What Does At-Will Employment Mean? Employee Rights Explained

“At-will” is one of the most misunderstood phrases in employment today. Employers and employees may believe that an at-will employee can be fired at any time or can quit without notice, without legal repercussions. Some think that there are state laws that prohibit such behavior without just cause.

As with most untested beliefs, this is both somewhat true and somewhat false. There are many myths and misconceptions about at-will employment. This article supplies answers to frequently asked questions about this common employment relationship.

What is at-will employment?

At-will employment means the employer and employee have no employment contract. Either one may end the relationship at any time for any lawful reason without penalty. By contrast, contracts and collective bargaining agreements often describe conditions for termination and the disciplinary process.

In theory, an employer can tell a worker, “I don’t like your shoes. You’re fired.” In reality, employment rights are more protected than that.

What laws protect at-will employees?

As of this writing, only Montana has laws protecting employees without employment contracts. Montana is a just cause rather than an at-will state, meaning your employer must provide a reasonable cause for termination. Montana gives employers a six-month probationary period during which they can fire a worker without cause. After that time, the employer must have cause for termination.

In other states, a probationary period is not statutory. It usually refers to a 30- or 90-day period after hiring during which a worker can be fired without benefits.

Although some states are leaning toward similar protections, no other state has passed legislation that makes the general exemptions to employment-at-will part of its labor laws. These exemptions are:

• Public Policy: Employers may not fire employees for actions in the public interest. These actions include refusing to carry out an illegal order, making a workers’ compensation claim, or exercising a statutory right. Forty-two states and the District of Columbia recognize at least some type of public policy exception to at-will termination.
• Implied Contract: Some employer actions may create an implied employment contract. Statements promising continued employment, a guarantee that termination will follow only a disciplinary process, or other assurances of job security can create an implied contract.
• Implied covenant of good faith and fair dealing: Many states recognize a good-faith covenant in all employment relationships. Employers cannot terminate employees for bad-faith reasons, for instance, to avoid paying pensions.

Although most states follow at least some of these exemptions, others do not. Examples include:

• No public policy exception: Alabama, Florida, Georgia, Louisiana, Maine, Nebraska, New York, and Rhode Island
• No implied covenant of good faith exception: Florida, Georgia, Louisiana, Maine, New York, and Rhode Island
• No implied contract exception: Delaware, Florida, Georgia, Indiana, Louisiana, Massachusetts, Missouri, North Carolina, Pennsylvania, Rhode Island, Texas, and Virginia
• No exceptions to protect at-will workers: Florida, Georgia, Louisiana, and Rhode Island

Check your state’s labor laws for the exact policies.

Is at-will the same as right-to-work?

No. Right-to-work is the right of an employee to refuse to join a union as a condition of employment. In a right-to-work state, an employer may not require new hires to join a union. Laws limit the employer’s ability to terminate workers who represent themselves in contract disputes.

Does an employment contract mean an employee is not an at-will employee?

An employment contract is an agreement between an employer and an employee that outlines the basic terms of the job. When the employee signs the contract, it becomes binding. The contract includes the employee’s start date, salary, benefits, and other conditions of employment.

A contract may include an at-will clause. The contract covers many other terms and conditions beyond whether the employee is an at-will worker. Some states may use a separate at-will agreement.

Is an employee handbook the same as a contract?

Most businesses have an employee handbook. This document describes company policies, medical leave and time off, and other job details. It should include a section on disciplinary practices. All employees, even at-will employees, are subject to disciplinary policies.

An employee handbook is not a contract, but business owners must take care when wording the disciplinary policy section. If the policy states that employers cannot fire employees unless they complete certain steps and fail to do so, an employee may have grounds for a lawsuit. Owners should get legal advice when writing their handbook.

How can a handbook create an implied contract?

If a handbook’s language is not carefully written or phrased incorrectly, employers could create a contract where none should exist. Employers and managers can imply contracts by their actions or comments. This includes:

• Termination clauses guaranteeing employees are only fired for just cause or a list of enumerated offenses may override the at-will status
• A strict, progressive disciplinary policy with clearly outlined steps may be seen as a promise that the policy will be followed in all terminations
• Verbal promises of “termination for good cause” or implications of long-term stability can imply a contract
• Promises of long-term benefits, accrued PTO payments, and other policies can be enforceable as contracts
• Inconsistent application of policies can lead to “company practice” violations, such as not following a termination policy as written in the handbook

Other types of situations can arise from poorly written handbooks.

What are good cause reasons for termination?

Sometimes, an employer may fire an employee who doesn’t work out or who doesn’t fit the business environment. Issues may surface during the probationary period that provide valid reasons for termination, but termination can occur at any time. This includes:

• Downsizing or workforce reductions: Layoffs do not violate any employee rights if they are fair. Depending on the size of the business, there may be legal requirements for laying off employees.
• Poor work performance: Owners may terminate underperforming workers in accordance with the disciplinary process outlined in their employee handbook. Some human resources professionals recommend following the procedure for all employees, regardless of their at-will status.
• Change in company focus: The owner may eliminate a sector if the company decides a product or service is ineffective. Terminating at-will employees may be part of this change in direction.

This is not an exhaustive list.

What are bad-faith reasons for termination?

Even in an at-will state, employers may not violate employment laws. The Equal Employment Opportunity Commission (EEOC) defines wrongful termination as a firing that violates federal, state, or local labor laws. A wrongful discharge can open the employer to a lawsuit, even if it’s an at-will employee. These can include:

• Violation of state and federal anti-discrimination laws: Employers may not base terminations on race, religion, gender, national origin, or disability
• Violation of state or federal whistleblower laws: Federal and state laws protect employees who report legal or ethical workplace violations, and firing whistleblowers can result in a federal lawsuit and fines
• Retaliation for making an EEOC or other claim: Terminating a worker for filing a sexual harassment or similar charge is illegal, as is firing someone in retaliation

Employers may not fire employees for exercising their civil rights, such as jury duty, voting, or National Guard service. Employers cannot fire workers who exercise guaranteed rights, such as those under the Family and Medical Leave Act (FMLA).

Does an employer have to give a reason for termination?

In theory, an employer does not have to give any reason for firing an at-will employee. In reality, terminating a worker for no reason, especially if they have no other red flags in their file, may raise suspicion. Employees may look for reasons to file a wrongful termination claim if their firing seems unjustified.

Firing an older worker and replacing them with a younger new employee in the same position may raise suspicions of age discrimination or violation of the implied covenant of good faith. It’s always better for employers to have some reason for terminating a worker.

Get Legal Advice on Your At-Will Employment Issue

Employers and employees should discuss any at-will employment questions with a competent employment law attorney. State and federal laws on this matter are complex. Both sides should have good advice before proceeding with any legal action.

While some employment legal issues can be solved without an attorney, complex employment law cases (such as harassment or discrimination) need a legal expert to protect your interests. Legal cases for wage and benefit issues, whistleblower actions, or workplace safety can be complicated and slow. An attorney can offer tailored advice and help prevent common mistakes.