At-Will Employment and Wrongful Termination
In general, an at-will employment relationship means that either the employer or the employee is free to end the relationship at any time, with or without advance notice, and for any reason (or no reason) at all. Employment relationships are presumed to be "at-will" in all U.S. states except Montana. At-will employment seems to give at-will employers free reign to fire employees. However, "wrongful termination" is a major exception to at-will employment.
Wrongful Termination Exceptions to At-Will Employment
Common law wrongful termination includes terminations that violate a state's public policy, terminations after an implied contract for employment has been established, and terminations in violation of the implied covenant of good faith and fair dealing. Wrongful termination also includes terminations in violation of federal, state, or local anti-discrimination laws. Below, we describe each common law wrongful termination exception to at-will employment.
Public Policy Exception
Under the public-policy exception to employment at will, an employee is wrongfully discharged when the termination violates an explicit, well-established public policy of the state. For example, in most states, an employer can't terminate an employee for filing a workers' compensation claim after being injured on the job, or for refusing to engage in illegal activity at the request of an employer.
Public policy may be found in a state constitution, statute, administrative rule, or other state policy. The public-policy exception is the most commonly accepted exception, recognized in the vast majority of states.
Implied Contract Exception
The second common law exception to at-will employment is applied when an implied contract is formed between an employer and employee, even though no explicit, written contract regarding the employment exists. An employer may make oral or written representations to employees regarding job security or procedures that will be followed when discipline is imposed. These representations may create a contract for employment. The implied contract exception is recognized in more than half the states.
The contents and representations made in employee handbooks can create an implied contract, absent a waiver that the policies in such handbooks don't create contract rights. The most common example is a handbook provision that states that an employer will follow specific procedures before disciplining or terminating an employee.
Covenant of Good Faith Exception
Recognized in a small minority of states, including California, this exception reads a covenant of good faith and fair dealing into every employment relationship. This exception means either that employer personnel decisions are subject to a "just cause" standard or that terminations in bad faith or motivated by malice are prohibited.
In deciding whether such a covenant is to be inferred, a court looks at factors including whether the company properly followed its stated personnel policies, the length of the employee's employment, any job security representations that have been made, a presence or lack of prior criticism of performance, and basic notions of fairness.
Not all states recognize each of the above common law exceptions to at-will employment. It's important to determine if your state recognizes the exceptions. If you need help in understanding wrongful termination or legal assistance in filing suit under one of the exceptions described above, you can contact an employment attorney.