Quirky Question #198, Employee Handbooks and At Will Employment

Question:

A friend just told me that we have to revise our Employee Handbook. He claims we no longer can say that our employees are employed “at will.” They are. Why can’t we say it?

Answer:

You ask a straightforward question. The response may be a bit more complicated than you suspect.

To ensure that everyone is operating with the same understanding, let me briefly explain the “at will” employment concept. The basic notion is that employees are employed “at the will of the employer.” Consequently, the employer reserves the right to terminate the employee’s relationship with the employer at any time, for any reason (a subject addressed further below).

Some employers like to hammer home the point that the employee is employed “at will,” so they also include phraseology emphasizing that the employee may be discharged “with or without notice,” and “with or without cause.” Combining these concepts might lead to a statement such as:

“As an employee of XYZ Corporation, you are employed at will. This means that the Company, in its sole discretion, may terminate your employment at any time, with or without cause, with or without notice, for any reason.”

Many statements of this kind are incorporated into company-issued Employee Handbooks. But, recognizing that this type of clause, especially when standing alone, might seem both harsh and capricious, many employers temper the at will definition by including language highlighting the fact that the employer’s rights are not substantially different from the employee’s rights. Given that the employee is free to quit at any time, for any reason, with or without cause, and with or without notice, this kind of parallel language also is often included in a company’s description of at will employment. For example, a “balanced” definition might read:

“As an employee of XYZ Corporation, you are employed at will. You are free to resign your employment, at any time, for any reason, with or without cause, and with or without notice. Similarly, the Company, also reserves the right, in its sole discretion, to end the employment relationship with you at any time, for any reason, with or without cause, and with or without notice.”

Of course, while this approach may appear more “balanced,” the content was not altered by including a reference to the employee’s rights.  It’s just that this statement appears more palatable than a statement emphasizing only the employer’s discharge rights.

So, that’s the basic idea of “at will” employment. The more important question is whether employees truly are employed at the will of the employer. Can they be fired, at any time, for any reason? Not really.

We perhaps belabor the obvious to state that employers cannot fire unionized employees at any time for any reason. Collective bargaining agreements include very specific termination provisions, restricting an employer’s rights to terminate employees and establishing the procedures that must be followed in the discharge setting.

But, even for non-unionized employees, virtually no one is employed “at will,” as the term is often used in Employee Handbooks or other policies affecting employees. The “at will” employment concept does not apply to employees with individually negotiated contracts. These contracts typically include termination provisions, limiting discharges to “for cause” terminations, or providing for specified severance benefits if the discharge is not “for cause.” So, individuals covered by these types of agreements are not truly employed at will.

But, let’s assume that an employee is neither a member of a union (and therefore has no collective bargaining rights) nor is sufficiently senior in the corporate hierarchy to warrant an individually-negotiated contract. Can these employees be fired at any time, for any reason? Nope. An employer could not fire an employee because of his/her age, race, gender, religion, disability, or any other protected classification under the federal statutory employment schemes (Title VII, the ADEA, the ADA, etc.), or the parallel state statutes. An employer could not fire an employee in retaliation for the employee’s exercise of his/her rights under these statutes or because the employee has engaged in conduct protected by the anti-retaliation provisions of the statutes.

But, it’s not just the anti-discrimination statutes that provide employees protection and demonstrate that they cannot be terminated at any time for “any reason.” There are a host of other statutes and common law prohibitions that limit an employer’s right to terminate an employee. This may include limitations (both statutory and common law) on an employer’s right to fire someone for whistle-blowing activities (i.e., reporting illegal conduct or conduct that clearly violates public policy), or terminating someone to whom certain promises were made to induce that person to take a job (i.e., promissory estoppel claims). Limitations on employers’ discharge rights also may include restrictions on terminating an individual who is about to take a health-related leave of absence, or an employee who has been called for military duty.

You get the drift, I’m sure. While my examples above provide some insight into the issues employers need to consider when making a discharge decision, these examples are by no means exhaustive. The bottom line, however, is that employers do not have the right to terminate employees at any time “for any reason” and it is somewhat silly to assert that right in a widely disseminated handbook or other company policy. As I have personally experienced as a defense lawyer, this can lead to some problematic cross-examination by a skilled plaintiffs’ attorney, when key witnesses are forced to acknowledge both that the company can NOT terminate employees for any reason, and that the company does NOT terminate employees for any reason.  (Incidentally, I got a complete defense verdict notwithstanding these problems, from a California jury no less.)

Having said that, handbooks or other policies can be tweaked in a minor way to make them more logical and more accurate descriptors of the present state of the law. Why not include a phrase such as: “XYZ Corporation reserves the right to terminate your employment at any time, for any reason not prohibited by law.” This language, or multiple alternative variations of this language that capture the same concept, would exclude all of the prohibitions referenced above.

Note, however, that in some jurisdictions, not even this language modification would suffice. Montana, for example, prohibits “at will” employment by statute, following a relatively abbreviated probationary period for employees. (For an analysis of the Montana statute, use the Category Index above to find other articles I’ve written on the subject of at will employment.)

In addition to the points made above, the National Labor Relations Board (NLRB) recently has entered the “at will” employment fray. I suspect that is what led your friend to advise you that your company should not continue to assert that employees are employed “at will” in your handbook. Now, if you’re thinking that because you don’t have unionized employees, the National Labor Relations Act (NLRA) has no applicability to your organization, think again. The NLRA has broad protections for all employees, unionized and non-unionized alike.

In its entirety, Section 7 provides:

“Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection, and shall also have the right to refrain from any or all such activities except to the extent that such right may be affected by an agreement requiring membership in a labor organization as a condition of employment as authorized in section 8(a)(3) [section 158(a)(3) of this title].”

The language that has the most sweeping scope is the reference to “the purpose of collective bargaining or other mutual aid or protection . . ..” One example of how this language of the NLRA can play out in a litigated dispute comes from the relatively recent decision of American Red Cross Arizona Blood Services Region and Lois Hampton, 2012 WL 311334 (NLRB Div. of Judges, February 1, 2012). There is much in the Hampton decision that is irrelevant to the issues of language used in an employee handbook. But, the handbook language used by the Red Cross was one of the problems that led to a charge of an unfair labor practice.

The NLRB’s General Counsel took the position that the language used in the Red Cross handbook violated Section 7 of the NLRA. The offending language was found in the acknowledgement form disseminated by the company. Specifically, the form (called the “Agreement and Acknowledgement of Receipt of Employee Handbook”) provided, “I further agree that the at-will employment relationship cannot be amended, modified or altered in any way.”

The company asserted a two-pronged defense. First, it argued that the language was permissible. Second, it argued that the issue was moot, because, out of an “abundance of caution,” it had modified the language. The Administrative Law Judge (ALJ) found neither argument persuasive.

As to the first point, the Judge concluded that this type of language could chill an employee’s exercise of his/her Section 7 rights. Moreover, the Judge pointed out that even absent “evidence of enforcement,” maintenance of an impermissible provision may constitute an unfair labor practice. Although the ALJ recognized that it was questionable whether the above-quoted language expressly restricted Section 7 activity (the handbook acknowledgement did not mention union or protected concerted activity, or even address complaints about wages, hours or working conditions), the ALJ nevertheless concluded. “in my view, there is no doubt that ‘employees would reasonably construe the language to prohibit Section 7 activity.” The ALJ found convincing the General Counsel’s argument that “the acknowledgement is essentially a waiver in which an employee agrees that his/her at-will status cannot change, thereby relinquishing his/her right to advocate concertedly, whether represented by a union or not, to change his/her at-will status.”

The ALJ also rejected the employer’s argument that the issue was moot, given that the language of the acknowledgement form had been modified since the Complaint was first brought. While the Judge recognized a line of cases where the wrongful conduct of the employer had been repudiated by the employer, thereby relieving the employer of liability, the ALJ did not find that standard had been satisfied in this instance. According to the ALJ, the language modification was not sufficiently timely and was not widely disseminated to the affected employees.

Given these determinations, the Judge found that the handbook acknowledgement violated the NLRA.

As you likely know, the current NLRB is quite active and is exploring issues that have not received significant attention in the past. The current focus on at will language in employee handbooks is just one example of the NLRB’s approach.

In sum, given the somewhat cavalier characterizations many employers use in their employee handbooks, and given the attention this issue is now receiving by the NLRB, you may want to examine whether your handbook language – specifically the language describing your employees’ employment as at will – warrants modification. With the addition of a clause or two, or an explanatory sentence emphasizing that nothing in your handbook’s description of “at will” employment status should be construed to limit any Section 7 activity by your employees, your company should be able to avoid problems relating to your handbook language in the future.