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What rights, obligations do employers have when terminating employees?

Employers need to continually manage and minimize a number of potential liabilities surrounding employees, including illegal discrimination and harassment, workplace safety, disciplinary issues, theft, protection of confidential business information, and so on. One particularly important area where employers need to be informed and cautious about their rights and obligations is termination of the employment relationship.

The general rule in nearly every state when it comes to the employment relationship is that employers may terminate employment at any time for any reason. This is known as the principle of employment "at-will." There are important exceptions to this general rule, though.

For one thing, there are exceptions to at-will employment under state common law. Depending on the state, these exceptions may fall under established public policy, implied contracts, the implied covenant of good faith and fair dealing, certain tort-based claims, and the equitable principle of promissory estoppel. States also recognize statutory exceptions to the at-will employment rule, such as illegal discrimination, whistleblowing and retaliation, as does federal law.

Another important exception to the at-will employment rule is agreement by contract. Businesses routinely use employment contracts as an avenue of spelling out the terms of employment, including the parties' rights when it comes to termination of the relationship. Unless specified otherwise, the rule is that the relationship is at-will, and this is why employers must be careful to clearly define these terms in their employment agreements. When an employer provides special protections to an employee, it must be careful in fulfilling its contractual obligations.

In our next post, we'll look a bit more at this issue, specifically at California's implied contract exception to the at-will employment rule and what employers need to know to protect their interests in this area.

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