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 terminated by the employer or staff at any time and for any reason or no reason at all – 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. Similarly, staff are free to leave.

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 12 months.

There are 4 exemptions to at-will employment:

Public Policy and Legislation

At-will employment may not be terminated if it violates public policy. For instance, staff cannot be terminated for refusing to do something illegal, whistleblowing, when staff are acting in the name of public interests such as taking time off to attend jury duty. US civil rights legislation also protects staff 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 staff have been misled to believe their job was secure but are 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 around 10% of the workforce in the US are members of a trade union.

Implied Contract

An employment contract was implied, for example, if an employer provides staff with a handbook which implies that staff 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 offer letter is not conclusive. Nevertheless, this should be stated very clearly.

• Staff handbooks. Go over your staff handbooks again. Some handbooks may state that staff have the right to a warning before they can be fired. This will not allow employers to terminate staff “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, for example, 40,000 dollars” which indicates promise of job permanency and security.  

• Specific commencement and end date. It is recommended not to put a specific start and end date. The start date would simply be when the terms of engagement are finalised – the employer may request staff to start anytime thereafter.

• Notice period. It is recommended not to include a notice period clause.

4 common types of employment relationships in the US

1. Temporary or Full-time
2. Fixed Term or Indefinite
3. At-Will or Contract

In conclusion, here is 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. Temporary fixed term staff (ski instructor working 10 hours per week during the winter)
   • At-will (comes with some risks associated with a specific end date)
   • Contract
2. Temporary indefinite staff (café barista working 10 hours per week with no end date)
   • At-will
   • Contract
3. Full-time fixed-term staff (project engineer working 40 hours per week for 2 years)
   • At-will (comes with some risks associated with a specific end date)
   • Contract
4. Full-time indefinite staff (in-house accountant working 40 hours per week with no end date)
   • At-will
   • Contract