Five Ways Employment At-Will Affects Employers

An employment at-will policy is an integral part of any employee handbook for a US employer. It signifies that employment may be terminated at any time by the employer or the employee for a good reason, a bad reason or no reason at all as long as it is not discriminatory. Here are five key facts an employer should know when it comes to at-will employment policies:

1. Employment At-Will Recognized in All States But One. The employment at-will doctrine is unique to US employers, and is recognized in 49 of the 50 states with Montana being the lone exception. Under Montana law, after a probationary employment period, employees may only be terminated for “just cause,” such as a failure to satisfactorily perform job duties, disruption of operations or other legitimate business reasons.

2. Avoid Implied Contracts. Even if an employer has an employment at-will policy, it should be particularly cautious and ensure that neither its words nor actions create an implied contract for a specific term.

For example, statements such as, “You’ll always have a job here,” or “We’ll never fire you,” or ambiguous employee handbook language, could result in an implied contract for continued employment. Before taking any action to terminate employment, an employer should assess the employment relationship and evaluate whether there is any reason for the employee to reasonably believe that an implied contract for employment has been created.

3. Know the Exceptions. Employers should be aware even if an employer operates in a state that recognizes employment at-will, there may be exceptions that vary by state. For example, several states recognize a public policy exception to the employment at-will doctrine, meaning that an employee may not be terminated for:

• Refusing to perform an act prohibited by law;
• Reporting a violation of the law;
• Engaging in actions that are in the public interest; or
• Exercising a statutory right.

Further, some states recognize the covenant of good faith and fair dealing as an exception to the employment at-will doctrine and prohibit terminations made in bad faith or with malice.

Additionally, federal, state and local laws prohibit employers from making employment decisions based on an employee’s membership in a protected class, retaliating against an employee for engaging in a legally protected activity or taking action against an employee for engaging in lawful off-duty conduct.

4. Employment At- Will Does Not Apply to Certain Employees. Employers should know that the employment at-will doctrine generally does not apply in unionized workplaces, where just cause for discipline and discharge is typically incorporated into a collective bargaining agreement. Further, employment at-will generally does not apply to public employment, where due process requirements exist. Also, many high-level executives enter into employment contracts providing employment for a specific term and termination only for just cause.

5. Do Not Violate the National Labor Relations Act. In recent years, National Labor Relations Board (NLRB) cases have suggested that an overly broad employment at-will policy may violate the National Labor Relations Act (NLRA) by infringing upon the rights of both union and non-union employees to engage in protected, concerted activity (working collectively to improve working conditions).

However, this past year the NLRB determined that an employment at-will policy was entirely lawful where the policy did not explicitly ban employees from exercising their rights to engage in protected activity under the NLRA. It remains to be seen if this signals a trend.

XpertHR has developed a 50-state Employee Handbooks tool that is authored by attorneys at Littler Mendelson, the largest US law firm exclusively representing management in labor and employment law. This resource features much more not only on the employment at-will doctrine, but also on other key issues affecting the workplace.

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