Putting At-Will Employment at Risk

HR Advisor feature article | July 2008

“At-will” employment refers to a common-law rule that the employment relationship may be terminated by the employer or the employee at any time, for any reason, with or without cause or notice. The intent behind this rule is to allow either the employee or employer to terminate the employment relationship without liability to the other. 

The recent establishment of various federal and state regulations and the application of certain employment laws, however, have created conditions much more in favor of today’s employees.   To minimize the risks of wrongful termination claims, every employer needs to understand at least three big exceptions to the employment at-will concept:

Public Policy:  A wrongful discharge when the reason for employment termination is contrary to an established state public policy. Recognized in a majority of the states, this exception prevents terminations based on reasons which violate a state's public policy.  Examples include termination of an employee for:   

• Taking Family Medical Leave Act (FMLA) time-off due to pregnancy,
• Requesting reasonable accommodations due to a physical disability protected under the American with Disabilities Act (ADA),
• Filing a workman’s compensation claim for a workplace injury or illness, or
• Filing a sexual harassment compliant against a supervisor.

Implied Contract:  A contract between the employer and the employee although no written documentation exists regarding the employment relationship. Such a contract for continued employment may be created due to an employer’s verbal confirmations or expectations referenced in the employee handbook, policies, or other written documentation.  For example,  

• “Probationary Period” language in an employee handbook often implies some form of guaranteed continued employment;
• Statements like “The Company will employ you as long as you meet the minimum job performance standards” create an assumption that the company will only discharge an employee for a performance-related issue; and
• A Progressive Discipline policy would subject an employee’s substandard performance to the conditions of a discipline program, thus negating the ability to terminate under employment at-will.
  

Good Faith Covenant:  The understanding that the employer treats employees honestly and fairly. This covenant of good faith and fair dealing has been interpreted widely (i.e. terminations need to be based on just-cause; terminations cannot be made based on malice; etc.).  This exception has been used primarily when the employer does not have an employee handbook, any written policies, or certain verbal statements in place. 

So, whenever you decide to utilize an employment at-will policy for your company, make sure you manage consistently the hiring practices, training programs, and performance evaluation processes in alignment with the Employee Handbook and relevant policies for all of your employees.

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