Use At-Will to Defend Your Policies, Not as a Reason to Terminate

What “At-Will” Means
What “At-Will” Really Protects
Don’t Terminate for “No Reason”
Defend Your Policies, Not Your Method of Termination
What the At-Will Statement Should Include

Many employers think they can hide behind an “at-will” policy statement and handle terminations any way they want. This cavalier approach, however, can result in discrimination claims.

Most employers are familiar with the “at-will” concept that, simply put, allows employers to terminate employees at any time, for any legal reason, or for no reason at all. The courts generally have upheld the right to terminate at will, but this right does not mean that employers should blithely terminate without giving a reason or without following normal policies and procedures. In fact, if you try to fire an employee by invoking the at-will clause, you could find yourself defending against a discrimination or wrongful termination claim. This possibility does not mean that the at-will clause is useless. The real reason most lawyers recommend including an at-will clause in personnel policies is to give the employer flexibility in applying its policies so that they will not become rigid contractual obligations that must be followed uniformly. Therefore, to help avoid discrimination claims, you should first follow your discipline and termination procedures, whenever possible. Your at-will clause should really only be thought of as a legal defense to keep you from being forced to follow your policies arbitrarily.

To use the at-will relationship most effectively, you need to understand what it means. Generally, employees who do not have contracts guaranteeing employment for a specific period of time (such as one year) are considered to be at-will employees. Under the at-will doctrine, employers have the right to terminate employees without these types of contracts at any time and for any legally permissible reason. Employees also have a similar right to resign whenever they want. In other words, it is a cold, somewhat harsh, legal concept that says both parties can terminate the relationship at any time.

However, an at-will statement does not really give employers free reign to terminate employees for no reason. There are two reasons for this. First, although every state except Montana recognizes the at-will employment relationship either by court decision or by statute, most also restrict it in some way. Courts in a majority of states have limited its application by allowing the at-will relationship to be restricted under several legal theories. For example, employees have claimed that their employer’s policies were contracts which the employer breached, that their termination violated some public policy, that their termination violated a “whistleblower” statute or statutory anti-retaliation provision; or that the employer’s action constituted a wrongful act (or, in legal jargon, a “tort”). The result is a patchwork of case law that varies from state to state, making it difficult for employers to know when, or if, they can rely on the at-will nature of the relationship.

The second reason for caution is that many employees are specially protected under federal or state discrimination laws, which must be complied with regardless of at-will status. Therefore, if you terminate a protected employee for “no reason” or without following your normal disciplinary process, you are raising a red flag that the termination was for improper or even discriminatory reasons. Thus, you may be provoking a challenge to the termination which otherwise might not have occurred.

Based on the above discussion, it might seem that the at-will concept has little value. However, a clearly written at-will statement is still a valuable tool to protect your policies and procedures so that they are not interpreted as contracts that must be followed exactly. Several courts have ruled that employers that have not included an employment-at-will statement in their policies may be legally required to follow the policies uniformly, without regard to the circumstances.

Take, as an example, an employee handbook that does not have an at-will statement but includes a disciplinary policy that states the employer will follow certain steps before terminating an employee. A court may conclude that the disciplinary policy is a contract and that the employer must follow each step precisely before it can fire anyone. Or, consider a policy that lists specific work rule violations that will result in immediate termination, without including an at-will reference or a statement that the list is not all-inclusive. A court could find that the employer may make such a termination only for the listed reasons.

So if you should not terminate solely by saying that an employee is at-will, how do you terminate a problem employee when a manager has not properly documented performance deficiencies? Your best bet is to follow your normal disciplinary process, even if that means taking extra time before you terminate the employee. For most employers this includes:

In addition to the above guidelines, you should document the performance issues and the steps taken before terminating the employee. This record can help you defend against any subsequent discrimination or wrongful discharge claims.

Of course, there may be circumstances when you feel you cannot take the time to follow your normal disciplinary procedure. In these cases, it is still better to discuss the specific problems with the employee and explain that they are the reason for the termination. If you simply invoke the at-will relationship and give no reason for the termination, the employee may assume that the true motive is related to discrimination or some other illegal act and thus seek legal recourse.

There is one circumstance when some HR experts agree the “no reason” at-will clause may be invoked to terminate an employee: during the introductory period. This period is usually structured as a trial that can be ended without following normal policies. In other words, the employee’s expectations are lower. However, as with your longer-term employees, if you do not identify a reason for the termination, you may unnecessarily provoke the employee to suspect discriminatory motives. Therefore, if you can point to a particular reason why the employee is not performing well in the job (for example, poor job or interpersonal skills), you may be able to reduce the odds that discrimination or other employment claims will be filed.

An at-will clause is a valid, but harsh, legal tool that grants employers some flexibility in applying their personnel policies. It should not be used, however, as a substitute for sound disciplinary and termination procedures. Faulty discipline and termination procedures can provoke unwarranted suspicions of discrimination and thus create unnecessary legal exposure. The at-will clause may not prevent you from being sued, but it can be helpful as a legal defense when policies were not, or could not, be followed. Therefore, you are best advised to conduct your HR affairs so that legal theories are your last line of defense, not a substitute for sound operating procedures.

What the At-Will Statement Should Include

Most courts will find an at-will relationship if the following criteria are met: