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Employment At Will – An Endangered Species?

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This article explains Employment At Will and the eroding of Employment At Will resulting from employee lawsuits and the carelessness of employers. It will also give business owners and human resource professionals tips to help maintain Employment At Will in their workplaces.

The definition of Employment At Will is succinct: “the ability to hire and fire employees for any reason or for no reason at all.” No justification is required. Employment can end at any time.

Sounds easy, doesn’t it? Not so fast!

Employers need to be aware of crucial exceptions in the law that curtail management’s ability to hire and fire employees for any reason, or no reason at all. Ignoring these exceptions invites employee lawsuits and government complaints against you and your company.

Exception One: Civil Rights Legislation. You cannot terminate an employee’s employment because of race, age, disability, national origin or any other lawfully protected class based on such characteristics.

Business owners and managers must keep in mind that state law is just as important as Federal law in the curbing of the traditional Employment At Will definition. For example, California prohibits discrimination based on gender identity or sexual orientation. Florida prohibits discrimination based on being a member of the National Guard. Oregon prohibits employment discrimination based on marital status. At least 20 states have prohibitions against employment decisions based on criteria not protected under Federal law.

Exception Two: Implied Contract. This exception comes out of lawsuits filed by employees against their former employers. State courts have originated the “implied contract” theory to specifically water down Employment At Will. The exception is based entirely on the employer’s behavior towards employees. The employer has not protected its right to Employment At Will, or the employer has acted in a way that is contrary to having Employment At Will. As a result, an “implied contract” exists with the employee; employment cannot be terminated except for good cause.

Here’s how it happens.

The Employer receives an Employment Application from a candidate, and interviews the candidate. The hiring process moves along and a “probationary period” of 60-90 days is explained by the employer. The candidate is hired, and given an employee handbook that contains policies on performance evaluation and progressive discipline, and does not mention Employment At Will. Periodically, the employee has his or her performance evaluated and receives glowing evaluations. The employee is complimented on his/her performance, and assured that as long as the employee performs satisfactorily, the employee will remain with the company; sometimes with the admonition that continued good evaluations are the road to advancement in the organization.

One day, management decides to terminate the employee’s employment for no reason at all, relying on Employment At Will. Result: the now fired employee hires a lawyer and files a lawsuit in state court claiming wrongful termination. It is extremely likely that a court and jury will side with the employee.

The reasoning of the court and jury is predictable. There is an implied contract between the employer and employee that as long as the employee performs satisfactorily, the employee will not be discharged except for good cause.

Answer the following questions, and you can see for yourself the pitfalls of the above scenario.

If management enjoys the Employment At Will right to hire and fire, what is the purpose of a “probationary period?” If the employee handbook has policies on progressive discipline, it must mean that the employer will not terminate an employee’s employment except for bad performance or good cause. The assurances to the employee that good performance reviews are the way to success with the company is just icing on the cake for the employee’s attorney to make the employee’s case to the judge and jury.

Maintaining Employment At Will: A Checklist. As an employer, if you want to protect the Employment At Will prerogative, your words and actions must constantly reinforce this right.

We’ll use the above example of the employment process to illustrate how management can put into practice a system that will maximize the ability to maintain Employment At Will

1. The Application of Employment – Make sure your Application has the words, “Employment is At Will” within the body of the application.

2. The Offer Letter – Yes, use an Offer Letter regardless of the position being filled. The Offer Letter should contain a sentence that Employment is At Will.

3. Use an At Will Employment Contract – As a lawyer counseling businesses on employment law, I have found that an At Will Employment Agreement is exceptionally useful.

4. The Employee Handbook – The most crucial of tools to maintain Employment At Will. Courts will always look at the Employee Handbook to see the intent of management. Here’s what an effective Employee Handbook should have and not have in order to protect Employment At Will.

     a. The Employee Handbook must be specifically written for your state’s law and Federal law. Complying with Federal law is not enough. State laws typically give employees greater rights than the Federal counterpart. Keep in mind that wrongful termination cases are usually in state courts. An employee handbook good for all 50 states may very well not protect your business as well as an employee handbook specifically written for your state laws. One size does not fit all.

     b. An Acknowledgment Form signed by the employee specifying that the employee has received the employee handbook, and that the employee acknowledges that employment is at will.

     c. A Policy explaining Employment At Will, with the Policy’s title just that: Employment At Will.

     d. No Probationary Period policy.

     e. All policies dealing with employee evaluations or progressive discipline must have statements that employment is at will.

5. Forms – All employee evaluations and warning notices must contain a notice that employment is at will.

While Employment At Will is endangered, the species is alive and well and can be nurtured and protected by following the simple principles spelled out in this article.

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About Jay E. Eckhaus, Esq.