May 3, 2023

You are likely familiar with at-will employment. After all, it is recognized in every state except Montana. But should you fire an employee for no reason just because you can? 

Not necessarily! There are exceptions and risks to employment at will, which vary from one state to the next.

Read on for a better understanding of at-will employment, its exceptions, and its pros and cons.

What is at-will employment?

Under an at-will employment arrangement, an employer can terminate an employee whenever, for any or no reason, as long as it is not illegal (e.g., discrimination or retaliation). At-will employees can also leave their jobs without giving employers an explanation or advanced notice. They can even simply stop showing up!

While at-will employment is the default in almost every state and the District of Columbia, the state of Montana and some employers require just cause. This means employers must have a valid reason for terminating an employee.

Decide what is best for your company and employees and ensure your hiring and firing practices comply with state and federal laws. If you don’t want to hire at-will employees, you might have them sign a different contract indicating their employment is not at-will. Most businesses have separate employment agreements for high-level employees, while the rest of the staff is hired at will.

Exceptions to At-will Employment

Beware of the exceptions to at-will employment, which vary by state.

Violation of Public Policy Actions

Most states prohibit employers from terminating employees for reasons that violate public policy. For example, it may be illegal to fire an employee for filing a workers’ compensation claim, reporting workplace safety violations, or refusing to engage in illegal

Making & Breaking Implied Contracts

Even without a written employment contract, an implied contract may exist between the employer and the employee. This may occur when an employer makes promises to the employee that are not reflected in the written employment agreement, or when the employer’s policies and practices suggest that employees will only be terminated for cause.

Employers can even get in hot water with seemingly innocent comments, such as a hiring manager telling a candidate, “We never fire anyone without good reason.” The candidate could take this to mean they can only be fired for just cause.

Breach of Good Faith & Fair Dealing

Select states have made it illegal for employers to fire employees to avoid obligations like paying earned commissions or retirement benefits. While only 11 states recognize this implied covenant of good faith and fair dealing, it’s best practice for employers to honor these obligations to their employees.

Discrimination & Retaliation

It should go without saying, but employers cannot terminate employees for reasons that violate state or federal anti-discrimination and anti-retaliation laws. For example, it is illegal to terminate an employee based on race, gender, age, disability, or religion. Similarly, you can’t fire workers for engaging in protected activities such as reporting workplace discrimination, harassment, or other illegal activities.

Collective Bargaining Agreements

Unionized employees may be protected by collective bargaining agreements that specify the terms and conditions of employment, including the circumstances under which employees can be terminated.

Contract Workers

If your business hires independent contractors, you must follow the terms in the agreement you’ve both signed. This means contractors are often exempt from at-will employment.

And remember, just because you’re not required to give an employee a reason for termination doesn’t mean you shouldn’t. Providing a valid reason (along with ample documentation) will minimize your company’s exposure to unemployment claims and potential litigation.

Pros & Cons of Hiring At-will Employees

As you debate what’s right for your organization, consider how at-will employment could affect your business and your team.

Pros of At-will Employment

  • Flexibility: At-will employment provides flexibility to both employers and employees. Employers can adjust their workforce as necessary without drawn-out negotiations and discussions. This allows them to let go of subpar employees and those causing problems immediately since they’re not required to give advanced notice. Employees are also free to leave their job if they find a better opportunity.
  • Cost-effective: At-will employment can be cost-effective for employers, as they can avoid lengthy severance packages, litigation, and other expenses associated with terminating employees. No more having to negotiate salaries or even continue paying employees who aren’t a good fit or those you can’t afford during an economic downturn.
  • Productivity: At-will employees may be more productive because they know their job is not secure, and they must perform well to keep it. And it allows employers to promote and reward team members based on their hard work and potential.

Cons of At-will Employment

  • Lack of job security: At-will employees may feel insecure about their job because they can be terminated at any time without any cause or notice. This, in turn, can negatively impact morale and make employees hesitant to share concerns or negotiate for themselves.
  • Short-staffing: If at-will employees quit suddenly, it could leave the company in a lurch—especially if multiple staff members leave at once.
  • Difficulty in attracting talent: At-will employment can make it challenging to attract top talent, as candidates may prefer a more secure employment relationship.

Final Thoughts on At-will Employment

While at-will employment can provide flexibility and cost savings for employers, it can also create job insecurity and staffing complications. Business leaders should consult with their HR team to evaluate their organization’s specific needs and culture to determine if at-will employment is the best option for their workforce.

Do you have questions about at-will employment? Or do you want to ensure your organization’s hiring and termination practices comply with state and federal laws? Let BlueLion’s HR professionals guide the way! Contact us at 603-818-4131 or to learn more today.

The information on this website, including its newsletters, is not, nor is it intended to be legal advice. You should contact an attorney or HR specialist for advice on your individual situation.