The Employment-At-Will Doctrine: Three Major Exceptions

Employment at Will The employment-at-will doctrine: three major exceptions In the United States, employees without a written employment contract generally can be fired for good cause, bad cause, or no cause at all; judicial exceptions to the rule seek to prevent wrongful terminations Charles J. Muhl Work joyfully and peacefully, knowing that ing in terms of bargaining power. Thus, the em- right thoughts and right efforts will ployment-at-will doctrine reflected the belief that inevitably bring about right results people should be free to enter into employment —James Allen contracts of a specified duration, but that no ob- ligations attached to either employer or employee See only that thou work and thou canst if a person was hired without such a contract. not escape the reward Because employees were able to resign from po- —Ralph Waldo Emerson sitions they no longer cared to occupy, employers also were permitted to discharge employees ike Allen and Emerson, many workers in at their whim. the United States believe that satisfactory The Industrial Revolution planted the seeds Ljob performance should be rewarded with, for the erosion of the employment-at-will doctrine. among other benefits, job security. However, this When employees began forming unions, the col- expectation that employees will not be fired if lective bargaining agreements they subsequently they perform their jobs well has eroded in recent negotiated with employers frequently had provi- decades in the face of an increased incidence sions in them that required just cause for adverse of mass layoffs, reductions in companies’ employment actions, as well as procedures for workforces, and job turnover. In legal terms, arbitrating employee grievances.2 The 1960s though, since the last half of the 19th century, marked the beginning of Federal legislative pro- employment in each of the United States has been tections (including Title VII of the 1964 Civil “at will,” or terminable by either the employer or Rights Act) from wrongful discharge based on employee for any reason whatsoever. The em- race, religion, sex, age, and national origin.3 ployment-at-will doctrine avows that, when an These protections reflected the changing view of employee does not have a written employment the relationship between employer and employee. contract and the term of employment is of indefi- Rather than seeing the relationship as being on nite duration, the employer can terminate the equal footing, courts and legislatures slowly be- Charles J. Muhl, formerly an economist employee for good cause, bad cause, or no cause gan to recognize that employers frequently have with the Bureau of at all.1 structural and economic advantages when nego- Labor Statistics, Traditionally and as recently as the early tiating with potential or current employees. The Washington, DC, is an attorney in Chicago, 1900s, courts viewed the relationship between recognition of employment as being central to a Illinois. employer and employee as being on equal foot- person’s livelihood and well-being, coupled with Monthly Labor Review January 2001 3 Employment at Will the fear of being unable to protect a person’s livelihood from Exhibit 1. Recognition of employment-at-will exceptions, unjust termination, led to the development of common-law, or by State, as of Oct. 1, 2000 judicial, exceptions to the employment-at-will doctrine begin- Public- Covenant of ning in the late 1950s. The bulk of the development of these State policy Implied-contract good faith and exception exceptions did not take place until the 1980s, but as we enter exception fair dealing the new millennium, the employment-at-will doctrine has been Total................. 43 38 11 significantly eroded by statutory and common-law protec- Alabama............... no yes yes tions against wrongful discharge. Alaska.................. yes yes yes Arizona................. yes yes yes This article focuses on the three major exceptions to the Arkansas.............. yes yes no employment-at-will doctrine, as developed in common law, California.............. yes yes yes including recognition of these exceptions in the 50 States. Colorado............... yes yes no The exceptions principally address terminations that, although Connecticut........... yes yes no Delaware............... yes no yes they technically comply with the employment-at-will require- District of Columbia yes yes no ments, do not seem just. The most widespread exception pre- Florida.................. no no no vents terminations for reasons that violate a State’s public Georgia................ no no no policy. Another widely recognized exception prohibits termi- Hawaii.................. yes yes no Idaho................... yes yes yes nations after an implied contract for employment has been Illinois.................. yes yes no established; such a contract can be created through employer Indiana................. yes no no representations of continued employment, in the form of ei- Iowa..................... yes yes no ther oral assurances or expectations created by employer Kansas................. yes yes1 no Kentucky.............. yes yes no handbooks, policies, or other written assurances. Finally, a Louisiana.............. no no no minority of States has read an implied covenant of good faith Maine................... no yes no and fair dealing into the employment relationship. The good- Maryland............... yes yes no faith covenant has been interpreted in different ways, from Massachusetts...... yes no yes Michigan............... yes yes no meaning that terminations must be for cause to meaning that Minnesota............. yes yes no terminations cannot be made in bad faith or with malice in- Mississippi............ yes1 yes no tended. Only six western States—Alaska, California, Idaho, Missouri................ yes no1 no Nevada, Utah, and Wyoming—recognize all three of the ma- Montana............... yes no yes Nebraska.............. no yes no 4 jor exceptions. Three southern States—Florida, Georgia, and Nevada................. yes yes yes Louisiana—and Rhode Island do not recognize any of the New Hampshire...... yes yes no1 three major exceptions to employment at will. (See exhibit 1.) New Jersey........... yes yes no New Mexico........... yes yes no New York............... no yes no North Carolina........ yes no no Public-policy exception North Dakota......... yes yes no Ohio..................... yes1 yes no Under the public-policy exception to employment at will, an Oklahoma............. yes yes no employee is wrongfully discharged when the termination is Oregon................. yes yes no Pennsylvania......... yes no no against an explicit, well-established public policy of the State. Rhode Island......... no no no For example, in most States, an employer cannot terminate an South Carolina....... yes yes no employee for filing a workers’ compensation claim after being South Dakota........ yes yes no injured on the job, or for refusing to break the law at the re- Tennessee............ yes yes no Texas................... yes no no quest of the employer. The majority view among States is that Utah..................... yes yes yes public policy may be found in either a State constitution, Vermont................ yes yes no statute, or administrative rule, but some States have either Virginia................. yes no no restricted or expanded the doctrine beyond this bound. Washington........... yes yes no West Virginia......... yes yes no The public-policy exception is the most widely accepted ex- Wisconsin............. yes yes no ception, recognized in 43 of the 50 States. (See map 1.) Wyoming............... yes yes yes Although the significant development of exceptions to em- 1 Overturned previous decision that was contrary to current doctrine. ployment at will occurred in the 1980s, the first case to recog- SOURCE: Data are from David J. Walsh and Joshua L. Schwarz, nize a public-policy exception occurred in California in 1959. “State Common Law Wrongful Discharge Doctrines: Up-date, Refine- 5 ment, and Rationales,” 33 Am. Bus. L.J. 645 (summer 1996). Case law In Petermann v. International Brotherhood of Teamsters, was shepardized (verified) to update the recognition of exceptions through Peter Petermann was hired by the Teamsters Union as a busi- Oct. 1, 2000. 4 Monthly Labor Review January 2001 ness agent and was told by its secretary-treasurer that he found that applying the public policy exception in this con- would be employed for as long as his work was satisfactory. text would more fully effectuate California’s declared policy During his employment, Petermann was subpoenaed by the against perjury. Holding otherwise would encourage criminal California legislature to appear before, and testify to, the As- conduct by both employer and employee, the court reasoned. sembly Interim Committee on Governmental Efficiency and Courts in other States were slow to follow California’s lead. Economy, which was investigating corruption inside the Team- No other State considered adopting such an exception until sters Union. The union directed Petermann to make false after 1967, and only 22 States had considered the exception statements to the committee during his testimony, but he in- by the early 1980s.7 Courts clearly struggled with the mean- stead truthfully answered all questions posed to him. He was ing of the phrase “public policy,” with some finding that a fired the day after his testimony. policy was public only if it was clearly enunciated in a State’s In recognizing that an employer’s

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