At Will Employment
Employment “at-will” has a technical legal definition, but for most employees it means one simple thing: unless you have a contract limiting your employer’s right to fire you, you can be fired for any reason or no reason at all.
From an employer’s perspective this makes sense. After all, you are free to quit your job at any time, for any reason. That’s true even if you have a contract in place (although you may suffer some other penaly as a result of leaving, like a restrictive covenant or repayment provision).
Limitations to At-Will terminations
Federal and State Statutes
Of course, an employer may not fire you for a reason that is prohibited by statute. Technically, this is not an exception to the at-will rule, but rather a protection afforded to every employee covered by the applicable statute.
For example, an employer covered by the Age Discrimination in Employment Act may not fire you because you are over 40 years old. Federal statutes also prohibit discipline or discharge based on race, religion, color, sex, national origin, and pregnancy. Most States have similar fair employment practice statutes that prohibit adverse employment decisions based on protected traits.
Anti-discrimination statutes are not the only types of laws that limit an employers right to discharge. In various forms, federal law and many States protect an employee who acts as a whistleblower —disclosing unlawful conduct by his or her employer.
The Public Policy Exception
Most States recognize some non-statutory limits on an employer’s right to discharge, even where your employment is at-will. That is, in most States an employer cannot discharge an employee if the decision violates a broad public policy. That’s a fancy way of saying that an employer cannot discharge you if it would somehow hurt the public interest. An example might be terminating an employee who attempts to report unlawful conduct by his supervisor. The State has an interest in having this type of conduct uncovered and an employee (even employed at-will) should not be penalized because he was doing some civic duty.
Keep in mind that most States have only a few public policies that would prevent an employer from discharge.
Implied Contract Exception
This can be a difficult exception to understand. In most cases, to have a contract, you need an express offer and acceptance between two or more parties. In some cases, however, courts are willing to say that a contract exists based on the circumstances surrounding the parties’ relationship. For example, in the employment context, an implied contract can said to exist when an employer’s handbook expressly limits the employer’s right to dischrage an employee. Nearly no employers do this, but a company could specifically state in their employee manaual that an employee will only be discharged for “just cause”. Depending on the facts of the case, in some states this could be enough to state a claim by the employee (technically, this would be a breach of contract action, rather than a tort for wrongful termination).
Covenant of Good Faith and Fair Dealing Exception
A handful of States recognize an exception to the at-will rule based on the covenant of good faith and fair dealing. Historically, courts would read this coveant (or promise) into private contracts between parties—requiring them to not only stick to the black letter of the contract, but to also act in a manner that would allow each party to fulfill his or her obligations. Bascially, you couldn’t shirk your contractual obligations by acting in bad faith. It’s rare to have this promise read into an employment situation, particularly where no express contract actually exists. In those states, however, an employer may not rely on the at-will rule where it has terminated an employee in bad faith.