Overview of American At-will Employment

posted by Neil Klingshirn  |  Jul 29, 2009 6:05 PM [EST]  |  applies to South Dakota

American employment law is built on the foundation of at-will employment. Before any meaningful body of employment law existed, employment in America was at-will. Based in state contract law, at-will employment meant that, unless otherwise agreed, either party to an employment agreement could terminate the contract of employment at any time, for any reason, except a reason prohibited by law. In other words, the term of the employment is day to day.  Either party can end it, at their will.

Since either party could end the employment at any time, they could also change the terms of their employment relationship as well.  An employer is thus free to cut wages, increase hours or change any other term of employment.  The employee's remedy, if dissatisfied, is to terminate the relationship. In that event, in a pure at-will setting, the employee is entitled to be paid only for services already rendered pursuant to terms to which the employer and employee agreed.

Limits on the Employment at-will Doctrine

As the harsh operation of the employment at-will doctrine became apparent to courts and legislative bodies, four limits on pure at-will employment emerged.  They are:

1. The public policy exception to employment at will;
2. Contracts implied by the facts and circumstances of the employment;
3. Promissory estoppel; and
4. State and federal statutory prohibitiosn on certain reasons for termination, such as discrimination and retaliation.

Public policy warrants an exception to the employment-at-will doctrine when an employee is discharged or disciplined for a reason that is prohibited by statute.  If a state statute prohibits an employer from terminating an employee for missing work due to jury duty but imposes only a minor penalty on the employer for violating the statute, the public policy exception to employment at will gives the employee a remedy.  He or she can typically recover the wages and benefits lost as a result of the employer's violation. If the public policy exception to employment at will is rooted in the state's tort laws instead of its contract laws, the employee may be able to recover monetary damages for the emotional pain and suffering resulting from the job loss, as well as punitive damages in deliberate cases.

Implied contracts arise when courts imply a contract regarding the duration of employment or limits on the employer's right to discharge without cause based on the facts and circumstances surrounding an otherwise employment-at-will agreement. The facts and circumstances from which courts can imply a contract include the character of the employment, custom, the course of dealing between the parties, company policy, or any other fact which may illuminate the question.  An employee's remedy for breach of an implied contract is limited to wages, benefits and similar economic losses.

Promissory estoppel is an exception to at-will employment that will bind an employer to its representations or promises that do not arise to an express or implied contract.  Courts will bind an employer to promises or representation that the employer it knows or should know an employee will rely upon, if the employee does rely upon them to his or her detriment and justice requires that the court enforce the promise or representation. 

Federal and state statutes forbid certain types of discrimination and retaliation for engaging in protected conduct.

posted by Neil Klingshirn  |  Jul 29, 2009 6:05 PM [EST]  |  applies to South Dakota