Posted on / Updated on / in Blog & Employment At Will /

In our last post, we introduced the problems that many organizations have with understanding employment at will.  This post will serve to clarify what exactly employment at will is, and some of the major exceptions to its provisions.  Don’t miss out on this compliance issue!

 

What Exactly Does Employment At Will Mean?

Employment At Will:  Both the employer and the employee are entering the relationship by mutual agreement, but that either can end the relationship at either time without mutual consent.  The employer can terminate the employee at any time for any reason, except an illegal one, or for no reason, without incurring legal liability.  Similarly, an employee can leave a job at any time for any or no reason without adverse legal consequences.

However, like with anything else, there are caveats and exceptions to this rule.

1) The number one exception is contracts.  Union contracts typically come to mind, however, contracts may exist between employers and employees in any environment.

There are also what are considered common law exceptions to at will employment.  They are public policy, implied contract, and implied covenant of good faith.  The interpretation of theset in real life situations will usually fall under the “illegal reasons” why you can’t terminate someone, but often in a shady area of gray.  Also, while it is important to be aware of these exceptions, it is also important to be aware that they are not all recognized in every state. (See chart — http://www.ncsl.org/default.aspx?tabid=13339).  Of course, since so much is left up to interpretation, much depends on how well a good attorney can swing a jury.

Here are the common law exceptions:

2) Public Policy:  This exception assumes that employees should be protected against termination for actions that are in the best interests of the public.  For instance:

a) Refusing to perform an illegal act for the employer.

b) Reporting an illegal act by the employer.

c) Engaging in acts that are in the public interest (such as serving on jury duty or enlisting in the military.)

d) Exercising a statutory right (such as filing for workers’ compensation benefits.)

3)  Implied Contract:  An implied contract of employment is one that is not written and not specific between the employer and the employee.  An example would be a supervisor telling an employee “As long as you keep up the good work, you’ve got a job here for life”, or even an employee handbook that guaranteed progressive discipline in every circumstance.   Even in states where an implied contract is recognized, courts are slow to honor them during termination in absence of an actual written contract.  However, the fact that there is the common understanding that an “implied contract” exception exists should be enough to motivate you to caution your managers to be diligent in what they express to employees.  Likewise, your employee discipline policy should state that progressive discipline is not guaranteed and that, depending on the nature and severity of the incident, discipline may be escalated accordingly.

4) Implied Covenant of Good Faith and Fair Dealing:  There are a few states that recognize an implied covenant of good faith and fair dealing.  An exact definition is difficult as interpretations of bad faith have depended upon judicial interpretations.  Examples of bad faith would include: firing an older employee prior to retirement to avoid paying retirement benefits, firing an employee right after relocating them to a new state, or firing a sales person just before a large commission payment or bonus was to be paid.

5) Finally, let’s remember one of our number one rules for everything when it comes to dealing with employees:  Let’s not do it or say it if we couldn’t defend it.  If  you can’t imagine yourself sitting in front of a jury and sticking with the “at will” defense to see how long it held against accusations of wrongful termination, discrimination, and other crimes against employees, then it’s best to follow Montana’s lead and terminate only for good cause.

Now you know some of the finer points about employment at will, make sure you are up to date on all of your policy and compliance documentation until the next post.  Next week we will bring you the exciting conclusion titled, “So Why Have Employment At Will At All?”  I don’t have to tell you what that’s about.  Don’t miss it!

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about the author: Amy Letke

Amy Newbanks Letke, SPHR, GPHR, is the Founder of Integrity HR, Inc. Amy provides workplace solutions to improve performance, reduce liability and increase profits. She is passionate about helping other entrepreneurs and business owners achieve success.