At-Will Employment & Relevant Legal Implications

In every state except Montana, employment is presumed to be "at will." In most countries, employers can only dismiss employees for cause. However, in the United States, an employer can fire an employee for no reason or any reason except an illegal reason, unless the employment contract specifies the reasons for termination. Employees are also allowed to leave a job at any time for no reason or any reason without incurring liability.

At-will employment means that employers may alter the terms and conditions of employment relationships without giving notice and without any negative consequences. For example, an employer could reduce paid time off, pay employees less, or terminate their health insurance for any reason, except for illegal reasons or when the employment contract specifies otherwise. Employees could be given a limited work schedule or an arbitrary dismissal, depending on the employer's needs.

Employment Contracts to Modify At-Will Employment

Although at-will employment is the default (other than in Montana), employers and employees are free to contract otherwise. An employment contract can provide that an employee will be employed for a specified period, or it may only allow the employee to be dismissed for cause. In most cases, lower-level and mid-level employees do not have the power to get this kind of job security.

Companies are more willing to negotiate contracts modifying at-will employment with executives and other high-level employees. For example, if an employee signed an employment contract that states that they can only be fired during the term of the contract if they perpetrate a crime, and the contract term is three years, the employment is not at will. If the employee is fired for some reason other than perpetrating a crime, they may be able to sue their employer for breach of contract or wrongful termination.

When a contract specifies that an employee can only be fired for cause, it may describe the job situations or actions that would result in termination for cause. These actions may include poor performance, economic necessity, or misconduct.

Exceptions to At-Will Employment

Generally, exceptions to at-will employment are implied covenant of good faith, implied contract, and public policy. It is against public policy to fire an employee for reasons that are illegal under federal or state laws, such as discriminatory reasons. For example, employers that have at least 15 employees are forbidden from terminating employees based on race, color, sex, religion, or national origin under Title VII of the Civil Rights Act. Under the Americans with Disabilities Act (ADA), employers with at least 15 employees are forbidden from terminating employees based on a disability. Generally, anti-discrimination laws also have a provision that employers cannot retaliate against employees because they complained about discrimination or harassment.

Whistleblowing Protections

It may be against public policy for an employer to fire an employee because of whistleblowing. Whistleblowing happens if an employee reports illegal activity at work to the authorities. For example, an employee would be a whistleblower if they reported to the SEC that their company was engaging in shareholder fraud. They would be a whistleblower if they reported that their employer was making false claims for payment to the federal government. A wide range of federal and state laws protect whistleblowing. For example, the Sarbanes-Oxley Act protects whistleblowers who report shareholder fraud and financial irregularities.

Last reviewed October 2024