Is At-Will Employment at Risk?

Foley & Lardner LLP

Foley & Lardner LLPWhat’s happening to the at-will employment doctrine?  The at-will doctrine has been the bedrock of employment law in the United States, guaranteeing management the right to pick its team.  Employment practitioners are familiar with the trope “The Company is an at-will employer.  The Company or the employee may terminate the employment relationship at any time, for any reason or no reason, with or without prior notice.”   To that end, companies routinely recite their at-will policy in applications for employment and employment handbooks to reinforce the importance of the policy. 

The City of New York has now broken the mold.  On December 17, 2020, the New York City Council passed an ordinance requiring large fast food businesses to have cause to terminate a worker.  Mayor de Blasio supports this move and is expected to sign the ordinance into law shortly.  When the law takes effect 180 days later, covered fast-food employers must demonstrate that once a worker has been employed for 30 days, there is “just cause” or a bona fide economic reason for discharge.  The ordinance defines “just cause” and “bona fide economic reason.”  Employers also must provide the terminated employee a written statement describing the reason for termination.   The city council also passed a companion bill requiring the application of seniority to layoffs, which is in addition to an existing NYC ordinance restricting management’s ability to change the schedules of fast-food workers.

While Montana is the only state that does not recognize the at-will doctrine, courts and legislatures have over time reduced management’s unfettered prerogatives of firing employees.  For example, anti-discrimination and anti-retaliation laws prohibit terminations on account of protected status and activities.  Certain states recognize broad protections based on public policy considerations.  Additionally, California and a few other states impose concepts of good faith and fair dealings into the employment relationship.  But no state or local government has gone as far as New York City to eliminate the application of the at-will doctrine to an industry employing an estimated 67,000 employees.

What does the New York City Council’s action foretell about the direction of the balance between protecting individual rights versus the prerogatives of management?

  • Mayor de Blasio was elected on a progressive platform. He will continue to move the needle toward workers in New York City.
  • There is a national movement to restrict or eliminate noncompete agreements. The erosion of the at-will doctrine may well follow the trend toward fewer management rights.
  • Unions will continue to lobby legislatures to reduce the scope of the at-will doctrine, particularly in regions where they have political power.

Employers should expect a significant increase in litigation in jurisdictions where legislatures impose a just-cause standard for termination when combined with a requirement that the employer pay the attorneys’ fees of a prevailing worker.  However, there might be an unanticipated consequence of such action.  That is, two of the principal selling points of unions are the contractual requirement of just cause for terminations and layoffs by seniority.  If legislatures or city councils provide that protection to workers as a matter of law, there may be significantly less need for unions.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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