At-Will Employment: What You Need to Know

The term “at-will employment” is often tossed around in the workplace. Amid myriad laws that dictate workplace practices, the at-will doctrine (as it is known in legal circles) stands at the core of an employment relationship in many states.

At a basic level, employees in most states (including California) are presumed to be at-will upon hire. What this really means is that a two-way relationship now exists between the employer and the employee. From an employer’s perspective, the employment relationship with an at-will employee can be ended at any time and for any reason, with or without notice; the same freedom is equally afforded to the employee to terminate the employment relationship at any time, with or without reason.

However, confusion often abounds in workplace environments, which can erode the at-will doctrine’s intent. For starters, at-will is frequently mistaken for the term “right to work”— a law that prohibits union membership or payment of union dues as a condition of employment. In terms of application, managers might invoke at-will’s basic tenets without regard for fairness toward their employees, and this can create serious legal exposure for the organization. While at-will does indeed allow a great deal of latitude to employers in terms of dictating an employment relationship, it is not a “free pass” to violate an individual’s basic rights.

Conversely many employees feel bound by assumed dictates of at-will, as in the case of providing notice when they terminate. While many employer policies dictate that a two-week notice be given upon termination, employees are under no statutory command to meet this obligation or provide a reason.

While at-will provides freedom in an employment relationship, there are some limitations in terms of its power. For example, the presumption of an at-will relationship can be superseded by evidence that an employment relationship of a certain duration exists, thereby limiting the employer’s power to terminate the employee in some way — as in the case of an employment contract or a union bargaining agreement. Further, employers are prohibited from invoking the at-will doctrine in a situation involving unlawful discrimination. In other words, terminating an employee due to a harassment complaint represents a misuse of at-will’s intent and likely will result in legal action.

The at-will doctrine offers a fundamental context for defining workplace employment relationships. Its philosophical intent is best maintained through consistent application of a few basic management practices. These include:

  1. Avoiding implied or direct promises of guaranteed employment for any duration. Many employers have ended the practice of probationary periods because they may erode the flexibility to end an employment relationship at any time. Further, use of verbiage such as “permanent” employee, or phrasing similar to “our employees will only be fired for cause or after the progressive disciplinary process has been exhausted,” may create misunderstandings and implied commitments of employment for a certain duration.
  1. Providing clear language on employment applications, forms and offer letters that specifically articulate the at-will relationship. These should be signed by the employee, but not by the employer to avoid the potential of an implied contract.
  1. Acknowledging that notice of a certain duration may be requested as a standard workplace practice; however there is no requirement that it be fulfilled by the departing employee. Again, the employee has equal rights to end his or her employment at any time, with or without notice or specific reason for termination.
  1. Honoring federal and state job protection laws that for a time may supersede at-will provisions. An example of this is the Family Medical Leave Act (FMLA), which provides employment rights to employees who take time off due to their own serious medical condition or that of a family member.
  1. During an employee termination, using language such as “We are ending your employment relationship with us effective today” versus “You’re fired,” speaks to the true intent of at-will while simultaneously allowing the person to maintain some sense of humanity in his or her departure.

In the end, at-will is simply a means of defining an employment relationship between employee and employer — one that either party can end freely, barring an expressed contract or unlawful intent. Like a friendship, the hope is that if the relationship is properly nurtured, it will be mutually beneficial and long lasting.

By: Saul Macias, MBA, PHR, Vice President of Professional Services/Principal

Bay Area Human Resources Services

Employer Obligations Resulting from the Newly Passed California Fair Pay Act

This election season, the topic of equal pay has made headlines nationally and once again California is at the forefront of new trends by enacting the Fair Pay Act (Senate Bill 358), an attempt to remedy wage inequalities among genders. The new law will solidify current California Labor Code § 1197.5 (Section 1197.5) and enhance employer requirements for pay decisions that create wage inequality. The Fair Pay Act applies to all private and public businesses in the state of California and will be enforced by the Division of Labor Standards.

Whereas the revisions to existing law are not immense, the changes will require businesses to update policies and practices and may require employers to revise and defend their compensation systems. Employers will likely now have an additional layer of consideration when offering salaries to high-value employees without impacting overall salaries within the company. Employers must be aware of the changes and be prepared to address anticipated claims regarding pay disparity.

Key Changes with the New Law

A significant change in the Fair Pay Act is the requirement for claimants to now show that their role is merely “substantially similar work” to a coworker when viewed as a composite of skill, effort, and responsibility. Previously it was required to show that a claimant was engaged in “equal work” with someone of the opposite sex. This lower standard allows for comparisons between employees who perform similar tasks regardless of job title.

Another key change in the new law is the opportunity for employees to freely compare salaries among any location the employer maintains. Previously, the law allowed pay comparisons solely within “the same establishment.” An employee may now draw distinctions between his or her pay and the pay of opposite sex employees performing substantially similar work at other work sites to show pay disparity.

Additionally, the Fair Pay Act is explicit in clarifying that the employer bears the burden of demonstrating that any wage difference is for the following allowed reasons and strengthens the definition of a “bona fide factor” an employer may use when distinguishing pay decisions.

  • seniority system;
  • a merit system;
  • a system that measures earnings by quantity or quality of production; or
  • a bona fide factor other than sex, such as education, training or experience.

The new law also makes it unlawful for an employer to prohibit disclosure, inquiry and open discussion of wages with other employees. However, there is no requirement for an employer to disclose employees’ wages to other employees.

Considerations for Employers

In order to prepare for the effective date of the new law and avoid potential claims by employees, employers should do the following:

  • Perform an audit to identify any pay differences within the work force. Employers should review each type of work performed rather than the specific job title and understand what factors justify pay disparities. (Remember that an audit resulting in findings suggesting unsupported wage differences must be acted upon immediately).
  • If you do not already have one, consider implementing a structured compensation policy. Determine the rationale for pay differentials.
  • Ensure policies specifically prohibit pay discrimination.
  • Emphasize that the employer does not prohibit discussions of salaries and provide training to supervisors regarding employees’ freedom to discuss wages.
  • Provide training to those making compensation decisions to understand what factors are permissible in setting wages and what system the employer has in place for each position.
  • Take steps to ensure there is no retaliation or discrimination for any action taken by an employee to invoke or assist the enforcement of this Act.
  • Review your record-retention policies relating to pay and personnel records. Past pay decisions may be scrutinized if an employee files an FPA claim. Why was Employee-A given a 2 percent raise in 2013 while Employee-X, Employee-Y, and Employee-Z received a 4 percent raise? You will need records to support each such pay decision.
  • Lengthen record retention times regarding wages, wage rates, job classifications and other terms and conditions of employment to a period of three years.

To help employers avoid unintentional violations, the author of SB 358 (Fair Pay Act) has committed to generating a clear and comprehensive report that would specify what could constitute valid reasoning for differences in wages between two employees doing similar tasks. We will be looking for this document in the coming months.

Employers are encouraged to consult with SharedHR to ensure pay practices and policies are compliant with the new law.

By: Brandi Gordon, SPHR, Senior HR Consultant

Bay Area Human Resources Services