If you work in the United States, the chances are your employment is ‘at will’. This means, unlike in most countries, terminating an employee doesn’t require a ‘just cause’, and employers are free to alter job descriptions, schedules and pay rates as they wish. Businesses only have to ensure their actions aren’t discriminatory or otherwise illegal. Similarly, employees may leave their role without providing any notice period.
Restrictions on Employment At-Will
While federal law generally allows employment at-will, except in cases of discrimination and illegality, most states impose some limits. In Montana, employment at-will only applies during a 6 month probationary period. Only in four states—Florida, Georgia, Louisiana and Rhode Island—does employment at-will operate unrestricted.
For more information, read our guide to at-will employment laws by state.
Exception to At-Will Employment
There are three common restrictions imposed on employment at will. These are:
- Public Policy Exemptions
In states with public policy exemptions, employment cannot be terminated in cases where an employee refuses to break state law, reports violations of state law or acts in the public good.
- Covenant of Good Faith
In the majority of states, employers are prohibited from acting in bad faith. If an employee has been repeatedly reassured they won’t be fired before suddenly being let go, an employer may be forced to show just cause. Another example of bad faith is firing an employee right before they are due to receive a large commission.
- Implied Contract Exemptions
If an employee is led to believe that they will only be terminated for just cause—for instance, if this is stated in an employee handbook—this may be interpreted as an implied contract. Even if an employee has agree to employment at-will, an employer could be forced to show just cause.
Further Exceptions to Employment At-Will
It’s not just state law imposing limits on employment at-will. There are variety of other circumstances where employers’ ability to easily terminate employment is restricted. This includes most public sector employees, contract workers and unionized jobs.
Federal law protects the employment of whistleblowers and those on FMLA leave. Lastly, employees are protected from discrimination thanks to civil rights legislation. Employment cannot be terminated based on an employee’s membership of a protected class (e.g., due to gender, religion or national origin).
The Pros and Cons of At-Will Employment
For employers, at-will employment brings flexibility. The ability to quickly reduce labor costs when required means businesses can take bigger risks and employ more staff. Meanwhile, employees benefit from the ability to seek new roles elsewhere whenever they please, without any obligation to fulfill a notice period.
However, employment at-will also means job insecurity for employees. With the risk of being let go at any time without warning, it can be harder for employees to be fully engaged and excited about their future with a company. Contracts which set up a more formal framework for terminations can reassure employees and increase engagement, offering businesses a competitive advantage.
How Paycor Helps
Paycor builds HR solutions for leaders. With Paycor, you can modernize every aspect of people management, from the way you recruit, onboard and develop your team, to the way you pay and retain them. See how Paycor can help the leaders of your organization solve the problems of today and tomorrow.