At-will employment refers to an arrangement in which either side may end the relationship at any time and for almost any reason. The one major exception is that employers may not fire an employee for discriminatory reasons.
Historically, the at-will employment arrangement worked because employers and employees enjoyed roughly equal bargaining power. Most people were either self-employed or worked for small businesses owned by a sole proprietor or a few partners. These businesses did not have an unfair advantage over their employees, so there was no reason to protect their employees from them. In fact, since employees could leave their jobs at will, most people felt employers should have the same freedom to terminate employees.
As the Industrial Revolution got underway, things changed. Employers got larger and the number of self-employed people dropped. Jobs became more specialized, making many employees' skills less widely marketable. Employees thus became more dependent on their employers for their livelihoods. Eventually it became clear that businesses had gained a huge advantage when negotiating with employees. Employees started forming unions, which would negotiate with businesses on behalf of their members. The collective bargaining agreements that they negotiated served as contracts, spelling out, among other things, how and why an employer may fire a union worker. The at-will employment doctrine came to apply mostly to non-union workers without an employment contract.
Most industrialized countries have done away with at-will employment and require employers to show cause for firing an employee. Even in the United States, which still technically operates under the employment at will doctrine, it has become more difficult to fire an employee without cause. In the 1960s the federal government began barring employers from firing employees solely because of characteristics like race, sex, age or religion. By the 1980s, courts tended to find in favor of employees in wrongful termination suits, even if the employer did not intend to discriminate. As a result, many employers are reluctant to rely on the employment at will doctrine, and instead document misbehavior or failure to perform required job functions before terminating an employee. States have also created several exceptions to employment at will. The three biggest ones are: - Breach of implied contract: Employers may create an implied contract through oral assurances of continued employment or through the wording found in employee handbooks or other written communication. - Breach of good faith and fair dealing: A few states recognize an implied covenant that says all employment relationships should be conducted in good faith, and employers should not violate this covenant. Some states define this to mean terminations require cause, while others simply require that employers act in good faith and without malicious intent. States may also consider the circumstances. For example, a company should not fire someone who has worked hard and been loyal to it for decades without just cause. - Violation of public policy: The most commonly recognized exception states that some terminations may violate a state's public policy, such as firing an employee for filing a workers' compensation claim or for being a whistleblower. Some states define public policy broadly, while others require it be something specifically spelled out in the state constitution or statutes.
Not all states recognize all three exceptions. In fact, only six do: Alaska, California, Idaho, Nevada, Utah and Wyoming. Four states do not recognize any. They are Florida, Georgia, Louisiana and Rhode Island. Despite the restrictions, it is still legal to fire people just because you don't like them, but this is a dangerous proposition if they belong to a protected class. In general, it's safe to terminate employees under the at-will doctrine when a company downsizes or reorganizes. The rest of the time, it is probably safer and less expensive to fire employees only for cause.