1.2 At-will employment doctrine

The at-will employment doctrine allows employers and employees to end their relationship at any time, for any reason. This default rule in most states gives employers flexibility but has important exceptions, including anti-discrimination laws and public policy considerations.

While at-will employment offers broad discretion, employers must navigate statutory protections and implied contracts carefully. Best practices include clear communication, consistent policy application, and thorough documentation to minimize legal risks when terminating employees.

At-will employment definition

• At-will employment is a legal doctrine that defines an employment relationship in which either the employer or the employee can terminate the relationship at any time, for any reason, or for no reason at all
• This doctrine is the default rule in most states, meaning that unless there is an explicit agreement to the contrary, employment is presumed to be at-will
• The at-will employment doctrine gives employers broad discretion in managing their workforce, allowing them to make personnel decisions without fear of legal repercussions in most cases

Termination for any reason

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• Under the at-will employment doctrine, an employer can terminate an employee for any reason, including reasons that may seem unfair, arbitrary, or irrational
• This means that an employer can fire an employee for reasons unrelated to job performance, such as personal dislike, personality conflicts, or even no reason at all
• However, there are some important exceptions to this rule, which prohibit termination based on certain protected characteristics or activities (race, gender, age, disability)

Exceptions to at-will doctrine

• Despite the broad discretion afforded by the at-will employment doctrine, there are several important exceptions that limit an employer's ability to terminate employees
• These exceptions are based on statutory protections, public policy considerations, implied contracts, and in some states, a covenant of good faith and fair dealing
• Examples of exceptions include termination based on discrimination, retaliation for engaging in protected activities (filing a workers' compensation claim), or violation of an implied contract of employment

History of at-will employment

• The at-will employment doctrine has its roots in the common law of England, where it was developed in the late 19th century
• The doctrine was based on the idea of freedom of contract, which held that employers and employees should be free to enter into and terminate employment relationships as they saw fit
• In the United States, the at-will employment doctrine was widely adopted in the late 19th and early 20th centuries, as the country underwent rapid industrialization and the employment relationship became more formalized

Common law origins

• The at-will employment doctrine originated in English common law, which is the body of law developed through court decisions rather than statutes
• In the late 19th century, English courts began to recognize the concept of at-will employment, based on the idea that an employment contract could be terminated by either party at any time, absent an express agreement to the contrary
• This doctrine was based on the principle of mutuality of obligation, which held that if an employee was free to quit at any time, the employer should also be free to terminate the relationship at will

Adoption in the US

• The at-will employment doctrine was widely adopted in the United States in the late 19th and early 20th centuries, as the country underwent rapid industrialization
• American courts and legislatures embraced the doctrine as a way to promote economic growth and flexibility in the labor market
• The doctrine was seen as a departure from the more paternalistic employment relationships that had characterized the pre-industrial era, in which employees often had long-term, quasi-familial relationships with their employers
• By the mid-20th century, the at-will employment doctrine had become the default rule in most states, and remains so today

Presumption of at-will status

• In most states, there is a presumption that employment is at-will, meaning that unless there is evidence to the contrary, the employment relationship can be terminated by either party at any time, for any reason or no reason
• This presumption is based on the idea that the employment relationship is a contractual one, and that in the absence of an express agreement to the contrary, the parties are presumed to have intended an at-will arrangement
• The presumption of at-will status places the burden on the employee to prove that the employment relationship was not at-will, either through evidence of an express contract, implied contract, or other exception to the at-will doctrine

Default rule in most states

• The at-will employment doctrine is the default rule in 49 out of 50 states, with Montana being the only exception
• This means that in most states, an employer can terminate an employee at any time, for any reason or no reason, unless there is evidence to the contrary
• The default rule of at-will employment is often codified in state statutes or recognized through case law

Overcoming the presumption

• While the presumption of at-will employment is strong, it can be overcome by evidence that the parties intended a different arrangement
• This evidence can take the form of an express contract, such as a written employment agreement that specifies a term of employment or limits the reasons for termination
• Evidence of an implied contract, such as an employee handbook or oral promises of job security, can also be used to overcome the presumption of at-will status
• In addition, some states recognize exceptions to the at-will doctrine based on public policy considerations or a covenant of good faith and fair dealing

Statutory exceptions

• Despite the broad discretion afforded by the at-will employment doctrine, there are several important statutory exceptions that limit an employer's ability to terminate employees
• These exceptions are based on federal and state laws that prohibit discrimination or retaliation against employees who engage in certain protected activities
• Statutory exceptions to the at-will doctrine are an important source of employee protections and can give rise to wrongful termination claims if violated

Anti-discrimination laws

• Federal and state anti-discrimination laws prohibit employers from terminating employees based on certain protected characteristics, such as race, color, national origin, sex, religion, age, or disability
• Examples of anti-discrimination laws include Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act (ADEA), and the Americans with Disabilities Act (ADA)
• These laws apply to employers with a certain minimum number of employees (15 for Title VII, 20 for the ADEA) and prohibit discrimination in all aspects of employment, including hiring, firing, promotion, and compensation

Whistleblower protections

• Whistleblower protection laws prohibit employers from retaliating against employees who report illegal or unethical conduct in the workplace
• These laws are designed to encourage employees to come forward with information about wrongdoing without fear of losing their jobs or suffering other adverse employment actions
• Examples of whistleblower protection laws include the Sarbanes-Oxley Act, which protects employees who report financial misconduct, and the False Claims Act, which protects employees who report fraud against the government

Other statutory limitations

• There are several other statutory limitations on an employer's ability to terminate employees under the at-will doctrine
• For example, the National Labor Relations Act (NLRA) prohibits employers from terminating employees for engaging in union organizing activities or other protected concerted activities
• The Family and Medical Leave Act (FMLA) prohibits employers from terminating employees for taking leave to care for a serious health condition or to care for a family member with a serious health condition
• The Occupational Safety and Health Act (OSHA) prohibits employers from retaliating against employees who report unsafe working conditions or exercise their rights under the Act

Public policy exceptions

• In addition to statutory exceptions, many states recognize public policy exceptions to the at-will employment doctrine
• These exceptions are based on the idea that there are certain public policies that are so important that they should limit an employer's ability to terminate employees, even in an at-will relationship
• Public policy exceptions are typically recognized by state courts and are based on a state's constitution, statutes, or common law

Refusal to commit illegal acts

• One common public policy exception to the at-will doctrine is the prohibition on terminating employees for refusing to commit illegal acts
• This exception is based on the idea that an employee should not be forced to choose between breaking the law and losing their job
• Examples of illegal acts that an employee might refuse to commit include perjury, price-fixing, or violating environmental regulations

Exercising statutory rights

• Another public policy exception to the at-will doctrine is the prohibition on terminating employees for exercising their statutory rights
• This exception is based on the idea that employees should not be punished for asserting rights that have been granted to them by law
• Examples of statutory rights that an employee might exercise include filing a workers' compensation claim, serving on a jury, or taking leave under the Family and Medical Leave Act (FMLA)

Reporting violations of law

• A third public policy exception to the at-will doctrine is the prohibition on terminating employees for reporting violations of law, also known as "whistleblowing"
• This exception is based on the idea that employees who report illegal or unethical conduct in the workplace should be protected from retaliation
• Examples of violations of law that an employee might report include fraud, safety violations, or discrimination

Implied contract exceptions

• In addition to statutory and public policy exceptions, some states recognize implied contract exceptions to the at-will employment doctrine
• These exceptions are based on the idea that an employer's actions or statements can create an implied contract of employment, even in the absence of an express agreement
• Implied contract exceptions are typically recognized by state courts and are based on the specific facts and circumstances of each case

Oral promises of job security

• One way that an implied contract of employment can be created is through oral promises of job security made by an employer
• For example, if an employer tells an employee that they will have a job "as long as they do a good job," this statement could be interpreted as a promise of continued employment and could create an implied contract
• Oral promises of job security are often difficult to prove, as they may not be documented in writing and may be subject to different interpretations by the parties

Employee handbooks vs disclaimers

• Another way that an implied contract of employment can be created is through statements made in an employee handbook or other written policies
• For example, if an employee handbook contains language suggesting that employees will only be terminated for "just cause," this could create an implied contract of employment
• However, many employers include disclaimers in their employee handbooks stating that the handbook does not create a contract of employment and that employment remains at-will
• The effectiveness of these disclaimers varies by state and depends on factors such as the prominence and clarity of the disclaimer

Course of dealing

• An implied contract of employment can also be created through the course of dealing between an employer and employee over time
• For example, if an employer has a consistent practice of only terminating employees for good cause, this could create an implied contract of employment, even in the absence of an express agreement
• Course of dealing arguments are often based on the length of the employment relationship, the regularity of performance evaluations and raises, and other factors that suggest a mutual understanding of continued employment

Covenant of good faith exception

• In a few states, courts have recognized an implied covenant of good faith and fair dealing in the employment relationship, which can limit an employer's ability to terminate employees under the at-will doctrine
• The covenant of good faith and fair dealing is a legal principle that requires parties to a contract to act in good faith and deal fairly with each other
• In the employment context, this means that an employer cannot terminate an employee for reasons that are arbitrary, capricious, or in bad faith

Implied duty of fair dealing

• The implied covenant of good faith and fair dealing imposes a duty on employers to deal fairly with their employees and to not act in bad faith
• This duty can be breached if an employer terminates an employee for reasons that are unrelated to the employee's job performance or the employer's legitimate business needs
• Examples of bad faith termination might include firing an employee to avoid paying a commission or terminating an employee just before they vest in a pension plan

Limited application in employment

• The implied covenant of good faith and fair dealing has had limited application in the employment context, and is only recognized in a handful of states
• In states that do recognize the covenant, it is often limited to certain types of employment relationships, such as those involving independent contractors or employees who have a long-term, quasi-fiduciary relationship with their employer
• Even in states that recognize the covenant, it is not a guarantee of continued employment and does not require an employer to have good cause for termination

Modification of at-will status

• While the at-will employment doctrine is the default rule in most states, it can be modified by agreement of the parties
• Employers and employees can enter into contracts that alter the at-will nature of the employment relationship and provide for specific terms and conditions of employment
• Modification of at-will status can provide greater job security for employees and greater predictability for employers

Written employment contracts

• One way to modify the at-will status of an employment relationship is through a written employment contract
• An employment contract can specify the length of the employment relationship, the duties and responsibilities of the employee, and the grounds for termination
• Employment contracts can be for a fixed term (1 year) or can be open-ended, with provisions for termination by either party with notice
• Employment contracts can also include provisions for severance pay, non-compete agreements, and other terms and conditions of employment

Collective bargaining agreements

• Another way to modify the at-will status of an employment relationship is through a collective bargaining agreement (CBA)
• A CBA is a contract between an employer and a labor union that represents a group of employees
• CBAs typically include provisions for job security, such as a requirement that employees can only be terminated for "just cause"
• CBAs also often include grievance procedures for employees to challenge disciplinary actions or terminations, and may provide for arbitration of disputes

Wrongful discharge claims

• If an employer terminates an employee in violation of a statutory or public policy exception to the at-will doctrine, or in breach of an implied or express contract, the employee may have a claim for wrongful discharge
• Wrongful discharge claims are tort claims that allow an employee to seek damages for the loss of their job and related harm
• The specific elements of a wrongful discharge claim vary by state, but typically require the employee to prove that the termination violated a clear public policy or contractual obligation

Elements of the claim

• To prevail on a wrongful discharge claim, an employee typically must prove the following elements:
  1. The existence of an employment relationship
  2. A clear public policy or contractual obligation that was violated by the termination
  3. A causal connection between the termination and the violation of public policy or contract
  4. Damages resulting from the termination
• Some states also require the employee to prove that they exhausted internal grievance procedures or administrative remedies before filing a wrongful discharge claim

Burden of proof

• In a wrongful discharge claim, the burden of proof is typically on the employee to prove that the termination was wrongful
• This means that the employee must present evidence sufficient to establish each element of the claim by a preponderance of the evidence (more likely than not)
• If the employee meets this burden, the burden may shift to the employer to prove that the termination was based on a legitimate, non-retaliatory reason

Remedies for wrongful termination

• If an employee prevails on a wrongful discharge claim, they may be entitled to various remedies, depending on the state and the specific circumstances of the case
• Potential remedies for wrongful termination include:
  • Reinstatement to the employee's former position
  • Back pay for lost wages and benefits
  • Front pay for future lost wages and benefits
  • Compensatory damages for emotional distress and other harm
  • Punitive damages to punish the employer for particularly egregious conduct
  • Attorney's fees and costs
• In some cases, an employee may also be entitled to injunctive relief, such as an order requiring the employer to change its policies or practices

Employer best practices

• Given the potential for wrongful discharge claims and other legal risks associated with terminating employees, it is important for employers to adopt best practices for managing the employment relationship
• These best practices can help to minimize the risk of legal claims and create a more positive and productive work environment

Clear communication of policies

• One important best practice for employers is to clearly communicate their policies and expectations to employees
• This can be done through employee handbooks, written policies, and regular training and communication
• Policies should cover topics such as attendance, performance expectations, disciplinary procedures, and grounds for termination
• Policies should be clearly written, consistently applied, and regularly updated to reflect changes in the law or business needs

Consistent application of rules

• Another important best practice for employers is to consistently apply their policies and rules to all employees
• Inconsistent application of policies can lead to claims of discrimination or unfairness, and can undermine employee morale and trust
• Employers should have clear procedures for disciplinary actions and terminations, and should document all such actions to demonstrate consistency and fairness
• Employers should also train managers and supervisors on the consistent application of policies and the importance of documenting performance issues

Documentation of performance issues

• A third important best practice for employers is to document performance issues and other grounds for disciplinary action or termination
• Documentation can include performance evaluations, written warnings, and other records of employee behavior or misconduct
• Documentation can help to demonstrate that a termination was based on legitimate, non-discriminatory reasons, and can provide a defense to wrongful discharge claims
• Documentation should be clear, objective, and factual, and should be maintained in a secure and confidential manner
• Employers should also have a process for employees to respond to disciplinary actions or performance evaluations, and should consider their input in making employment decisions