Glossary of Human Resources Management and Employee Benefit Terms
According to the National Conference of State Legislatures, at-will employment means “an employer can terminate an employee at any time for any reason, except an illegal one.” In other words, an employer can fire someone without being held legally liable.
At-will employment also means an employer is free to change the terms of employment without giving notice or suffering consequences. Essentially, an employer can change wages, benefits, and on-call work schedules at any time. The at-will employment rule can be modified through an employment contract that specifies the employer’s terms of employment and termination.
Additionally, at-will employment means “an employee is free to leave a job at any time for any reason or no reason” without suffering potential legal consequences.
Yes. In the United States, most employment is at-will. The reasons for this include:
A desire for freedom
Respect for employers
A belief that both employers and employees enjoy having strong business relationships more than job security
At-will employment works by having an employer make their new employee sign an at-will agreement upon hiring. This document gives an employer consent to terminate the employee at will. An employee is not required to sign the agreement, but employers can refuse to hire if the onboarding employee does not sign. However, most employers choose not to do so.
If an employee is terminated and believes it was the result of an exemption (see below), then they can choose to take legal action against the employer.
There are a number of exceptions to being able to fire an employee at will, including:
Public policy/retaliation: Covers an employee who:
Refuses to perform an illegal act, such as discriminating against a subordinate.
Reports a violation of the law, such as accounting fraud.
Acts in the public’s best interest, such as attending jury duty.
Exercises a statutory right, such as those under the state’s Workers’ Compensation law.
Implied contract: Where implicit or oral agreements were violated.
Implied covenant of good faith: Which includes firing employees to avoid paying large commissions, retirement benefits, etc.
Tort-based claims: These cover terminations that inflict extreme or intentional emotional distress.
Promissory Estoppel: In which an employee quits a current job to accept an official job offer, but then is terminated from the new job before the first day of work.
Illegal Discrimination: Prohibiting the hiring or firing of an employee based on:
Sexual orientation (in some states)
Legal off-duty activities (in some states)
Note, not all jurisdictions recognize these exceptions, and even if an employer’s jurisdiction does, it can still be difficult to prove an employee’s termination circumstance is protected under one of them.
Yes, at-will employment goes both ways. This means for any reason (other than those that are illegal), employers can terminate an employee from a job and an employee can quit a job at any time without notice.
For the employer, there are two main downsides of at-will employment. They are:
In most states, an employee can quit at any time, for any reason, and without notice.
There is the risk of being sued by an employee who believes their employer violated the at-terms employment agreement. Even though such cases are difficult for employees to win, they can still cause damage by giving the employer a bad reputation and by draining financial resources required for defending the lawsuit.
All states have some form of at-will employment, as does Washington, D.C. However, some states do place limitations on the legal exceptions to this rule.
For example, Alabama, Nebraska, and Rhode Island (and others) do not follow the public policy exemption. Florida, Montana, and Virginia (and others) don’t recognize the implied contract exemption. Only some states, including California, Delaware, and Alaska recognize the covenant of good faith exception. Additionally, the state of Montana does allow at-will employment, but only during an introductory probationary period.
All states and the District of Columbia have at-will employment to some extent, but each state has its own exceptions to the rule (see above).
When comparing at-will employment vs. contract employment, recognize that most at-will employees are also contract employees. This is because employers usually offer an employee a written, oral, or implied employment contract that covers compensation, benefits, and terms of termination.
The main difference between at-will and contract employment is that with contract employees, the terms of the contract are binding, whereas at-will employees can only be terminated according to the law. Note that we’re talking about employees here, not independent contractors, who are governed by different rules.