Employment at will is defined as a contract of employment that can be terminated at any time and for any reason by any of the two involved parties, the employee and the employer. The employer does not need to establish a reason for termination as long as it is not illegal.
The contract also allows an employee to render his resignation at any time without warning or notice. There are no legal requirements that are predefined about notice periods on either side.
Meaning of employment at will
Employment at will is an arrangement that offers flexibility to both employer and employee, but an essential fact that one should pay attention to is that it does not provide any job security. It is presumed that all the employees are working under employment at will contract until and unless the worker has a legally binding act that states otherwise.
When the employment of an employee is terminated, hired under employment at will rules, then even the courts deny him any claim for a loss that he has suffered because of the dismissal. This is because the employee also has a similar right to leaving his job at any moment even if the termination has severe repercussions on the employer.
Exceptions to the rule of employment at will
The practice of employment at will is considered unjust by many, especially employees who look at a job as a security. With time exceptions were added to prevent serious misuse of the contract. At the end of the day employment at will remains controversial.
There are exceptions to the rule of employment at will and some of them are-
1. Public policy exceptions
Under the public policy exception, the employment of an employee cannot be terminated by an employer if the dismissal is against federal statute or public policy doctrine. One of the most common examples of public policy exception is when an employee reports safety hazards.
Even workers who have filed claims for worker’s compensation, who refuse to violate laws and have reported legal transgressions are exceptions to the rule and cannot be dismissed by their employers. The guidelines offer protection to workers who have to serve on a jury or in the military reserve and are unable to undertake their regular duties in the workplace.
2. Implied contracts exception
If an implied contract is formed, then the employer cannot dismiss an employee even if there is no written contract exists that categorically states about the employment relationship. It is not easy to prove the existence of an implied contract, and the burden of proof rests with the fired employee. An implied contract includes the oral statement made by the employer or via other written policies written down by the employer.
For example, if the first sixty days of an employee’s service is considered a probationary period, then it is implied that he will continue to work after the stipulated sixty days. From an employer’s point-of-view, it is best to avoid any such language or condition that implies continued employment and can come back to bite him later on.
3. Employment contracts
When an employee is under a collective bargaining agreement, he cannot be dismissed under the employment-at-will rule. The several stipulations under this category include violations of public policy, discrimination, and termination of policy guidelines.
Suppose a contractual agreement states that the employment can be terminated for cause and in such circumstances, the employer cannot fire the employee under employment at will.
4. Company policy
An exception to the rule of employment at will is the company policy of an organization. The company policy offers detail about the circumstances of how and when the employment of an employee can be terminated and whether any warning should be issued before the dismissal.
In most cases, the employers have to follow the set guidelines and policies during a termination of employment
5. Individual employment contract
In some companies as well as industries workers have specific employment contracts that outline in detail the terms of employment as well as the terms of discharge.
The employer in such a condition has to follow the agreement terms because otherwise, he becomes liable for wrongful termination action.
6. Covenant of good faith and fair dealing exception
Eleven states have put down their foot and consider the employment at will exceptions based on the broad principles of just cause and good faith. Employees have the right to file a lawsuit if they feel that their dismissal was not justified or does not have any reason.
7. Statutory exceptions
Almost all the states have statutory protections for employees and these include
It prohibits the dismissal of an employee on discriminatory grounds because of age, origin, sex, religion, color, pregnancy, family status, veteran status, ethnicity, sexual orientation, race or disability
2. Illegal acts
An employer cannot fire an employee if he refuses to commit an act that can be considered illegal
3. Medical or family leave
an employer cannot terminate the employment of an employee who has taken a leave of absence for family or medical reasons as outlined in the Family and Medical Leave Act of 1993.
4. Protected action
An employer cannot terminate the employee’s employment for a protected action taken by the employee. These include wrongful termination and testifying as a witness in the wrongful termination case.
Advantages of employment at will
The advantages of employment at will are described below
1. More flexibility
The concept of employment at will is such that it gives both the involved parties the employer and employee complete flexibility in the employment. Workers are no longer bound by any terms and conditions and can leave the job without any notice if something better comes their way.
The employers also have similar freedom and can terminate the employment at their will without any fear of repercussions.
2. Focus on merit and usefulness
The employment structure in employment at will does not follow a collective bargaining agreement. This allows the company to promote workers who they think are efficient and showing leadership qualities over others who they find inefficient and not at par with set standards.
This focus on merit and usefulness and encourages the workers to give their best so that there is an increase in their future output
3. Stay focused on the job
As the employment at will structure follows a standard policy, every worker is on the same page in the structure, and there is no need to negotiate a bargaining agreement. The resources now can stop worrying about mundane issues and think about projects and deadlines.
The employment-at-will concept helps the worker to stay focused on his job and stop thinking about other things connected with the job
4. Less threat of a strike
The employment at will is a concept where the employer does not worry about the threat of hold-out or strike. Both the employer and the employee know that if any such occurrence happens, then the employer will terminate the employee’s employment.
5. Encourage productivity
The employee knows that if he is not efficient in his workplace, then the employer has the right to dismiss and replace him. This threat on their livelihood encourages him to give his 100% and this results in better productivity for the company.
6. Reduces binding issues
The employment will work more in favor of the employer than the employee. When the worker signs such a contract, the employer has more flexibility as he does not have to worry about any binding issues.
If the employer does not find the employee’s work or the current market condition or any other related issue favorable for him, he can easily terminate the contract.
7. Promotions are based on merit
If the employer has hired a workforce under the employment at will contract, he does not worry about hurting the sentiments of other workers, and there is no such issue as seniority. This gives him the necessary leeway to offer promotions based on merit and not seniority.
This will work in favor of the company as all the workers will try to increase their efficiency and productivity levels to get a raise or promotion.
8. No negotiation of contract
Employment contracts need to be negotiated at periodic intervals, but there is no such factor in an employment-at-will contract. The employer does not deem profitable to increase pay or offer raise as he does not need to do anything as per the contract
9. Issues are very less
The employment-at-will contract does not have any serious issues as it gives both the employer and employee to terminate and quit the job respectively. Both of them know that if they raise any issues, then the other is going to leave the job; hence, they leave the original contract as it is.
Disadvantages of employment at will
Some of the disadvantages of employment at will are as follows-
1. No valid reason required for dismissal
When an employee is under a contract that states employment at will the employer has the authority to fire him for even a silly reason or without any reason. The employer does not need any justification for his action and can do whatever he wants. The employee does not have the right to protest or question his employer’s behavior.
2. Unilateral changes
Under the employment at will contract, the employer has the authority to make unilateral changes in the employer and employee relationship. For instance, he can make changes to the wages, hours and even duties of an employee.
3. Slow hiring and fast-firing process
The employment at will is considered a slow hiring and fast-firing process because the employees can be released from their jobs even for an unauthentic or unaccountable reason at any time.
4. High uncertainty
The employment at will is a very uncertain situation where the employee can leave the job for no reason, and so can the employer terminate a job without rhyme or reason.
5. Lack of job security
The feeling of being secured at their job is missing in the case of employment at will. The employees are cautious as they know that their employment can be terminated at the drop of a hat and the job gone in seconds
6. Financial stress
Every employee has some financial obligation or other. The concept of employment at will is a scary thought for them as they are subjected to unannounced cuts in pay and benefits that ultimately increases their financial stress. Moreover, the employees also are tense and worried at their job as there is no guarantee of employment and they know that sudden termination will increase their financial worries to a great extent
7. Prevalent conflict with co-workers
There is a threat of termination hanging over the head of an employee who has signed the employment-at-will contract. This affects his relationship with other workers because of the stress, conflict, and competition get to him and increase his tension
8. Creates more job openings
The employer tends to terminate the employment of those employees they feel are underperforming at once without thinking of consequences. Finding suitable replacement takes time, and meanwhile, the responsibilities of the terminated worker are undertaken by other workers which cause the burning of human resources. It creates severe issues as these workers also think of leaving the company as after some time it becomes a common occurrence in the company
9. Can cost the firm unemployment with the termination
Yes, employment at will gives the employer the advantage of terminating the employment of any worker it finds troublesome. Unless they can prove, it was for a just cause the move can backfire, and the employee becomes liable for unemployment compensation. In such cases, the insurance provider opts to raise the rates of insurance coverage thus minimizing the overall profitability of the organization.
10. Less stability
The structure of employment at will is such that there is minimal scope for stability in the workplace from either side. As both are free to exit anytime and anyplace, there cannot be any dependency of one on another. It results in low efficiency and productivity levels at the end of the day.