Avoiding employee termination claims with at-will employees

The at-will employment doctrine allows an employer to fire someone for any old reason, right down to the kind of hat the person wears, or no reason at all (as long as the termination isn’t discriminatory). And because at-will is in force in every state but Montana, most employers have a lot of latitude.

Earned benefits
But in several states, there’s at least one situation where applying at-will can cause trouble: if it looks like you fired somebody to avoid paying them benefits they’ve earned. This might violate what’s known as “good faith and fair dealing.”

A Wisconsin case highlights the point. A bank fired an employee, citing ethics violations. She said, however, that the bank dumped her to avoid paying benefits she’d accrued under an incentive plan, but for which she became ineligible when she was fired.

A lower court said because the bank had the right to fire the employee under the at-will doctrine, it didn’t have to pay the benefits. But the state appeals court differed, saying the right to fire “does not mean … that an at-will employee may be deprived of benefits that accrued before he or she was let go if the firing was to prevent payment of those benefits.”

Legal experts say as many as 20 states recognize an employer’s obligation to observe good faith and fair dealing. You might want to check whether your state is one of these.

Cite: Phillips v. U.S. Bank, No. 2009AP246, Wisc. App., 2/2/10.

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