Employment-at-Will Doctrine and Whistleblower Policy

Introduction to Employment-at-Will Doctrine

The employment-at-will doctrine is a term used in labor law referring to a contractual relationship in which an employer can dismiss an employee for any reason and without warning. When a worker is recognized as having been hired under the employment-at-will doctrine, a court does not grant that employee any claim for loss associated with the dismissal. This rule has been justified by the fact that employees may similarly leave a job without giving a reason or warning (Miller & Cross, 2010). In practice, an employer has the authority to dismiss a person for any reason — good, bad, or none at all. Similarly, an employee is also free to cease work, strike, or quit at will.

For an employee to successfully challenge a dismissal, the employee must establish either that his or her status was not at-will or that the dismissal was wrongful. If employers enter into a formal employment contract with employees, or with the union representing employees, the contract must specify the circumstances that can lead to termination and the duration of the employment relationship. If either party attempts to end the employment relationship by violating the contractual terms, a breach of contract will result.

Public policy limitations can be a source of problems for business operations. Accordingly, an employer is obliged to deal in good faith and fairly with employees. For instance, a dismissal grounded in an employee's engagement in illegal activities without informing relevant authorities must be handled with caution, as the employee may add claims for emotional and mental distress — along with demands for punitive damages — to any emotional or physical harm suffered after being fired.

Limiting Employer Liability and Operational Impact

One approach is to modify the employment-at-will doctrine in accordance with the employee's individual contract. For example, if the employee's contract allows dismissal for cause only, the company must adhere to that standard (Miller & Cross, 2010). Companies typically negotiate individual employment agreements with top executives. Under collective bargaining, an employee may be terminated for cause, with causes including employee misconduct and poor performance. Where an employment contract has explicitly outlined the employee actions or situations that would lead to termination for cause, those provisions govern the relationship.

Over the years, the Supreme Court has carved out exceptions to the employment-at-will doctrine to mitigate its harshest consequences. The major exceptions are the implied contract, public policy, and the implied covenant of good faith and fair dealing. The employment-at-will doctrine remains powerful; however, an employer must carefully assess whether an employee's circumstances fall under one of these exceptions before proceeding with termination.

In some cases, it may be inappropriate to fire an employee who was unaware that specific contractual terms existed. Such an employee may subsequently sue the company for violating the terms of a contract the employer never intended to create — a situation known as an implied employment contract. A court may side with the terminated employee on the ground that the employer broke a promise by ending the employment relationship (Cross, Miller & Cross, 2009). Even when a company did not intend to form a contract, an implied contract may nonetheless be found binding. Because the employee effectively shifts the burden to the organization to demonstrate that termination was for cause, courts have constrained the employer's unlimited freedom to dismiss workers at any time.

Exceptions to Employment-at-Will and Implied Contracts

A whistleblower policy covers situations in which a person raises an alarm about a malpractice or risk of wrongdoing that can affect the entire organization in terms of public interest, suppliers, employees, or customers. A CEO should consider adopting a whistleblower policy due to the legal and ethical imperatives that compel organizations to develop one.

Legal perspective: The legal landscape makes a whistleblower policy a vital component of an organization's overall code of ethics. The growth of statutory protections at both the state and federal levels, combined with courts' decisions to safeguard whistleblowers through the public policy exception to employment-at-will, creates a compelling legal imperative for such a policy (Miller & Cross, 2010).

The employment-at-will doctrine is increasingly being eroded. Beyond legislative trends protecting whistleblowers, the Supreme Court has acknowledged the doctrine governing employer-employee relationships in the private sector. For instance, companies have created implied contracts through statements in employee handbooks, which limits their freedom to terminate without just cause. It has also been established that some employers terminate contracts out of bad faith or malice. In some states, certain human resource decisions by employers have been found to violate public policy and must therefore be treated as exceptions to the original employment-at-will doctrine. In several jurisdictions, these exceptions have been interpreted to protect whistleblowers from discharge. The public policy exception provides the broadest potential protection for whistleblowers. For these reasons, adopting a formal whistleblower policy is strongly advisable.