Employment at Will

Legal guidelines relating to the status of employment at will are still developing or remain unclear in many states. The evolving judgments of legislatures and courts on this issue reflect a continuing debate over how to protect wrongfully discharged at-will employees while allowing employers the freedom to make personnel decisions.

The rising number of wrongful-dismissal suits has alarmed many employers. Faced with the threat of high legal fees, court costs, and huge potential damage awards in such cases, more companies have begun to add express employment-at-will clauses to employment contracts. Many employers have deleted potentially troublesome statements from their handbooks and instructed recruiters to make no promises about just cause or the term of employment. Companies are also turning more frequently to severance pay settlements, in which discharged employees receive a reasonably generous compensation package in exchange for waiving all future claims based on the employment or its termination.

The decline of the power of employee unions and COLLECTIVE BARGAINING has provided many employers with the freedom to insert the new contract clauses. In many instances, companies are concerned more with losing expensive termination lawsuits than with inciting union action or public boycotts.

Whereas employers claim they are simply reasserting their rights under the traditional at-will doctrine, employee advocates believe that many companies may be attempting to cheat workers out of the job security gains they have achieved through several decades of wrongful-dismissal lawsuits. They propose legislation that would protect at-will employees from unjust discharge and provide for arbitrators to handle disputes. This solution, they suggest, would be fair to employees and employers alike. Such legislation would protect at-will employees, not just those who fall under the exceptions and who can afford to pursue a lawsuit that may take years to complete. Businesses would benefit not only because employee morale might improve, but also because relief could be limited to back pay and reinstatement rather than possibly including punitive and COMPENSATORY DAMAGES.

Some state legislatures have enacted legislation that struggles to balance the rights of the employee and the employer. In 1987, Montana passed the Montana Wrongful Discharge from Employment Act (Mont. Code Ann. § 39-2-901). This law limits the rights of employees claiming wrongful discharge, by restating the principle that at-will employees may be dismissed for "any reason considered sufficient by the terminating party." However, a discharge could be considered wrongful even under this principle if it was in retaliation for the employee's refusal to violate public policy, if it was not for good cause, or if the employer violated the express provisions of the employer's own personnel policy.

The Montana statute limits the remedies of a discharged employee who sues the former employer. The employee may be awarded lost wages and fringe benefits but only for a period not to exceed four years, and PUNITIVE DAMAGES may be sought only when there is clear and convincing evidence that the employer engaged in actual FRAUD or malice in the wrongful discharge. In addition, any earnings that were or could have been accrued following the discharge must be deducted from the amount awarded in lost wages. The Montana Supreme Court upheld the constitutionality of the act in Meech v. Hillhaven West, 776 P.2d 488 (1989).