I Live in an At-Will State. Can I Fire an Employee for Any Reason or No Reason At All?
Your answers are yes, sort of, and no, not really.
If you own a business in the United States (except in Montana), and you hire someone for an indefinite period of time, your employees are presumed to be employed at will. The U.S. is actually unique in this way, as other leading nations have moved to employment contract systems that protect employees from the whims of an employer.
A Bit of History About At-Will Employment
At-will employment is the idea that the employee and the employer are only required to remain in their employment arrangement as long as both parties desire the arrangement to exist, so the employee or the employer may terminate the arrangement for any reason or no reason at all.
Up until the late 1800s, at-will employment was a doctrine that was whole and complete. During the industrial era, however, the courts began to recognize that employers had a distinct advantage when negotiating working conditions.
The National Labor Relations Act came into being, introducing employees’ right to unionize. Later additional laws were added to protect employees, including the Civil Rights Act of 1964 (Title VII), the Americans with Disabilities Act, the Whistleblower Protection Act, and others. Each of these laws lays out rules for employers when determining how to treat employees, including the decision to terminate. When an employer terminates an employee for a reason prohibited by law, it is called a wrongful termination.
Exceptions to At-Will Doctrine
Public Policy Exception
Under the Public Policy Exception, an employer may not terminate an employee for upholding an established public policy of the state or engaging in protected activity.
A good example of an employer who violated this exception is the Petermann v. International Brotherhood of Teamsters case, in which Peter Petermann refused to lie on the stand during a trial involving the Teamsters. The day after Petermann’s testimony, the Teamsters terminated Petermann, and he filed suit for their violation of the Public Policy exception.
Implied Contract Exception
The Implied Contract Exception to at-will employment grants employees protection in the event that an employer makes a promise of continued employment that it cannot keep. Implied contracts can be unintentionally created when an employer makes statements such as, “As long as you do a good job, you’ll always have a job here,” or “We would give you two weeks’ notice if we decide to let you go.” They can also be created when HR discipline policies are written too narrowly, thereby promising an employee that they will be subject to specific disciplinary actions before separation.
These contracts don’t have to be created by the employee’s direct hiring manager—they can be created by a supervisor, CEO, or anyone who has any authority over the employee’s working conditions.
Covenant of Good Faith and Fair Dealing Exception
This final exception is the least recognized among states and disallows terminations made in bad faith or are otherwise motivated by malice.
A good case study for this is Kmart Corporation v. Ponsock, where Ponsock was terminated not long before her retirement. It was determined by the Supreme Court of Nevada that Kmart had terminated Ponsock in order to avoid paying her retirement benefits.
A Termination Checklist
Before separating an employee, it’s a good idea to ensure that you’re not violating any of the following:
- Discrimination laws (including for retaliation)
- Your own policies
- Executive or union employment contracts
- Constructive dismissal (making working conditions bad in order to orchestrate a resignation)
- At-will exceptions
Following this checklist and carefully documenting your reasons for termination can ensure that you keep your company out of hot legal water. If you aren’t sure whether you’re risking a lawsuit by terminating, you’ll want to reach out to an employment attorney or a qualified human resources professional.
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