The ability for companies to dismiss employees under “Employment-at-Will” has been somewhat eroded over the years by a number of court cases. This has made it important for employers to clearly state their Employment-at-Will policy on all relevant documentation. The following real cases are examples of what can go wrong:
- A company hired MR. X as a sales representative. The employee handbook stated that the first 90 days on the job was a probationary period and that the company had an Employment-at-Will policy. A performance appraisal was completed on Mr. X’s performance at the end of 90 days during which he was evaluated favorably. Two months later the company terminated Mr. X using the Employment-at-Will provisions of the employee handbook. Mr. X sued the company for wrongful discharge and won. Mr. X’s lawyer argued that the company’s use of the probationary period and the use of performance appraisals indicated that the firm terminated for cause only. The performance appraisal form did not contain an Employment-at-Will statement and the probationary period was shown to be an implied and accepted contract between employer and employee. Mr. X was awarded $740,000 for wrongful dismissal based on the employee’s projected lost wages plus benefits from the date of termination through retirement age and for economic loss due to the breached implied contract.
- In another case a manufacturer had an application for employment and an employee’s manual, which stated that it was an Employment-at-Will organization. However, the employee handbook also contained a section, which spelled out a progressive step-discipline system. When a worker was fired after not appearing for work for three days in a row with no explanation, he sued the company and argued that he was improperly terminated because the step system had not been followed. The companies attorney argued that there was no need to follow the step system because the Employment-at-Will policy was in place. The court found that the employee had been improperly discharged and ordered the company to reinstate him and pay compensatory damages.
So here is today’s Daily HR Tip: If you have not had a labor lawyer review your employment documentation recently, now is the time. Do not rely on a simple “Employment-at-Will” statement in your employee handbook to protect you from wrongful dismissal suits.
Kevin is an Industrial/Organizational psychologist and management consultant specializing in organizational development, employee development, and human capital management.