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At-Will Employment - State Employment Laws

Video Transcript

What legal obligations exist between an employer and an employee and particularly with regard to continued employment or continued benefits as initially described in the employer/employee relationship? Well to start with if there is any form of agreement or contract between the employer and the employee it controls those are the terms of the employer/employee relationship. In the absence of specific contractual terms between the employer/employee, state law with regard to employment practices controls.

Now many of us have heard the concept of an at will employment state. Well, what that means is that an employee is free to leave an employer at any time and the employer is free to discharge or fire an employee at any time without cause or without reason. So the term at will employment the way it's used is often times misused or misunderstood because in many ways most states are at will employment states, that is it doesn't put extensive limits on the ability of the employee to leave or the employer to fire the employee but the degree to which a state limits that ability varies the nature or the extent of their at-will status.

So there are three primary factors that determine what protections a state provides to employees of an employer and which of these exceptions the state recognizes will vary the extent to which a state is at will versus less at will or not at will employment. So to start with there's a public policy reason for promoting healthy employer/employee relationships. So what this means is that the employer cannot knowingly fire or discharge an employee for reason that runs afoul of or against public policy.

For example if an employee were required to testify or provide evidence or served as a witness or something like that for an investigation and the employer didn't like it and discharged or fired the employee, well public policy dictates that we should pursue the administration of justice. So this could be a violation of public policy for the employer to exercise this level of bad faith or their intent as violating public policy in firing the employee. So in this way it could run afoul of employment laws in a given state. It depends on the extent to which a state recognizes the public policy doctrine.

So that's one level and one exception to the general principle that an employer and employee can leave or fire the other at will. The second exception would be the implied contract theory. Now the implied contract theory is that any employer/employee relationship is part of a contractual agreement and absent some cause or reason to rupture that agreement then discharging an employee for example without reason or cause to do so would violate that implied contract. Now the terms of the contract would be whatever communications or information or material or understanding exists between the parties.

So an employee comes in, the employer hands the employee and employee handbook that has certain procedural rights as far as if the employee is written up for any reason or reprimanded or anything like that or provides the employee assurance that if the employment relationship ends that there's always a 30-day notice or two week severance or whatever, any of these things, then these could become part of the contractual relationship or agreement between the parties, part of an implied contract. So again this level of implied contract theory would severely limit the extent to which a state is recognized as at will. And then lastly there is a good faith doctrine or theory and that theory implies that the employer/employee relationship is somewhat fiduciary in nature or it's a trust-based relationship. So in that way the employer and the employee in dealing with each other owe each other a duty of good faith, particularly the employer should not exercise bad faith or any level of deceit for example in hiring and then firing the employee.

So for example if an employer were to simply hire an employee temporarily, to keep that employee from going to a competitor and once the competitor's position is filled with someone else and the employer feels confident that the employee that they just hired will not run to the competition, they fire the employee. So the entire time there was no good faith in negotiating the employer/employee relationship. It was all a product of deceit.

So that would be an example of acting in bad faith and bad faith could take on any number of situations or examples but again the state's recognition that these duties of good faith exist between the employer and employee again would limit the at will doctrine. So these are just some simple basic examples to limit the concept of an employee can leave at any time they want to and in employer can fire an employee any time you want to so you've got an express contract between them, the parties that controls, otherwise a public policy exception may apply, otherwise in implied contract theory may apply and lastly a good faith theory may apply to the employer/employee relationship.

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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.

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 employee would violate these duties in firing an employer 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.

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