Until fairly recently, most employment in the United States could be classified as at-will employment, essentially meaning that either the employee or the employer could terminate the relationship at their discretion, without notice. Wrongful termination cases, which are a fairly recent phenomenon in employment law, seem to have placed some limits on the notion of at-will employment. In fact, for a time, they were considered antithetical to the concept of at-will employment.

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What Are the Exemptions to At-Will Employment?

In a number of states, state labor boards and legislative bodies have created additional requirements for terminations in at-will settings. For instance, all but seven states allow the public policy exception to at-will employment. Under the public policy exception, employers cannot terminate employees for reasons that appear to violate a key portion of public policy. It's essentially a state-level response to federal public-policy labor laws, such as those that prohibit employment discrimination on the basis of age or gender.

The stickier exception for most employers is the implied contract exception, which applies when the court feels that good faith and fair dealing have been mandated by the at-will employment contract. Usually, this happens when the contract includes a statement that the employee can be terminated only for just cause, or something along those lines. The implied contract exception is recognized in all but thirteen states. Eleven states take the concept even further, through the covenant of good faith exception. In those states, all employers, even in at-will employment situations, must always act in good faith, terminating employees only for good cause.

All three of these exceptions—the public policy exception, the implied contract exception, and the covenant of good faith exception—mitigate the strength of the at-will termination power. Any employer has not met those standards of termination, or has acted in a way that violates one of these exceptions, can be sued for wrongful termination, even if the employee worked under an at-will employment contract.

How Can I Avoid a Wrongful Termination Lawsuit as an Employer?

One of the most important lessons an employer can take from the various wrongful termination cases is the importance of documentation. The hardest cases for an employer to defend against are those in which the employer doesn't have official records that state the reasons the individual was fired. Information from memory may not be admissible into evidence because of hearsay rules. On the other hand, regular documents that record disciplinary actions, performance issues, and other similar records can generally be introduced verbatim under the business record exception.

Each state has slightly different requirements for getting documents and records admitted into the record under the business records exception. However, in general, employers must make sure that the documents meet several criteria:

• They are prepared in the regular course of business
• They are created for the use of the business
• They are not intended solely to prevent a lawsuit

It's all right if the employer realizes the documents can help avoid a lawsuit, but they shouldn't be prepared only for that purpose, or only if the employer thinks there is a risk of a suit. Generally, it's best to include the following information in the reports:

• Name of employee
• Reason for the disciplinary action or termination
• Supporting evidence for the behavior and action, citing previous records if possible

All emails and recordings as well as other documents that demonstrate the employee's behavior or support reasons for termination should also be saved. They may not be allowable as evidence, but they will help bolster the case, particularly if the dispute goes through arbitration or is settled out of court.

Maintaining accurate documentation also offers employers another benefit. A large number of wrongful termination cases settle outside of court. Having solid records that document grounds for the termination significantly increases the likelihood that the case will be dropped entirely before it ever reaches the courtroom.

Employers who have at-will employees can be confused to find out they can be sued for wrongful termination. The best way to protect your business from invalid claims of wrongful termination is to maintain documentation of all actions taken against every employee. These documents make it easier to demonstrate that the employee's termination did not violate the exceptions to at-will employment.

For help avoiding or handling an illegal termination case, talk to an employment lawyer.

Get started Start Your Termination Letter Answer a few questions. We'll take care of the rest.

Get started Start Your Termination Letter Answer a few questions. We'll take care of the rest.