public Policy in the 43 states that recognize this as an exception.

2. Implied Contract – 38 out of the 50 states recognize the implied contract exception to the employment at will doctrine. Implied contract is formed between an employer and the employee regarding the employment relationship although nothing is written down. Such as a false sense of security. For example, telling an employee if they continue to do their job, they have nothing to worry about and then a month later terminating them for cause or no cause at all. By implying to the employee that the employee will not be terminated as long as they continue to do what they are doing acts as an implied sense of security for the employee. Additionally, an employee handbook can be interpreted as a contract if not otherwise stated. Therefore, if the handbook does not specifically state that it is not a contract, and the handbook outlines a disciplinary process, an employee who is terminated for employment at will may not hold up because the employer did not follow the disciplinary process recognized as an implied contract in the handbook. Under the implied contract, it’s important to be careful with statements that may imply a false sense of security and ensure your employee handbook specifically states it is not a contract.

3. Covenant of Good Faith Exception –11 out of the 50 states recognize the covenant of good faith and fair dealing as an exception to the employment at will doctrine. This is interpreted to mean that employers termination reasons can’t be made in bad faith or motivated by malice. An example of bad faith would be an employee being terminated after being employed with the company for 10 years and out of nowhere, the employee was terminated for cause. Under the covenant of good faith, with the employee’s tenure with the organization, this termination would be an exception to the employment at will doctrine.

4. Anti-Discrimination – Regardless of the state you live in, terminating employment based on protected characteristics, including race, gender, religion, age, disability, or other factors outlined in federal and state anti-discrimination laws is illegal. What if you fired an employee for performance, but they claimed they were fired because of their gender? Can an employee do that? The answer is yes, but that does not mean it is true. When terminating an employee for cause, there is usually not a burden on the employer to prove cause if the termination is not discriminatory or illegal. The idea of discrimination has given employees an instrument to use to defend themselves against a cause of action. While this might not be true, the employer must be prepared to provide evidence defending the potential charge. Providing no reason for termination in these situations opens the door for interpretation from the judge or jury to fill in the blanks and potentially rule against you.

5. Retaliation Protections - With this protection, employers can’t retaliate against employees for whistleblowing, filing discrimination complaints, or engaging in other protected categories.

Conclusion

At-will employment is often misunderstood and can lead to unfair treatment if not managed well. While it provides flexibility for employees and employers, Employers and employees must be aware of the limitations and exceptions to at-will employment, ensuring that terminations are fair and in compliance with the law allows.

To avoid wrongful terminations and be prepared for terminations that challenge you, it is recommended to handle at will terminations through good HR practice. Document, document, document! Documenting attendance issues, performance, conversations, or behavioral issues mitigates risk in the event an employee feels they have been wrongfully discharged. So to answer the question, being in an employment at will state is not always as easy as terminating someone for a reason or no reason at all.

Advisor HR Support

Advisor HR is here to help and ensure your business is compliant. Should you have any questions or need guidance regarding employee issues – reach out! We are here to help.