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This article was written by our valued partner ADP, who provides Innovia Co-op members with world-class human resource solutions.

 

At-will employment is an important concept for both employers and employees to understand. To help, here are answers to frequently asked questions about at-will employment.

Q: What is at-will employment and why is it important?

A: At-will employment generally means that, absent certain exceptions such as an implied contract or public policy, either the employer or the employee can terminate the employment relationship at any time and for any reason, as long as the reason is a lawful one. Absent an at-will-employment relationship, the employer may have to establish “just cause” to terminate an employee.

Note: The exceptions to at-will employment vary by state. Employers should consult legal counsel to discuss the exceptions that apply in their state.

Q: What is an implied contract?

A: Most states recognize implied contracts as an exception to at-will employment. Implied contracts can be created by oral or written statements or actions and conduct that imply future employment for a definite or indefinite period. For instance, “don’t worry—we never lay off employees” could be interpreted as a promise of future employment without any possibility of layoffs. Certain policies and practices can also create an implied contract. For example, if drafted incorrectly, disciplinary policies that lock you into taking a specific course of action regardless of the infraction could create an implied promise of employment., Probationary or introductory periods are sometimes used to assess a new hire’s performance but can also lead to confusion regarding at-will status. For instance, employees sometimes think that once they successfully complete a probationary period, they are no longer at risk for termination based upon their performance. This misunderstanding can lead to increased risk of wrongful termination claims.

Q: What is the public policy exception to at-will employment?

A: Generally, it means that a well-established policy of a state, which can be found in a law or rule, such as a law that prohibits employers from terminating an employee for filing a workers’ compensation claim, creates an exception to at-will employment.

Q: Do all states recognize at-will employment?

A: At-will employment is recognized in every state but Montana.

Q: How is Montana different?

A: In Montana, employers must have “good cause” to discharge an employee after the employee completes an initial probationary period. If an employer doesn’t establish a specific probationary period or provides that there is no probationary period prior to or at the time of hire, the probationary period is assumed to be 12 months from the date of hire, which can be extended to up to an additional six months by the employer. The law also has rules for notifying a discharged employee of any written internal procedures under which an employee may file an appeal with the employer about a discharge.

The state defines good cause as reasonable job-related grounds for an employee’s dismissal based on:

  • The employee’s failure to satisfactorily perform job duties;
  • The employee’s disruption of the employer’s operation;
  • The employee’s material or repeated violation of an express provision of the employer’s written policies; or
  • Other legitimate business reasons determined by the employer while exercising the employer’s reasonable business judgment.

Q: We aren’t in Montana. How can I reinforce at-will employment among my employees?

A: Here are some best practices for reinforcing at-will employment:

  • Prominently display an at-will employment statement in the beginning of your employee handbook. Reinforce at-will status in your handbook acknowledgment form as well. Here’s an example of an at-will statement:Employment with [Company Name] is “at-will.” This means employees are free to resign at any time, with or without cause, and [Company Name] may terminate the employment relationship at any time, for any lawful reason, with or without cause or advance notice. As an at-will employee, you are not guaranteed employment with [Company Name] for any set period of time.

    The policies set forth in this employee handbook are the policies that are in effect at the time of publication. They may be amended, modified, or terminated at any time by [Company Name], except for the policy on at-will employment, which may be modified only by a signed, written agreement between the President and the employee at issue. Nothing in this handbook may be construed as creating a promise of future benefits or a binding contract between [Company Name] and any of its employees.

  • Avoid policies that may create confusion about at-will status, such as those that restrict your ability to decide what type of discipline is appropriate given the severity of the offense and the employee’s history of misconduct. State that violations may result in disciplinary action, up to and including termination, and that the company reserves the right to decide what disciplinary action to take in any given situation. Keep in mind, however, that treating employees fairly is key and similar situations and past practices should guide and impact the disciplinary action that you take.
  • Train all supervisors to avoid using language or making statements that may be construed as an offer or promise of future employment.

Conclusion:

Make sure you understand at-will employment in your state, and avoid using policies, statements, and practices that could inadvertently undermine employees’ at-will status.

Contact us to learn more about our partnership with ADP, and how they help our member companies provide a great working experience for their employees.