Meaning of At-Will Employer

What Is the Meaning of At-Will Employer: Definition Explained

Last Updated on January 19, 2023

Though at-will employment is a relatively common agreement that is made between American employers and employees, many business owners may be unfamiliar with the practice. As such, if you own and operate a business, it’s a good idea to familiarize yourself with at-will employment, including what it means and how it could apply to your company.

Below, you’ll discover what at-will employment is, the benefits of at-will for both employers and employees, and what, if any, exceptions there may be to this agreement.

At-Will Employer Defined

At-will employment is a term that is used to describe a specific working environment in which employers have the liberty to terminate employees at any time without any stated reason, explanation, or warning. It’s important to note, however, that the grounds for termination cannot violate anti-discrimination laws as defined by the state and federal government.

Likewise, employees have the liberty to quit a job at any time without stating a specific reason and without providing advanced notice.

The practice of at-will employment is allowed in almost all American states. It should be noted, however, that this type of employment agreement directly contrasts processional sectors that are backed by unions that maintain employee protections and employees, such as education and labor.

The Benefits of At-Will Employment

Benefits of At-Will Employment

Both employers and employees can benefit from at-will employment in a multitude of ways. Below, we outline some of the key benefits for both parties.

Employer Benefits

At-will employment provides employers with the flexibility that may be needed to achieve new goals that have been identified when the needs of their business or market demands have changed.

In addition to having the freedom to terminate at-will employees without stating a specific cause, employers also have the ability to alter the job duties, reduce salaries, adjust paid time off, and make changes to the benefits of employees who are hired under an at-will agreement.

The freedoms and flexibility that at-will employment provides can be particularly beneficial for small business owners who may not be able to accurately predict what their employment needs may be over the long term. Furthermore, the flexibility that at-will employment provides can help business owners reduce costs.

In addition to the above-mentioned benefits, an at-will employment agreement protects employers from legal action so long as they do not violate the legal rights of employees whom they hire at will.

If you are an employer, you can take advantage of reducing the risk that employees will take legal action against you in the event that they are terminated. You can do this by requesting that your existing employees, as well as new hires, sign a statement that acknowledges the at-will status of your company.

Employee Benefits

For employees, an at-will agreement with an employer can also be beneficial. Namely, at-will employees have the flexibility to leave a position with a company for any reason, at any time, and without providing any advanced notice, when they are employed under an at-will agreement.

Moreover, under an at-will agreement, employment policies usually feature non-compete agreements; in other words, employees have the immediate ability to begin working for other businesses without having to wait out a specific period of time or other kinds of restrictions.

At-Will Employment Exceptions

There are situations in which an employer or an employee might need to adhere to stricter guidelines than the typical at-will employment agreement provides.

Examples of these exceptions include the following:

  • Implied contracts. When an implied contract exists between an employer and an employee, the employer is not permitted to fire an employee, despite the existence of legal documents. Proving the validity of this type of agreement can be challenging, and the burden of proving the agreement exists rests on the employee. An employer’s policy book or new-hire handbook might note that their employees are not at-will and can only be fired for a just cause.
  • Employment contracts. Employees who are covered under collective bargaining agreements or who have employment contracts might have access to rights that typical at-will employees are not afforded.
  • Public policy. Employers are prohibited from terminating employees for actions that violate the public policy exceptions that violate existing state or federal public policy exceptions. In this instance, employers cannot fire or seek damages from employees if the reasons employees left benefited the public. To illustrate this, public policy states that employees are allowed to file workers’ compensation claims against their employers if they sustain work-related injuries. Firing an employee who submits such a claim is prohibited and would be deemed a wrongful termination.
  • Good faith and fair dealing. The fourth and final exception to at-will employment is the good faith and fair dealing exception. This exception states that employers are required to treat their employees fairly when they are making decisions regarding terminations, regardless of whether or not a contract exists. When a contract does exist, acting in good faith means that an employer can only terminate an employee in accordance with the provisions that are outlined in the contract and not without just cause. Likewise, with implied contracts, the good faith and fair dealing exception stipulates that the employer can only terminate an employee when there is a good cause; repeatedly arriving late to work, chronic absenteeism, significant underperformance, theft, insubordination, and the inability to meet the core work duties that have been outlined.

Employee Rights Under an At-Will Agreement

Boss Women Discussing Business & Work

Though there are fewer protections under an at-will employment agreement than other types of employment agreements, such as union collective bargaining agreements, employees do still have rights if they are terminated. These rights include federal and state statutory rights, such as anti-discrimination laws and unemployment insurance.

Both state and federal governments have put laws in place that protect at-will employees from being wrongfully terminated. The reasons for wrongful termination include sex, race, religion, citizenship, retaliation for completing actions that are legally protected, whistleblowing, age, disability, physical health, sexual orientation, and other factors that are protected under labor laws.

In addition to the above, a company’s policy might provide protections, such as severance pay for employees who are terminated under certain types of conditions.

At-Will Employment Across US States

Regardless of the variances that exist across states, the vast amounts of employment relationships in the United States are at will. The majority of the differences between each state, however, relate to at-will exceptions. For instance, for public policy in the state of Illinois, exceptions apply for implied contract and covenant of good faith and fair dealing exceptions.

As such, employers in the state of Illinois are permitted to terminate employees at will only if the termination does not fall under the highlighted categories. Conversely, in the state of Florida, no at-will employment exceptions apply.

As such, employers have the liberty to terminate or alter the job duties of their employees whenever they wish, so long as the termination or changes to job duties do not violate state or federal anti-discrimination laws.

Like diversity across organizations, employment statutes that are related to unemployment insurance, paid leave, fair working conditions, etc., differ from state to state. As such, if you are an employer, it’s important to research the employment statutes in your state, as well as the at-will employment exceptions, before developing and implementing policies for your company.

Doing so will help to ensure that you are well informed and that your company’s policies are in alignment with any legal requirements that are outlined by your state. State government websites can provide this type of information.

Frequently Asked Questions About At-Will Employment

Below are answers to some of the most frequently asked questions regarding at-will employment.

Does At-Will Employment Mean That You Can Be Fired Without Warning?

Not necessarily; however, it would be in the employees’ best interest to conduct themselves as if they could be fired without warning. Therefore, it is advisable to have any documentation or paperwork that could be useful for finding new employment in the event that you are terminated without notice.

Do Employees Have Rights When They Are Employed at Will?

Yes, employees who are employed at an at-will organization do have protections under federal law. This means that they are entitled to the following:

  • Being compensated fairly for duties they perform
  • Being provided a safe working environment
  • Freedom from being harassed or discriminated against
  • Being protected from wrongful termination on the ground of sex, race, age, disability, etc.
  • Receiving severance pay
  • Unemployment insurance

Additionally, at-will employees are also protected under anti-retaliation laws, which means that an employer cannot fire them for retaliation for filing harassment, unsafe working conditions, or discrimination complaints.

How Do Companies Indicate That They Are At-Will Employers?

A lot of business owners indicate that they are at-will employers in the offer letters they provide to new hires. Additionally, they may ask new hires to sign agreements that state they acknowledge the at-will status of the company before they begin working.

It would also be in a company’s best interest to highlight its at-will status in its company handbook or policy manual so that this information is clearly documented in writing.