The employer/employee relationship extends for the entire time an employee works for your company – including, and through, the end of that relationship. As an employer, you are responsible for making sure your organization complies with all applicable federal and state laws.
This blog post is the fourth installment of a four-part series on employment law. If you missed the previous posts in this series, the first installment addressed employers’ responsibilities in the pre-employment stage. The second post touched on wage and hour laws and common issues that can arise at the start of the employment relationship. In the series’ third post, we discussed the framework of laws that govern time off and workplace safety.
In this final post in the series, we will address “At-Will Employment,” including state-specific variations to it. We will also discuss employers’ responsibility for unemployment insurance in various states.
In every U.S. state except Montana, the employment relationship is considered to be “at-will.”
Broadly defined, at-will employment means an employer is free to terminate an employee for any legal reason – including no reason – at any time, without any legal ramifications (subject to the exceptions discussed more fully below.)
On the flip side, an employee is also free to quit at any time, and does not need a reason to do so.
Because broad at-will employment doesn’t offer any security to either employees or employers, there are some exceptions recognized in many states and the District of Columbia.
Modification by Contract
First, in every jurisdiction, employers can enter into employment contracts with employees to modify the at-will presumption. For example, a contract might say that the employer can only terminate the employee for cause (which should be defined in the contract itself.)
Public Policy Exception
Employees are also protected from an employer’s actions that violate a public interest. In most states, this exception is limited to public policies that are stated already in state laws and/or in the state’s constitution.
For example, if an employee is fired because she refused to do something illegal that the employer demanded she do, the employer cannot claim they had the right to terminate her employment under the “at-will” doctrine.
A few states take a broader approach to defining public policy. The only states that do not include a public policy exception to the at-will doctrine are AL, FL, GA, LA, NE, NY and RI.
Implied Contract Exception
In the District of Columbia and 41 states, an employer’s oral statements to an employee, the employer’s policies, practices or even an employer’s handbook may create what’s referred to as an implied employment contract. This means that if an employee is terminated other than for cause, he or she may have standing to take legal action against the employer.
The best way for employers to protect themselves is by including clear and direct statements on policy manuals, and making it clear in training, that such materials or statements do not give employees any contractual employment rights.
Implied Covenant of Good Faith and Fair Dealing Exception
In a few states (AL, AK, AZ, CA, DE, ID, MA, NV, MT, UT and WY), employers can be liable if their employment decisions were not made “in good faith” or were malicious in nature.
Finally, employers are also prohibited from terminating employees at-will when any type of illegal discrimination played a role in the termination – regardless of what state the employer is in.
As an employer, you also need to be aware of your requirements under the Department of Labor’s Unemployment Insurance program, administered by individual states and the District of Columbia.
Workers who lose their jobs through no fault of their own (i.e. not for cause and not voluntary terminations) are generally eligible to receive unemployment compensation for a period of time, to help them get back on their feet financially while they look for new employment.
States take different approaches to employer’s obligations. In New York, employers are required to register, submit quarterly filings to the state, and publicly post a notice to employees. In Florida, the unemployment insurance program is referred to as “reemployment.”
In four states (AK, CA, NJ, and PA) employees also contribute a small amount to unemployment insurance programs.
Employers need to understand their unemployment insurance requirements, in every state where they have employees.
Be Mindful of Other State and Federal Laws Related to the End of the Employment Relationship
This is not an exhaustive list of laws employers need to be mindful of when terminating an employee. For example, some states require employers to immediately provide a terminated employee with his or her last paycheck. Employers also need to be aware of their requirements when it comes to notifying terminated employees about their rights to continue health care coverage under COBRA.
ICS can Help with Staffing Needs
ICS is a leading staffing agency serving employers and job seekers in New York, Washington, D.C., Fort Lauderdale, Chicago, Dallas, Houston, Minneapolis, and Denver.
When you work with ICS, you can have the confidence that comes from knowing we know the laws in the states where we operate – and we can help you understand your obligations.
To learn more about how we help employers fill their Accounting & Finance, Compliance & Legal, Information Technology and Corporate Support roles with qualified, pre-screened candidates, contact ICS today.