Project 3: Leading Ethically and Legally at Home and Abroad

Employment at Will

Transcript

Employment at will is a doctrine of common law that allows either the employee or the

employer to terminate an employment relationship at any time, for any reason, with or

without notice, and even for a morally reprehensible reason, so long as the ending of the

relationship does not fall into an exception to the employment-at-will doctrine.

Employment at will is the prevailing legal doctrine concerning employment relationship

termination in 49 US states (not Montana). In the overwhelming majority of the United

States, employment at will and its exceptions govern the rules by which one may legally

terminate an employee.

The generally accepted exceptions to employment at will include

express contract,

implied contract,

promissory estoppel,

public policy violations, and

good faith and fair dealing.

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We discuss these five exceptions below.

Express Contract Exception

If an employer terminates an employee in violation of the terms of an express contract

between the employer and employee, then the employee can sue the employer for breach

of contract (and, in some states, wrongful termination).

For example, an employment contract guarantees that the employee will be employed by

the employer for a definite duration of time, with cognizable boundaries, such as a "one-

year period" or "for six months." The employer terminates the employee before the stated

period has expired, and that termination is not otherwise permitted by the contract.

Likewise, consider a case where an employment contract states that an employee can be

terminated only "for cause" or "for just cause," and the employee is terminated without

cause.

Implied Contract Exception

Implied contracts are contracts created by the conduct of the parties, which include any

representations or assurances made by the employer prior to or during the term of

employment. In some states, an implied contract is an exception to the employment-at-

will doctrine.

For example, if an employer provides an employee handbook to a new employee, the

provisions in the handbook may be considered part of the contractual relationship. Often,

such handbooks outline a procedure for performance review, discipline, and discharge of

the employee. An employer who fails to live up to procedural obligations prior to

discharging an employee could be liable.

Promissory Estoppel Exception

In many states, promissory estoppel acts as an exception to the employment-at-will

doctrine. That is, when an employer makes a promise to an employee of employment or a

period of employment, and the employee relies on that promise to his detriment, and it

leads to injustice, then an employee may be able to have that promise enforced regardless

of employment at will.

For example, John is offered a job with Widget Co. He discusses with Widget's manager

that, to take the job, he needs to move from California to New Jersey and give up an

already lucrative position with benefits. The manager assures John that he will have

gainful employment and a substantially larger income with Widget Co. for at least a year if

he makes the move. In reliance on this promise, John quits his job and moves to New

Jersey to begin work at Widget Co. After one week, John is laid off. Despite being an

employee at will, John may be able to recover under the theory of promissory estoppel.

Public Policy Violations Exception

Most states in the United States prohibit an employer from firing an employee if the

reason for the action violates some readily accepted public policy. This prohibition

prevents an employer from terminating an employee for exercising a legal right, including

a right contained in state and federal laws; or for failing to perform an illegal act for the

employer.

Firing an employee for performing some public duty (showing up to jury duty), for

exposing illegal conduct (such as reporting violation of some law to the employer or a

government agency), or for exercising her rights as a US or state citizen (such as voting)

are all against public policy.

This exception to employment at will encompasses the inability to terminate an employee

if doing so would violate her state or federal statutory rights. If an employee is terminated

because of her race, this may be a violation of Title VII of the Civil Rights Act of 1964, and

so an otherwise at-will employee would have a claim against the employer for violating a

federal statute.

Moreover, it is against public policy to terminate an employee for refusing to commit an

illegal act, such as a crime.

Good Faith and Fair Dealing Exception

A minority of states impose upon the employer a duty to exercise good faith and fair

dealing in regard to all employees. This doctrine, to varying degrees, means that an

employer must treat an employee fairly in the decision to fire her. This generally means

that an employer would violate these duties in firing an employee without due cause or

justification.

The preceding five generally accepted exceptions to employment at will allow injured

parties to seek recovery even in the face of the employment-at-will doctrine. As such,

they limit the circumstances by which an employer can terminate an employee.

Licenses and Attributions

Business Law: An Introduction (https://thebusinessprofessor.com/business-law-an-

introduction/) , by TheBusinessProfessor.com, Jason M. Gordon & Colleagues has been

adapted with permission from Jason M. Gordon. © Business Professor, LLC.

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