At-will employment: What are the exceptions? 

Every state except for Montana follows the “at-will employment” law. This means it is legal to terminate an at-will employee for any reason outside of federal and state law protections without being required to establish cause for termination. 

However, most states also have exceptions to this rule, meaning “at-will employment” doesn’t give you free rein to terminate someone for absolutely any reason. If one of the exceptions applies to your reason for firing the employee, you’ll have to prove they were fired for cause. 

There are 3 common reasons different states nullify the at-will employment law : 

  • Implying any type of job security or termination process in oral or written policies, like your employee handbook, and not following them 
  • Firing someone for following the law 
  • In a few states, terminating an employee for unfair reasons or with malicious intent 

Violating these exceptions while terminating an employee could be considered a wrongful discharge based on where you operate your business. The terminated employee could file a lawsuit against you, which could result in serious fines and penalties. 

Different states honor different exceptions, so it’s important to be aware of what you could get in trouble for depending on your area. 

Federal exceptions to at-will employment 

Discrimination

First and foremost, there are federal laws, as well as additional state legislation, against firing someone for discriminatory reasons. According to the Equal Employment Opportunity Commission, you may not fire an employee based on the following discriminations: 

  • Race
  • Color
  • Religion
  • Sex (including pregnancy, sexual orientation, or gender identity)
  • National origin
  • Age (40 or older)
  • Disability
  • Genetic information (including family medical history)

Retaliation 

You can’t fire a whistleblower to get back at them, according to federal labor law. The EEOC says you cannot retaliate against an employee for the following:

  • Filing or being a witness in a complaint, charge, investigation, or lawsuit
  • Communicating a case of discrimination or harassment to a supervisor
  • Answering questions as part of a harassment investigation
  • Refusing to follow orders that result in discrimination 
  • Resisting sexual advances or intervening to protect others 
  • Requesting disability or religious accommodation
  • Attempting to uncover potentially discriminatory wages 

State exceptions to at-will employment

Many states have their own exceptions to the at-will rule, although a few do not have any exceptions at all. We’ll list which states either honor the exception or do not honor the exception, whichever is fewer, in the descriptions below. 

Public policy 

You cannot fire an employee for either performing an action that complies with federal or state laws or for refusing to perform an action that breaks a law. This reasoning for dismissal is considered wrongful termination and is not protected under the at-will employment rule. 

For example, if an employee suffers an injury on the job and files a workers’ compensation claim, you can’t fire them for doing so. And if the employee doesn’t want to engage in an illegal activity that you request, you cannot fire them for that reason either. 

If an employee proves the termination was in violation of the public policy exception, they may be entitled to: 

  • Compensatory damages: The business may have to pay back pay for lost income, lost benefits, and/or lost future earnings
  • Punitive damages: If the employer deliberately and harshly terminates the employee, extra fines may be added to punish them. 
  • Attorney fees: The employer may have to pay the litigation and attorney fees of the employee.

Here’s an example: 

A Missouri business terminated an employee after she informed her boss that she followed the law and answered a federal investigator’s questions about the business’s overtime practices. She proved that the termination was in violation of public policy and was awarded $125,000. 

This is the most popular exception that states allow. However, the following states do not honor this exception: 

  • Alabama
  • Florida
  • Georgia
  • Louisiana
  • Maine
  • Nebraska
  • New York
  • Rhode Island

Implied contract

Currently, 36 states and the District of Columbia recognize an implied contract exception to at-will employment. You can’t fire someone when an “implied contract,” not necessarily an official employment agreement, provides any representation of job security or termination procedures that you don’t follow. 

If an employee is able to prove wrongful termination through breach of implied contract, they would typically be entitled to expectation damages. This means the employer would have to pay them what they should have received under the implied contract. 

Here’s an example: 

A Connecticut woman and her husband worked for a mobility services company. The company laid off her husband after undergoing restructuring but promised the woman she would not be fired, even if her husband went to work for a competing company. 

She was eventually terminated soon after her husband took a job with a rival business. She sued the employer for breach of implied contract and the court awarded her $850,000. 

The states that do not allow this exception include: 

  • Alabama
  • Alaska
  • Arizona
  • California
  • Delaware
  • Idaho
  • Massachusetts
  • Montana
  • Nevada
  • Utah
  • Wyoming

Good faith

A few states also recognize the “implied covenant of good faith and fair dealing” exception, which means that you must have a “just cause” for firing an employee and cannot terminate someone because of malice or bad intentions. 

An employee can file a wrongful termination claim against you if they believe they were fired for unjust reasons or that you broke your policies. Courts tend to look at the following to justify this claim: 

  • Whether or not you followed your employee handbook
  • How long the employee worked for you
  • If any job security promises were made
  • Whether or not you critiqued their performance over time 
  • General notions of fairness 

Good faith violations could include actions like firing someone right before their pension vests, making up a reason to fire an employee because you want to hire cheaper labor, or terminating a team member to prevent them from collecting commissions. 

The states that follow this exception include: 

  • Alabama
  • Alaska
  • Arizona
  • California
  • Delaware
  • Idaho
  • Massachusetts
  • Montana
  • Nebraska
  • Utah
  • Wyoming

Modification by contract 

Some individual employee contracts stipulate a specific term of employment or only allow you to fire them for cause, in which case the at-will presumption would be disqualified. However, businesses typically only draw these up for high-level employees. 

However, you may be more likely to encounter a collective bargaining agreement (CBA) in your work environment. A CBA is a contract that a union and employer negotiate regarding wages, hours, and terms and conditions of employment. These contracts typically include a clause that says you can only fire them for cause.

To learn more about what you can fire employees for if they have a contract that negates the at-will presumption, take a look at our article on what counts as cause for termination and what does not

While at-will employment protects you from many wrongful termination claims, things can get tricky if your state follows one of these exceptions. It’s best to contact an employment attorney if you have serious questions before firing an employee.

Have more questions about terminations?

Homebase can also help. With HR Pro you’ll get access to certified HR experts who can answer any questions about specific employee situations, review your existing termination policies, and even help you create new ones.

Related posts

COVID vaccine mandates by state: requirements and bans

The federal government’s COVID vaccination requirement legislation is currently on hold. However, many state and local legislators are implementing their…

Read article

California labor laws: a list of 2022 changes

The new year will bring an onslaught of California labor law changes after a busy legislative session. From COVID-19 reporting…

Read article

5 common wage and hour mistakes every employer should avoid

As a small business owner, you know that failing to pay your employees in accordance with the Fair Labor Standards…

Read article

2022 non-compete agreement law changes by state

A non-compete agreement (or non-competition agreement) is a legal contract from an employer. It prevents an employee from entering into…

Read article

Paid leave laws: What’s new in 2022?

The United States Family and Medical Leave Act (FMLA) gives eligible employees entitlement to unpaid family and medical leave. However,…

Read article

2022 minimum wage increases by state

The federal minimum wage rate that stipulates employers pay employees $7.25 an hour has not been modified since 2009. This…

Read article