Under the law in most states, if there’s no employment contract, workers are employed on an “at-will” basis. That means employers have the right to fire employees at any time for any reason or no reason, and, conversely, employees have the right to leave the organization at any time.
If an employee is under contract, however, the terms of the contract apply. A contract may be a formal, signed agreement, a collective bargaining pact or an implied contract. Not all states recognize implied contracts.
Besides implied contracts, federal laws, state statutes and court decisions are chiseling away at the at-will doctrine as the number of wrongful-discharge suits spirals higher.
Federal laws. Employers subject to certain federal laws may not terminate employees for prohibited reasons, such as racial discrimination, or for exercising their rights under the laws. The laws include the Equal Employment Opportunity Act, Title VII, the Occupational Safety and Health Act, the ADA, the FMLA, the ADEA and the Pregnancy Discrimination Act.
State laws. Likewise, state legislatures have passed wage/hour laws, workers’ compensation and other statutes that restrict employment decisions.
Implied covenant of good faith and fair dealing. Some states also hold that every agreement contains an implied covenant of good faith and fair dealing, which basically means that the parties will treat each other fairly. When an employer fires someone in a manner that a jury considers patently unfair, the former employee may be able to recover damages.
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Public policy. In some states, courts will hold an employer liable for wrongful discharge if an employee is terminated for a reason that violates public policy. That means, for instance, you cannot fire one of your engineers for informing the EPA that your company has been dumping toxic waste in the river or another employee for refusing to lie to a tax examiner. Likewise, it’s against public policy to fire someone for filing a workers’ compensation claim or reporting for jury duty.
Torts. Some employees have won judgments against their employers by suing over a civil wrong, such as “intentional infliction of emotional distress.”
In many court cases, an employee handbook is a prime piece of evidence showing the employer’s policies and promises. You must pay careful attention to your handbook to help protect your status as an at-will employer, to the extent allowed by law, and to reduce your chances of losing in court.
USERRA. Under a little-known provision in the Uniformed Services Employment and Reemployment Rights Act, it’s illegal to fire returning soldiers and reservists without a valid, business-based reason. In other words, soldiers are temporarily no longer at-will employees even if they were before they deployed or signed up for the Reserves.
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