What is Employment At-Will?
The doctrine was designed to foster the freedom to contract and promote economic expansion and has remained fairly popular over time. It is no surprise that employment relationships are presumed to be at-will in nearly every U.S. state. Employers and employees alike benefit in the employment at-will system, but with greater flexibility comes greater potential for conflict.
The other side of that coin is that employers may terminate employees at any time without cause, explanation, or prior warning, subject to the condition that the reason for the termination is lawful.
Most employers clearly state in their employee handbooks that employees are at-will. However, employment at-will is just a presumption; it may be overcome by direct evidence of fixed-term employment contracts or indirect evidence of an implied contract that requires good cause for termination. Only a minority of jurisdictions recognize the implied contract exception, and Texas is not one of them.
What Are the Limits of an Employer’s Right to Terminate Employees?
The Texas Labor Code prohibits discharge based on certain forms of discrimination or in retaliation for engaging in certain protected conduct, such as opposing a discriminatory practice; filing a charge or complaint; or participating in an investigation, proceeding, or hearing. Federal laws likewise limit employers’ ability to terminate employees.
The Age Discrimination in Employment Act of 1967 prohibits employers from discriminating against employees 40 years of age or older. The Pregnancy Discrimination Act of 1978 prohibits discrimination based on pregnancy.
Recently, on June 15, 2020, the Supreme Court in Bostock v. Clayton County, Georgia held that an employer may not terminate an employee because of the employee’s sexual orientation or transgender status, reasoning that such discrimination was because of an employee’s sex and therefore illegal.
What Are the Exceptions to Employment At-Will?
In 2020, 14.3 million Americans were employed under a union collective bargaining agreement , which afforded employees more protection by generally requiring employers to show just cause for termination. Texas is a right to work state, meaning employment may not be conditioned or denied on the basis of membership or non-membership in a union. Union status is essentially an exception to the at-will presumption.
Additionally, some jurisdictions impose upon employers a duty of good faith and fair dealing, which prevents employers from firing someone to avoid their obligation to pay for healthcare, retirement, or commission-based work. Although this issue is not well-settled in Texas, Texas courts, including the Texas Supreme Court, have held that employers may not terminate employees to avoid obligations to contribute to employee’s pension plans.
However, the Texas Legislature has created protections to limited classes of employees who report particular violations, including physicians who report other physicians’ violations that present public harm to the State Board of Medical Examiners; employees who work with hazardous chemicals who report violations of the Hazard Communication Act; and registered nurses who report other nurses’ acts that expose a patient to risk of harm.
Only eight states do not recognize the public policy exception, including Alabama, Florida, Georgia, Louisiana, Maine, Nebraska, New York, and Rhode Island. Although Texas recognizes the public policy exception, it is limited to only preventing employers from terminating employees in retaliation for the employee refusing to commit a criminal act on the employer’s behalf.
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