At-Will Employment; Why Terminating Without Good Reason Creates Legal Risk in the US

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One of the first concepts UK employers likely learn when exploring employment in the US is that of at-will employment. At-will employment, the default status in the US, means employment can be terminated at either party’s will, without providing any good reason or fair process and without contractual commitments or any obligation to provide notice. This is often heralded as creating flexibility to change terms and move employment nimbly and without constraint.

However, the concept of at-will employment is not as straightforward as it may first seem. Although employers can lawfully terminate an at-will employee for a good reason, a bad reason or no reason at all, they cannot terminate for an unlawful reason, such as discrimination or retaliation. When employees are terminated without a good reason or fair process and with little notice to find replacement employment, they may understandably feel mistreated and might assume that discrimination or retaliation is the actual motive for termination, resulting in an expensive and time-consuming claim.

Employment litigation in the US differs from that in the UK, most notably in the costs and potential awards to successful claimants. Typically, a US employer must pay the legal fees of a successful claimant, which can easily amount to tens of thousands of dollars, if not more. This cost is on top of the employers’ own legal fees and any court award which can, depending on factors such as the claim brought, the state of location, the claimant’s salary and the size of the employers’ workforce, be a six-figure sum. Moreover, a claimant need not have direct evidence of discrimination to prevail; they can rely on circumstantial evidence, such as the deviations from disciplinary policies or inconsistent treatment among employees, from which a jury may infer a discriminatory or retaliatory reason for the termination.

Given these costs and risks, the best practice in the US is to provide both a good reason for termination as well as a fair investigative and disciplinary process. These are not strict requirements but can help forestall or defend a claim. It also aligns with the processes and values of UK employment, resulting in cultural alignment between an employer’s US and UK workforces.

For questions on how to manage your US workforce and minimize legal risk associated with terminating at-will employment or on other US employment law questions, contact Michelle Bush or any other member of MBM’s US Team.

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