Published April 2002

Take steps to protect ‘employment at-will’

“Employment at-will” is the doctrine that employment can be terminated at the will of the employer or the employee. The philosophy of at-will employment is appealing; it allows employers to discharge employees without having to demonstrate to the employee or to a reviewing body (e.g. judge or jury) that they had “cause” to end the employment relationship.

While employment at-will is still the general rule in most states, in reality, an employer’s ability to discharge an employee for any reason has been limited.

Various state, federal and municipal laws make it unlawful to terminate an employee based on sex, race, age, religion, national origin, disability, marital status, political ideology, sexual orientation and family status.

In addition, almost every state recognizes other exceptions to at-will employment. Generally, those exceptions fall into three categories: an express or implied contract prohibiting the discharge, a public policy prohibiting discharge and an implied covenant of good faith and fair dealing.

Contracts
Obviously, an employer’s ability to terminate an employee can be limited by agreement between the employer and the employee.

Express, negotiated employment contracts are not uncommon, especially for high-level positions. Contractual obligations also may be based on employer policies, handbooks or other documents.

For example, employers who specify the compensation to be paid to a prospective employee in terms that reflect an intent to keep him or her employed for at least a year may find themselves stuck with a poor performer for at least 12 months.

Employers also may promise specific treatment in specific circumstances.

For example, an employer may state that employee discipline will always be progressive. If the employer discharges an employee without following each step in the process, it may be forced to reinstate the employee.

Contracts also may be implied through an “understanding” that employment would be long term or that just cause would be required before an employer could fire an employee.

Discharge against public policy
States also recognize a public policy exception to the employment at-will doctrine. This means, in essence, that employers are not allowed to discharge an employee for a reason that society should not allow.

A discharge violates public policy if an employee’s protected activity was a substantial factor in the decision to terminate.

For example, a court may find a discharge in violation of public policy if an employee is terminated because he or she filed a workers’ compensation claim, refused to violate the law, reported a violation of the law (whistle-blowing) or filed a complaint against the employer.

Implied covenant of good faith, fair dealing
Although less common, some courts recognize an implied covenant of good faith and fair dealing in the employment relationship. This requires parties to a contract to be fair to one another and not to act in bad faith.

Where recognized, the covenant is implied into employment agreements, not because of any conduct engaged in by the employer, but because courts believe employers should conduct themselves fairly and in good faith when dealing with employees.

Protecting at-will status
While the scope of exceptions may have employers questioning if the concept of at-will employment still exists, employers can still take steps to protect what remains of the doctrine. In particular, employers can ensure they do not inadvertently create a contract when such a contract is not desired.

Here are a few protections employers can put in place:

• Use express disclaimers of contractual intent in handbooks, written policies and other documents. State that employment is at-will and that the employee or employer may terminate the relationship at any time without notice or cause. The disclaimer can also state that the document is not a contract and should not be relied on as one.
• Reinforce the at-will nature of employment in handbooks and on other written policies and application forms.
• Use a separate acknowledgment page where employees acknowledge in writing their understanding that the handbook/policy is not intended to establish a contract and that their employment is at-will.
• Retain sole discretion to interpret and apply employer policies and to modify them without notice. Use words such as “may” and “should” rather than “will” or “shall.” These discretionary terms make it clear that the employer is not obligated to follow the policy in all cases.
• Train managers and supervisors on the concept of at-will employment so they do not make written or verbal promises that undermine an employer’s ability to be flexible.

While employment at-will is still a recognized doctrine in most states, various laws and judicial interpretations limit employers’ ability to discharge. Employers need to understand the statutes that apply to them, stay current on judicial interpretations in their state and ensure that employment contracts are formed only when desired.

Jack Goldberg is President of Personnel Management Systems Inc., with offices in Everett, Kirkland and Tacoma. The PMSI Web site is www.hrpmsi.com.

Back to the top/April 2002 Main Menu