At-will employment or just cause employment are the two categories of work agreements in the US. Regarding the grounds required to terminate an employee, there are distinctions between the two kinds of arrangements. In contrast to just cause, which needs a legitimate reason, at-will employees allows for the termination of workers at any time. A contract that is at-will might be advantageous for companies, but it is not always as easy and uncomplicated as it would seem.
What is at-will employment?
The District of Columbia and practically all states in the United States have at-will employment as the standard work status. Your employees are assumed to be at-will workers until they have acknowledged otherwise in a written agreement or contract.
However, at-will employment works both ways. Employees may quit their jobs without giving a reason and without informing their employer in advance, just as employers may terminate employment without providing a cause or explanation for the termination. They may even depart without announcing their intention to resign.
Which states have exceptions to at-will employment status?
The District of Columbia and almost all states in the United States accept at-will employment. Montana is an anomaly; there, an employee may only be fired without justification while on first probation.
However, there are several instances in which at-will employment is not applicable, as recognized by various jurisdictions. The following list includes typical at-will employment exclusions.
Unionized employees may be excluded from at-will employment under collective bargaining agreements.
Employer retaliation against union members.
If a company fires workers because they took a union activity, like going on strike, at-will employment doesn’t apply
Contract employees may be excused from at-will employment via a legal agreement they have in place with their employer.
Employee action protected by public policy.
Most jurisdictions prohibit firing at-will workers for engaging in conduct that is protected by public policy, such as making a whistleblower complaint or exposing dangerous or unlawful behaviour. Alabama, Florida, Georgia, Louisiana, Maine, Nebraska, New York, Rhode Island, and Florida are exempt from this provision.
Employer implication that an employee has a contract.
If there is a suggestion that a contract exists, it is conceivable that an employee won’t have at-will status depending on a number of variables. This may be the case, for instance, if an employee handbook provision states that terminations must be justified. Another example is if the organization tells prospective personnel directly that it never fires employees. With the exception of Arizona, Delaware, Florida, Georgia, Indiana, Louisiana, Massachusetts, Missouri, Montana, North Carolina, Pennsylvania, Rhode Island, and Virginia, all states accept this as true. According to Tamika Hardy, a lawyer in Rivkin Radler LLP’s employment and labour practise division, only New York (unilaterally) accepts the implicit contract of employment exemption to at-will employment.
Employer breach of good faith.
In accordance with the “implied covenant of good faith,” employers have specific duties toward workers (such as paying earned commissions and incentives). At-will employment is not applicable in Alabama, Alaska, Arizona, California, Delaware, Idaho, Massachusetts, Montana, Nevada, Utah, and Wyoming if the employer discharged the worker in bad faith or in order to avoid fulfilling their duties.
Nowhere in the United States does at-will employment apply if a person is dismissed as a result of discrimination based on their race, gender, religion, or sexual orientation.
Employee refusal to commit an illegal act.
Every state in the US is subject to this exemption.
There are no exceptions to at-will employment in Alabama, Florida, Georgia, Louisiana, Nebraska, Maine, New York and Rhode Island.
What are the pros and cons of hiring at-will employees?
For both company owners and workers, it’s crucial to have a clear grasp of the benefits and drawbacks of at-will employment.
Pros of hiring at-will employees
Faster, easier termination process.
Employees who are employed by your company on contract are often subject to lengthy talks, difficult negotiations, and delays. However, because at-will employees are dismissed without cause (though you may choose to), it is simpler to get rid of underachievers (and other problematic employees) without facing criticism about your decision or having to worry about contract violations. In particular, hiring at-will makes it easier to rapidly fire workers who are generating major problems. For instance, Hardy cited a client who had a complaint from a worker alleging that a coworker had harassed her because of her colour. “The employer was allowed to undertake a fast inquiry and fire (that) individual without responsibility because the accused harasser was an at-will employee, even if the claimed harasser’s behaviour didn’t get to the level of an actionable harassment claim,” said Hardy. Additionally, an employer is not required to notify at-will workers in advance of their termination, thus they are free to leave on the day they are fired.
More nimble operations and a better bottom line.
The hassle of negotiating and renegotiating contracts at contract renewal time is removed with at-will employment. This enables organizations to allocate more resources to ongoing activities that boost sales. Additionally, the absence of contractual responsibilities enables organizations to respond or adapt swiftly to change. According to Kevin Lee, CEO of JourneyPure, “For instance, if you sign a two-year employment contract with someone and the company experiences a crisis or outside forces (like the COVID-19 pandemic) necessitate layoffs before that time, you don’t have to pay off the remaining balance of the contract.”
Increased focus on employee merit, rather than seniority.
According to Matt Bertram, CEO of EWR Digital, “this enables businesses to promote employees who are productive and demonstrate leadership potential, even if they haven’t been with the company for very long.”
Cons of hiring at-will employees
Employees who suddenly quit.
Without warning, at-will workers may leave, leaving you rushing to locate a successor.
Difficulty attracting top talent.
According to David Cusick, chief strategy officer of House Method, this may make it challenging for businesses to find top employees. When applicants are looking for permanent work, neither the phrase “I can fire you anytime I want” nor “You can quit whenever you want” is seen as a benefit, according to Cusick.
Employee reluctance to “tell all.”
At-will workers could be reluctant to speak out or bargain for perks out of concern that they’ll be fired without notice. This might affect a company’s “productivity and [its] capacity to make effective business choices,” according to Edgar Arroyo, owner of SJD Taxi.
Steps employers can take when hiring at-will employees
There isn’t really anything specific that has to be done since at-will employment is often the default choice for businesses. But experts agree that there are several actions company owners would be better off doing.
Reference ‘at-will’ status in offer letters and employee handbooks.
Charles R. Cohen, a partner at Cohn Lifland Pearlman Herrmann & Knopf LLP, said that offer letters should explicitly say that employment at your company is at will and include a brief explanation of what this implies.
All handbooks and policy manuals should explicitly state that employment is at will, that either party is free to terminate the employment relationship for any or no reason, and that there is no guarantee of employment unless expressly or implicitly stated, according to Joseph Maddaloni, Jr., partner and co-chair of the labour and employment practice Group at Schenck Price Smith & King LLP.
Additionally, you should make it clear that the at-will policy cannot be changed or waived unless via a written agreement signed by you or a designated representative.
Draw up an agreement.
It’s a good idea to draught an independent contract titled “At-Will Acknowledgement” or “At-Will Employment Agreement.” Otherwise, sacked workers may claim that there existed an implicit contract and that prevented their dismissal.
According to Amy McWaters, CEO of The Hamper Emporium, “include that the employment is ‘at-will’ whenever feasible, including the introductory phrase.” Explain that new rules or actions taken by anybody cannot change the “at-will” character of employment at any moment.
Think before you speak.
Don’t tell this to candidates for interviews or recently recruited at-will employees even if you have never fired an employee and believe it would be difficult for you to do so.
According to Steven Mitchell Sack of The Law Offices of Steven Mitchell Sack, “If an employer tells the worker during the job interview that ‘We never fire anyone around here, except for a good reason,’ it may (be construed as) an oral promise that the employee will have job security” and as an implied contract.
Additionally, refrain from saying anything that suggests a year’s worth of work or more. The at-will employee will be around for that long if statements like “This time next year, you may be managing this project” or “We pay top staff twice-yearly incentives,” according to Cusick, are made during the interview.
What employers should do when terminating at-will employees?
Nothing specific has to be done as long as you are not breaking the Civil Rights Act or other laws. There are, nevertheless, a few suggested practises that could reduce headaches.
Know the law.
According to Cohen, it is never appropriate to fire an employee for a criminal offence.
“Employers must be informed of the law or contact a counsel before moving through with the termination process,” Cohen said. “The law isn’t consistent in all jurisdictions.
Document, document, document.
According to Ursula H. Leo, partner and head of the employment and labour law practise at Laddey Clark & Ryan, companies are best served by being upfront with workers about why they are being let go of their jobs.
Leo said that employers “should be able to justify why they’re firing an at-will employee – bad performance, attitude, etc., so that they can defend it if an employee brings a claim of discrimination.” Performance problems should always be recorded so that an employer may review them later if necessary.
Keep track of any actions taken to inform staff about their bad work and any associated problems, such as frequent tardiness, and to assist them in improving. By doing this, the likelihood that the business may face a wrongful termination case is decreased.
Share the reason for termination with the employee.
Although it is not required by law, it is nonetheless fair to explain to workers why their job is ending.
According to Maddaloni, “The employee will get unemployment benefits unless the termination was for cause or for some other ineligible reason.” Even with an at-will employee, “an business concerned in reducing its exposure to jobless claims would certainly reveal the cause for termination.”
At-will workers who have been fired may attempt to retaliate by complaining that other fired workers aren’t treating them fairly. If you fire one employee for a certain behaviour, you should also fire the subsequent employee who displays the same behaviour, Leo said, unless there is a valid justification for the inconsistency.
Can an at-will employee sue your business for wrongful termination?
Employees employed at will are shielded against unjust termination by federal and state labour regulations. While there are always exceptions, the following frequent circumstances might result in a wrongful termination lawsuit:
Contract or agreement replaces at-will employment.
The agreement may be in writing or inferred.
Breach of good faith and fair-dealing practices.
If you fired an at-will employee in order to evade responsibilities like providing retirement or health benefits or paying a legitimately earned sales commission, the person has the right to take your business to court.
Violation of public policy.
An at-will worker who requests time off to vote may sue your employer if you fire them for doing so.
Employee claims discrimination.
If a company has violated civil rights and anti-discrimination legislation, or if there is suspected discrimination based on race, religion, gender, marital status, sexual orientation, and the like, an at-will employee may sue the company for illegal termination.
Employee was terminated in retaliation for another occurrence.
If, for instance, an at-will employee was fired after reporting a coworker for sexual harassment, your company may be subject to legal action.
It is fraud to assert that the termination of an at-will employee was due to fair cause, such as poor job performance, when the person’s file shows that their performance was consistently great.
Employer commits defamatory act in connection with termination.
Giving phoney and/or malicious references that make it difficult for a fired at-will employee to get a new employment is one illustration of this.