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Employers: Mind the risks of at-will employment

Most employers in the United States now apply the at-will employment doctrine when hiring. It essentially holds that an employer can terminate employees hired under the doctrine at any time without warning or explanation. (There are some exceptions, which we’ll discuss below.)

If your organization uses at-will employment, staff members who hold the power to hire and fire must still step carefully. Misunderstanding the doctrine, or wielding it recklessly, can spur lawsuits, slow productivity and damage your employer brand.

Some exceptions apply

As mentioned, there are exceptions to the at-will employment doctrine. First and foremost, you can’t terminate employees for unlawfully discriminatory reasons. That is, you must abide by statutory considerations established under Title VII of the Civil Rights Act of 1964 — including age, race, religion, national origin, and gender or sexual orientation discrimination, as well as other applicable laws.

Another exception is you can’t commit a “a public policy infringement” when terminating someone. This refers to various violations of established public policy, such as firing an employee out of retaliation for having filed a workers’ compensation claim. A third exception is violation of implied covenants of good faith and fair dealing, such as terminating long-term employees just before they’re due to receive anticipated financial benefits.

When considering whether to fire an employee signed to an at-will contract, be sure to review these exceptions and other mitigating factors with your employment attorney before acting. There may also be some state-specific rules to consider.

Documentation still necessary

Even if you don’t violate any of the exceptions to at-will employment, a terminated employee may still file a wrongful termination claim on the grounds of discrimination, retaliation or other unlawful actions.

For this reason, employers are widely advised to use progressive discipline to improve their odds of prevailing in court should a lawsuit arise. Typically, progressive discipline follows three steps: 1) Verbal warnings, 2) written warnings and 3) termination. In some situations, suspension (with or without pay) can be an additional step between a written warning and termination.

At each step, the supervisor involved (and perhaps other parties) need to create written documentation showing that progressive discipline was applied. Along with helping defend against potential lawsuits, documented progressive discipline can often improve employee performance — avoiding legal action and benefiting everyone involved.

Probationary periods may help

As part of an at-will employment contract, many employers include a probationary period upon hiring — usually the first 60 to 90 days of employment. Doing so may help prevent terminated employees from coming back and suing you for wrongful termination. But it depends on the worker’s employment status.

If a union’s collective bargaining agreement is in place, the employer may be able to terminate the employee during the probationary period risk-free without going through progressive discipline. Union contracts usually allow management the right to terminate during this period without fear of a lawsuit.

On the other hand, if employees are hired at will, no similar “contractual right” exists. Consequently, the employer does have the right to terminate without cause or notice — but the former employee also has the right to sue. Therefore, you may want to issue at least one written warning before terminating even probationary employees to support your case in court.

The reality of the situation

In practice, the at-will employment doctrine generally doesn’t allow employers to terminate employees on a whim — at least not without risking a potentially expensive and time-consuming lawsuit. Again, consult your attorney before undertaking any adverse employment action. And contact us for help analyzing the financial impact of your hiring process and staffing decisions.

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