Employment-At-Will vs. Progressive Discipline: Understanding the Legal Dichotomy

by paulfalconehr.com on April 26, 2014

Why does a company have to offer its employees progressive discipline if they’re already employed at will? As an HR professional, you’ve probably been asked that question a number of times throughout your career, especially when one of your front-line manager clients wants to terminate someone quickly. After all, doesn’t “at will” literally mean “at the whim and total discretion of the employer?” Well, yes and no. What’s important in explaining this to your clients is that the “at will” legal concept is not something that’s used in the workplace . . . it’s used in the courtroom. And it would be a serious error to assume that you, the employer, have total discretion to terminate at whim simply because your staff members are hired at will. As you’ll see below, the rules and interpretations change significantly once you’re in the litigation arena.terminationgraphic

First, Some Definitions . . .

Employment-at-will” is a relationship where employers may terminate workers at any time for any legitimate reason or for no reason at all, with or without cause or notice. Likewise, employees may leave the organization at any time with or without notice. Progressive discipline, in comparison, is a system for according employees with workplace due process in the form of a series of documented steps where penalties increase for repeat occurrences of problematic or substandard performance or conduct. In theory, workers are made aware of their deficiencies and given a chance to improve before the ultimate step, termination, takes place.

Clearly the two concepts are diametrically opposed since one requires notifying employees in advance and in a progressive manner of their shortcomings while the other allows for immediate dismissal for no reason (as long as it’s not an unlawful reason) at the total discretion of the company. What’s important to remember on a practical basis is that the employment at will rule is littered with statutory exceptions, making it difficult to apply in the workplace on a practical basis and ultimately defend in court. To understand how employment at will came about, however, you need to understand the causes of its origination.

A Brief History Lesson

In the 18th century at the time of our nation’s founding, the job as property doctrine stated that the right to work was so fundamental to U.S. citizens that it shouldn’t be taken away arbitrarily or without just cause as accorded under the 14th Amendment to the Constitution. This “termination for just cause onlystandard was borrowed from English law and basically made working a “property right” of all American citizens.

That all changed, however, at the time of the Great Depression in the 1930s when capitalism and free enterprise were deemed to be at risk. Congress passed a series of drastic measures that resulted in severely limiting U.S. workers’ rights and gave companies the power to terminate workers “at whim” in order to keep their doors open. And we all know what the Great Depression looked like: Hundreds of workers lined up outside the factory door waiting for a plant employee to be injured or to make a mistake and get fired . . . in order to create a space for the new worker to fill in. It was mayhem, plain and simple, but “employment at will” became the law of the land in the 1930s, and as a result, a fundamental shift occurred where employers’ rights to terminate at whim replaced workers’ right to due process. In essence, a fundamental shift occurred where working became the “property right” of employers, not workers.

World War II began, and the employment at will debate was sidelined. It wasn’t coincidental, however, that labor unions saw their massive rise in the late 1940s when the war ended and through the 1970s. Why? Because union organizers could sell prospective member workers on the idea that if you’re represented by a union, then your employment would not be at will – it would revert to the “termination for just cause only standard” that was established in the 18th century. Workers flocked to unions as a result, if only to have a modicum of job security and be given advanced notice if their position was in jeopardy prior to being terminated. (The right to collectively bargain for wages and benefits was another big reason to join unions, but that was typically second in line to the advantages that greater job security offered by not being held to the employment-at-will standard.)

But wait – the story’s not over. Employment-at-will took a major turn in 1980 when a California court ruled that there could be exceptions to the employment at will doctrine. California Supreme Court Justice Rose Byrd ruled in Tameny vs. Arco Oil that a long-term employee couldn’t be fired under the employment-at-will affirmative defense for refusing to engage in unlawful activities (in this case, price fixing) on the employer’s behalf. Once the employment-at-will veil was pierced, the public policy exception was born, and tort law became part of the legal landscape.

Today, four key exceptions to the employment-at-will doctrine are generally recognized:

  1. Public Policy Exceptions
    You cannot terminate an employee for refusing to commit an unlawful act on the employer’s behalf (i.e., the Tameny case), for filing a workers’ compensation claim, for “whistle-blowing,” or for engaging in group activities that protest unsafe work conditions.
  2. Employment Contracts
    If a contract exists, you must adhere to its terms and conditions, including notice requirements, lest you breach the contract. Where an employment contract exists for a fixed period of time (for example, three years) and is silent concerning grounds for terminating the contract, courts in many states have held that employers have an implied obligation to discharge only for just cause. Similarly, unionized employees are governed by the terms and conditions of a collective bargaining agreement and are not at-will.
  3. Implied Contract Exceptions
    You may be bound by promises published in your employee handbook or oral promises made at the hiring interview requiring “just cause” to terminate. In addition, you’re prohibited from discharging long-term employees just before they are due to receive anticipated financial benefits like pension vesting (known as an implied covenant of good faith and fair dealing).
  4. Statutory Considerations
    Dismissals are illegal when based on age, sex, national origin, religion, union membership, or any other legislation established in Title VII of the 1964 Civil Rights Act, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and state law equivalents. Potential problems regarding race, age, sex, and physical disability may arise any time you fire someone in a protected class.

With such broad exceptions to employment at will now in place, you can’t know without a crystal ball what type of spin a plaintiff attorney may apply to a particular case if your company gets sued at some point in the future. Therefore, you can’t rely on the employment-at-will affirmative defense as an absolute and exclusive measure against a wrongful termination claim—there are just too many exceptions that plaintiff attorneys have at their disposal.

Legal vs. Workplace Application

Now to really answer your client’s question about freedom to terminate when an employee is hired “at will,” you’ll need to explain a bit about the anatomy of a lawsuit by distinguishing between the hearing stage and the trial stage in the litigation arena. Employment at will only exists at the hearing stage. Your company’s defense attorney will argue that the individual was employed at will and that your company did nothing to abrogate the employment-at-will relationship. Therefore, your defense attorney will request a summary judgment (i.e., immediate dismissal of the case) using the employment-at-will affirmative defense. If your company prevails, congratulations – the case is dismissed and everyone can go home.

However, the plaintiff’s attorney will argue that the case should not be summarily dismissed at the hearing stage and should continue to trial where it can be judged on its own merits because the company arguably engaged in some form of unlawful activity that justifies an exception to the employment-at-will relationship. If the plaintiff attorney prevails and the judge agrees to hear the case at trial, then there’s no such thing as employment at will anymore. (Remember, employment at will only belongs at the hearing stage.)

Once the case proceeds to the trial stage, then the 18th century concept of “termination for just cause only” becomes the only standard available, so your company will have to show that it had good cause to terminate. And most judges and arbitrators will rule that if nothing was written down (i.e., in the form of corrective action), then the performance problems may not have been serious enough to warrant termination. In short, your organization could be left trying to defend its actions without the supporting documentation necessary to prove that it had good reason to terminate the plaintiff.

Unfortunately, you won’t know in advance if your defense lawyers will be successful in asserting that a bona fide employment-at-will relationship exists and thereby winning a summary dismissal of the case at the hearing stage. Therefore, you’ll always want to have progressive discipline in place to defend and justify your company’s actions should the case proceed to trial. When it comes to employment at will and corrective action, it’s not one or the other—it’s both. You want to protect the at-will relationship to give your company the greatest chance of winning a summary judgment at the hearing stage, but you’ll want to rely on your documented corrective action at the trial stage to prove that the individual was accorded due process and that your company had good cause to terminate.

The Moral of the Story

If you have to take employees through formal steps of disciplinary actions before you can terminate “for cause,” does that naturally erode your ability to terminate at whim? Well, the two concepts aren’t mutually exclusive; rather, they’re part of the complicated, and often times contradictory, issues that make up employment law today. By making the at-will nature of employment known expressly (i.e. in writing), however, you should be better able to successfully argue that an employee did not have a reasonable expectation that discharge could only be for cause.

Progressive discipline is a necessary part of performance management regardless of a worker’s employment-at-will status. Relying on employment at will as a sole defense (as opposed to a fall back measure) in terminating workers provides far too many employers with a false sense of security. Don’t let your clients fall into this trap. Your company should never rely solely on employment-at-will to make wrongful termination charges magically disappear. Understanding how the two concepts are actually applied in the courtroom should help to highlight the simultaneous benefits of maintaining an employment-at-will relationship with your workers as well as the necessity for documenting sub-par performance prior to termination.