NEWS, EVENTS, PUBLICATIONS & EMERGING ISSUES

SW&M EMERGING ISSUE
December 18, 2009

WHAT DOES “AT-WILL EMPLOYMENT” REALLY MEAN?

In recent months, many of our credit union clients have had to make difficult decisions in order to reduce expenses, including in some cases laying off employees and/or eliminating positions. Although employers may be aware that their termination decisions are protected to a certain extent by the employment-at-will doctrine, our credit union clients should also understand the limits of at-will protection.

So What Does It Mean?
Generally speaking, “at-will employment” refers to the mutual right of employers and employees to sever their employment relationships at any time, with or without cause or advance notice. Nearly every state in the nation has adopted an employment-at-will standard either by statute or by case law; in California, this principle is set forth at Labor Code § 2922.

Of course, such right to discharge employees is subject to numerous limitations. First, the at-will doctrine is a presumption that does not apply where the employment relationship is governed by express or implied contract. Second, the reason for discharge of an at-will employee must be lawful – that is, the employer cannot fire an employee for discriminatory or retaliatory reasons. Additionally, employers cannot fire employees in violation of public policy (for example, for whistle-blowing) or for participating in a protected activity.

But where an employer’s reason for terminating an employee is lawful, can the employer still be exposed to a wrongful discharge claim? The answer is yes, and in many cases it is because the employer did not adequately protect its “at will” rights.

Prudent Steps to Take: Don’t Raise the Bar
Preserving the right to terminate “at will” is not meant to encourage terminations based on arbitrary or inappropriate reasons, but to ensure that the credit union is not challenged on the termination decisions it does make. Where a company’s termination standard is higher – for example, where an employer must have “good cause” to terminate – management decisions may be open to scrutiny, whether by the former employee, an arbitrator, a judge, or a jury.

Even if your credit union does not intend to use a “good cause” standard, you should be cautious that certain policies may imply that such a standard exists. For example, disciplinary, performance, and/or grievance policies should be carefully worded so as not to indicate that the Credit Union must (or will) take specific actions prior to disciplining or terminating the employee. Similarly, these and other policies should not be so rigidly drafted that it limits the credit union’s ability to discipline for certain infractions or the flexibility to take into account the circumstances at hand.

You should also ensure that the following credit union documents, where applicable, contain language confirming the at-will nature of the employment relationship:

• Employment application (online applications)
• Offer letter, if any
• Employee Handbook Acknowledgement
• Descriptions of Employee Classifications and Introductory/Probationary Periods
• Grievance, Discipline/Progressive Discipline, and Standards of Conduct policies
• Leave of Absence forms
• Arbitration policies

Caution in drafting the foregoing policies and the inclusion of “at will” language should help prevent the implication of a “good cause” standard for dismissal at the credit union. And of course, you should keep careful records of the performance or business reasons for terminating any employee, even if they are employed at-will.

For further assistance in reviewing or drafting personnel policies and at-will statements, or guidance on termination decisions or wrongful discharge claims, please contact our office.

 < BACK