Employment in most states is generally presumed to be “at-will.” That means a private-sector employer can terminate an employee for any reason at any given time, absent an employment agreement to the contrary. An employee is also free to quit a job for any reason without notice. While this is the general rule, there are exceptions that employers and employees should understand to avoid incurring legal liability.
At-will employment provides flexibility to both sides in determining when to end an employment relationship. However, employees have essentially no job protection and may be terminated without cause or notice.
In contrast, employees with employment contracts may have rights such as limitations on the reasons they can be terminated and procedural requirements that must be met before termination. If the employer acts improperly in terminating them, they may also sue for breach of contract and potentially receive damages.
There are some restrictions on an employer’s right to fire an at-will employee. Employers cannot terminate employees for illegal reasons, such as those that would constitute discrimination, retaliation, or whistleblowing. For instance, federal, state, and many local laws protect employees from discrimination based on race, color, religion, sex, national origin, age, disability, pregnancy, sexual orientation and gender identity. Various laws also prevent retaliation against employees who complain about the employer’s illegal activity, advocate for employee rights, or engage in other protected activities.
Employees terminated for an unlawful reason can sue for wrongful termination. If successful, the employee may be awarded statutory penalties and/or damages for lost wages, lost benefits, emotional distress and reasonable attorneys’ fees as provided in the statute that the employer violated.
Employers may have the legal right to fire an employee at-will, but they should take certain steps to minimize the risk of liability. Best practices include the following:
Note that there may also be specific legal requirements that apply to termination. For example, in New York, an employer must provide the departing employee with proper termination notice.
The presumption that an employment relationship is at-will can be changed by an employment contract or collective bargaining agreement. Typically, employment agreements are used for high-level employees to entice them into taking a job. They usually provide that an employee can only be fired for “cause,” meaning there has to be some form of improper conduct. The contract also will often clarify each side’s rights and obligations, including setting forth terms and conditions of employment, protection of confidential information, and restrictions on competitive activities.
The specific terms of the contract are important. For example, in New York, the existence of an offer letter or employment agreement does not negate at-will employment unless the document specifically provides that termination is only permitted “for cause.” Employment contracts should be reviewed by an attorney to ensure they provide the intended rights and do not create unwanted obligations. Further, employers should take care not to inadvertently create an employment contract through language in their employee handbook employee handbook or employment forms, or with verbal promises. Many businesses explicitly state in their handbook or forms that the employee agrees that he or she is an employee at-will to provide additional protection to employers.
Where a contract exists, it is essential to comply with its provisions. If an employer fires an employee in violation of the written contract, it may be sued and be subject to liability for breach of contract.
Employers and employees should familiarize themselves with the rules governing employment at-will. If the employer’s intent is to hire at-will employees, an attorney can review hiring-related materials to ensure an employment contract is not created as well as help develop appropriate workplace policies to govern termination of employees.
Employees who believe they were wrongfully terminated should consult an attorney to discuss their rights.