At-will Employment

“At-will” means that employees are generally considered at will unless they have an employment contract or statutory right that provides otherwise. Specifically, at-will means that an employer may terminate an employee without notice and it does not need to be for cause. However, an employer cannot terminate an employee for a reason that violates the law or is discriminatory. Of note, employees can also quit without notice and for no reason.

All states (except Montana) and Washington DC are at-will employment states, but a majority of states have exceptions that tempers the nature of at-will status. For instance, one limitation is the public policy exception – an employer cannot terminate an employee in violation of the state’s public policy doctrine or a statute (federal or state). Texas, however, does not have a public policy exception and an employee can be fired for any reason or no reason at all. See below for some examples of public policy exceptions. Forty-two of fifty states have a public policy exception. Pennsylvania is one of the 42. The states that do not have such an exception are Alabama, Florida, Georgia, Louisiana, Maine, Nebraska, New York, and Rhode Island.

 

The Restatement (Third) of Employment Law provides four categories within the public policy exception:

A table that shows the four categories of the restatement (third) of employment laws, and examples for those categories.
Category Example(s)
1) Refusing to perform an act that state law prohibits. Refusing an employer’s request to commit perjury at a trial.
2) Reporting a violation of the law. Reporting an employer’s fraudulent accounting practices or use of child labor.
3) Engaging in acts that are in the public interest. Joining the National Guard or performing jury duty.
4) Exercising a statutory right. Filing a claim under the state workers’ compensation law.

Another exception is the “implied contract” exception. In 36 states, an employee cannot be terminated when an implied contract is formed between the employer and employee. (States that do not are Arizona, Delaware, Florida, Georgia, Indiana, Louisiana, Massachusetts, Missouri, Montana, North Carolina, Pennsylvania, Rhode Island, Texas, and Virginia.) Contracts can be implied via verbal or written means. For example, if an agent of the employer states that “they don’t fire employees without giving them a chance to correct their behavior,” that can be construed as an implied contract and therefore does away with at-will employment. Likewise, if a timeline is expressed, that could indicate an implied contract for continuing employment for a certain duration. See Unit 17 for ways to ensure that a company’s handbook does not serve as an implied contract. Courts are reluctant to consider language that promises a life-time or very long term employment as binding.

Eleven states allow for exceptions that are “implied-in-law” or recognize an implied covenant of good faith and fair dealing. Terminating someone out of malice falls within this exception. Often this exception comes up to prevent an employer from firing a tenured employee to avoid paying something like retirement benefits. These states are Alabama, Alaska, Arizona, California, Delaware, Idaho, Massachusetts, Montana, Nevada, Utah, Wyoming.

Estoppel can come into play with employment relationships as well. What if a person gets a job offer and moves only to be terminated before they start? It is likely that the person would have a promissory estoppel claim. Employers can be estopped from terminating an employee (or required to pay damages) if the employee can show:

  • The employer made a clear and unambiguous promise of employment;
  • The employee relied on this promise:
  • The employee’s reliance was reasonable and foreseeable; and
  • The employee was injured as a result.

💡 Consider this: Do you think it is easy or difficult to establish promissory estoppel given the presumptive at-will nature of employment?

There are other state-specific statutory exceptions as well, so it is important to check your jurisdiction for the laws that apply with regard to at-will employment and the exceptions thereto. Statutory exceptions include illegal discrimination, and retaliation/whistleblowing. These can overlap with some of the common law exceptions but be aware that you can bring a claim both under the common law and the statute.

A note on Montana: Mont. Code Ann. §§ 39-2-901 through 39-2-915, The Montana Wrongful Discharge from Employment Act of 1987, prohibits termination (discharge) for other than good cause after a designated probationary period and provides a cause of action for employees who were terminated without good cause. Damages are limited to up to four years of lost wages, including the fair market value of any fringe benefits, including interest.

💡 In which way does this law help employers?

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To the extent possible under law, Samantha Prince has waived all copyright and related or neighboring rights to Entrepreneurship Law: Company Creation, except where otherwise noted.