What does at-will employment mean?

Most U.S. states are at-will states. Understanding your rights as an employer and your employees’ rights is essential. At-will employment means that both you and your employees maintain a working relationship for as long as it suits both parties. If one party isn’t happy with the arrangement, they can terminate it without needing to justify themselves.

Contrary to common belief, at-will states can still have unions. There are advantages and drawbacks to forming a union for employees, and employers generally prefer not to work through a union to keep their workforce happy. Many unions have rules or procedures that make it more difficult for employers to fire or lay off their workers, and the fees members pay can become exorbitant.

Pros of at-will employees

Employers and employees can both benefit from at-will employment under the right circumstances. Consider these pros of at-will employees.

Pros for employees

At-will employees can use their status for leverage if needed. Since they can change or end their employment with your business, they can pursue their individual career goals, even if they begin to diverge from your company goals. This means they can leave for greener pastures and give little notice when doing so, but the benefit to employees is the ability to leave positions that no longer benefit them.

Employees may use at-will employment to argue for a raise or a better benefits package. If the employee is of great enough value to the company, they may receive their demands in return for staying.

Pros for employers

Employers can terminate at-will employees for any reason. This means you can make changes to your workforce with limited legal pushback. If you find yourself needing to downsize or change the scope of several positions within your organization, you don’t need to justify your choice or get special approval from your workers. Smaller businesses benefit from at-will employment because they might not always be able to accurately predict their future staffing needs and could need to make changes.

As an at-will employer, you can also amend your benefits, change pay structures and go in a different direction with paid time off without suffering consequences. Most importantly, at-will states offer much more protection for employers against disgruntled ex-employees who may seek to take legal action against them.

Cons of at-will employees

At-will employment isn’t without its downsides. Some of the disadvantages of at-will employment include the following.

Cons for employees

Employees who have an at-will agreement with their employer don’t enjoy as many protections as those who are part of a union. When workers unionize, employers need to work with their union representatives on issues such as wages, tenure and working conditions. At-will employment comes without these benefits because employers have the right to end the working relationship at any time and for any reason.

Cons for employers

One of the greatest downsides to at-will employment is that it’s a double-edged sword. Sure, you can eliminate a portion of your workforce whenever you need to, but they can also walk out the door. If you don’t offer adequate training, competitive pay and benefits and a positive work environment, your employee retention will suffer greatly.

Unions often negotiate salary and pay arrangements for their entire base, while at-will workers can represent themselves. Under some circumstances, retaining your most valuable talent under an at-will agreement could be more expensive than if they were with a union.

Exceptions to at-will employment

At-will employment generally means an employer or employee can terminate a work arrangement for any reason. There are some key exceptions you need to consider to protect your business from legal action or a potential public relations nightmare.

Public policy

The public policy exception means you need to follow the law and encourage your workers to follow it. If someone needs to file a worker’s compensation claim, for example, you can’t punish them or end their employment due to their injury. The best way to ensure you’re meeting this standard is to read the federal and state-level employment laws that apply to your business and seek the guidance of a lawyer.

Discrimination

Discriminatory termination is defined as ending a work relationship due to an employee’s age, gender, race, religion or sexual orientation. Employers need to be careful regarding these issues, so they aren’t sending a message that they’re favoring one group over another.

Employment contracts

An employment contract is a specified agreement between you and your employee. It’s a legally binding agreement, so you can’t change a contracted employee’s salary, job duties or benefits without renegotiating the contract. You need to have a solid reason to fire anyone who’s under a work contract.

Implied contracts

An implied contract is an unofficial promise and can be verbal or written. Before you begin your recruitment process, you should speak with an attorney who specializes in employment law, so you can avoid using language that could be construed as giving promises to potential hires. Some legal battles between employers and their ex-employees stem from things said during job interviews or written in job offer letters.

Good faith practices

Employers operating in at-will states don’t need specific reasons to terminate employees. However, they should still treat employees with fairness and respect to avoid legal headaches. For example, some valid reasons for terminating an employee include excessive tardiness, absenteeism, inability to perform job duties, actions that violate company policy or the law and insubordination.

At-will employment states

Most states allow at-will employment. The only state that isn’t an at-will state is Montana. Although 49 out of 50 states allow at-will employment, there are still many thriving unions, and many employers offer their top talent contracted positions.

At-will employment FAQs

What rights do workers have if they’re at-will employees?

Federal law still affords people many protections in the workplace. These include anti-discrimination laws, worker’s compensation, workplace safety regulations, unemployment insurance and the right for workers to take legal action if they have evidence of harassment or retaliation.

How do I inform employees of at-will employment?

You should acknowledge that your business is offering at-will employment in your offer letter and have your new hires review and sign a document that outlines what this means for them. Information about at-will employment should also be readily available in your company handbook in case your employees want a refresher.

What type of severance pay do at-will employees get?

While at-will employees are entitled to unemployment benefits, they’re only entitled to severance pay if you agreed to provide it when hiring them. Most workers who receive severance are contracted workers. If you didn’t have an implied or official contract about severance pay, you don’t need to provide it.