Absent a written agreement stating otherwise, with the exception of Montana, employment relationships are presumed to be at-will. In other words, an employer can terminate an employee at any time for any reason, or for no reason, so long as it’s not for a discriminatory or other illegal reason. Likewise, an employee is free to leave a job at any time.
However, employers need to ensure that they train their supervisors, managers and HR to be careful when making statements and representations to employees and job candidates. Otherwise, these statements or representations can create an unintended implied contract limiting an employee’s ability to terminate employment. While state laws may vary, here are five ways an employer can generally alter the at-will employment relationship.
1. Making Promises of Job Security
Employers may get caught up in the moment and make statements when communicating a job offer to a desired candidate that could be used against them at a later time. Statements such as, “you have a job for life!” or that the position has “excellent job security,” may alter the terms of the at-will employment relationship and create an implied employment contract. Similarly, employers should avoid making statements about job security in any policies or in an employee handbook.
2. Making Representations in the Offer Letter
Employers must be careful when sending a written job offer as well. Poorly drafted letters can inadvertently modify the at-will relationship. For instance, stating a yearly salary could be read as a promise of at least a full year’s employment. To be on the safe side, an employer should state the salary instead in terms of payroll increments. And if an employer provides bonuses to its employees, the offer letter should state that bonuses are discretionary and avoid saying that the employee is entitled to an annual bonus.
An employer should also clearly and unambiguously inform the employee of the at-will employment relationship in the written job offer and include specific language explaining that the offer letter is not an employment contract.
3. Failing to Include a Disclaimer in the Employee Handbook
Creating an implied contract through an employee handbook may be avoided by clearly disclaiming that any policy or handbook statement creates an employment contract for a specific time period or that employment is guaranteed. To be effective, the statement must be straightforward and appear prominently within the handbook. The disclaimer should also state that the employer has secured its right to terminate employment at-will.
However, employers should be aware that an overly broad at-will disclaimer in an employee handbook, personnel manual or an employee offer letter may violate the National Labor Relations Act by infringing upon the rights of both union and non-union employees to engage in protected concerted activity (such as working collectively to improve working conditions). Therefore, employers should review their at-will disclaimers, acknowledgements, offer letters and policies to ensure they do not contain any language that the NLRB may view as overly broad and interfering with an employee’s right to engage in protected concerted activity.
4. Mandatory Progressive Discipline Procedures
Having a progressive discipline policy could create an implied employment contract with employees under certain circumstances. For instance, if a progressive discipline policy sets out a plan (such as “three strikes” before termination) it may be enforced as a binding commitment of the employer to go through the progressive discipline steps prior to terminating an employee. While state laws may vary, an employer should do the following to help prevent a contract interpretation:
- Avoid using words such as, must, will or shall. Instead, use “generally,” “typically” and “usually” in drafting the policy.
- Include an at-will disclaimer in any workplace discipline policy that is part of an employee handbook or manual.
An employer should also leave itself with the flexibility to immediately terminate an employee for certain behaviors, such as theft, dishonesty, insubordination and workplace violence.
5. Just Cause Provisions
In addition to a progressive discipline policy, employers should avoid “just cause” provisions in an employee handbook or policy, which protects against termination based on any arbitrary, capricious or illegal reason. If the employee handbook or policy promises that terminations will only occur for “just cause,” an employer may need to abide by the obligations created and justify its decision to terminate employment.
However, employers should be aware that employees covered by collective bargaining agreements can usually be terminated only for cause. Also, in Montana if an employee completed a probationary period, the employer bears the burden of proof to demonstrate “just cause” or “good cause” to support a decision to terminate that employee.
For more information on preserving the at-will employment relationship, check out XpertHR’s customizable policy.