Nobody likes to terminate an employee, and no one likes to be terminated in return. It’s just one of those things in the business world that happens and isn’t really fun for anyone. You’ve probably seen countless movies or TV shows that include a very dramatic scene where some new person at a company is instructed to lay some long-time employee off, and the long-time employee—reasonably so—gets extremely upset with the person laying them off, and things get out of hand. While these scenes are often dramatized, this isn’t too far off from reality: there’s a real weight to getting terminated, and it really is people’s livelihoods that are at stake. These kinds of actions are difficult decisions for businesses to make and should not be taken lightly. But how do you go about terminating an employee in a way that’s respectful for both parties when this process can often be a lose-lose situation?
It’s a difficult situation, and it’s one that we here at Payday HCM have seen many of our clients go through. Oftentimes, after certain events happen that can be deemed grounds for termination, the emotions of the moment can overtake whoever is involved. It’s good to take a moment, step back, and look at the bigger picture. When doing so, it can be important to look at the different laws and regulations that determine how employers can actually go about terminating employees—understanding at-will employment is one such thing.
That’s why, in this article, we’ll go over what an at-will employee is and, more generally, what at-will employment is. We’ll look at how this structure of employment operates from both the employee perspective as well as the employer perspective. Most importantly, we’ll look at the different rules and regulations that guide this type of employment to ensure both parties understand what they can and cannot do. By the end of this article, you’ll have all the information you need to know to make an informed decision that benefits everyone.
In this article, you will learn:
- What Is At-Will Employment?
- What Does It Mean To Be An At-Will Employee?
- Laws And Regulations Surrounding At-Will Employment
What Is At-Will Employment?
Firstly, we’ll dive into the meaning of at-will employment as a whole, as well as how at-will employment came to be.
History Of At-Will Employment
The origins of at-will employment go all the way back to 1884 and the Supreme Court of Tennessee case L. Payne v. The Western Atlantic Railroad Company. Payne claimed he had built a successful business trading with employees of the Western Atlantic Railroad Company. Later, the company allegedly issued a notice that employees trading with Payne would be terminated. Payne believed the railroad company acted with malicious intent in issuing the notice and was, therefore, unlawful.
The court, however, did not see it this way. They ruled that the railroad company acted within its rights. A portion of section 518 of the judgement reads: “and men must be left, without interference to buy and sell where they please, and to discharge or retain employees at will for good cause or for no cause, or even for bad cause without thereby being guilty of an unlawful act per se.”
The phrase “discharge or retain employees at will” is what has brought us to where we are today with at-will employment. This ruling is what created what is often referred to as the doctrine of at-will employment.
How Does At-Will Employment Work?
Generally speaking, any employer in the U.S. operates under the at-will employment doctrine. There isn’t any set policy or legislation that defines employment as being at-will, just the aforementioned court decision.
Typically, an employee handbook will outline an employer’s at-will relationship with an employee, although this is not required. Sometimes, businesses may have new hires sign a document explaining the at-will relationship. It’s also important to note that employers are not required to use the phrasing “at-will”—employers can simply express that employment can be terminated at any time.
What Does It Mean To Be An At-Will Employee?
Next, we’ll get into what at-will employment means for employees and what they should keep in mind.
At-Will Employee
Generally speaking, every person is an at-will employee as each person in the U.S. is subject to the at-will doctrine (there are exceptions, which we’ll get into a little later on). This relationship will look different from state to state, though, as different states have different rules or exceptions regarding at-will employment.
An interesting exception to the at-will doctrine is Montana, which is the only state that strictly doesn’t have at-will employment based on the Wrongful Discharge from Employment Act. The act states that, after six months, an employer can only terminate an employee “for cause,” meaning they must have a good reason.
Is There Anyone Who Isn’t An At-Will Employee?
There are some exceptions to the at-will doctrine that aren’t set in stone but are typically the case (besides the ones we’ll get into later on in this article). These exceptions are contracted employees (employees working for a specific duration or with some sort of employment agreement) and employees with a collective bargaining agreement.
In cases of employees with a contract or agreement, the contract will typically outline the terms by which an employer can terminate the employee. In some cases, this contract doesn’t actually have to be written: if an employer verbalizes something that can be interpreted as them saying they will not terminate an employee at-will, it could be considered an implied contract exception (although these would need to be proved in court).
Again, these aren’t for-sure exceptions. It is typical, however, for an employment contract to contain language about guidelines for terminating an employee and for a collective bargaining agreement to contain verbiage surrounding termination that would differentiate employees in these situations from at-will employees.
Laws And Regulations Surrounding At-Will Employment
Finally, we’ll dive into the different laws and regulations that affect the doctrine of at-will employment.
Federal Laws That Affect At-Will Employment
As we’ve stated earlier, at-will employment isn’t a law, and there isn’t any federal legislation or law that actually states that the U.S. operates within an at-will employment model. However, this doesn’t mean that other federal laws don’t impact the reach of the at-will employment doctrine.
The biggest one to note here is any wrongful termination as it relates to the Civil Rights Act of 1964. That means employers cannot terminate employees based on race, religion, sex, national origin, or disability. Alongside this, employers also can’t terminate someone in retaliation, as determined by federal labor laws.
Retaliation can include a variety of different things, including termination for:
- Filing or participating in an Equal Employment Opportunity investigation or lawsuit
- Informing management of possible harassment or discrimination or answering questions in an employer investigation of alleged harassment
- Refusal to follow orders that would lead to discrimination
- Resisting or protecting others from sexual advances
- Requesting accommodations for a disability or religious practice
- Asking for salary information from coworkers or management
State Laws Surrounding At-Will Employment
Several states have different laws that affect how the at-will employment structure actually works. The main three exceptions that exist on a state-level are:
- Public policy exemption: Employees cannot be terminated for participating in jury duty or other public policy violations.
- Covenant of good faith: An employer cannot terminate an employee if the termination is believed to be in bad faith. An employer must show just cause.
- Implied contract exemption: when a contract or employee handbook implies an employee will only be terminated with just cause.
The state in which your business operates will affect whether or not some of these exceptions apply to you. Payday’s homestate of New Mexico, for example, is still an at-will employment state but does have exceptions for public policy, covenant of good faith, or an implied contract exemption.
Deepen Your Understanding Of Employment Law
As we said before, terminating an employee or being terminated is not something most people enjoy doing or enjoy having done to them. Of course, termination is just one of those unfortunate realities in the business world. As such, you want to ensure that any time you do arrive at the decision to terminate someone, that the process goes as smoothly (and legally) as possible. Understanding how at-will employment functions is a key part of doing this, as there are a number of key exceptions. With the information provided in this article, though, you’ll be equipped to approach these difficult situations with the knowledge you need to ensure both parties have the most pleasant experience possible, given the circumstances.
Now, one thing that may happen after terminating an employee is, well, you realize that maybe it wasn’t actually the best decision. No fear: Check out our article on what you need to know when rehiring past employees.
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