At-will employment is a doctrine of American law that defines an employment relationship in which either party can break the relationship with no liability, provided there was no express contract for a definite term governing the employment relationship and that the employer does not belong to a collective bargaining group (i.e., has not recognized a union). Under this legal doctrine:
| “ | any hiring is presumed to be "at will"; that is, the employer is free to discharge individuals "for good cause, or bad cause, or no cause at all," and the employee is equally free to quit, strike, or otherwise cease work.[1] | ” |
The doctrine of at-will employment has been criticized as predicated upon flawed assumptions about the inherent distribution of power and information in the employee-employer relationship and for its brutal harshness upon employees.[2][3] Regardless, the doctrine is widely credited as one of the major factors behind the strength of the U.S. economy; this thesis has been advanced by leading scholars in the field of law and economics such as Professors Richard A. Epstein[4] and Richard Posner.[5] In particular, at-will employment has been credited with making possible the success of Silicon Valley as an entrepreneur-friendly environment.[6]
Several statutory and judge-made exceptions to the doctrine exist, especially if unlawful discrimination is involved regarding the termination of an employee. These restrictions (explained below) have been controversial; an empirical study in 1992 by the RAND Corporation showed that imposing exceptions to at-will employment resulted in a long-term drop in aggregate employment of two to five percent.[7]
As a means of downsizing, such as closing an unprofitable factory, a company may terminate employees en masse. However, there are legal limitations upon the employer's ability to terminate without reason.[8]
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The at-will rule has its genesis in a rule in Horace Gray Wood’s 1877 treatise on master-servant relations. Wood cited four U.S. cases as authority for his rule that when a hiring was indefinite, the burden of proof was on the servant to prove that an indefinite employment term was for one year.[9] In Toussaint v. Blue Cross & Blue Shield of Michigan, the Court noted that "Wood’s rule was quickly cited as authority for another proposition."[10]
Some courts saw the rule as requiring the employee to prove an express contract for a definite term in order to maintain an action based on termination of the employment.[11] Thus was born the U.S. at-will employment rule, which allowed discharge for no reason. This rule was adopted by all U.S. states. In 1959 the first judicial exception to the at-will rule was created by one of the California Courts of Appeal.[12] Later, in a 1980 landmark case involving ARCO, the Supreme Court of California endorsed the rule first articulated by the Court of Appeal.[13] The resulting actions by employees are now known in California as Tameny actions for wrongful termination in violation of public policy.[14]
Since 1959, several common law and statutory exceptions to at-will employment have been created.
Common law protects an employee from retaliation if the employee disobeys an employer on the grounds that the employer ordered him or her to do something illegal or immoral. However, in the majority of cases, the burden of proof remains upon the discharged employee. No U.S. state but Montana has chosen to statutorily modify the employment at-will rule.[15] In 1987, the Montana legislature passed the Wrongful Discharge from Employment Act (WDEA). The Montana Act is unique in that, although it purports to preserve the at-will concept in employment law, it also expressly enumerates the legal bases for a wrongful discharge action.[10] Under the WDEA, a discharge is wrongful only if: "it was in retaliation for the employee's refusal to violate public policy or for reporting a violation of public policy; the discharge was not for good cause and the employee had completed the employer's probationary period of employment; or the employer violated the express provisions of its own written personnel policy."[16]
Under the public policy exception, an employer may not fire an employee if it would violate the state's public policy doctrine or a state or federal statute.
This includes retaliating against an employee for performing an action that complies with public policy (such as informing the authorities of an illegal activity, for instance nursing home abuse[17]), as well as refusing to perform an action that would violate public policy. In this diagram, the pink states have the 'exception', which protects the employee.
As of October 2000,[18] forty-three U.S. states and the District of Columbia recognize public policy as an exception to the at-will rule.[19]
The 7 states which do not have the exception are:
Thirty-seven U.S. states (and the District of Columbia) also recognize an implied contract as an exception to at-will employment.[18] Under the implied contract exception, an employer may not fire an employee "when an implied contract is formed between an employer and employee, even though no express, written instrument regarding the employment relationship exists."[18] Proving the terms of an implied contract is often difficult, and the burden of proof is on the fired employee. Implied employment contracts are most often found when an employer's personnel policies or handbooks indicate that an employee will not be fired except for good cause or specify a process for firing. If the employer fires the employee in violation of an implied employment contract, the employer may be found liable for breach of contract.
37 US states have an implied-contract exception, thus 13 do not. Those 13 states are:
The implied-contract theory to circumvent at will employment must be treated with caution. In 2006, the Texas Court of Civil Appeals in Matagorda County Hospital District, Petitioner v Christine Burwell, Respondent,[21] held that a provision in an employee handbook stating that dismissal may be for cause, and requiring employee records to specify the reason for termination, did not modify an employee's at-will employment. The New York Court of Appeals, that state’s highest Court, also rejected the implied-contract theory to circumvent employment at will. In Anthony Lobosco, Appellant v New York Telephone Company/NYNEX, Respondent,[22] the court restated the prevailing rule that an employee could not maintain an action for wrongful discharge where state law recognized neither the tort of wrongful discharge, nor exceptions for firings that violate public policy, and an employee's explicit employee handbook disclaimer preserved the at-will employment relationship.
Only eleven U.S. states have recognized a breach of an implied covenant of good faith and fair dealing as an exception to at-will employment.[18][23] These 11 states are:
This exception for a covenant of good faith and fair dealing represents the most significant departure from the traditional employment-at-will doctrine. Rather than narrowly prohibiting terminations based on public policy or an implied contract, this exception – at its broadest – reads a covenant of good faith and fair dealing into every employment relationship. It has been interpreted, by some courts, to mean either that employer personnel decisions are subject to a “just-cause” standard or that terminations made in bad faith or motivated by malice are prohibited.
Although all U.S. states have a number of statutory protections for employees, most wrongful termination suits brought under statutory causes of action use the federal anti-discrimination statutes which prohibit firing or refusing to hire an employee because of race, color, religion, sex, national origin, age, or handicap status. Other reasons an employer may not use to fire an at-will employee are:
Examples of federal statutes include:
This article incorporates public domain material from the United States Government document "The employment-at-will doctrine: three major exceptions" by Charles J. Muhl, U.S. Bureau of Labor Statistics (retrieved on 6 February 2010).