6 Things to Know About At-Will Employment

By: Brad Nakase, Attorney

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6. At-Will Employment in the United States

In the United States, employment is considered to be “at-will” in every state except for Montana. The United States is unique in this way, being one of the only countries in the world where employment is largely “at-will.” In most countries, an employer cannot terminate an employee unless he or she has a legitimate reason to do so. So, why does the United States maintain such a system when most of the world does not? It largely comes down to our respect for freedom of contract, respect for the employer, and the belief that both employers and employee prefer the ability to terminate or quit for any reason over job security.

5. What Is At-Will Employment?

“At-will” means that an employer can fire an employee for any reason at any time without getting into legal trouble. The exception is that the reason cannot be illegal in nature. Similarly, an employee can leave a job at any time for any reason without facing any legal consequences.

At-will employment not only applies to ending an employment contract. It also means that an employer can change the terms of an employment contract with no advance notice or consequences. This means that an employer can raise or lower wages, get rid of benefits, or reduce paid time off and face no legal consequences for these actions. This can be reduced to a rather harsh reality: in the United States, the at-will system means that an employee can be suddenly fired for no reason, get their hours or wages cut without notice, and lose their benefits in one fell swoop. All of this is legal.

Example: Amber has been working at a make-up store for the past three years and is a loyal employee. One day, her boss announces some “necessary changes,” including a reduction in the staff’s hourly wage. Amber is now paid $18 an hour instead of $23 an hour. She is furious, mostly because she will have to move apartments, as her current place is now too expensive for her to afford. She will also have more difficulty paying bills, and she won’t be able to afford the pet dog she was planning on adopting. Her whole life has been upended. When she complains her boss, he merely shrugs and says there’s nothing he can do. When Amber continues to protest the changes, he fires her on the spot. Though upset, Amber has no recourse. Legally, her boss could reduce her wages, and he could also fire her for no reason.

4. Contract Modification

In the United States, “at-will” employment is default unless otherwise stated in the employment contract. For instance, a company’s employment contract may state a specific employment time period (6 months, 1 year, etc.) or require that termination has cause. Usually, companies in the United States negotiate employment agreements with high-level employees exclusively. Employees represented in collective bargaining agreements can attain the right to only be terminated for a just reason.

What are just reasons? These generally include poor employee performance, misconduct or bad behavior, and economic necessity. It is possible that an employment contract would detail the reasons that can lead to termination.

In California, the state’s Labor Code defines just reasons as “a fair and honest cause or reason, regulated by good faith on the part of the employer.”

Some types of employees do not have at-will employment. These include employees in the public sector, who are protected by civil service laws. Also included are employees represented by unions, who are covered by a collective bargaining agreement. Executives also may negotiate their employment contracts, requiring “good cause” for termination.

Example: Justin is hired at an office in Brentwood. When he is given his employment contract, he notices that it is different to others he has signed in the past, which were expressly at-will. This time, his employment has a term of one year, and he can only be fired for a legitimate reason. He notices that these reasons are listed on the contract. His employment will be terminated if he engages in misconduct, does not meet performance benchmarks, or if the company needs to make financial adjustments. Six months later, the company goes through economic hardship when their sales tank, and Justin is one of the employees let go. He has no legal recourse, however, because he was fired for an acceptable reason, as stated in his contract.

3. “Common Law” Exceptions to At-Will

Because at-will employment can sometimes result in harsh consequences for employees, there are certain “common law” exceptions that can be used to challenge at-will termination. These exceptions may be divided into three categories:

  • Public policy
  • Implied contract
  • Implied covenant of good faith

That said, at-will employment is hard to challenge, and an employee will be hard-pressed to prove that his or her circumstance qualifies as one of these exceptions. It will also depend on the particular jurisdiction if these exceptions are recognized as legitimate.

Public Policy

This is the most widely recognized common law exception. The “public policy” exception protects employees from termination if the reasons behind the firing violate a public interest. Most states define public policy as it is expressed in state constitutions and statutes. A few states might consider codes of ethics and greater ideas of the public good and civic duty.

According to the American Law Institute, there are four categories of public policy exceptions. An employee may protest at-will termination if he or she:

    • Refuses to perform an act that is illegal under state law.
      Example: An employer asks an employee to commit perjury at a trial and fires the employee when they refuse.
    • Reports a violation of the law.
      Example: An employee reports his boss’ use of child labor, and the employer fires the employee for reporting him.
    • Engages in acts that are in the public interest.
      Example: An employee reports to jury duty, and his boss fires them for taking time off to do their civic duty.
    • Exercises a statutory right.
      Example: An employee files a claim under the state workers’ compensation law.

Implied Contract

A contract of employment may be implied. Implied contracts are recognized in 41 states and the District of Columbia, but they can still be difficult to prove even in these jurisdictions. How is an implied contract formed? It is possible to be spoken, with an employer saying, “You’re great, you’ve got the job for life!” or “We give everyone a second chance.” These types of statements imply an exception to at-will employment – that the employee has some protections. It is also possible that written statements in employer’s handbooks or policies can imply a contract with at-will exceptions.

Therefore, even if there is no definitive written contract between employer and employee, an employee can still expect to be employed for a specific time or indefinitely based on a verbal statement. They might also expect to only be fired for cause, based either on a verbal statement or a statement written in an employee handbook, for example.

Legally speaking, courts do not take seriously language promising permanent employment. They still consider the employment to be at-will. That said, employers can still protect themselves from legal proceedings by providing a clear disclaimer on written materials saying that policies and procedures do not reflect contractual rights.

Implied Covenant of Good Faith and Fair Dealing

Some states acknowledge an implied covenant of good faith and fair dealing in employment. Interpretation of the implied covenant varies from requiring legitimate cause for termination to banning terminations made in bad faith. A bad faith termination might be an employer firing an older employee to avoid having to pay retirement benefits. Still, there have been fairly few cases where employers have been found at fault under the implied covenant of good faith theory.

Additional Tort-Based Claims

At-will employees can also sue their employers for additional reasons. One of these is intentional interference with a contract. This applies when a supervisor or coworker with a malicious motive succeeds in getting the employee fired.

There is also intentional infliction of emotional distress. This occurs when extreme conduct either intentionally or recklessly causes serious emotional distress. Still, in some jurisdictions, even severe psychological abuse may not be enough to win a case against one’s employer.

Promissory Estoppel

An employer can be prevented from firing an employee if the employee can prove:

    • The employer clearly promised employment
    • The employee trusted this promise
    • The employee’s trust was reasonable and understandable
    • The employee was injured as a result

It is hard for employees to file a claim against their employer based on promissory estoppel. It is argued that an employee cannot rely on a promise of employment if the employment, by nature, is at-will.

Example: Alan is hired by a tech company in San Francisco. Since he lives in Los Angeles, Alan excitedly moves his family north to a new home in the Bay Area. But a week before he is supposed to start work, Alan’s new employer terminates him, having found someone they like better. Since Alan had a reasonable expectation of employment and relied on his employer for that employment, he has a promissory estoppel claim and may seek damages.

2. Statutory Exceptions to At-Will

There are also some statutory exceptions to at-will employment.

Illegal Discrimination

Federal and State discrimination laws prevent employers from making employment decisions based on an employee’s race, religion, age, sex, disability, national origin, or veteran status. Some states may also protect employees based on other factors, such as sexual orientation.

Still, it should be remembered that discrimination laws protect a member of a certain class from being fired because of their membership in that class. They do not protect from termination on other grounds.

Example: Sean has a disability that requires him to use a wheelchair. Last year, he got a job working at a country club. When Sean’s employer fires him, Sean wonders whether he was fired because of his need to use a wheelchair. However, his employer if aware of discrimination statues and would not fire someone based on their disability. Sean’s boss actually fired him because he was taking food from the country club kitchens to cater parties at his own house.

Retaliation

Whistleblower protection is normally provided for public sector employees, and protection for private employees is usually more limited. In seventeen states, employees are protected from retaliation if they report an employer’s illegal activity. This activity may include workplace health and safety, accounting fraud, environmental protection, and discrimination. Employees have the burden of finding the statute that applies to their particular situation.

1. Advice for At-Will Employers

The National Labor Relations Board (NLRB) looks closely at employer policies, so there are certain practices that at-will employers should use to protect themselves from legal action.

First, an employer should put an employment-at-will statement on the job application and in the offer letter. This way, before he or she quits a previous job or moves, a prospective employee understands that the employment is at-will.

Second, an employer should have new hires sign an employment-at-will acknowledgment on their first day work.

Third, an employer should put an employment-at-will statement in the employee handbook.

Fourth, an employer should avoid strict discipline policies and instead say that breaking company rules “may result in disciplinary action up to and including termination of employment.”

Fifth, an employer should not make casual assurances of job security during interviews or as an answer to employee or applicant questions.

Summary

Though there are some exceptions to at-will employment, in the United States at-will employment remains an overwhelming feature of the employment landscape.

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At Will Employment

At will employment means that the employer or the worker may end the employment relationship at any time. When an employment is at will, the employer can terminate employees for no reason.

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Can an employee be terminated while on medical leave?

It depends on the reason the employee is on medical leave. Under the FMLA, an employee cannot be terminated simply because they take leave. An employee is free to take medical leave without fear of losing their job. However, if there is a reason unrelated to the medical leave, an employer does have the right to terminate an employee.

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A PAGA claim is generally one year from the date of the last employment law violation on which the PAGA claim is based.

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California law declares vacation time to be earned wages, and vacation time is accumulated as work is performed. So, an employee who has the right to ten days of vacation per year will after six months of work earn five days of vacation time.

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