Are You Certain Your Staff Are Employed “At-Will” in the US?

In the US, staff are hired under either at-will employment or under an employment contract. Employment at will is an employment relationship which may be…

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Written by yichengchen

In the US, staff are hired under either at-will employment or under an employment contract. Employment at will is an employment relationship which may be terminated by the employer or employee at any time and for any or no reason – subject to limited exceptions.

At-will employment is very popular amongst companies as it gives staff the flexibility to terminate such employment at any time without giving any just cause – at-will indeed. Employers are not required to provide notice period. Similarly, employees are allowed to leave freely as well.

Montana is the only State in the US which does not recognise employment at-will after the initial probation period. Under Montana state laws, probation cannot be longer than a 12-month period.

There are namely 4 exemptions to at-will employment:

Public Policy / Legislation

At-will employment may not be terminated if would violate public policy. For instance, staff cannot be terminated for refusing to do something illegal, whistleblowing, when employee is acting in the name of public interests such as taking time off to attend jury duty. US civil rights legislation also protects employees from discriminatory termination because of race, gender, religion, national origin, sex, genetic information or age.

Covenant of Good Faith & Fair Dealing

Many states require employers to act in good faith. For instance, terminating staff right before they were due to receive a large commission would be acting in bad faith. Or when an employee has been misled to believe his or her job was secure but was terminated a long time after positive reviews.

Unions

Where there are trade unions there would be collective bargaining agreements in place and these workers are protected against certain employment actions. Only about 10% of workforce in US are members of a trade union.

Implied Contract

An employment contract was implied. For example, employer providing an employee handbook which implies that an employee will only be terminated for “just cause”.

Practical Guidance

Below are some pointers for employers and HR specialists to take note:

  • Substance not form. Stating “employment is at-will” on the employment offer letter is not conclusive. Nonetheless, this should be stated very clearly.
  • Employee handbooks. Go over your employee handbooks again. Some handbooks may provide that an employee has a right to a warning before they can be fired. This will not allow employers to terminate employees “at-will”.
  • Acknowledgement forms. It is not uncommon for some companies to require new-hires to sign a separate acknowledgement form indicating that they understand and accept that their employment is at-will.
  • Payroll description. It is recommended to state “payroll is computed and paid monthly” rather than to use words such as “you will be paid an annual salary of $X dollars” which indicates promise of job permanency and security.  
  • Specific commencement and end date. You are recommended not put a specific start and end date. The start date would simply be when the terms of engagement are finalised – the employer may request the employee to start anytime thereafter.
  • Notice period. You are recommended not to include a notice period clause.

4 common types of employment relationships in the US

Temporary  
or  
Full-time
XFixed Term  
or  
Indefinite
XAt-Will  
or  
Contract

At the conclusion of this article, we like to give an overview of the 4 common types of employment relationships in the US. This is to demonstrate that both contract employment and at-will employment are simultaneously possible:

  1. Temp fixed term employee (ski instructor working 10 hours a week during winter)
    • At-will (comes with some risks associated with a specific end date)
    • Contract
  2. Temp indefinite employee (café barista working 10 hours a week with no end date)
    • At-will
    • Contract
  3. Full-time fixed term employee (project engineer working 40 hours a week for 2 years)
    • At-will (comes with some risks associated with a specific end date)
    • Contract
  4. Full-time indefinite employee (in-house accountant working 40 hours a week with no end date)
    • At-will
    • Contract