If you're unsure about what "at-will employment" means, you're not alone. Many business owners are unfamiliar with the intricacies of this legal principle, despite its widespread use in the U.S workforce.
Unless an employee has a specific contract saying otherwise, the employment relationship is considered at-will. At-will employment offers several benefits, particularly when it comes to employee termination. However, misunderstanding its nuances can lead to legal issues that can cost you!
Keep reading as we explain the concept of at-will employment, explore its advantages and disadvantages for you and your business, and clarify the difference between fair and wrongful termination.
Understanding these aspects can help protect your business from wrongful termination claims.
At-will employment allows an employer to terminate an employee at any time for almost any reason without facing legal repercussions. Likewise, employees are free to leave their jobs whenever they choose.
However, there are critical exceptions to this rule. Employers cannot terminate employees for illegal reasons, such as age, color, country of origin, disability, gender, race, religion, or genetic information. But please note, there may be policy exceptions and state specific regulations that might limit your right to terminate at will.
Let’s break it down for NY and NJ.
New York State follows the at-will employment, meaning employers can terminate employees at any time and for any reason. However, there are specific legal exceptions to this rule that employers must be aware of.
Employers in New York cannot terminate employees for reasons related to discrimination, whistleblowing, retaliation, exercising rights under FMLA or workers' compensation laws, or engaging in legal off-duty activities such as smoking or political activities.
Employers should clearly communicate the at-will nature of employment to their employees through written policies and handbooks to avoid potential misunderstandings.
Here’s what else you should be including in your employee handbook!
New Jersey is also an at-will employment state, meaning employers or employees can terminate the employment relationship at any time, for any reason, or for no reason at all. But be aware, there are important exceptions to this rule that protect employees from unfair treatment, including discrimination based on race, sex, gender identification, national origin, pregnancy, disability, age, or religion, as protected by the Civil Rights Act of 1964 and the New Jersey Law Against Discrimination (NJLAD).
Employers in New Jersey should be mindful of implied contracts and verbal assurances that could alter the at-will employment status. Employee handbooks, policies, and verbal statements can create unintended obligations if not clearly defined.
If an express or implied contract exists, the employment relationship is no longer considered at-will.
Express contracts outline terms & conditions of employment, limiting an employer's ability to terminate without cause.
Implied contracts, which come from statements or actions suggesting ongoing employment, can also complicate at-will employment.
Employers should be cautious about verbal commitments and written policies that may unintentionally create implied agreements.
At-will employment offers flexibility for both employers and employees, allowing businesses to adjust their workforce without lengthy contract negotiations and saving costs by avoiding legal battles and contract obligations. However, there are drawbacks to at-will employment, such as job insecurity that can make employees feel uncertain about their future.
The ease of leaving can result in higher turnover rates, which complicate business planning and increase hiring costs. Additionally, the lack of job stability may negatively affect employee morale and productivity. Legal risks also arise if the at-will nature of employment is misunderstood, potentially leading to wrongful termination claims.
While employers have the authority to terminate employees, it's crucial to ensure terminations are carried out in "good faith" to avoid wrongful termination claims. Good faith termination typically involves dismissals based on legitimate business reasons such as poor performance, persistent attendance issues, violation of company policies, or workplace misconduct.
As an employer, you should always document these issues to support your decision if you end up being challenged.
On the other hand, wrongful termination occurs when an employer terminates an employee in violation of legal protections, such as discrimination, retaliation for whistleblowing, violating public policy, or dismissing an employee who is on protected medical leave.
To protect your business from legal issues, it is crucial to document everything related to employee performance, warnings, and corrective actions.
You should provide clear expectations to employees regarding performance standards and company policies. Offering opportunities for improvement and consulting legal counsel before making termination decisions can also help mitigate risks. Conducting exit interviews can provide valuable insights and ensure compliance with termination procedures.
By following these guidelines, you can make informed and legally sound decisions regarding your team.
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.
Can an employer change the terms of employment under at-will status?
Yes, employers can modify job duties, compensation, benefits, and work schedules at any time under at-will employment, as long as these changes do not violate any employment laws or other contract obligations.
Employment laws are constantly evolving. It’s essential for business owners to stay up to date. You should regularly review state and federal employment regulations to ensure your policies align with current & up-to-date laws.
For further insights and compliance support, Megapay offers expert HR solutions to help businesses navigate complex employment laws and maintain compliance with confidence.
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