At-Will Principles: Understanding the Flexibility of Employment in the USA

At-Will Principles: Understanding the Flexibility of Employment in the USA

CHALLENGES:
  • Understanding the principles of at-will employment and its implications for the employer-employee relationship

  • Becoming familiar with the application of at-will and the exceptions to these principles

  • Getting prepared for the risks of an employee contesting dismissal, taking into consideration the local (state) legislation

1. The principles of “at-will”

A bit of history…

For a very long time, no written document was signed between US employers and employees. Only an agreement on principles, often formalized orally, established collaboration between the two parties. It was then agreed that if the employee came to the worksite every day, performed well, and was respectful and loyal to the company, the employer would repay them by keeping them as an employee and paying them a salary adjusted to their results: the foundations of the “at-will” doctrine.

At Will Principles_Understanding the Flexibility of the US Job Market

This conviction is so deeply seated in the American culture that employment in the USA today is still, by default, at-will. In other terms, the employer or the employee can put an end to their collaboration at any time, regardless of the reason (even if it is illegal), or without any reason at all.

At-will today:

An at-will employer is one who can modify the criteria of their collaboration with an employee at any time and without warning. For example, they can reduce the employee’s salary or take away their benefits (retirement plan, vacation days, etc.), with no fear of legal consequences.

At first sight, the principles of at-will can give an impression of extreme flexibility in the labor market. If you are very used to a highly regulated and constrained labor market, it can be easy to be so enthusiastic that you forget that this American flexibility is only possible within a very well defined framework. You can swim wherever you want in the pool… so long as you are in the water!

2. Defining the framework: “Offer Letter” versus “Employment Agreement”

The principles of at-will normally apply by default, for example, when an “offer letter” is signed by the employer and the employee [see The different types of employment agreements in the USA].

There is an exception, however, if the employee is protected by an employment contract, also known as an “employment agreement”, which determines the reasons that are valid for dismissal: “good cause” or “cause” (e.g. poor performance, serious mistake, economic layoff, etc.).

These reasons (“causes”) are generally imposed by worker unions that exist for certain professions (e.g. security guards, nurses, technicians, warehouse workers, etc.). Cause conditions for dismissal can also be found within an employment contract negotiated with a very high level employee who is put in charge of performing a job with measurable goals within a given time period (e.g. top executives responsible for a specific task restructuring a company).

It is therefore impossible to apply at-will principles in the framework of an employment contract.

Internship contracts and ones for independent contractors generally mention mutual commitments between the two parties and are subject to regulation. [see Hiring a freelancer (or independent contractor) in the USA]

It is also very important for the employer to ensure that they do not create ambiguities themselves that could call into question the application of these at-will principles.

3. Ensuring that the spirit of these principles is respected

Wishing to apply practices common in their native country but ones that are poorly adapted to the at-will principles, employers themselves can create confusion in a situation that should not be open to interpretation.

The “Notice Period”:

According to the rules that define the at-will principles, namely, that collaboration between an employer and an employee can be ended at any time by one party or the other, there is no obligation to give advance notice. An employee can be dismissed at a moment’s notice.

In reality, however, it is common practice in the USA to give 2 weeks notice (whether it is a dismissal or a layoff), which is an acceptable period to ensure a transition and continuity in their work life.

The “notice period” is very often stated in the “employment agreement” so that the other party knows that the contract will not necessarily reach the end of its term.

The “Probationary Period”:

As with notice, from the moment that it becomes possible to set an end date for the collaboration without needing to justify this, the “probationary period” no longer needs to be mentioned.

In the USA, the probationary period can be used as a management tool to motivate an employee for a given time period (often a period ranging from 1 day to 1 year). However, lawyers specializing in workers’ rights consider this to be risky. Actually, an employee can easily interpret a probationary period as probation before being offered a permanent position for which at-will principles no longer apply. Labor courts could even find it suspicious for an employer to implement a probationary period to then claim that the person is an at-will employee.

The materials provided in this US Toolbox are for general information purposes only and are not intended to constitute comprehensive or specific legal, accounting, tax, marketing, or other advice. These materials may not reflect recent developments in the law, may not be complete, and may not pertain to your specific situation and circumstances.TradeSherpa, Inc. assumes no responsibility for errors or omissions in the materials, or for any losses that may arise from reliance upon the information contained these materials.  Because these materials are intended to provide only general advice, specific advice should be taken from qualified professionals when dealing with specific situations and circumstances. 

2018-04-03T15:41:15+00:00