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Knowing the Law Protects You
Most states observe some form of at-will employment policies: Both both you and your employees can decide at whim when to terminate your working relationship. However, even if your company is in an at-will state, you must always be cognizant whether your policies inadvertently subvert the laws in your state so that an employee can seek redress if he believes he has been terminated without just cause.
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What is At-Will Employment?
The concept of at-will employment came into being in the 1870s, shortly after the Civil War, when most areas of the country were busy rebuilding and expanding. It was a time when companies expanded without much government interference. There was an aura of freedom about men throughout the country--not just those who had been emancipated by the Civil War, but the working man in general felt the impetus of his own individualism. An atmosphere of equality thrived between employer and employee: Just as the employer had always enjoyed the option to terminate someone’s employment whenever he pleased and without any reason, the employee gained equal footing to “up and quit" his job at will, whenever it suited him.
Eventually, relationships normalized between employers for both unionized and non-unionized employees. The status quo indicated that if an employee reported for work regularly and did a good job, he provided a value that would preclude any unnecessary or unjust termination.
Initially, all 50 states plus the District of Columbia subscribed to the at-will doctrine. But social changes in the mid-1900s brought the issue back to the table. Legislators and jurors revisited concerns about employee rights of at-will employment and eventually identified three conditions--called exceptions--that protected employees from the hazards of sudden, unexplained termination: Employees were protected against discharges that went against public policy; they were protected against discharge when an implied contract existed; and they were protected when good faith covenants existed.
As the exceptions evolved, most states accepted one or more of them, but today only six states honor all three exceptions—Alaska, California, Idaho, Nevada, Utah, and Wyoming. Conversely, there are four states that refuse to recognize any of the exceptions—Florida, Georgia, Louisiana, and Rhode Island.
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The Public Policy Exception
This exception prohibits a company from terminating an employee if it violates the statutes of the state where the company operates. For example, employers cannot fire someone who has refused to commit a dishonest act—such as lying for his employer in a trial case. Employees are also protected from termination if they suffer a work-related injury. Petermann vs. International Brotherhood of Teamsters set this precedent in California in 1959. An employee named Petermann testified truthfully in a case even though union representatives had ordered him to perjure himself, and immediately afterward he was fired. The court found that the solicitation of perjury went against the public good.
Of the three exceptions, this is the one most widely honored. Only eight states do not recognize the public policy exception: They are the original four mentioned above--Florida, Georgia, Louisiana, and Rhode Island—as well as New York, Maine, Nebraska, and Alabama.
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The Implied Contract Exception
The next exception sparks a lively debate among employers who do not sign contracts with their employees, because if there is no contract, then termination can be at will—right? Actually, the law says that an implied contract exists as soon as the employer describes steps that will be taken during an employee redirection phase. If the employee handbook, for example, sets out a disciplinary procedure, then the employee is protected against at-will termination by virtue of that policy. There is also an implied oral contract if an employer tells the employee that he will remain employed as long as he does his work.
The states that dispute this exception—Delaware, Georgia, Florida, Indiana, Louisiana, Massachusetts, Montana, Missouri, North Carolina, Rhode Island, Pennsylvania, Texas, and Virginia—offer varying reasons for doing so. A Florida court decided in Muller v. Stromberg Carlson Corporation that a contract had to be “definite." Pennsylvania ruled in Richardson v. Cole Memorial Hospital that an employee handbook did not represent a “meeting of the minds."
It’s important to note that you can avoid this exception even if you issue an employee handbook by including language that no contract is implied or intended. The Bureau of Labor Statistics reprints an article on its website (referenced below), and Note 25 suggests appropriate phrasing.
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The Good Faith Exception
Only 11 states actually recognize the Covenant of Good Faith Exception: Alabama, Alaska, Arizona, California, Delaware, Idaho, Massachusetts, Montana, Nevada, Utah, and Wyoming. If your company operates in another state, it doesn’t apply to you. This exception places value on the longevity of employment as a proof of the employee’s worth to the company and generally protects the employee against malicious termination. Some states have permitted tort action against companies who terminated tenured, faithful employees for seemingly unjust cause.
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What’s Your Next Step?
As the business owner or human resources manager, you should search your state’s website for doctrines on at-will employment. The website for Ohio, where I live, offers the case of Rose v. Hercules Tire and Rubber Co., et al. Mr. Rose challenged his termination on the basis that the company had negated its right to terminate at will when it published its progressive discipline policy. However, prior to his termination Rose had been counseled by management for a procedural breach and warned that future breaches could lead to termination. Ohio upheld that such counseling nullified the contract offered by the progressive discipline policy, and Rose lost his case.
If your state does not spell out a position on this topic, you are likely at the very least to unearth documents that will shed light on what your state has decided on cases involving employee rights of at-will employment.
Muhl, C. The employment-at-will doctrine: three major exceptions. Monthly Labor Review, January 2001. Retrieved from Bureau of Labor website at http://www.bls.gov/opub/mlr/2001/01/art1full.pdf