Pros and Cons of the “At-Will” Contract by Jonathan Sparks, Esq.
A Little History on Employment Contracts
In employment law, you can break down contracts into two very broad categories: traditional contracts and at-will contracts. With traditional contracts, employees could not be fired without a legitimate reason, such as the failure to fulfill their job requirements or damaging the businesses’ reputation by mistreating customers. If an employee were fired for one of these reasons, he or she would be able to bring a lawsuit against the business, and argue that he or she actually did fulfill their duties and / or didn’t damage the company’s reputation when he threw his triple mocha latte at the TV during last year’s superbowl (totally excusable behavior, in my opinion). With a traditional contract, a lawsuit would ensue (very expensive) and a court would decide who was in the right.
Similarly, if an employee decided to quit without any reason, the business was allowed to sue them for lost revenue or business that occurred because of the employee’s leaving. Of course, if such a lawsuit was brought against the employee, the employee could defend (again, very expensive) the lawsuit, arguing that their departure from the company did not cause any economic loss.
Georgia is an “At-Will” State
At-will employment contracts do a great job of removing the litigation expenses from the equation, by allowing an employee to either quit for no reason, or be fired by their employer for no reason (there are still some federally protected reasons a person can’t be fired for, more on this below). For more information on Georgia employment laws, go to the Georgia Department of Labor’s website, available here.
The Few Limitations on At-Will Employment Contracts
Ever since the mid 1950s, there has been a short list of federally protected rights for employees. Because the federal government protects these rights, individuals can’t be fired for these particular reasons in any American state. If this is the reason the employee is being fired, or even if it appears that this is the reason, then the fired employee will have a strong case against the business for “wrongful termination.”
The list, basically, includes termination based on: sex, race, age, religion, national origin and/or disability. Current US law also doesn’t allow employees to be fired for retaliation, or for their outward disagreement with illegal business practices (whistleblowers).
When Do Companies Not Want At-Will Employees?
Oftentimes, companies will have certain key personnel that are crucial to their regular business operations. Maybe this employee has a large client base that she brings to the company, or is an expert in the field. Whatever the reason, if this employee were to leave without notice, the company would suffer a loss (of productivity, profit, etc). In these situations, it’s usually best to use a traditional employment contract, and require the employee to stay at the business for a pre-determined length of time. Of course, if the employee has to leave for disabilities or the like, they can still do that, but if they choose to quit their job for no reason – or to take a higher paying position – and the company loses revenue because of it, the business could sue. The reverse is also true; if the company fires the employee before the contract is up, the business would have to honor the remaining term of the contract or pay damages to the employee.
Georgia , and many other states like it (here’s a list), is an at-will state, meaning that it allows employees to be hired and fired, or employees themselves to leave their job for any reason. There are a few, federally protected, anti-discrimination policies that are protected, but aside from these, at-will employees allow for very simple employment law contracts. When employers have crucial, key employees or personnel that they’d like to keep on board for an extended period, they can use a more traditional contract that allows either party (the company or employee) to sue for lost revenue if they are fired/choose to quit before the contract ends.
Jonathan Sparks is the principal attorney at Sparks Law Practice, where he helps small to medium sized companies with their legal issues, general counsel and registered agent services.
He is your on-call in-house counsel for all of your business needs including help with startup agreements, employment law, protecting your intellectual property through copyrights and trademarks, B2B (business to business) contracts like NDAs (non-disclosure agreements) and contracts with distributors and manufacturers, buy-sell agreements for mergers and acquisitions, local government licensing requirements, and creating template contracts for your customers.
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