A Beginner's Guide to At-Will Employment

Your people are your most important asset, and you need to find ways of attracting and retaining the best talent if you want to run a successful business. This is a key aspect of strategic human resource management and workforce planning.

If you take the archaic view that your employees should consider themselves extremely lucky to work for you, and you don’t need to worry about their happiness, then you will never be able to assemble the best workforce.

The terms of employment, such as what kind of contract they have, and how secure their job is, is one aspect that workers consider when accepting a job, so it’s something you need to put thought into when hiring a new employee.

At-will employment is currently the default employment option for companies in the US.

It can also be a legal minefield for an employer, as being an at-will employer brings a number of legal risks that vary on a state-by-state basis.

Overview: What does at-will employment mean?

At-will employment means that you can fire an employee at any time without any notice period or any warning and you won’t face any legal consequences, although there are exceptions, as we’ll discuss later.

An at-will employment agreement also means that a company can change the terms of the employment relationship at any time without giving notice.

In practice, an employer can alter working hours, time off, wages, responsibilities, and benefits as often as they like with no notice and not face legal action.

On the flip side, this also means that an employee can quit without giving you any notice or reason and start working for another company the very next day, again with no legal consequences.

This isn’t necessarily the same as being a contract employee, as these types of employees often have their own contracts and set of conditions and are governed by different laws.

How does at-will employment impact businesses?

In practice, at-will employment means you could fire someone because you don’t support the same football team, or you don’t like the color of their suits. In theory, this type of employment means you don’t have to even tell them the reason you fired them.

However, in practice that’s not exactly the case.

Firstly, there are legal exceptions at both a state and federal level to at-will employment, which could lead to you being sued by an employee for wrongful termination.

Technically all 50 states are fire at-will states but Montana, for example, does not adhere to the full employment at-will doctrine. This state only allows you to fire a worker without cause during their initial probationary period.

If you want to be certain you won’t face any legal ramifications, then you can consult a lawyer or your HR software provider. BambooHR, for example, provides tips on employment contracts in its glossary.

BambooHR offers advice on at-will employment. Image source: Author

Firing someone at the drop of a hat without just cause can also affect your company’s brand. If you get a reputation -- and word spreads throughout your industry -- for being a bad company to work for, then you’ll have trouble attracting new workers, especially the top talent in your field. They won’t want to risk committing to a company and potentially leaving another high-profile job, to work for someone who might fire them tomorrow.

What rights does an at-will employee have?

Employment at-will is only common in the US and a handful of other countries. Most other places in the world only allow you to fire someone with cause, so be careful if you are hiring employees outside the US, as they will have more rights.

Labor laws also vary widely, so it’s important that both employers and employees are fully aware of all the exceptions and clauses when signing a contract.

An employee will normally be asked to sign a contract that specifies that they are an at-will employee and agree to all the conditions of this agreement. Some employers include policies in their employee handbooks explaining that their workers are at-will. This can help prevent any dispute later down the line.

However, if an employee handbook says that workers can only be fired according to certain conditions then this conflicts with any other at-will agreement that the employee has signed and can lead to legal action if an employer dismisses them for no reason.

If, as an employee, you have been asked to sign an at-will contract without having previously discussed this with your employer, and this conflicts with previous discussions, then you should consult a lawyer before signing the document. And, if you have signed an agreement, then even if you are meeting all of your performance metrics and doing a great job at the company, you can still be fired without any reason.

What are some exceptions to at-will employment?

There are exceptions to at-will employment, and these vary by state, so it’s important to always get legal advice before you create a contract.

Public policy

Some of the most widely recognized exceptions to at-will employment at a state level with only a few exceptions include Delaware, Florida, and Georgia, where public policy protects employees against being fired if it violates public interest. This is similar to the retaliation exception, which we talk about in more detail below.

The most widely recognized common law exception to the at-will presumption protects employees against adverse employment actions that violate any public interest.

According to the American Law Institute’s proposed Restatement (Third) of Employment Law, there are four categories within the public policy exception:

Implied contracts

You cannot fire an employee without notice or cause if there is an implied contract for employment. This exception is recognized in 41 at-will employment states and the District of Columbia.

Implied contracts can be created by oral assurances from a supervisor or employer representative. This could be something like “your job here is safe” or “we don’t fire employees without warning”. The employee then is considered to have a reasonable expectation of fixed-term or even indefinite employment based on these statements.

Sometimes employee handbooks or company policies may also contain written assurances that create an implied contract, for example, if there is a clause stating that specific termination procedures will be followed. You need to make sure that your employees can access an up-to-date handbook at all times by storing it in a centralized location, such as in a document repository in your HR software.

Zenefits lets you keep a record of which documents you have sent to which people, right from the moment you send them an employment offer to when you provide them with essential business information such as the company handbook.

Zenefits has a centralized documents repository where you can store your employee handbook. Image source: Author

If an employee has a collective bargaining agreement or an employment contract, they may also be exempt from at-will employment and being fired without cause.

If, as an employer, you want to protect yourself from being found liable under the implied contracts exception, you can create a clear and unambiguous written disclaimer that states that the company’s policies and procedures do not create contractual rights.

Good faith and fair dealing

Good faith and fair dealing is an exception that is recognized in 11 states, including California.

This means that employers cannot dismiss workers for reasons motivated by malice or decisions that are made in bad faith. It covers situations such as an employer firing someone to avoid paying for healthcare or other benefits, or because they are soon to retire.

Other examples include dismissing someone just before they are due to receive a large commission from a sale.

However, it’s worth noting that there have not been many cases where the courts have found an employer liable under the good faith and fair dealing exception.

Discrimination and retaliation

At a federal level and across all states, employers cannot dismiss anyone based on their race, religion, sex, age, disability, or veteran status, as this is classed as discrimination. Employers can also not dismiss someone for engaging in legally proper, necessary, or desirable activities, or when they have asserted their rights.

These kinds of activities and rights include:

• Claiming minimum wage or overtime pay
• Belonging to a union
• Opposing unlawful and discriminatory practices
• Whistleblowing

Promissory Estoppel

Another exception to at-will employment is promissory estoppel where an employer cannot fire an employee if they can provide all the following:

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

It is difficult for employees to prove all of the above four elements, especially as some courts have in the past stated that an employee cannot reasonably rely on a promise of a job if they are accepting at-will employment.

Use at-will contracts wisely

Offering an at-will contract can be beneficial for both the employer and employee, but only if used correctly, if both parties are happy with the agreement, and if everyone acts in a fair and respectful matter and neither party takes advantage of the terms of the agreement.

For example, if the employment is on a casual basis while the employee looks for other work, then they benefit from being able to leave at any time. If an employer wants to give someone very inexperienced a chance, then they might feel more secure knowing that they aren’t bound into a long-term contract.

At-will employment does not, however, offer an employer a blank check to fire anyone they like at any time, even if they have signed an agreement. If you’re going to dismiss someone, you should always get legal advice first to make sure you don’t end up in court.

It’s often better practice to implement a solid recruitment process so you can find a worker who you want to invest in, and then implement performance measures and workforce analytics to track their success, than to think about firing someone before they’ve even started working for you.

If you treat your employees fairly and with respect, they are more likely to want to work harder and be loyal to your company. It’s a win-win situation.