At-Will Employment: Not All It’s Cracked Up to be for Employers

All too often, small business managers think, “my business is in an at-will state, which means we can terminate someone’s employment for any reason or for no reason at all, right?”

Wrong.

There are a number of exceptions to the employment-at-will doctrine, including the following:

Express employment contracts

If one exists, it may prohibit termination in the absence of certain reasons (e.g., good cause).

Implied employment contract

An employment contract prohibiting termination in the absence of certain reasons may be implied as the result of statements, promises, conduct and the like.

Unionized employees

Unionized employees are governed by the terms and conditions of collective bargaining agreements and are not considered at-will employees.

Anti-discrimination laws

Dismissals are illegal if based on age, sex, national origin, religion, race, color, disability, union membership or any other characteristic protected by federal, state or local law. Some state laws also address discharges based on factors such as marital status, sexual orientation, tobacco use or appearance.

Public policy exceptions

In most states, you can’t terminate employees for such activities as filing workers’ compensation claims, whistle-blowing, protesting unsafe working conditions or refusing to commit unlawful acts.

Retaliation

Employees are protected from discharge based on retaliation for reporting or otherwise opposing unlawful employer practices.

Exercising rights

You can’t discharge employees solely for exercising federal or state- mandated benefits, such as taking leave to care for ill family members under the Family and Medical Leave Act or organizing unions under the National Labor Relations Act.

Vested benefits

You’re prohibited from terminating employees solely because they’re about to qualify for financial benefits under pension, welfare, deferred compensation or other similar plans.

As an employer, you’ll want to consider all such issues before moving forward with the termination of an employee, even in a state that presumes employment to be on an at-will basis.  Discrimination, public policy, retaliation and rights issues generally pose the most frequent challenges.

A key question for any manager who is contemplating terminating an employee for a performance issue is, “do you have any documentation of this performance issue, such as counseling forms or performance improvement plans, showing that you made the employee aware of the performance issue at hand and then gave the employee the tools, resources and time to improve?”

Another key question is, “would termination of this employee be consistent with the company’s handling of similar situations in the past?”

If the answer to either of those questions is “no,” then termination of the employee would be tantamount to inviting discrimination, public policy, retaliation, rights and other claims. Why? Because the employee would be able to argue that the employer’s official reason for the termination is not supported by documentation and/or not consistent with the way in which similar situations have been handled in the past. This, the employee could argue, means that the employer’s official reason must be a pretext—and that the “real” reason must be discriminatory, for example.

Even in at-will states, terminations are never just cut and dried. For more guidance, contact TriNet for help.

This communication is for informational purposes only; it is not legal, tax or accounting advice; and is not an offer to sell, buy or procure insurance.