There are two types of employment arrangements in the United States: at-will or just cause. The differences between the two types of arrangements refer to the reasons needed to fire an employee. At-will gives an employer the right to terminate employees at any time, while just cause requires that employers have a valid reason for doing so. While businesses can benefit from an at-will arrangement, it’s not as simple and straightforward as it sounds. Show
What is at-will employment?At-will employment is the default employment status in almost all U.S. states and the District of Columbia. Unless your employees have signed an agreement or contract that indicates employment isn’t at-will, they are considered to be at-will employees. At-will employment works both ways though. Just as employers can terminate employment without disclosing the cause or reason for the firing, employees can leave their job without providing a reason and without notifying their employer in advance. They can even leave without saying they’re quitting their job. Key takeaway: At-will employees can be fired without reason or notice; conversely, at-will employees aren’t obligated to give advance notice (or any notice) or reason for leaving a company. Which states have exceptions to at-will employment status?Nearly every U.S. state and the District of Columbia recognize at-will employment. Montana is the exception; there, employers can only terminate an employee without cause during an initial probationary period. However, several states recognize exceptions to at-will employment ‒ situations in which at-will doesn’t apply. Common exceptions to at-will employment are as follows.
There are no exceptions to at-will employment in Alabama, Florida, Georgia, Louisiana, Nebraska, Maine, New York and Rhode Island. Key takeaway: At-will employment is recognized in all but one state, Montana. However, in many states, exceptions apply. What are the pros and cons of hiring at-will employees?It is important to have a clear understanding of the pros and cons that go along with at-will employment – for both business owners and employees. Pros of hiring at-will employees
Cons of hiring at-will employees
Key takeaway: At-will employment makes dismissing employees easier and hastens their departure before they can make trouble, but it can also create difficulties like staffing shortages at inopportune times and difficulty finding talent. Steps employers can take when hiring at-will employeesSince at-will employment is the default option for most employers, there isn’t technically anything special you need to do. However, experts agree there are a number of steps business owners are better off taking. Reference ‘at-will’ status in offer letters and employee handbooks.Offer letters should clearly state that employment at your business is at will, with a short explanation of what that means, said Charles R. Cohen, partner at Cohn Lifland Pearlman Herrmann & Knopf LLP. Joseph Maddaloni, Jr., partner and co-chair of the labor and employment practice Group at Schenck Price Smith & King LLP, said all handbooks and policy manuals should clearly state that employment is at will, that either party is free to terminate the employment relationship for any or no reason, and that there is no guarantee of employment unless express or implied. You should also clarify that the at-will policy can’t be modified or waived, except in a document signed by you or a specific person whom you’ve named to do so. Draw up an agreement.Creating a separate document labeled “At-Will Acknowledgement” or “At-Will Employment Agreement” is a good idea. Otherwise, terminated employees may claim that they couldn’t be fired because there was an implied contract. “Mention that the employment is ‘at-will’ everywhere possible, including the opening sentence,” said Amy McWaters, CEO of The Hamper Emporium. “Elaborate that the nature of the employment remains ‘at-will’ all the time and cannot be altered by new policies or actions of any entity.” Think before you speak.Even if you’ve never terminated an employee – and think it would take a lot for you to do so – don’t say this to interviewees or newly hired at-will workers. “If an employer tells the worker during the job interview that ‘We never fire anyone around here, except for a good reason,’ it may (be construed as) an oral promise that the employee will have job security” and as an implied contract, said Steven Mitchell Sack, of The Law Offices of Steven Mitchell Sack. Also, avoid making verbal statements that imply a full year of employment or more. “If you say things in the interview like, ‘This time next year, you could be managing this project,’ or ‘We give twice-yearly bonuses to top employees,’ it implies that the at-will employee will be around that long,” said Cusick. Key takeaway: Use offer letters, employee handbooks and acknowledgement documents to emphasize that workers’ employment is at-will. Avoid saying anything to interviewees and new hires that implies otherwise. What employers should do when terminating at-will employeesAs long as you are not violating the Civil Rights Act or other laws, there is nothing special that needs to be done. However, there are some best practices that could minimize headaches. Know the law.It’s never proper to terminate an employee for an unlawful reason, according to Cohen. “Because the law isn’t uniform in all states, employers must be aware of the law or engage an attorney before going forward with the termination process,” Cohen said. Document, document, document.Ursula H. Leo, partner and head of the employment and labor law practice at Laddey Clark & Ryan, said employers are best served by clearly explaining to employees their reasons for terminating their employment. “Employers should be able to explain why they’re terminating an at-will employee – poor performance, attitude, etc., so that if an employee makes a claim of discrimination, they can refute it,” Leo said. “Performance issues should always be documented so an employer can go back and reference them if required.” Document all efforts to warn employees about poor performance and related issues – like excessive lateness – and to help them improve. Doing so can reduce the risk of a wrongful termination lawsuit being filed against the company. Share the reason for termination with the employee.Even though the law doesn’t compel it, it is still appropriate to give employees a reason behind why you are ending their employment. “The employee will receive unemployment unless the termination was for cause or some other disqualifying reason,” Maddaloni said. “An employer interested in limiting its exposure to unemployment claims will likely divulge the reason for termination, even with an at-will employee.” Be consistent.Terminated at-will employees may try to retaliate by claiming they’re being treated differently than others who were previously terminated. If you terminate one employee for certain conduct, terminate the next employee who exhibits that same conduct, unless you have a documented reason for the lack of consistency, Leo said. Key takeaway: Familiarize yourself with applicable laws that govern at-will employment. Be candid in your reasons for and consistent when terminating at-will employees. Can an at-will employee sue your business for wrongful termination?Federal and state labor laws protect at-will employees from wrongful termination. While exceptions apply, here are some common situations that could lead to a wrongful termination lawsuit:
Key takeaway: While you have the right to terminate an at-will employee whenever you want, there are circumstances that can result in a wrongful termination claim being filed against your business. This includes breaching good-faith practices, violating public policy, discrimination, retaliation for an employee’s previous actions, fraud, or defamatory acts against the fired employee. |