It is sometimes useful for planning purposes to require advance notice of termination. Yet employers with “at-will” employees on their books may be hesitant to introduce notice requirements for fear of destroying the “at-will” status and thereby losing their flexibility to dismiss employees. It may be of interest to employers to know that “at-will” employment can co-exist with a requirement to give advance notice of termination. Employers and employees should also know that having an agreement in writing does not, without more, mean that the employee can only be terminated “for cause”.
In this, and the two follow-up articles, we aim to clarify some of the confusion regarding when “at-will” and “for cause” relationships arise and to provide an overview of the approach of courts in New York and California on the issue of requiring advance notice in “at-will” employment.
An “at-will” employment relationship is one where either party can terminate the relationship at any time and for no particular reason. In other words, there is no need to have what is generically labeled as “cause” in order to end the relationship. The vast majority of employees in the US are “at-will”. There are circumstances in which termination is illegal despite the “at-will” status, for example, where the termination is based on discriminatory grounds such as race or gender. In the absence of an exception, an employer can tell an at-will employee that he/she is no longer needed from that moment on. Similarly, an at-will employee can hand in his/her resignation on one day and start a new job the very next day.
The “at-will” status can be conveyed orally or in writing to the employee. Even if an employee has a written document regarding the employment, the employee could still have an “at-will” status. The question in that case would be what the written document states and whether any oral or written statements have been made to the employee that affect the employee’s “at-will” status. Thus an agreement in writing does not automatically mean that the employee is not (or is no longer) “at-will”.
A “for cause” relationship is the opposite of an “at will” relationship because it can only be brought to an end if certain events occur. The parties are not free to terminate “at will”. This is often the case in fixed-term contracts where the employer cannot terminate the employment before the expiration of the fixed-term unless one of the specified “for cause” events occur. Similarly, the employee in a fixed-term contract might not be able to terminate the employment early save in specific circumstances. Such contracts are intended to provide certainty to both parties. Contracts for an indefinite term can also state that termination can only be “for cause”. The crux of the “for cause” principle is that the employee has a guarantee of continued employment (either indefinitely or for a fixed term) unless one of the “for cause” events occurs.
The definition of “for cause” is sometimes stated in an employment agreement. It is commonly defined as gross negligence, acts of dishonesty and conviction of a felony. However, as with any other agreement that is not contrary to public policy, the definition of “for cause” can be whatever the parties agree to. An employer could, therefore, broaden the definition to include a whole range of circumstances.
At-Will Employees: You Can Ask Them to Give Advance Notice
In California and New York, employers can include advance notice provisions even if the employee in question is “at will”. The only requirement for terminating then becomes the notice period agreed to by the parties, for example two weeks or a month. Mutual notice requirements are less likely to be challenged as unfair. A failure to abide by the agreed notice requirements would leave the non-terminating party with a breach of contract claim. In order to retain the flexibility of having the employee off the premises from the moment notice has been tendered, employers can include a provision permitting pay in lieu of notice. Read more about the approach of the courts in California and New York on this topic in the following two articles.
– Under California and New York law, neither a written document nor a requirement to give advance notice will automatically turn an “at-will” relationship into one “for cause”.
– Don’t give mixed messages. Employers should be careful not to inadvertently change the “at-will” status into one “for cause” by making promises about future employment and disciplinary procedures. This can happen through, for example, reviews or employee handbooks, which, if handled incorrectly, can give the employee the belief that employment will continue unless he/she does something serious that constitutes “cause” to terminate.
– Be clear from the beginning. Employers should state unambiguously to employees at the hiring stage of the relationship that the employment is “at-will” and they should be consistent in this message throughout the employment relationship.
Each case is unique so you should consult an attorney in your state to determine which termination and notice rights and obligations you have as an employer or employee.