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At-Will Employment: Employer’s Dream or Toothless Tiger?

The old saying goes that the devil is in the details. When considering the doctrine of at-will employment, it may be more correct to say the answers are in the details. But, that doesn’t mean some of those details aren’t a bit devilish to decipher.

HR professionals often struggle with termination decisions. The decision is easy if an employee does something egregious — stealing, violating a safety rule, harassing coworkers, or committing workplace violence, for example.

It’s not so easy if the employee just isn’t working out. Despite adequate training, the performance isn’t up to par, or maybe the employee isn’t a good fit with the work group. Is it safe to fire under those circumstances? Often, the reasoning goes, “Well, this is an at-will state, so it’s legally safe to terminate.” That’s not the only issue to consider, however.

50 Employment Laws in 50 States, including at-will employment

Definition and exceptions
At-will employment basically means that absent a contract an employer can terminate an employee for good reason, bad reason, or no reason at all so long as it’s not an unlawful reason. Likewise, employees are free to leave an employer without facing legal liability.

A nonexhaustive list of unlawful reasons for terminating employment includes discrimination based on race, national origin or ancestry, religion, sex, age, and disability. Federal, state, and local laws outline those and other “protected classes.”

Even in an at-will setting, employees can’t be fired because of their membership in one of the legally protected classes. Instead, termination has to be for a legitimate nondiscriminatory reason.

All of the exceptions “sort of whittle away at the idea of at-will employment,” says Kimberly A. Klimczuk, a partner in the law office of Skoler, Abbott & Presser, P.C. in Springfield, Massachusetts. “It’s not a good idea to fire for any reason or no reason.”

When an employee feels he’s been treated unfairly, he may try to exact revenge against the employer. “That puts the employer in a position to defend itself,” Klimczuk says. And since anyone can fit into some type of protected class, an employee can claim the employment action was taken because of unlawful discrimination.

If an employer has fired for no reason, or for what a jury would see as a bad reason, at-will employment isn’t likely to be enough to overcome a discrimination complaint. “That’s where at-will loses a lot of its teeth,” Klimczuk says.

An employee making a claim of discrimination has to make out a prima facie case, Klimczuk says, meaning he has to show he’s a member of a protected class, there was adverse employment action, and it could be discrimination. For example, an employee can claim she’s qualified for the job and doing it well but was fired because of a disability. The employer needs to show a legitimate, nondiscriminatory reason for the adverse employment action. Otherwise, the employee can prevail.

The at-will definition applies to more than just terminating employees. “At-will also means that an employer can change the terms of the employment relationship with no notice and no consequences,” according to information from the National Conference of State Legislatures (NCSL). “For example, an employer can alter wages, terminate benefits, or reduce paid time off.”

Adherence to the at-will employment doctrine sets the United States apart from most other countries, which require employers to terminate employees for cause. “Some reasons given for our retention of the at-will presumption include respect for freedom of contract, employer deference, and the belief that both employers and employees favor an at-will employment relationship over job security,” according to the NCSL.

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Handbook cautions
Sometimes employee handbooks can negate at-will employment. Appropriate disclaimers, though, can solve that problem. A disclaimer should include an explanation that the handbook can be changed at any time, Klimczuk says.

Often a handbook will outline a progressive discipline policy outlining steps that are to be taken before termination. The handbook also should explain that the employer reserves the right to skip any steps.

Employers must take care to follow their handbook policies consistently or they can negate at-will employment. For example, if an employer has a policy that unused vacation time is to be paid out upon termination, the employer needs to follow that policy and not refuse to pay because someone is fired or else it will look like unlawful discrimination. “Juries expect employers to follow their own policies,” Klimczuk says.

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At-will states
Despite the simple-sounding definition of at-will employment, the situation is different across the country because of the variety of exceptions outlined in state and local laws. Despite the differences among the states, there’s only one state in the country that doesn’t claim some form of at-will employment.

Montana is the only non-at-will state. The Montana Wrongful Discharge from Employment Act of 1987, “prohibits discharge for other than good cause after a designated probationary period and gives the employee the right to challenge a termination in court or before an arbitrator,” according to the NCSL.