NONPROFIT RISK MANAGEMENT CENTER
Employment at Will:
Sacred Cow or Dinosaur?
A Risk Management Webinar
March 8, 2006
Melanie L. Herman
Nonprofit Risk Management Center
1130 17th Street, NW - Suite 210
Washington, DC 20036
(202) 785-3891 - FAX: (202) 833-5747
Web site: www.nonprofitrisk.org
The concept of “employment at will” is often comforting to nonprofit managers. For these
managers the fear of employment litigation is lessened by the theory that “we have employment
at will—we can fire people at any time.” Other managers believe the opposite: that terminating a
staff member for any reason other than gross misconduct leaves an organization exposed to
claims. A closer look at recent cases and litigation in this area reveals both good news and not so
good news. Nonprofit leaders must understand the concept of employment at will in order to
guard against avoidable employment claims and fortify their organizations to defend any claims
Generous funding to support this Web Seminar was provided by the Public Entity Risk Institute.
For more information, visit www.riskinstitute.org.
What is Employment-At-Will?
The term employment at will refers to the fact that:
Either the employee or the employer may terminate the employment relationship, at any
time and for any reason, except a reason specifically prohibited (illegal) under state or
Additional definitions of the term include:
“…when an employee does not have a written employment contract and the term of
employment is of indefinite duration, the employer can terminate the employee for good
cause, bad cause, or no cause at all.”
Source: Shane and Rosenthal, Employment Law Deskbook, Section 16.02 (1999).
“The employment-at-will doctrine provides that both the employer and the employee can
end the employment relationship at any time without notice or reason.”
What this means:
Employers in every state except Montana* are presumed to be “employers at will” unless
a current or former employee can prove otherwise.
Employers may voluntarily adopt an “employment at will” policy as the basis for the
relationship between employer and employee.
Employment at will is presumed unless an employer provides a clear indication that it
will only fire employees for good cause.
It is possible to terminate an employee for a trivial issue or for no reason at all and not
violate state or federal law.
Nonprofit employers, like other employees, have the ability to hire and fire employees
based on the needs and resources of the organization and the preferences of management.
What employment at will doesn’t mean:
Firing an employee on whim is okay as long as the nonprofit has an employment at will
An employee handbook must be in place for employment at will to exist.
There is no need to tell an employee the reason for their termination.
* See Wrongful Discharge from Employment Act, 1987 (Montana) and also Employment
Protection Act of 1996 (Arizona).
The Historical Development of Employment-at-Will
Since at least the latter half of the 19th century, the doctrine of employment-at-will has provided
the foundation for most employment relationships in the United States. Its existence reflects the
idea that workers should be free to leave positions that no longer suited them and that similarly,
employers should be free to dismiss employees who, for any reason, no longer suited the
employer’s needs. The doctrine of employment-at-will seems to place employers and employees
on an equal playing field.
Despite is prevalence in the American workplace, a number of key developments have served to
erode, though not destroy, the doctrine. One of these developments is the emergence of
collective bargaining by unions on behalf of employees. Many, if not most collective bargaining
agreements include provisions that severely limit the conditions under which an employee can be
removed and may limit removal to instances when the employer can demonstrate “just cause.”
The decade of the 1960s saw the adoption of statutory protections prohibiting the termination of
employment based on specific factors. The most well-known of these laws, whose adoption
would continue in subsequent decades, is Title VII of the Civil Rights Act of 1964, which
prohibits employers from making employment decisions based on such factors as race, religion,
sex, age and national origin.
A quick online search of articles on the topic of “employment-at-will” reveals varying opinions
about the current status of the doctrine. More than one author regards the doctrine as alive and
well in all but one state (Montana). Another author writes, “Since 1980 the number of states
adopting some of all of the new doctrines has more than tripled, leaving only five states,
Delaware, Florida, Georgia, Louisiana, and Mississippi, as employment-at-will states.” (Source:
Exceptions and Limitations to Employment at Will
Limitations to the concept of employment at will come from two major sources:
State and Federal laws (statutory law)
The courts (common law)
Under statutory law employers are prohibited from taking any action that adversely impacts an
employment relationship if the basis for that action is:
(1) the employee’s membership in a protected class (e.g. race, sex, ethnicity, etc.); or
(2) in retaliation for employee conduct that is protected (e.g. blowing the whistle on the
Under common-law, the courts may recognize and enforce an employee’s right to continue his or
her employment based on a theory of contract (e.g. breach of written or oral contract) or tort law
(e.g. breach of covenant of good faith and fair dealing).
Although employment experts disagree about the practical value of the “employment at will”
doctrine in today’s workplace, most agree that the doctrine continues to serve as the basis for
most employment relationships in the U.S. today. Although the doctrine has survived the test of
time, it does not negate the need for employers to exercise extreme caution when implementing
decisions that negatively affect the employment relationship. In particular, two areas deserve
very close attention and consideration:
The adoption of policies or actions that inadvertently erode or diminish the employment at
will relationship and thereby create a right to continued employment;
Decisions that negatively affect employees (including the decision to terminate employment)
without first considering the possibility of legal or administrative challenges.
Common-Law Exceptions to Employment-at-Will
There are three general categories of exceptions to the doctrine that have been developed through
common law and recognized by various states. These exceptions are: public policy, implied-
contract, and breach of covenant of good faith and fair dealing.
(1) Public Policy—Forty-three states recognize employer violations of public policy as a
possible exception to the employment-at-will doctrine, making the public policy exception the
most widely accepted exception. The seven states that have rejected the public policy exception
are: Alabama, Florida, Georgia, Louisiana, Nebraska, New York and Rhode Island.
Like other employers, a nonprofit may not dismiss an employee for doing something that has a
public benefit, such as blowing the whistle on the employer’s violation of the state wage and
hour laws, or reporting an unsafe workplace to the Occupational Safety and Health
Administration. The trend in recent years has been to encourage employers to encourage
employees to report wrongful conduct and promise protection from retaliatory action. A growing
number of nonprofit employers have followed the requirement imposed on publicly-traded
companies in Sarbanes-Oxley by adopting written Employee Protection (or Whistleblower)
Not surprisingly, the courts in various states have embraced different interpretations of what
constitutes a violation of “public policy.”
There seem to be two major “schools of thought”:
1. Some state courts have ruled that public policy exceptions must be derived from the State
constitution and statutes;
2. Other state courts recognize a public policy exception derived from the State constitution
and statutes as well as broader notions of public good and civic duty.
In Palmattere v. International Harvester (1981), the courts in Illinois adopted what is viewed as
one of the most expansive definitions of “public policy.” In that case, involving an employee
who notified a local law enforcement agency about what he believed to be criminal acts
perpetrated by a co-worker, the court described the public policy exception to employment-at-
will as required to establish a “proper balance… between the employer’s interest in operating a
business efficiently and profitably, the employee’s interest in earning a livelihood, and society’s
interest in seeing its public policies carried out.” Despite the lack of any requirement or
admonition to employees to report criminal activity in the State constitution or state statutes, the
court ruled that Palmattere had established an actionable claim for retaliatory discharge.
Some states have adopted specific laws to clarify the public policy exceptions to the
employment-at-will doctrine. For example, in Texas there are 14 public policy exceptions
memorialized by statute, including laws that make it unlawful to discharge an employee for
military service, for filing a good faith workers compensation claim, and for attending a political
Most of the judicially recognized or statutory public policy exceptions to the doctrine of
employment-at-will can be characterized as falling under one of the following categories:
Refusing to commit illegal or unethical acts (e.g. illegally dumping toxic materials
produced by the employer).
Performing a legal duty (e.g. serving on a jury or as a witness).
Exercising legal rights (e.g., filing a workers’ compensation claim).
Whistle-blowing (e.g., notifying the IRS that the nonprofit’s Form 990 contained false
During recent history many states have adopted whistleblower protection statutes. Some of the
statutes are rather broad, while others protect employees in specific situations. The early South
Carolina statute was limited in scope, protecting employees against retaliatory termination for
filing a workers compensation claim. A more recent review suggests that the early law has been
amended to protect employees who report occupational health and safety violations (see South
Carolina Whistleblower Act (S.C. Code Ann. §8-27-10 - §8-27-50 [Supp. 2000]).
(3) Contracts—There are a number of contract-law theories that a court might apply in order to
reject an employer’s claim that its termination of an employee was legal due to the existence of
employment at will. Of course when a written, valid contract of employment exists the doctrine
of employment at will does not apply. Termination of employment is based on the terms and
conditions found in the written contract. In the absence of a valid, written contract, a recently
terminated employee plaintiff might allege that he or she was working at the nonprofit on the
basis of an implied contract. The implied contract between the employer and employee might be
found in the language of the nonprofit’s employee handbook, such as a clause indicating or
implying that subsequent to the completion of a probationary period an employee will only be
terminated “for cause.” Thirty-eight states recognize the possibility that oral or written
statements about job security may create an implied-contract of employment. Some of the states
that recognize this exception may limit its applicability to instances when written assurances of
job security have been made by the employer and only in the absence of prominent and
unambiguous disclaimers. States that have rejected the implied-contract exception to
employment-at-will include: Texas, Louisiana, Florida, Georgia, North Carolina, Virginia,
Pennsylvania, and Massachusetts.
Potential sources of litigation in this area have included:
Statements concerning the procedure for discharge or promises of termination only
for “just cause” contained in the nonprofit’s Employee Handbook or Personnel Policy
Statements by management personnel in the nonprofit concerning job security.
The existence of a merit pay plan (rejected as evidence of an implied contract by a FL
appellate court in Muller v. Stromberg Carlson Corporation)
The classification of an employee as “permanent” in an offer letter and identification
of a scheduled retirement date (rejected by the Texas courts in Webber v. M.W.
(3) Covenant of good faith and fair dealing. Eleven states recognize the “covenant-of-good-
faith-and-dealing” as an exception to employment at will. In a majority of these states, a plaintiff
may assert the breach of the covenant of good faith and fair dealing in the form of a tort or
contract claim. What the concept essentially means is that every employment relationship is
governed by the requirement that employers act in good faith and without malice in making
personnel decisions. The courts in California were the first to recognize this exception to the
doctrine of employment at will. In a case involved a terminated American Airlines employee, the
court wrote: “Termination of employment without legal cause after such a period of time offends
the implied-in-law covenant of good faith and fair dealing.” The ruling continued by noting that
“a duty arose on the part of…American Airlines… to do nothing which would deprive…the
employee…of the benefits of the employment…having accrued during [the employee’s] 18 years
of employment.” (See Lawrence M. Cleary v. American Airlines, Inc. - 1980).
Additional Limitations on Employment at Will
The exceptions described above are not the end of challenges to employment at will. Claims may
be brought by dismissed employees claiming intentional infliction of emotional distress or
promissory estoppel. The latter term refers to instances when an employee claims that he or she
has relied on employer representatives to their detriment.
The tort of intentional infliction of emotional distress is regarded as among the weakest bases on
which to attack employment at will. The tort is a means by which to compensate the victims of
outrageous conduct. In the context of an employment claim, a plaintiff might allege that they
were harassed by their employer or that the employer required the employer to do something
improper or illegal, which in turn caused the distress.
Risk Management Lessons and Strategies
There are numerous lessons to be learned from studying the history of the doctrine of
employment at will as well as its journey through the courts and the various legislatures.
Nonprofit leaders are well advised to pay close attention to these lessons and take time to
understand the status of the doctrine in their own states.
This section explores risk management lessons and recommended strategies.
1. Put Your Nonprofit’s Employment Policies in Writing
Written policies and procedures are the starting point for defensible, consistently applied and
ultimately effective employment practices in every nonprofit. There is no substitute for
committing the organization’s policies to writing. Written employment policies serve several
important purposes, including:
Written policies ensure consistency. They represent an effective way to communicate
a common message to all employees. Each person receives the same written
statement of policy. The organization can avoid the risk that various supervisors will
interpret a policy differently, causing inequitable treatment of employees. Employees
also feel they are treated fairly if the same standards are applied consistently.
Written policies provide admissible evidence of the organization’s policies, should the
organization need to defend its practices in court or at an administrative hearing.
Many employers have been held liable for unlawful employment practices when they
were unable to prove that a lawful policy existed and was followed. The absence of
written policies leaves a nonprofit needlessly vulnerable to legal challenge.
Written policies establish the business-related reason for an employment action,
reducing the possibility that the employer’s conduct will be challenged as subjective
2. Identify an Outside Expert
Every nonprofit organization with paid employees should identify an outside expert who can
be contacted for advice and counsel on employment matters. While a nonprofit may choose
to contact such an expert (an employment attorney licensed in the jurisdiction where the
nonprofit operates) for help on various matters, the termination of an employee is a matter
requiring such assistance. It is never a good idea to simply rely on counsel from a board
member who happens to be an attorney, a spouse or other relative of a staff member who has
a license to practice law, or someone else whose relationship with the nonprofit would not be
construed as that of legal advisor. This outside expert should be contact any time the
nonprofit is contemplating the termination of employment and certainly before any action is
3. Use a Disclaimer and Require Employee Acknowledgement
It is important that the nonprofit Employee Handbook or Personnel Policy manual include an
explicit statement regarding “employment-at-will.” Make certain that your employment
advisor has reviewed your statement prior to use. Consider requiring employees to sign an
acknowledgement indicating that they have read, understand and agree to abide by your
nonprofit’s employment policies, including the policy of employment at will.
The [Nonprofit]’s employees are considered Employees-at-Will unless employed under a
specific written contract. This Manual does not constitute an employment contract in whole
or in part, and the [Name of Nonprofit] reserves the right to add, amend or delete any policy
or procedure stated herein at any time.
Employment at [Name of Nonprofit] is “at will” and [Name of Nonprofit] does not offer any
guarantee of employment. Either the organization of the employee can terminate the
employment relationship at any time, with or without cause, and with or without notice. This
at-will-employment relationship exists regardless of any other written statements or policies
contained in this Handbook or any other documents or policies. No one except the Executive
Director may enter into any kind of employment relationship or agreement that is contract to
this policy of employment-at-will. Any deviation from the policy of “at-will employment”
will be invalid unless it is in writing and signed by the Executive Director.
4. Don’t Do Anything to Degrade Employment-at-Will
Some employers unwittingly undermine the employment at will status they enjoy under state
law through written statements or oral representations to employees. Look for ways that your
nonprofit may be undermining employment at will and vow to correct them. Examples
Other statements or sections of the Handbook, such as statements about job security,
“permanent” status, statements requiring the use of a detailed disciplinary procedures or
language requiring notice by an employee.
5. Strive for Flexibility in Addressing Employee Performance and Behavior
Striving for fairness in the workplace is an appropriate goal. Severely restricting the ability of
the nonprofit’s management to address performance and behavioral issues may place the
employer between the proverbial rock and a hard place.
6. Review Policy Compliance Prior to All Terminations or Other Punitive Action
It is vital to take the time to review your written policies prior to taking any punitive action
against an employee or terminating their employment at your nonprofit. Some of the
important questions that should be asked (and answered) at this time include:
❑ Does the employee handbook or personnel policy manual contain a clear and
unambiguous statement concerning our at-will status?
❑ Are there any statements in the handbook that might be construed as contravening that
❑ Do our written policies suggest or require a series of steps (e.g. progressive discipline)
prior to terminating an employee?
❑ If yes, what are those steps?
❑ If yes, have we followed the steps outlined in our policy to the letter?
❑ Is the reason for the disciplinary action or termination clear? What is the reason?
❑ Does the written documentation about the employee’s performance or behavior support
the reasons for the disciplinary action or termination?
❑ Are we willing to clearly state the reason for the termination to the employee at the time
of termination? If not, why not?
❑ Have we consulted our outside employment attorney concerning the proposed discipline
or termination? Have we followed the advice provided by that advisor? It not, why not?
❑ Are we adequately prepared to defend a challenge (administrative or lawsuit) to the
termination or disciplinary action? What steps will we take upon notice of a challenge?
Some employment advisors have argued that the increasing number of common-law and
statutory limits on employment at will coupled with our “litigation at will” society have, in
effect, destroyed the doctrine. One author writes, “…it simply does not make sense to
continue to use the term “employment at will.” An employer cannot fire an employee at any
time for any reason or no reason. The prudent employer will terminate employees only for
good reasons that it will be able to prove in a court of law through documentary evidence and
testimony.” (Source: “What Happened to At-Will” by Karla Grossenbacher, Seyfarth Shaw,
The National Law Journal, April 11, 2005.)
This author believes that employment at will remains a credible foundation for the
employment relationship in most jurisdictions, but that nonprofit employers must act with
care to both preserve this status (if desired) and plan accordingly for challenges that may be
made following the termination of an employee.
“The employment-at-will doctrine: three major exceptions,” Monthly Labor Review,
January 2001, www.bls.gov/opub/mlr/2001/01/art1full.pdf
“Employment at Will Prevails Despite Exceptions to the Rule,” by Robert J. Lanza and
Martin Warren, October-November 2005, SHRM Legal Report, www.shrm.org
Employment at-will: Employment Law 101: #3 of 60,
Wrongful Termination of At Will Employment, by Aaron Larson, September 2003,
At-Will Employment, www.workplacefairness.org
“Maryland Court Applies Anti-Discrimination Prohibitions on Small Employers,”
The Montana Wrongful Discharge From Employment Act,
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