Legal Corner: The Myth of 'At-Will' Employment

Even if your employer terminates you claiming you were an at-will employee, you can assert a claim against the employer based on other legal doctrines. My first conversation with a terminated or demoted securities industry employee usually starts something like this: I was fired based on accusations that are untrue. My career is ruined, but I guess there's nothing I can do since I'm an at-will employee.

Even if your employer terminates you claiming you were an at-will employee, you can assert a claim against the employer based on other legal doctrines.

My first conversation with a terminated or demoted securities industry employee usually starts something like this: “I was fired based on accusations that are untrue. My career is ruined, but I guess there's nothing I can do since I'm an at-will employee.”

I inevitably respond, “Well, it's not that simple. Tell me what happened.”

Most major firms require employees to sign documents stating something along the lines of:

I acknowledge that my employment is at-will, and either I or the firm may terminate my employment for any or no reason at any time.

The firms repeat the mantra of at-will employment endlessly, to the extent that if employees know nothing else about the law, they know about the at-will doctrine.

Taking a Closer Look

But just what is the at-will employment doctrine, and what does it mean for employees?

In most states, the at-will doctrine is part of common law, meaning that it derives from court decisions, not from laws passed by the legislature. It holds that employees who do not have a verbal or written contract of employment for a definite term of employment can be terminated without notice for any or no reason.

It sounds simple, but it's not.

For starters, federal law, namely the Federal Arbitration Act (FAA), governs securities industry arbitrations. The federal courts, interpreting the FAA, have consistently held that arbitrators may award money for wrongful termination of a securities industry employee, even if the claim would be thrown out in court under the at-will doctrine.

Even if the at-will doctrine applied in a case, it would not negate numerous antidiscrimination laws. In every jurisdiction, federal and state law protects at-will employees against adverse employment action on the basis of race, color, sex, age, national origin and disability.

Many states and municipalities also prohibit discrimination based on things such as sexual preference, positive HIV/AIDS tests, marital/family status, arrest record, genetic carrier status, military and jury service, and a host of other status or conduct categories. Other local laws prohibit or limit AIDS and drug testing, and polygraph analysis.

So-called whistle-blower laws may protect employees who report wrongdoing or who refuse to engage in unlawful conduct. If your office is closed, plant-closing laws may cover you. Did your boss snoop on you? You may have a claim under federal and state wiretap laws.

Other legal doctrines may protect you as well. Did the firm put nasty language on your U-5, which prevented you from getting a job? You may have a defamation claim or a claim for tortious interference with prospective business relations.

The common law in many states provides for a “promissory estoppel” exception to the at-will doctrine. For example, if the firm promised you a certain benefit, say stock options, as an inducement to join or stay at the firm, the firm may not be able to fire you for no reason just before the options vest. State wage laws may also allow you to recover unvested contributions to deferred compensation plans.

The point of all this is not that you should automatically assert a claim against your employer. Rather, don't give up hope just because the firm claims you were an at-will employee.


William A. Jacobson, Esq., a partner with Kaplan & Jacobson Inc. in Providence, R.I., represents securities industry employees in employment disputes.

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