Differentiating between ‘Employment at Willt’ and ‘For Cause employment’ can get tricky for both seasoned applicants as well as those new to the workforce.
And while you may know a bit about these arrangements, legally they go deep.
Our post will expand on the two terms. It will provide a complete guide on the differences and benefits of employment at will and for cause employment so you can ensure that you’re legally complying with the U.S. and Californian law as an employer.
Table of Contents
Employment at will (At will employment)
To put simply, at-will employment, also known as employment at will, means that either you or your employees have the right to terminate employment, with or without cause and with or without notice, as long as it is not illegal. About 74% of U.S. workers are considered at-will employees.
The key reason that the U.S. and California allow employment at will is because it aims to promote efficiency and flexibility in the workplace.
For cause employment
On the other hand, for-cause employment means that an employment agreement can only be terminated only if you have a good reason to terminate your employee’s contract. The conditions are usually specified in the employment agreement you first created for your employee.
Although these generally vary depending on what business you run, the main reasons you can terminate your employee’s contract are:
- Wrongdoing on the part of the employee
- The employee acted fraudulently
- The employee stole company property
- Significant failure to perform job duties by the employee
- The employee intentionally violated company and employment policies
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Employment at will in California
In California, there is a presumption that employees are employed at will under California’s Labor Code. Similar to the definition above, the employee and employer can terminate the employment contract at any time, with or without notice.
Employers have benefited from this labor law because ‘cause’ under California law is defined as ‘fair and honest cause… regulated by good faith on the part of the employer’. This benefits employers because they don’t have to prove to a court or jury that they acted ‘in good faith’ every time there is an employment termination.
How to preserve employment at will
Although there is a presumption, as an employer, you should still do everything in your power to preserve employment at will to ensure there aren’t any difficulties down the track and you’re abiding with Californian employment law. Here are some tips you can put in place:
- Ensure that the employment application includes an employment-at-will statement to ensure the prospective employee knows the job is an at-will position.
- Include an employment-at-will statement in offer letters. This will ensure prospective employees understand, before leaving another job or moving out of state, that the new job will be employed at will.
- Have all new employees sign an employment-at-will acknowledgment on their first day.
- Incorporate an employment-at-will statement into the employee handbook.
- Make sure your company’s policies don’t implement rigid progressive discipline. Instead, try including a statement such as “conduct violations may result in disciplinary action, including termination.”
- Managers and supervisors should not make careless promises about job security during job interviews or when answering questions from employees or applicants.
- You should not answer questions asking about a person’s prospects for future employment when completing an employment verification form for a mortgage application.
If your employee can prove the following elements, you can be estopped from firing your employee or even be required to pay damages:
- You made an unambiguous promise of employment;
- Your employee relied on this promise;
- Your employee’s reliance was reasonable and foreseeable; and
- Your employee was injured as a result.
To give you an example of what this might look like, here is an example.
Imagine if you hire an employee, and they accept the job. They quit their current employment and relocate their family to California, where the new job is located. Before the new employee’s first day with your business, you choose to terminate them. In this situation, the new employee will have a promissory estoppel claim.
If you do terminate your employees, it may be considered a breach of contract. An at will employment should include various terms to ensure that it is valid. If you want a valid At-will Employment Agreement, you can use Lawpaths At-will Employment Agreement and feel protected at all times.
If you or another supervisor has done something that creates an expectation of fixed-term or indefinite employment, this is known as the implied contract exception. The following are examples of implied contract exceptions:
- A statement made by you about your employee’s future in the company, e.g., You’ll always have a home in this business as long as you do a good job.
- Your practice of only firing employees for cause
- A statement in the employee handbook that specific termination procedures will be followed
The advantages and disadvantages of employment at will
Many employers and employees prefer employment at will because of the various benefits that come with it. These include:
- An employer can change the employment contract terms – such as wages, benefit plans, and paid time off, without any notice to the employee or consequence.
- An employee can leave the business at any time without any notice – Generally, it’s best to provide two weeks of notice, but this is not legally required.
- You can terminate employees if your business is experiencing a down period.
- At will employment is beneficial for employees who want a short-term commitment. There is career freedom.
Just with anything, some disadvantages are associated with employment at will for employees and employers. These include:
- Less job security for you and your employees – Neither you nor your employee need to provide notice for ending the working relationship.
- Less teamwork – Employees are afraid that they might lose their jobs, which can lead to less teamwork and cooperation in the workplace.
- High employee turnover – The nature of employment at will often leads to high employee turnover.
In the U.S. and California, many state laws and federal statutes are in place to ensure that employment rights are not violated.
As a Californian employer, you should be aware of the following federal and statute statutes to avoid your employees taking disciplinary actions against you and your business. They include but are not limited to:
- The Americans with Disabilities Act– This act protects people with disabilities from discrimination from their employers.
- Retaliatory Employment Discrimination Burea (REDA) – REDA protects employees who, in good faith, engage in protected activities under the law.
- Family and Medical Leave Act of 1993 (FMLA) – Protects employees to take unpaid and protected leave for family and medical reasons.
- The Equal Pay Act of 1963 – This statute relates to discrimination based on sex in the payment of wages.
- Civil Rights Act of 1964 – Relates to discrimination based on race, color, religion, sex, or national origin)
- Age Discrimination in Employment Act of 1967 – discrimination based on age concerning people aged 40 or above.
- Rehabilitation Act of 1973 – Relating to discrimination based on a handicap status.
- The National Labor Relations Act – protections for those employees who wish to join or form a union and those who engage in union activity.
The purpose of most federal and state statutes is to prohibit employers from illegally discriminating against their employees. An employee’s termination cannot be based on discrimination. Are you wondering what would be considered discriminatory termination? It includes discharging an employee based upon:
- Sexual orientation
- National origin
Here’s a simple example of what would be considered discriminatory conduct. Say you have an employee who has failed to perform the required functions of their job, but they are also in a wheelchair. In this situation, you have the right to fire an employee for not completing their employee duties, but not because they are in a wheelchair.
What are the exceptions of at-will employment?
As a Californian employer, you must abide by the following exceptions to at-will employment to avoid disciplinary action and a wrongful discharge. Here are the key exceptions to be aware of:
Public policy exception
Employees can’t be terminated for reasons that violate public policy. Discharging an employee based on public policy violations includes:
- When an employee files a worker’s compensation claim
- Bringing or threatening a lawsuit
- Serving on a jury
- Engaging in lawful off-duty activities
- Refusing to commit perjury
- Whistleblower situations
Good faith and fair dealing
The implied covenant of good faith and fair dealing is also an exception to at will employment. In this situation, you can’t fire an employee to avoid specific employer duties. These duties include:
- Paying for your employee’s healthcare
- Paying for retirement
- Any commission-based work
Frequently asked questions (FAQs)
Does employment at will mean that one can fire an employee without warning?
In short, yes, you can do this. However, to avoid your business gaining a reputation for impulsivity, it would be a good idea to provide your employee with some form of warning to provide them the opportunity to find work elsewhere. Different types of warning can include:
- Offering your employee a performance improvement plan
- Providing severance after separation
- Have regular catch-ups to see how your employee is performing
What are the limits of employment at will?
Although employment at will means that you as an employer can’t be sued for a breach of an implied contract, there are still limitations that have been implemented by state and federal law to prevent employment at will if it is discriminatory or violates specific statutes.
How to prevent a lawsuit?
Even if you have at will employment in place for your employees, there are other grounds for lawsuits an employee can bring for wrongful termination. Therefore, documenting the reasons for terminating an employee would be a good idea. Some things you can document are:
- Evidence of prior warnings
- Documentation of poor job performance
- Attendance policy violations
What does at-will employment mean?
At will, employment means that either you or your employees have the right to terminate employment, with or without cause and with or without notice, as long as it is not illegal.
Which states do not allow at will employment?
Montana is the only state in the US that is completely not at will. All other US states such as California, New York, Alabama, Florida, Nebraska, Rhode Island have some version of at-will employment.
Are at-will employees required to provide a notice period?
No. Just as employers are not required to provide a reason to dismiss at-will employees, employees are not legally required to give a notice period. However, some companies might have company policies that stipulate a notice period.
What’s the difference between at-will and for cause (just cause) firing?
Those employed at will have the right to terminate their employment at any time, with or without cause, and with or without notice.
When an employer fires a worker for cause, also known as just cause, there is a legitimate reason for the dismissal. Examples of for cause include:
- Poor work performance
- Criminal activity and illegal activity
- Violating company rules
- Harassment of co-workers.
If you plan on having at-will employment agreements in your business, ensure that you include all the relevant terms of employment in your employee’s agreement to minimize the risk of breaching your employer obligations.
Don’t know where to start? You can use Lawpath’s At-will Employment Agreement (C.A.) to hire your perfect employee.
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