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At-will employment

At-will employment

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At-will employment is a doctrine of American law
Law of the United States
The law of the United States consists of many levels of codified and uncodified forms of law, of which the most important is the United States Constitution, the foundation of the federal government of the United States...

 that defines an
employment
Employment
Employment is a contract between two parties, one being the employer and the other being the employee. An employee may be defined as:- Employee :...

 relationship in which either party can break the relationship with no liability, provided there was no express contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...

 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
Trade union
A trade union, trades union or labor union is an organization of workers that have banded together to achieve common goals such as better working conditions. The trade union, through its leadership, bargains with the employer on behalf of union members and negotiates labour contracts with...

). Under this legal doctrine:
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. 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
Law and economics
The economic analysis of law is an analysis of law applying methods of economics. Economic concepts are used to explain the effects of laws, to assess which legal rules are economically efficient, and to predict which legal rules will be promulgated.-Relationship to other disciplines and...

 such as Professors Richard A. Epstein and Richard Posner
Richard Posner
Richard Allen Posner is an American jurist, legal theorist, and economist who is currently a judge on the United States Court of Appeals for the Seventh Circuit in Chicago and a Senior Lecturer at the University of Chicago Law School...

. In particular, at-will employment has been credited with making possible the success of Silicon Valley
Silicon Valley
Silicon Valley is a term which refers to the southern part of the San Francisco Bay Area in Northern California in the United States. The region is home to many of the world's largest technology corporations...

 as an entrepreneur-friendly environment.

Several statutory and judge-made exceptions to the doctrine exist, especially if unlawful discrimination
Discrimination
Discrimination is the prejudicial treatment of an individual based on their membership in a certain group or category. It involves the actual behaviors towards groups such as excluding or restricting members of one group from opportunities that are available to another group. The term began to be...

 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.

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.

Origins


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. In Toussaint v. Blue Cross & Blue Shield of Michigan, the Court noted that "Wood’s rule was quickly cited as authority for another proposition."

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. Thus was born the U.S. at-will employment rule, which allowed discharge for no reason. This rule was adopted by all U.S. state
U.S. state
A U.S. state is any one of the 50 federated states of the United States of America that share sovereignty with the federal government. Because of this shared sovereignty, an American is a citizen both of the federal entity and of his or her state of domicile. Four states use the official title of...

s. In 1959 the first judicial exception to the at-will rule was created by one of the California Courts of Appeal. Later, in a 1980 landmark case involving ARCO
ARCO
Atlantic Richfield Company is an oil company with operations in the United States as well as in Indonesia, the North Sea, and the South China Sea. It has more than 1,300 gas stations in the western part of the United States. ARCO was originally formed by the merger of East Coast-based Atlantic...

, the Supreme Court of California endorsed the rule first articulated by the Court of Appeal. The resulting actions by employees are now known in California as Tameny actions for wrongful termination in violation of public policy.

Since 1959, several common law
Common law
Common law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...

 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. 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. 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."

Public policy exceptions


Under the public policy
Public policy
Public policy as government action is generally the principled guide to action taken by the administrative or executive branches of the state with regard to a class of issues in a manner consistent with law and institutional customs. In general, the foundation is the pertinent national and...

 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), 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, forty-three U.S. states and the District of Columbia recognize public policy as an exception to the at-will rule.

The 7 states which do not have the exception are:
  • Alabama
    Alabama
    Alabama is a state located in the southeastern region of the United States. It is bordered by Tennessee to the north, Georgia to the east, Florida and the Gulf of Mexico to the south, and Mississippi to the west. Alabama ranks 30th in total land area and ranks second in the size of its inland...

  • Georgia
    Georgia (U.S. state)
    Georgia is a state located in the southeastern United States. It was established in 1732, the last of the original Thirteen Colonies. The state is named after King George II of Great Britain. Georgia was the fourth state to ratify the United States Constitution, on January 2, 1788...

  • Louisiana
    Louisiana
    Louisiana is a state located in the southern region of the United States of America. Its capital is Baton Rouge and largest city is New Orleans. Louisiana is the only state in the U.S. with political subdivisions termed parishes, which are local governments equivalent to counties...

  • Maine
    Maine
    Maine is a state in the New England region of the northeastern United States, bordered by the Atlantic Ocean to the east and south, New Hampshire to the west, and the Canadian provinces of Quebec to the northwest and New Brunswick to the northeast. Maine is both the northernmost and easternmost...

  • Nebraska
    Nebraska
    Nebraska is a state on the Great Plains of the Midwestern United States. The state's capital is Lincoln and its largest city is Omaha, on the Missouri River....

  • New York
    New York
    New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...

  • Rhode Island
    Rhode Island
    The state of Rhode Island and Providence Plantations, more commonly referred to as Rhode Island , is a state in the New England region of the United States. It is the smallest U.S. state by area...

  • Florida
    Florida
    Florida is a state in the southeastern United States, located on the nation's Atlantic and Gulf coasts. It is bordered to the west by the Gulf of Mexico, to the north by Alabama and Georgia and to the east by the Atlantic Ocean. With a population of 18,801,310 as measured by the 2010 census, it...

     - with exception

Implied contract exceptions



Thirty-seven U.S. states (and the District of Columbia) also recognize an implied contract as an exception to at-will employment.
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." 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:
  • Delaware
    Delaware
    Delaware is a U.S. state located on the Atlantic Coast in the Mid-Atlantic region of the United States. It is bordered to the south and west by Maryland, and to the north by Pennsylvania...

  • Florida
    Florida
    Florida is a state in the southeastern United States, located on the nation's Atlantic and Gulf coasts. It is bordered to the west by the Gulf of Mexico, to the north by Alabama and Georgia and to the east by the Atlantic Ocean. With a population of 18,801,310 as measured by the 2010 census, it...

  • Georgia
    Georgia (U.S. state)
    Georgia is a state located in the southeastern United States. It was established in 1732, the last of the original Thirteen Colonies. The state is named after King George II of Great Britain. Georgia was the fourth state to ratify the United States Constitution, on January 2, 1788...

  • Indiana
    Indiana
    Indiana is a US state, admitted to the United States as the 19th on December 11, 1816. It is located in the Midwestern United States and Great Lakes Region. With 6,483,802 residents, the state is ranked 15th in population and 16th in population density. Indiana is ranked 38th in land area and is...

  • Louisiana
    Louisiana
    Louisiana is a state located in the southern region of the United States of America. Its capital is Baton Rouge and largest city is New Orleans. Louisiana is the only state in the U.S. with political subdivisions termed parishes, which are local governments equivalent to counties...

  • Massachusetts
    Massachusetts
    The Commonwealth of Massachusetts is a state in the New England region of the northeastern United States of America. It is bordered by Rhode Island and Connecticut to the south, New York to the west, and Vermont and New Hampshire to the north; at its east lies the Atlantic Ocean. As of the 2010...

  • Missouri
    Missouri
    Missouri is a US state located in the Midwestern United States, bordered by Iowa, Illinois, Kentucky, Tennessee, Arkansas, Oklahoma, Kansas and Nebraska. With a 2010 population of 5,988,927, Missouri is the 18th most populous state in the nation and the fifth most populous in the Midwest. It...

  • Montana
    Montana
    Montana is a state in the Western United States. The western third of Montana contains numerous mountain ranges. Smaller, "island ranges" are found in the central third of the state, for a total of 77 named ranges of the Rocky Mountains. This geographical fact is reflected in the state's name,...

  • North Carolina
    North Carolina
    North Carolina is a state located in the southeastern United States. The state borders South Carolina and Georgia to the south, Tennessee to the west and Virginia to the north. North Carolina contains 100 counties. Its capital is Raleigh, and its largest city is Charlotte...

  • Pennsylvania
    Pennsylvania
    The Commonwealth of Pennsylvania is a U.S. state that is located in the Northeastern and Mid-Atlantic regions of the United States. The state borders Delaware and Maryland to the south, West Virginia to the southwest, Ohio to the west, New York and Ontario, Canada, to the north, and New Jersey to...

  • Rhode Island
    Rhode Island
    The state of Rhode Island and Providence Plantations, more commonly referred to as Rhode Island , is a state in the New England region of the United States. It is the smallest U.S. state by area...

  • Texas
    Texas
    Texas is the second largest U.S. state by both area and population, and the largest state by area in the contiguous United States.The name, based on the Caddo word "Tejas" meaning "friends" or "allies", was applied by the Spanish to the Caddo themselves and to the region of their settlement in...

  • Virginia
    Virginia
    The Commonwealth of Virginia , is a U.S. state on the Atlantic Coast of the Southern United States. Virginia is nicknamed the "Old Dominion" and sometimes the "Mother of Presidents" after the eight U.S. presidents born there...



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, 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, 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.

Covenant of good faith and fair dealing exceptions (aka. "Implied-in-law" Contracts)



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. These 11 states are:
  • Alabama
    Alabama
    Alabama is a state located in the southeastern region of the United States. It is bordered by Tennessee to the north, Georgia to the east, Florida and the Gulf of Mexico to the south, and Mississippi to the west. Alabama ranks 30th in total land area and ranks second in the size of its inland...

  • Alaska
    Alaska
    Alaska is the largest state in the United States by area. It is situated in the northwest extremity of the North American continent, with Canada to the east, the Arctic Ocean to the north, and the Pacific Ocean to the west and south, with Russia further west across the Bering Strait...

  • Arizona
    Arizona
    Arizona ; is a state located in the southwestern region of the United States. It is also part of the western United States and the mountain west. The capital and largest city is Phoenix...

  • California
    California
    California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...

  • Delaware
    Delaware
    Delaware is a U.S. state located on the Atlantic Coast in the Mid-Atlantic region of the United States. It is bordered to the south and west by Maryland, and to the north by Pennsylvania...

  • Idaho
    Idaho
    Idaho is a state in the Rocky Mountain area of the United States. The state's largest city and capital is Boise. Residents are called "Idahoans". Idaho was admitted to the Union on July 3, 1890, as the 43rd state....

  • Massachusetts
    Massachusetts
    The Commonwealth of Massachusetts is a state in the New England region of the northeastern United States of America. It is bordered by Rhode Island and Connecticut to the south, New York to the west, and Vermont and New Hampshire to the north; at its east lies the Atlantic Ocean. As of the 2010...

  • Montana
    Montana
    Montana is a state in the Western United States. The western third of Montana contains numerous mountain ranges. Smaller, "island ranges" are found in the central third of the state, for a total of 77 named ranges of the Rocky Mountains. This geographical fact is reflected in the state's name,...

  • Nevada
    Nevada
    Nevada is a state in the western, mountain west, and southwestern regions of the United States. With an area of and a population of about 2.7 million, it is the 7th-largest and 35th-most populous state. Over two-thirds of Nevada's people live in the Las Vegas metropolitan area, which contains its...

  • Utah
    Utah
    Utah is a state in the Western United States. It was the 45th state to join the Union, on January 4, 1896. Approximately 80% of Utah's 2,763,885 people live along the Wasatch Front, centering on Salt Lake City. This leaves vast expanses of the state nearly uninhabited, making the population the...

  • Wyoming
    Wyoming
    Wyoming is a state in the mountain region of the Western United States. The western two thirds of the state is covered mostly with the mountain ranges and rangelands in the foothills of the Eastern Rocky Mountains, while the eastern third of the state is high elevation prairie known as the High...



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.

Statutory exceptions


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:
  • for refusing to commit illegal acts – An employer is not permitted to fire an employee because the employee refuses to commit an act that is illegal.
  • family or medical leave – federal law permits most employees to take a leave of absence for specific family or medical problems. An employer is not permitted to fire an employee who takes family or medical leave for a reason outlined in the Family and Medical Leave Act.
  • not following own termination procedures – often, the employee handbook or company policy outlines a procedure that must be followed before an employee is terminated. If the employer fires an employee without following this procedure, the employee may have a claim for wrongful termination.


Examples of federal statutes include:
  • Equal Pay Act of 1963
    Equal Pay Act of 1963
    The Equal Pay Act of 1963 is a United States federal law amending the Fair Labor Standards Act, aimed at abolishing wage disparity based on sex . It was signed into law on June 10, 1963 by John F. Kennedy as part of his New Frontier Program...

     (relating to discrimination on the basis of sex in payment of wages);
  • Title VII of the Civil Rights Act of 1964
    Civil Rights Act of 1964
    The Civil Rights Act of 1964 was a landmark piece of legislation in the United States that outlawed major forms of discrimination against African Americans and women, including racial segregation...

     (relating to discrimination on the basis of race, color, religion, sex, or national origin);
  • Age Discrimination in Employment Act
    Age Discrimination in Employment Act
    The Age Discrimination in Employment Act of 1967, Pub. L. No. 90-202Code, through , forbids employment discrimination against anyone at least 40 years of age in the United States .-Scope of Protection:...

     of 1967 (relating to certain discrimination on the basis of age with respect to persons of at least 40 years of age);
  • Rehabilitation Act of 1973
    1973 Rehabilitation Act
    The U.S. Rehabilitation Act of 1973 prohibits discrimination on the basis of disability in programs conducted by Federal agencies, in programs receiving Federal financial assistance, in Federal employment, and in the employment practices of Federal contractors...

     (related to certain discrimination on the basis of handicap status);
  • Americans with Disabilities Act of 1990
    Americans with Disabilities Act of 1990
    The Americans with Disabilities Act of 1990 is a law that was enacted by the U.S. Congress in 1990. It was signed into law on July 26, 1990, by President George H. W. Bush, and later amended with changes effective January 1, 2009....

     (relating to certain discrimination on the basis of handicap status).
  • The National Labor Relations Act
    National Labor Relations Act
    The National Labor Relations Act or Wagner Act , is a 1935 United States federal law that limits the means with which employers may react to workers in the private sector who create labor unions , engage in collective bargaining, and take part in strikes and other forms of concerted activity in...

     provides protection to employees who wish to join or form a union and those who engage in union activity. The act also protects employees who engage in a "concerted activity".
  • In addition to being fired based on status in a protected class (race, gender, etc.), employers are not allowed to retaliate against any protected action. "Protected actions" include suing for wrongful termination, testifying as a witness in a wrongful termination case, or even opposing what they believe (whether they can prove it or not) to be wrongful discrimination. In the recent federal case of Ross v. Vanguard, Raymond Ross successfully sued his employer for firing him due to his allegations of racial discrimination.

See also

  • Employment Rights Act 1996
    Employment Rights Act 1996
    The Employment Rights Act 1996 is a United Kingdom Act of Parliament passed by the Conservative government to codify the existing law on individual rights in UK labour law. Previous statutes, dating from the Contracts of Employment Act 1963, included the Redundancy Payments Act 1965, the...

    , for the UK approach to employment protection. See also, Contracts of Employment Act 1963
    Contracts of Employment Act 1963
    The Contracts of Employment Act 1963 was an Act of the Parliament of the United Kingdom which introduced the requirement to give reasonable notice before dismissal and written particulars of a contract of employment...

    , for the first modern UK law on the requirement to give reasonable notice before any dismissal.
  • Creen v Wright
    Creen v Wright
    Creen v Wright LR 1 CPD 591 is an English contract law and labour law case concerning wrongful dismissal and the appropriate period of reasonable notice to be implied at common law in a contract of employment.-Facts:...

    (1875–76) LR 1 CPD 591 and Hill v C Parsons & Co [1972] 1 Ch 305
  • Employment agency
    Employment agency
    An employment agency is an organization which matches employers to employees. In all developed countries there is a publicly funded employment agency and multiple private businesses which also act as employment agencies.-Public employment agencies:...

  • European Social Charter
    European Social Charter
    The European Social Charter is a Council of Europe treaty which was adopted in 1961 and revised in 1996. The Revised Charter came into force in 1999 and is gradually replacing the initial 1961 treaty...

  • UK agency worker law
  • Worker Adjustment and Retraining Notification Act
    Worker Adjustment and Retraining Notification Act
    The Worker Adjustment and Retraining Notification Act of 1988 is a United States labor law which protects employees, their families, and communities by requiring most employers with 100 or more employees to provide sixty- calendar-day advance notification of plant closings and mass layoffs of...

     (WARN Act)
  • Bammert v. Don's Super Valu, Inc.
    Bammert v. Don's Super Valu, Inc.
    In Bammert v. Don's Super Valu, Inc., 646 N.W.2d 365 , the Wisconsin Supreme Court was faced with "a single question of first-impression: can the public policy exception to the employment-at-will doctrine be invoked when an at-will employee is fired in retaliation for the actions of his or her...

    , 646 N.W.2d 365 (Wis. 2002)