At-will employment
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At-will employment is an employment relationship in which either party can terminate the employment relationship at-will with no liability if there was not an express contract for a definite term governing the employment relationship. Several exceptions exist to the at-will doctrine.
Although at-will employment allows an employee to quit for no reason, it is most often invoked when an employer wants to fire an employee at any time, but there are limitations upon the employer's ability to terminate without reason. Many of these jobs are entry-level ones. As a means of downsizing, say closing an unprofitable factory, a company may fire employees en masse.
United States
At-will employment is a creation of U.S. law. Under English common law, an indefinite term of employment was presumed to be for one year. See Toussaint v. Blue Cross & Blue Shield of Mich., 408 Mich. 579, 600, 292 N.W.2d 880, 885 (1980) (for an extended discussion on the genesis of the at-will rule). The at-will rule has its genesis in a rule in Horace Gay Wood’s 1877 treatise on master servant relations. Wood cited four U.S. cases as authority for his rule that when a hiring was indefinite the burden of proof was on the servant to prove that an indefinite employment term was for one year. Id. at 601, 292 N.W.2d at 886. In Toussaint the Court noted “…Wood’s rule was quickly cited as authority for another proposition. Some courts saw the rule as requiring the employee to prove an express contract for a definite term in order to maintain an action based on termination of the employment.” Id. at 603, 292 N.W.2d at 887. Thus was born the U.S. at-will employment rule, which allowed discharge for no reason. This rule was adopted by all states and it was not until Peterman v. Intl. Bhd. of Teamsters, Chauffeurs, Warehouseman, and Helpers of Am., Local 396, 174 Cal. App. 2d 184, 344 P.2d 44 (1959), that the first judicial exception to the at will rule was created.
Since then, there have been several common law and statutory exceptions to at will employment.
Common Law Exceptions That Swallow the Rule
All U.S. States recognize retaliatory discharge as an exception to the at-will rule. Under the retaliatory discharge exception, an employer may not fire an employee if it would violate the State's public policy or a State or Federal statute.
Most states also recognize an implied contract as an exception to at-will employment. Implied employment contracts are most often found when an employer's personnel policies or handbooks indicate that an employee will not be fired except for good cause or specify a procedural process for firing. If the employer fires the employee in violation of an implied employment contract, the employer may be found liable for breach of contract.
A much smaller number of States have also recognized a breach of an implied covenant of good faith and fair dealing as an exception to at-will employment.
Statutory Exceptions
Although all States have a number of statutory protections for employees, most wrongful termination suits brought under statutory causes of action use the Federal anti-discrimination statutes which prohibit firing or refusing to hire an employee because of race, gender, age, or religion.