Employment at-will allows employers to terminate employees without cause (meaning for any legal reason or no reason at all), provided that the termination doesn’t violate anti-discrimination or other employment statutes. It also allows employees to leave a company at any time, for any reason, provided there are no other restrictions on their employment. This gives both parties the freedom to act in their own best interests.
Employment at-will is the predominant standard in the US; however, some states have exceptions—with Montana not allowing it at all. We have provided a state-by-state guide on at-will employment below, but we suggest seeking the advice of an attorney to ensure you are following the correct laws in your state.
Maintaining Your At-will Status
Beginning with the interview process and continuing through hiring employees, you need to make sure you’re not making any long-term promises. This means following all employment laws when it comes to interviewing and remembering the following:
- Never refer to a job as permanent. Many people use the term “permanent” when referring to a full-time or direct-hire job—but that can get your company in legal trouble if you ever terminate an employee.
- Always call jobs “direct hire position” or “contract position” coupled with “full-time” or “part-time” for clarity.
- While there is no legal requirement that you include at-will employment language in your company handbook or employee offer letters, it’s good practice to include at-will reminders in these documents.
More important is how your company operates day to day. Certain company statements and actions can undermine the at-will status of your employees. For example, if you routinely tell employees you need everyone on staff for an extensive project or you tell employees that you never envision them leaving the company, those statements could be perceived as overriding the at-will status of your employees.
Exceptions to Employment At-will
As with most legal matters, there are exceptions. Employment at-will is the overwhelming standard in the US, but some states allow for certain exclusions.
When a whistle-blower or employee is engaged in some form of protected conduct, an employer cannot terminate the employee at their whim. This exception came about in 1980 from a California Supreme Court case, Tameny v. Atlantic Richfield Co. In this case, an employee refused to engage in price fixing as their employer directed, and the judge ruled that the employee could not be terminated under the at-will doctrine because the employee was engaged in protected conduct.
While at-will employment allows companies to terminate employees with or without cause, the company must be able to prove that they did so without violating any statute. For example, Title VII of the Civil Rights Act of 1964 prohibits employers from discriminating against employees based on their sex, race, color, religion, or national origin. If a company terminates an employee for any of those reasons and does not have just cause, it could be liable for wrongful termination.
Here are some examples of common statutory protections:
- A company cannot fire an employee because they are pregnant
- A business cannot terminate an employee who plans to retire soon
- A disabled employee cannot be terminated because they ask for accommodation
- An employee cannot be terminated because they filed a workers’ compensation claim
- A company cannot terminate an employee if the employee refuses to do an illegal act
All of these examples go against the nature of at-will employment. However, federal and state legislatures have determined that these scenarios should be protected from employment at-will.
Collective bargaining agreements often include terms and conditions on how and when an employer can terminate an employee. Some companies also routinely have employees sign employment contracts. Both of these agreements may include termination only for cause, essentially overriding the at-will doctrine.
Implied contracts, those not actually written down but assumed through company statements and actions, could give an employee the impression they would not be terminated without just cause. If you tell an employee that you need them to finish a two-year project and you simply couldn’t do it without them, that could be evidence of an implied contract. So, if you terminate that employee before the project is completed, they could sue your company.
While courts generally disregard lifetime or permanent employment language, it’s good practice, as we mentioned above, for you to always have an at-will clause in your offer letters and company handbooks. This alone won’t protect you, but it can—along with your actions—provide sufficient evidence that your employees are at-will.
Good faith means that all parties come together fairly, openly, and in agreement that they will not undermine one another’s rights. A covenant in good faith requires an employer to respect employees’ rights—and this applies to terminations as well.
Some states will also hold companies liable if they act in bad faith. For example, a company that terminates an older employee could act in bad faith if the company fired the employee to avoid paying retirement benefits. In states that adhere to the good faith exception to at-will employment, companies must be able to show a legitimate business reason for terminating an employee.
State Laws: At-will Employment
Every state is presumed to be an at-will employment state, except Montana. Additionally, while New York is an at-will employment state, it does have a special case regarding fast food workers. Click your state from the interactive map below to see which exceptions it follows, if any, and get a link to more information.
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Special Case: Montana
Passed in 1987, the Montana Wrongful Discharge from Employment Act essentially abolished the at-will employment doctrine in the state, requiring just cause for nearly all employee terminations. Since then, the Montana Legislature has made significant changes to this law that small businesses must know.
Under the original law, Montana employers could only terminate employees at-will during the probationary period, which was set at six months. After that probationary period, employers could only terminate employees for just cause.
Under the new changes to this law, however, several key items have changed:
- The probationary period is now at least one year, and companies can set it up to 18 months or more, if an employee has taken a leave of absence
- Just cause now includes termination of employment for repeated violations of a company policy
- Courts now give companies the “broadest discretion” when terminating a managerial or supervisory employee
Special Case: New York City
In New York City, the Just Cause Bill requires fast food employers to terminate employees only for just cause. The law also requires employers to engage in progressive disciplinary procedures and prohibits fast food employers from significantly reducing employees’ hours by more than 15% of their regular schedule.
The law does provide for an exception if an employee is terminated during their probationary period, which ends 30 days after the start of their employment. Despite this exception, this law may be challenged.
Overcoming a Charge of Discrimination
Employment at-will can also provide your company with a solid legal defense. If a former employee sues you for wrongful termination, you could rely on the at-will employment doctrine to protect you.
While not required in every state, it’s a good business practice to have “just cause” to terminate an employee. Besides helping overcome a charge of discrimination, it can also boost employee morale by showing your team that you’re fair and reasonable, but will take action if an employee isn’t carrying their weight.
Be careful how your managers act leading up to an employee’s termination. Small businesses can be found liable for terminating an employee without just cause if it’s clear an employee was put on a performance improvement plan that was set up for them to fail.
For example, say you put an employee on a performance improvement plan for documented instances of poor work performance. You give the employee 90 days to meet a project deadline and improve their overall performance, but after 30 days, you move up the project deadline and then terminate the employee when they don’t meet the new target. Absent other details, your company probably could not show just cause for this termination and would face legal action.
Maintain Documentation
Documenting employee performance issues is important. Having a paper trail of an employee’s poor work performance and the steps your company took to help them will legitimize your decision to terminate employees.
Common examples of just cause include terminating an employee for:
- Poor work performance
- Threatening or harassing other employees
- Insubordination
- Dishonesty
- Theft
- Downsizing
- Financial hardships within the company
At-will Employment Frequently Asked Questions (FAQs)
What does it mean to be at-will to work?
At-will employment means either the employee or the employer can terminate the employment relationship at any time, for any reason, for no reason, with or without notice. However, termination cannot be for any illegal reason, like race discrimination. It is always best to provide employees with a legitimate reason for termination, whether that’s performance, workforce reduction, or another reason. Not only can this help avoid legal issues for wrongful termination, it’s just the right thing to do.
What is an example of employment-at-will?
An example of employment-at-will is most full-time jobs. For example, if you hire an employee as an administrative assistant—absent any other details, like a CBA or employment contract, and so long as you’re not in Montana—that job is at-will.
What is true of at-will employment?
At-will employment allows both employees and employers flexibility in their working relationship. The employer can terminate an employee without needing to provide cause or notice, and the employee can resign without any obligation to stay for a particular duration. This arrangement does not protect against wrongful termination based on discrimination or retaliation.
Bottom Line
No matter what state you’re in, even with at-will employment, terminating an employee who routinely violates company policy or shows poor work performance is less legally tumultuous when you have documentation to back up the termination. Nothing can stop a former employee from suing your company, but having evidence that the termination was legal, and you had just cause to do so will help you overcome any legal challenges.
