Does At-Will Employment Really Mean What You Think It Means?

June 30, 2009
By: David B. Mulé

We are often asked by clients, "Do I have to have a reason to terminate employees if they are at-will?"

Well, yes and no. Think of it this way. When you make the decision to terminate an employee, you do not have to have a reason if they are at-will, but you have a reason nevertheless. Try to think of the last employee you fired for absolutely no reason at all. You always have a reason. Employers do not fire employees arbitrarily. They invariably have reasons. Sometimes they are legitimate reasons and other times they are illegitimate reasons. Employees know this.

Although the at-will doctrine1 does not require an employer to have a reason or "cause" to terminate an employee without a contract, the actual reason for the termination must not be unlawful. For example, regardless of whether one is an at-will employee or not, an employer may not terminate the employee because of his or her membership in a protected class, like race, gender, age, disability, sexual orientation, religious creed, etc. Nor may an employer terminate an employee for complaining about unlawful conduct in the workplace, such as sexual harassment or discrimination. Further, employees are protected from terminations for retaliatory reasons such as reporting potentially unlawful activities to a governmental agency like OSHA or the Labor Commissioner. Employees may not be terminated for refusing to engage in conduct that would be illegal, such as forging financial documents on behalf of their employers. The list is seemingly endless. Essentially employers may not terminate employees for reasons that would violate any law that provides protection to employees.

So, while you do not have to have a reason, in reality you do and it better not be unlawful. If you do not clearly communicate the concerns you have with an employee's work performance, attendance or any other issues that constitute the reason for the termination, the employee may conclude that your reason for the termination was unlawful. One can imagine a conversation between a recently terminated employee and his or her attorney going something like this:

Lawyer: Did your employer tell you why you were terminated?

Employee: No.

Lawyer: Do you know why you were let go?

Employee: Well, my boss said that they did not have to give me a reason because I was at-will. But, I think my termination had something to do with my pregnancy.

Lawyer: How do you know that?

Employee: I was terminated just three hours after telling my boss that I was pregnant.

This looks problematic for the employer. However, there may have been a legitimate reason for the decision to terminate the employee in this example. Perhaps, the employer had to eliminate the position for economic reasons. Perhaps the company had been investigating losses in the department and discovered that the employee had been misappropriating funds from the company. Perhaps the decision to terminate had been made well before the company had knowledge of the employee's pregnancy. There are many potential legitimate reasons. But, if the employee is in the dark on what the actual reason for the termination was, then the employee's speculation may result in a lawsuit.

This is why it is so important to do performance reviews and to communicate with your employees regarding ongoing issues. Does this mean that you should always give reasons to your employees when you terminate them? No. There are circumstances where it is best not to provide a reason, but they are rare. As a general rule, employees should be given a reason for their terminations, even though the law does not require it.

If an employee feels that he or she has been treated fairly and honestly, even though the employee may not like the outcome, the likelihood that the employee will pursue litigation or file a claim decreases. Healthy communication with your employees regarding their performance, constructive evaluations and proper documentation go a long way to keeping you and your employees on the same page with respect to their employment. Ultimately, if you must terminate the relationship, good communication will prevent misunderstandings and avert claims.

While often necessary, terminations are never easy and very often present tricky legal problems. Employers should never simply rely on - and essentially flaunt - the at-will doctrine when making the decision to terminate without also considering other potential issues that may arise. Employers should also consider seeking advice from labor and employment legal counsel to guide them through the process.

For more information, contact FitzGerald & Mulé LLP.

1 California Labor Code, section 2922

This article is intended for informational purposes only. Nothing herein should be construed to constitute legal advice. It is recommended that you seek legal counsel before making decisions regarding labor and employment matters.

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