By Matthew Sorensen and Dana Livne
One of the major ways in which American employment law has traditionally differed from its British counterpart has been its entrenched employment “at-will” doctrine. The “at-will” employment doctrine provides employers with the right to terminate their relationships with their employees at any time, with or without notice or cause. UK companies doing business in the US are often relieved to be advised that they become “at-will” employers to their US-based employees. In the US, unless an employer has entered an employment contract or collective bargaining agreement that expressly limits the employer or employee’s rights to terminate the employment relationship, employment is considered “at-will.”
In the UK, on the other hand, under the Employment Rights Act 1996 (ERA), every employee must be provided with a written statement of the terms and conditions governing their employment within two months of commencing work. In fact, under the Common Law, some changes to working conditions cannot be made without the employee’s consent. The controversial Beecroft Report, commissioned by the UK government, has recently called for changes in the dismissal procedures in Britain to mimic the American “at-will” doctrine. The theory is that if employers are permitted to terminate workers with more ease and less “red tape,” it will encourage the UK’s financial growth, support business, and boost the economy. Indeed, according to the Institute of Directors, the UK business community is supportive of these measures, with a third of companies surveyed claiming that it would lead them to hire more workers.
However, the experience of “at-will” employers in the US has been not without its challenges. Although employers in the US who are not parties to employment contracts or collective bargaining agreements have a significant amount of discretion in determining whether and how to discharge an employee, the freedom afforded by “at-will” employment has been eroded in many respects by robust anti-discrimination laws. Even in the context of “at-will” employment relationships, employers must remain cautious when disciplining and terminating employees. A misstep can potentially lead to costly discrimination claims.
The US has developed a comprehensive body of law that places a number of limitations on employers’ rights to terminate “at-will” employees. Title VII of the Civil Rights Act of 1964 (“Title VII”) prohibits employment discrimination on the basis of the individual’s race, color, sex, religion, or national origin (the “protected classes”). The Age Discrimination in Employment Act (ADEA), prohibits discrimination against individuals that are older than 40 years old on the basis of their age. Individuals with disabilities are protected under the Americans with Disabilities Act (“ADA”), and the Genetic Information Nondiscrimination Act of 2008 (GINA) prohibits discrimination on the basis of genetic information. In addition to the protections established by these federal laws, many US states have also enacted their own state-specific statutes that provide additional protections to employees, such as prohibiting discrimination on the basis of sexual orientation, political affiliation, and physical appearance. Enforcement of these statutes has led to a long line of cases in which state and federal courts in the US have found that employers wrongfully terminated “at-will” employees based on protected characteristics. Even layoffs or termination policies that seem neutral on their face have been found to be discriminatory when they had a disproportionately negative impact on a “protected class” of employees.
Charges of discrimination can be damaging to workplace morale, public relations, productivity and the company’s bottom line. Indeed, even in cases involving baseless claims of discrimination, employers may be forced to expend significant resources to defend themselves in administrative and court proceedings. Employers in the US must implement creative strategies to thwart potential claims of discrimination before they arise, and to best position themselves to defend any claims of discrimination that do arise. The first step in protecting against claims of discrimination related to termination decisions is to ensure that the employer has a clear policy governing employee conduct and discipline that specifically reminds employees that their employment remains terminable “at-will.” The policy should provide a uniform and fair manner to respond to performance failures and misconduct by employees. For example, it may be appropriate to implement a progressive discipline policy. Such policies typically establish a schedule of progressively severe disciplinary sanctions for performance failures or acts of misconduct, often beginning with oral warnings and ending in termination. However, entities that establish progressive discipline policies should reserve their rights to short-circuit the progressive disciplinary process and immediately terminate the employment relationship or take other appropriate disciplinary action as they deem necessary.
In addition, employers must ensure that they follow their discipline and termination policies consistently. Those companies that do not consistently apply their rules to similarly situated employees can frequently encounter problems in discrimination lawsuits where it can be essential to have evidence that a worker was treated the same as other employees holding his or her position who are not members of the worker’s “protected class.” Companies are advised to maintain clear and consistent documentation of all disciplinary actions. A trail of properly documented disciplinary actions is always the best evidence to defend against allegations that an employee was terminated or subjected to other disciplinary action for discriminatory reasons. Employers should also conduct periodic anti-discrimination training for their employees and managers. For managers, particular attention should be given to reinforcing the need for consistent and non-discriminatory application of the company’s disciplinary policies.
In a competitive economy, the benefits to an “at-will” employment setting are clear. Employers can quickly dismiss workers who fail to comply with the company’s disciplinary rules or who do not add the expected value to business operations. However, to protect against charges of discrimination, companies operating in the US should carefully craft their discipline and termination policies and ensure that their managers are properly trained in the application of those policies. A proactive approach to planning and implementing uniform and fair procedures governing discipline and discharge will help companies avoid costly discrimination claims and focus on the continued success of their business in the US.