At-will employment

At-will employment is a doctrine of American law that defines an employment relationship in which either party can break the relationship with no liability, provided there was no express contract for a definite term governing the employment relationship and that the employer does not belong to a collective bargain (i.e., has not recognized a union). Under this legal doctrine:

Several exceptions to the doctrine exist, especially if unlawful discrimination is involved regarding the termination of an employee.

As a means of downsizing, such as closing an unprofitable factory, a company may terminate employees en masse. However, there are legal limitations upon the employer's ability to terminate without reason.^[2]

Origins

The at-will rule has its genesis in a rule in Horace Gray Wood’s 1877 treatise on master-servant relations. Wood cited four U.S. cases as authority for his rule that when a hiring was indefinite, the burden of proof was on the servant to prove that an indefinite employment term was for one year.^[3] In Toussaint v. Blue Cross & Blue Shield of Michigan, the Court noted that "Wood’s rule was quickly cited as authority for another proposition."^[4]

Some courts saw the rule as requiring the employee to prove an express contract for a definite term in order to maintain an action based on termination of the employment.^[5] Thus was born the U.S. at-will employment rule, which allowed discharge for no reason. This rule was adopted by all U.S. states. It was not until 1959 that the first judicial exception to the at-will rule was created.^[6]

Since then, several common law and statutory exceptions to at-will employment have been created. Common-law protects one's job if an employee disobeys an employer on the grounds that the employer ordered him or her to do something illegal or immoral. However, in the majority of cases, the burden of proof remains upon the discharged employee. No U.S. state but Montana has chosen to statutorily modify the employment at-will rule.^[7] In 1987, the Montana legislature passed the Wrongful Discharge from Employment Act (WDEA). The Montana Act is unique in that, although it purports to preserve the at-will concept in employment law, it also expressly enumerates the legal bases for a wrongful discharge action.^[8] Under the WDEA, a discharge is wrongful only if: "it was in retaliation for the employee's refusal to violate public policy or for reporting a violation of public policy; the discharge was not for good cause and the employee had completed the employer's probationary period of employment; or the employer violated the express provisions of its own written personnel policy."^[9]

Public policy exceptions

U.S. states with a public policy exception

Under the public policy exception, an employer may not fire an employee if it would violate the state's public policy or a state or federal statute.

Specific states

As of October 2000,^[10] forty-three U.S. states and the District of Columbia recognize public policy as an exception to the at-will rule.^[11]

The 7 states which do not have the exception are:

• Alabama
• Georgia
• Louisiana
• Maine
• Nebraska
• New York
• Rhode Island
• Florida - with exception^[12]

Implied contract exceptions

U.S. states with an implied-contract exception

Thirty-seven U.S. states (and the District of Columbia) also recognize an implied contract as an exception to at-will employment.^[10] Under the implied contract exception, an employer may not fire an employee "when an implied contract is formed between an employer and employee, even though no express, written instrument regarding the employment relationship exists."^[10] Proving the terms of an implied contract is often difficult, and the burden of proof is on the fired employee. Implied employment contracts are most often found when an employer's personnel policies or handbooks indicate that an employee will not be fired except for good cause or specify a process for firing. If the employer fires the employee in violation of an implied employment contract, the employer may be found liable for breach of contract.

37 US states have an implied-contract exception, thus 13 do not. Those 13 states are:

• Delaware
• Florida
• Georgia
• Indiana
• Louisiana
• Massachusetts
• Missouri
• Montana
• North Carolina
• Pennsylvania
• Rhode Island
• Texas
• Virginia

The implied-contract theory to circumvent at will employment must be treated with caution. In 2006, the Texas Court of Civil Appeals in Matagorda County Hospital District, Petitioner v Christine Burwell, Respondent,^[13] held that a provision in an employee handbook stating that dismissal may be for cause, and requiring employee records to specify the reason for termination, did not modify an employee's at-will employment. The New York Court of Appeals, that state’s highest Court, also rejected the implied-contract theory to circumvent employment at will. In Anthony Lobosco, Appellant v New York Telephone Company/NYNEX, Respondent,^[14] the court restated the prevailing rule that an employee could not maintain an action for wrongful discharge where state law recognized neither the tort of wrongful discharge, nor exceptions for firings that violate public policy, and an employee's explicit employee handbook disclaimer preserved the at-will employment relationship.

Covenant of good faith and fair dealing exceptions (aka. "Implied-in-law" Contracts)

U.S. states with a covenant-of-good-faith-and-fair-dealing exception

Only eleven U.S. states have recognized a breach of an implied covenant of good faith and fair dealing as an exception to at-will employment.^[10][15] These 11 states are:

• Alabama
• Alaska
• Arizona
• California
• Delaware
• Idaho
• Massachusetts
• Montana
• Nevada
• Utah
• Wyoming

This exception for a covenant of good faith and fair dealing represents the most significant departure from the traditional employment-at-will doctrine. Rather than narrowly prohibiting terminations based on public policy or an implied contract, this exception – at its broadest – reads a covenant of good faith and fair dealing into every employment relationship. It has been interpreted, by some courts, to mean either that employer personnel decisions are subject to a “just cause” standard or that terminations made in bad faith or motivated by malice are prohibited.

Statutory exceptions

Although all U.S. states have a number of statutory protections for employees, most wrongful termination suits brought under statutory causes of action use the federal anti-discrimination statutes which prohibit firing or refusing to hire an employee because of race, color, religion, sex, national origin, age, or handicap status. Other reasons an employer may not use to fire an at-will employee are:

• for refusing to commit illegal acts – An employer is not permitted to fire an employee because the employee refuses to commit an act that is illegal.
• family or medical leave – federal law permits most employees to take a leave of absence for specific family or medical problems. An employer is not permitted to fire an employee who takes family or medical leave for a reason outlined in the Family and Medical Leave Act.
• not following own termination procedures – often, the employee handbook or company policy outlines a procedure that must be followed before an employee is terminated. If the employer fires an employee without following this procedure, the employee may have a claim for wrongful termination.

Examples of federal statutes include:

• Equal Pay Act of 1963 (relating to discrimination on the basis of sex in payment of wages);
• Title VII of the Civil Rights Act of 1964 (relating to discrimination on the basis of race, color, religion, sex, or national origin);
• Age Discrimination in Employment Act of 1967 (relating to certain discrimination on the basis of age with respect to persons of at least 40 years of age);
• Rehabilitation Act of 1973 (related to certain discrimination on the basis of handicap status);
• Americans with Disabilities Act of 1990 (relating to certain discrimination on the basis of handicap status).
• The National Labor Relations Act provided protection to members of labor unions, but this portion of the Act has been repealed.^[16]
• In addition to being fired based on status in a protected class (race, gender, etc.), employers are not allowed to retaliate against any protected action. "Protected actions" include suing for wrongful termination, testifying as a witness in a wrongful termination case, or even opposing what they believe (whether they can prove it or not) to be wrongful discrimination.^[17] In the recent federal case of Ross v. Vanguard, Raymond Ross successfully sued his employer for firing him due to his allegations of racial discrimination.^[18]

See also

• Employment Rights Act 1996, for the UK approach to employment protection. See also, Contracts of Employment Act 1963, for the first modern UK law on the requirement to give reasonable notice before any dismissal.
• Creen v Wright (1875-76) LR 1 CPD 591 and Hill v C Parsons & Co [1972] 1 Ch 305
• Employment agency
• European Social Charter
• UK agency worker law
• Worker Adjustment and Retraining Notification Act (WARN Act)

Notes

 This article incorporates public domain material from the United States Government document "The employment-at-will doctrine: three major exceptions" by Charles J. Muhl, U.S. Bureau of Labor Statistics (retrieved on 2009-11-07).

References

• Highstone v. Westin Engineering, Inc., No. 98-1548 (8/9/99) - at-will relationship must be clear to the employees