Episode 97: The Two-Way Street of At-Will Employment

Paul: The reason why we’re here is employers often kind of misunderstand the limitations, or they don’t…I didn’t use the right word. They don’t understand what the limitations are. And that at-will employment is by no means a bulletproof shield. You need it for the contractual reasons that we gave you, that reason we gave it that no contract is formed.

However, this idea is that they believe or they’ve been incorrectly informed that because at-will employment supports giving no reason that they can fire people for any reason so long as they give no reason.

Voiceover: You’re about to listen to an episode of What the Hell Just Happened. Join Paul Edwards and his guests as they discuss interesting HR topics and solve some of our listeners’ submitted questions.

Paul: And occasionally I’ll go off topic to talk about whatever I want. Think barbecue, space exploration, growing your business. The things that interest all of us.

Paul: Hey, Divya.

Divya: Paul, hi.

Paul: Today we’re going to talk about at-will employment.

Divya: That’s right.

Paul: And what the hell just happened is that someone told one of our clients that he didn’t even need a support company like CEDR because they’re an at-will employer, and they can let people go any time they want to. And all of this other stuff that we do is just pure bullshit, right?

Divya: That’s right. We hear that a lot.

Paul: We hear that a lot. And in first of all, we get defensive, which somebody says that about us. I thought it would be a good idea for us to jump in here and just talk about at-will employment. Let’s define what that means.

Divya: Yeah. So for employers, what at-will employment means is that you can separate from the employment relationship with your employee at any time and for any legal reason.

Paul: Your employees can do that too. It’s a two way street.

Divya: It’s a two way street.

Paul: Except for the employees.

Divya: It doesn’t have to be a legal reason.

Paul: There are no legal reasons.

Divya: No legal reasons.

Paul: There aren’t gazillions of laws out there that could make it an illegal reason for them to quit.

Divya: There’s a little bit more flexibility for employees. But it is a two way street.

Paul: Right. So they can end the relationship with or without notice, reason or really consequences.

Divya: That’s right.

Paul: Really what it means is, is no contract is formed.

Divya: That’s right. And that’s a huge benefit to employers.

Paul: And to employees, by the way. There’s no contract formed, no consequences. If there are contracts there are consequences. There are consequences within contracts. If you leave early, if you don’t do this, whatever that looks like.

Divya: That’s right.

Paul: By the way, during the pandemic, we had a lot of associates who had contracts in place that we had nothing to do with. Whereby they were not, “they” the employer, were ostensibly based off of the contract, unable to lay off the associate because their base rate of pay was due for the term of the contract. Which carried them through several months. So contracts can be empowering and they can be quite disempowering.

Divya: Yeah, if you don’t consider all the elements, you could find yourself in a bind.

Paul: Let’s just give an example of a contract that you would then have to form with every employee. Ever signed a mortgage out there people? Have you ever signed a mortgage Divya?

Divya: I have, yes.

Paul: I have signed a few. And they’re not getting less. They’re getting more.

Divya: They’re large documents.

Paul: They’re large. They’re thousands of words, hundreds and hundreds of pages. And that’s because that’s what a contract has to do in order to cover all of the circumstances, all the twists and turns, everything. The contract has to be thorough. Now, in an associate agreement, believe it or not, folks, you can get a very thorough agreement with someone and still maintain your at-will status. But that’s for, that’s for another podcast. Okay. So we’ve defined what at-will employment is. It’s a two way street. We’ve kind of touched on there are some illegal reasons that you could fire someone, so.

Divya: There are some illegal reasons. Has to be a legal reason.

Paul: I love history. Got some history on at-will employment?

Divya: I have a little bit. So it’s a little murky, but there was this legal scholar in England. He wrote a treatise which is really just his thoughts on a number of legal issues. Right. And in his treatise, he mentioned an at-will doctrine. An idea that was really to benefit employees, because at the time a number of employees found themselves in situations where they were in servitude to their employers because they were.

Paul: They were.

Divya: Right. They lived on site, they ate from food the employer provided. The company store, they were purchasing from the company store. And so to work they had to live and then they had to procure items from the employer in order to pay the employer back at work. And it was just a cyclical relationship.

Paul: And they wouldn’t be able to leave.

Divya: They could never leave.

Paul: No, there were guys standing at the end of at the end of the street saying, ‘Where are you going? That’s our food. That’s our clothes. You haven’t paid for all that yet’.

Divya: That’s right.

Paul: So this idea came about that people could leave at-will.

Divya: They could leave when they wanted to. Every day’s a new day. One day you could just walk away.

Paul: So how do we get into, how do we go from a dude in England writing some ideas down on a piece of paper to this is a doctrine that is recognized in 49 states.

Divya: Yeah. So the dude in England wrote this treatise and then some judge made a decision in a case at some point, used the at-will doctrine as reasoning in that case. For the decision. That was case A. Case B came along with another plaintiff.

Paul: And we don’t know, a week later, a year later, a month later.

Divya: No idea. And they used case A as their reasoning in their decision. Case C comes down the line, they use case A and B, and this is precedents, just common law passed down.

Paul: So it just kind of came about. Congress didn’t created it, didn’t do anything. Although I think over the years Congress, different states have kind of codified what at-will means in those different states. But it’s it’s virtually the same across the board. At some point, lawyers begin to argue on behalf of employers, it should be an even playing field.

Divya: That’s right. If the employee can walk away at any time, the employer should be able to walk away at any time.

Paul: Right. So this goes back to no contract is formed. You don’t have to form a contract to create a bunch of conditions and rules and how you want your business to operate. You can just state them within, guess what? An employee handbook.

Divya: That’s right. That’s where you create your boundaries. Yeah.

Paul: Yeah. That gives us a brief history. Why is it important? Why is at-will, well it’s really kind of an essential part. And it’s unique to the United States.

Divya: It is. Yes.

Paul: I think it’s an essential part to our economic engine. I think it really makes things run well when it’s not abused. It can be abused. I will admit that there are managers out there who shouldn’t be managers and maybe even owners out there who get pissed off and in retaliation for being challenged on something or, you know whatever, they fire someone at will. You know, they don’t really have a good reason other than that they’re upset that they’ve been called out. I think that’s the worst example of it.

Divya: So worst possible case, but the best case is it allows people the freedom to choose.

Paul: Yeah. On both sides. I chose different. One time I had worked for a guy. He was a bully. He came in first, balled up red, faced, mad, screaming at me. I’d been there for three weeks. I’m a retired colonel son for 17 years. Bullies trigger me even though I have a pretty thick skin. I backed him off. I stood up, he took a step back, and I quit. He tried to hold my check. He tried to mess with me getting another job. He tried all sorts of things.

Divya: Can’t be doing that.

Paul: You can’t be doing that.

Divya: Not under at-will.

Paul: Yeah, not under at-will. You got to let people go at-will, when they want to go.

Divya: And give them the freedom to choose. That’s right.

Paul: Okay, so it’s essential because it allows us to run our businesses and it also allows people who don’t want to work for you, who aren’t good at their job or don’t want to be working for you to go find a job someplace else. I think it’s kind of cool when it’s not being misused. The reason why we’re here, is employers often kind of misunderstand the limitations or they don’t…. I shouldn’t, I didn’t use the right word. They don’t understand what the limitations are. And that at-will employment is by no means a bulletproof shield. Need it for the contractual reason that we gave you. That reason we gave you that no contract is formed. However, this idea is that they believe or they’ve been incorrectly informed that because at-will employment supports giving no reason that they can fire people for any reason so long as they give no reason.

Divya: Yes, this is not a limitless shield, right? This doctrine doesn’t allow you to do whatever you want, whenever you want.

Paul: You are not king. You have to be a good leader.

Divya: You got to be a good leader.

Paul: And you are the king or the queen of your business. And you do get to run it like you want to run it, but you have these confines that are around you. So when we talk about the limitations and understanding the limitations, can we tell everybody all of the limitations? I mean, if we think about all the protections and the laws and the regulations and OSHA and all across the board, could we list off all of the reasons why someone could be found to fire someone illegally?

Divya: No, we could start that list.

Paul: But we would be here for hours.

Divya: For a really long time. It wouldn’t, we wouldn’t even get all of it.

Paul: Gazillions of, of federal laws and local laws and state laws, regulations, ordinances.

Divya: Cases.

Paul: I mean, it’s just too many things in there. So it’s very easy to kind of trip and fall into a trap whereby you have fired someone, here comes that word, in close proximity to something that is a protected activity or a protected circumstance. I’m going to give, I’m going to give a couple. And let’s play off of this.

Divya: Yeah.

Paul: We have a 64 year old employee who’s habitually late. She’s not been a great employee. We have not been documenting things with her because she’s been with us for 20 years, and every time we try to talk to her and correct or document or get coached, she just gets angry. And then we have a terrible week. And then everybody has a terrible week. So, you know, she does her job. The patients like her okay, everybody likes her alright. So we have this employee and we finally decide to let her go. And under the at-will doctrine, we could just walk in, not give her a reason and let her go. What’s, what’s the immediate problem that happens when we don’t give someone a supportable reason for letting them go?

Divya: They are going to make up the reason why they were let go.

Paul: They could.

Divya: Yeah, they’re going to think about it.

Paul: They’re going to think about it and they could make up the reason.

Divya: And come back with a lawyer.

Paul: And then the other bad thing. Well I describe, I described the scenario that you hear all the time over at CEDR whereby, ‘We just don’t want to talk to her because she makes us miserable. It’s getting worse and worse and worse.’

Divya: It’s awkward.

Paul: And it has nothing to do with her age, and it just has to do with her performance and coming in late and it’s just not good, right? So we’re just going to let her go.

Divya: Right. Rather than managing and coaching and trying to get this employee on the right track, employers sometimes avoid the situation.

Paul: And it just happens. It’s like that thing, like you’re look down and all of a sudden you’re 12 pounds heavier and you’re like, ‘What? How did I get here?’

Divya: ‘Why are my jeans tight, what happened?’

Paul: All of a sudden, ‘I got to do something about this.’ So it just happened. So no judgment from us to anybody out there. But in the best of circumstances, two things are happening. One, you really are engaged with employees and you’re holding their feet to some kind of standard.

Divya: That are outlined in?

Paul: Your employee handbook and your policies. And it’s all legal. It has been written by you, but you’ve had a lot to say about what’s in it. But experts, I guess this is a pitch for CEDR, but experts have helped you get there and really done the work for you. Okay. Let me throw a little twist in here. Two months ago, the same employee came in and kind of out of left field, told the manager that she wasn’t being paid properly. She didn’t think she was being paid properly for overtime. Caused a big stink. Look, it turns out that she was and everybody was being paid properly. However, it really caused some serious issues. For everybody who’s listening, we said there’s a bunch of laws out there, this is one of them is employee does have the right to let you know about benefits and working conditions and pay. And if there’s a problem, they can discuss it and bring it up to you. And once they do, they are protected for a period of time and back comes the word proximity.

Divya: That’s right. You cannot retaliate because that activity is protected under the law. They are allowed to do that.

Paul: So I think everybody knows if they did that the next day you came in and said, ‘I’m firing you for causing this upset.’ I think you would at your core, you would understand that you might be doing something that’s not exactly kosher, right? So people have a sense of what might not be protected by at-will, I think, inside. And so I think most of us know we’re not going to walk in and go, ‘We’re firing you because you told us you’re pregnant again, and you’ve been pregnant a lot over the last three years.’ You’re not going to walk in and give them these reasons, which leads to this really bad guidance, which is if you’re going to give them, give them no reason. Because they can’t use no reason against you. But the fact is, they can.

Divya: They can use no reason against you.

Paul: And circumstances matter. And so in proximity I, we would say that if this occurred a month or two ago, that she’s so protected by it, you might want to consider waiting a longer period of time, doing a better job of doing more documentation and talking to this employee so that you do have everything in place and not just pull your at-will trigger at that point.

Divya: Yeah. At-will is a really great shield as long as you’re documenting the performance and behavior of your employees.

Paul: And the real reasons and then being cognizant of one, when one of these protected things comes up. I want to say this. This is what happens all the time, is your at-will status is fine. You can let this employee go. Maybe you haven’t been managing them as hard as you might, I shouldn’t say hard, as close and as you should. You have been holding them accountable. While you’re waiting, because you’re busy and you don’t want to hire again, something like this happens.

Divya: Yes, that’s right. There’s a proximity issue.

Paul: There’s a, proximity issue pops up and all of a sudden they’ve complicated everything.

So leading up to two months ago, before she said anything about the pay not being right, she was, she just had a regular protections there. You really had the green light to let her go. But because you waited, and didn’t lean into the actual reasons for letting her go when you put it off. I keep saying her. It could be a he, everybody. We just, it’s mostly women in the practices that we work with.

Divya: You waited too long.

Paul: You waited too long to make your decision. And we never know. I mean, nobody wants to just fire people. It’s not fun.

Divya: Correct. But if you are, I always say this if you are documenting performance issues, behavior issues with your employees, the documentation sort of starts speaking for itself.

Paul: It does. And it also lets them know, it doesn’t surprise them. It’s not an ambush, they know that something’s coming.

Divya: That’s right. You should always be talking to your employees. I say this so many times to our members. It should never be a surprise to an employee if they were terminated. Alternatively, it should never be a surprise to an employee if they receive a raise.

They should have been receiving this feedback continuously. So they should know that something good or something bad is, is going to happen, based on the other conversation.

Paul: Yeah. This supports the one on one conversation. The method, the technique. If you guys want to go search CEDR’s databases, search their site for it. I can get an article on one on ones if you’re not doing them. You know, they did a poll at CEDR, I think it was last year, and I was really surprised a fully 40% of offices reported back out of several hundred that answered the poll that they were actually doing one on ones.

Divya: They’re so great.

Paul: Well, they’re, they are a platform for praise and for corrections and for small corrections.

Divya: Small corrections, not big.

Paul: Not the big ones. Don’t Wait until it’s a mess, get in there and try to make the small corrections.

Divya: That’s right. I always say, because sometimes employers ask, ‘What, what should I say?’ And I say, ‘Tell them, keep doing this. Stop doing this. Start doing this right. This is what you’re doing really well. You might want to try doing it this way. I’ve seen this. That might not work’.

Paul: It’s an opportunity, right?

Divya: That’s it. It’s a quick conversation, but it’s a touch point. And those are important.

Paul: Okay, so what the hell just happened is somebody told one of our clients they don’t need to do any of this stuff. They don’t need to manage people. They don’t need to document stuff with people. They don’t need to do anything to protect themselves because they’re in an at-will state and they are protected. And I’m telling you, if you’re getting that advice from someone, I don’t care if he’s famous and he gives all kinds of financial advice and he tells you that you should stop listening to them. This is not the way to go about running a business and protecting it and doing what it is that you can do to make life good for everybody that works for you.

Divya: That’s right.

Paul: You know, another advantage about, well, employment is when you got somebody toxic on your team or someone turns toxic and you can’t get it changed, you can get them out of there. I think it’s one of the best uses of at-will.

Divya: Of the at-will doctrine. Yes, culture killers.

Paul: All right. Divya this has been great.

Divya: Paul, thank you.

Paul: Yeah, it’s been great. And nobody’s going to know what I’m talking about when I say this, but Divya I’m going to get you a race car ride based on our discussion.

Divya: I’m so excited. Yes.

Paul: Divya taught herself, well with a friend.

Divya: With a great friend.

Paul: She learned how to drive a stick shift. And she’s got a little inner, like you’ve got three kids now?

Divya: I do. I have three children.

Paul: So this is like a midlife crisis thing.

Divya: I’m having a midlife crisis but rather than buying a race car, I just pretend I’m a racecar driver.

Paul: Well, I’m going to get you into a race car in the passenger seat with one of my buddies. By the way, if you listen to the podcast, it’s Ed Prather who is the astronomer who came on the show.

Paul: And we talked about a bunch of really cool stuff. Ed’s also a racecar driver, and he may be the fastest amateur racecar driver in the country. I know there’s lots of other racecar drivers out there who listen to this podcast. Ha ha ha. Who probably.

Divya: They’re all listening to this podcast.

Paul: Yeah, they are listening.

Divya: Yeah, I’m so excited.

Paul: What the hell just happens is you probably get a race car ride.

Divya: From doing this podcast. I’ll do so many more podcasts with you.

Voiceover: Thanks for joining us for this week’s episode of What the Hell Just Happened. Do Paul and yourself a favor and please share the podcast with your network. If you have an HR issue, question, or just want to add a comment about something Paul said please record it on your phone and sent it to podcast@WTHJustHappened.com. We might even ask if we can play it on the show. You can also visit WTHJustHappened.com to learn more about the show and join our HR community, Don’t forget to like and subscribe and join us again next week.