Employment at will is sometimes treated as a blank check to terminate employees that management decides that they do not like for some reason. Many small business owners believe that this concept allows them to fire an employee for almost any reason, as long as they are not violating discrimination laws or other local regulations or policies during the termination process.
The truth about employment at will in the United States is that it isn’t it that simple. There are limits in place for the reasons why you cannot fire someone, including when an employee seeks to use or exercise their rights under laws and employment statutes. In many states, it is not possible to fire someone for their conduct that happens away from the office, unless they bring those issues to work with them for some reason.
There are also good face exceptions found in 11 states which says that in certain situations, employers can only dismiss a worker for just cause. Even with employment at will, the termination cannot be motivated by malice or be an action taken in bad faith.
Here are the employment at will pros and cons to review.
List of the Pros of Employment At Will
1. Workers and organizations have more flexibility in the employment contract.
When it is possible to provide an employment at will contract, then there is more flexibility for workers and organizations to find situations which are mutually beneficial. Workers are no longer bound by the idea that they have to stay in a specific position if another job offer comes through which pays them more. Supervisors benefit because there are fewer restrictions in place so that it is easier to terminate an employee who is under performing.
Both parties have the opportunity to terminate the employment contract immediately, allowing each party to provide for themselves a better outcome. Workers don’t need to notify their employers about their desire to quit because they can decide not to show up. Companies can remove those who fail to meet productivity standards without an extensive documentation trail.
2. This structure focuses on the merits of each worker.
Employment at will does not generally follow a collective-bargaining agreement, which means there are no issues with seniority placement in the workplace. That means an organization can promote the workers who are showing leadership and excelling in their productivity instead of worrying about who has been working for them the longest.
When this policy of at will employment is enforced with consistency, then it encourages workers at every level in the chain of command to work for themselves because their output helps to create future opportunities for advancement.
3. You can stay focused on the work instead of the employment structure.
Because employment at will follows a standard worker agreement, everyone is on the same page with the workplace structure immediately. There isn’t the same need to continually re-negotiate a collective bargaining agreement or some other contract which governs how workers, managers, and organizations conduct themselves. That means more resources can go into the projects and contracts for their clients instead of worrying about internal expenses.
When employment contracts come up for renewal, the extensive negotiation process can last for up to a year in some situations. This structure can often rob teams of their productivity potential, which can adversely impact future opportunities for the organization.
4. This concept reduces the threat of a strike or hold-out issue.
Because employers have the opportunity to terminate workers without going through a collective bargaining process, then most situations only require an approach of good days for it to be a legal termination. This structure gives an organization the ability to encourage productivity every day because the offer of employment can be retracted at any time. Although some workers do not function well without some level of job security, people tend to work harder if they feel like their livelihood is under threat.
From the perspective of an employer, if a team of employees is failing to meet their expectations or obligations, employment at will gives them the opportunity to fire them and replace each worker with someone new.
5. It reduces the binding issues that are in place with other contract agreements.
If you signed a contract with an employee that gives them two years of guaranteed work, then it would limit your flexibility in how to proceed during a changing environment. You would be stuck with that worker or forced to pay the remainder of the contract to evolve your business. Employment at will changes this dynamic because you can operate with more flexibility. There are fewer binding issues to worry about because your decision for termination must follow only the legal stipulations which govern the hiring process in the first place.
6. There are still legal protections in place for the employee.
Employment at will indicates that an organization can terminate a worker for any reason, with or without cause. The exceptions involve discrimination or illegal activities conducted by the company. Employers are not permitted in the United States to fire someone based on their race, color, creed, national origin, gender identity, sexual preference, age, or disability. A worker cannot lose their job if they refuse to commit an illegal act for their employer, even if such an action was given as a direct order.
List of the Cons of Employment At Will
1. This structure tends to create more job openings at companies.
Companies which tend to follow the employment at will concept often see more open job opportunities available than those who follow collective bargaining agreement. Many supervisors follow a philosophy which causes them to terminate underperforming workers quickly without having a suitable replacement available for them. It is not unusual for an organization to ask their workers to fill the responsibilities of one or two additional workers while they seek suitable replacements, causing burn out to the extent that even more people choose to leave.
2. It will still cost the organization unemployment with the termination.
Employment at will might offer organizations an opportunity to remove employees that they feel are troublesome in the workplace, but that does not mean that they can do so without a cost to their bottom line. Unless there is an administrative trail of paperwork that can show a manager terminated a worker for just cause, then there is an excellent chance that the former employee will qualify for unemployment compensation. If this happens too often, the insurance provider will raise the rates for this coverage, reducing the overall profitability of the company.
There is still a cost savings to consider since there are fewer incidents of litigation with at-will contracts, but some workers may still have the opportunity to pursue a lawsuit if they feel like their termination was not for a justifiable event.
3. It creates less stability in the workforce.
When there is employment at will available for an organization, then workers can be fired for virtually any legal reason. That can even mean someone can lose their job for a simple uniform violation. The benefit here is that the company can directly manage their workforce in ways that allow them to structure people to obtain the most possible production. This issue also means that employees can leave their job at any time without facing a financial or legal consequence.
This disadvantage of employment at will creates a lack of stability within the labor force. Organizations and workers never have 100% security in their knowledge that a job will be available and productive each day. An employer has no control over how or when an employee decides to leave their job with this agreement in place.
4. There are fewer opportunities to modify the working environment.
Organizations have less motivation to negotiate with their employees over workplace conditions, safety factors, and even salaries because of the employment at will perspective. The only possible way for a worker to guarantee a positive change in their environment is to quit their job. If they were to approach a manager or supervisor about the concerns they have with regard to their job duties, then there is a possibility that the feedback could get them fired. Any question an employee asks is a threat to their paycheck.
5. This rule does not cover a breach of implied contract.
The most significant exception to employment at will in the United States is called a breach of implied contract. In general terms, and implied contract becomes a legally enforceable agreement because it is assumed to exist based on the conduct of each party and how it brings about a fair result. Whenever this issue is present in an employment situation, it is construed to be in favor of the employee.
Employers create numerous implied contracts every day, sometimes without thinking about it. In a lesson on employment at will from Study.com, an example is used where a hiring manager tells an applicant that people “work for her until they retire,” and then offers a job. This language creates an implied contract that could be costly for the organization if the new worker then gets fired because they are under the impression that their position is permanent.
6. Employee handbooks can eliminate at-will employment arrangements.
Another issue that organizations face with the issue of employment at will is that their policies and procedures can eliminate this contract even though it is part of the hiring process. If an employer states in their employee handbooks that there are specific termination procedures that will be followed, or that a specific act will result in grounds for termination, then this creates another implied contract.
Organizations need to be careful about clearly stating their termination procedures or how the process is our followed because it can outline a specific circumstance where only that situation can lead to a worker being fired.
7. There can be more workplace conflict in employment at will situations.
The stressors which come about because of the presence of an employment at will situation can lead to higher levels of employee conflict in the workplace. This issue can adversely impact the relationship and cooperation that you see between team members. It is especially prevalent in situations where an organization encourages competition, such as within a sales department. When workers are pitted against each other with the threat of their job on the line, then it can lead to more personality conflicts which may eventually create lower levels of productivity.
8. It can create higher levels of financial stress for the worker.
When employment at will is allowed to be practiced in its unadulterated form, then the rules which are in place leave an employee vulnerable to sudden or arbitrary dismissal. Organizations can also choose to change the position of responsibility of an employee so that they receive limited or on-call work instead of a full-time schedule. Because these decisions are based on the needs of the company instead of the employee, there could even be unannounced cuts in wages or benefits that can further increase the financial stress of each worker.
There are even times when employers can use these actions as a way to force some workers out of their jobs, and then use the employee decision to quit as leverage not to offer unemployment compensation.
Verdict on the Pros and Cons of Employment At Will
Employment at will seems to offer several advantages on the surface because it appears to offer more flexibility for organizations and workers to find some common ground. The reality of this agreement is quite the opposite. It is a structure which allows both parties to act in bad faith without suffering many consequences for their decision.
That is why many communities in the United States are looking at how a good faith stipulation for employment at will situations can enhance the job security that workers and companies need to remain productive. If someone can be fired for minor reasons, then there is no way to guarantee a result.
That is why the pros and cons of employment at will are critical to review. Every decision must go through a careful process of consideration so that the maximum benefits are achievable in each hiring choice. If this policy is absued for some reason, then it can create significant long-term problems.
Keith Miller has over 25 years of experience as a CEO and serial entrepreneur. As an entrepreneur, he has founded several multi-million dollar companies. As a writer, Keith's work has been mentioned in CIO Magazine, Workable, BizTech, and The Charlotte Observer. If you have any questions about the content of this blog post, then please send our content editing team a message here.