After 27 years working the same job, Steve Whitmire received a call from his boss notifying him that he had been terminated from his position. Whitmire was stunned. He claimed to have received no advanced warning of the termination, and he had no reason to believe that he was about to be fired. Whitmire’s employer did not even offer a reason for the firing until after he went public with his story, initiating backlash in news and social media outlets.
The only reason that we know Mr. Whitmire’s story is because he is quite famous, though most of America had never seen his face until it appeared on television to discuss the firing. Steve Whitmire is the puppeteer for Kermit the Frog, the world-famous lead character in the beloved puppet show the Muppets. His employer, Disney, publicly rebuked Whitmire’s claims, arguing that the company had fired him due to unprofessional conduct and a poor attitude.[1]
Employers in the United States typically have broad discretion in firing decisions, so, although many people sympathize with Whitmire’s devastation over losing his lifelong career, Disney most likely had every right to fire him at will.
Prior to important legal reforms in the 19th and 20th centuries, American workers could be fired for any reason, even if the purpose of the firing was patently unfair, improper or discriminatory. The law has evolved over time to limit employers’ discretion in firing decisions to some degree. However, U.S. employment policy still values freedom of contract as a foundational principle, so most employees can still be terminated at the will of their employers. Though some companies do so as a matter of good business practice, employers typically are not required to offer notice, severance or a stated cause for terminating employees. Still, when faced with sudden and unexpected job loss, there are certain best practices that both employers and employees should follow to ensure a smooth transition out of the workforce.
Employment Relationships
The circumstances of a termination are often dictated by the type of employment relationship an employee had with his or her employer. Employment relationships may be established by contract, in which case both the employers and employees are bound by the terms of the agreement, which can limit causes, timing or other circumstances surrounding a termination. However, most employment relationships are “at-will,” meaning that either the employer or the employee can terminate the employment relationship at any time for any reason not prohibited by law.
At-will employment
At-will employment is the presumptive employment relationship in every U.S. state except Montana, meaning that all workers are assumed to be at-will in the absence of proof otherwise.[2] At-will employees may be terminated by their employers without any requirement for cause or notice. Common reasons that workers are fired from their jobs include tardiness, disrespectful behavior, theft, fraud, or poor job performance. But in employment-at-will relationships, employers have broad discretion in firing decisions and are not required to have one of these reasons to fire an employee.[3]
Employers’ rights to fire at-will employees for any reason without incurring liability have some important limitations, however. For one, employers may not fire workers under circumstances that violate federal or state laws regarding workers with disabilities. Furthermore, companies are barred from make firing decisions that discriminate based upon gender, race, national origin, religion, political affiliation or other protected personal status.
Termination for Cause
Most developed countries allow employers to terminate employees only for cause. Germany, for example, requires that employees be given written notice when they are being fired, and if the worker has been with the company for at least six months, he can only be terminated for specific reasons such as misconduct or long-term leave.[4] However, at-will employment remains the standard in the United States for reasons related to freedom of contract and deference to the independence of private businesses.
Unlike private employers, the federal government has protected its employees against termination without cause since 1912. Just-cause termination requirements have been expanded to cover most public employees in the United States. Most unionized employees also have just-cause termination protection through collective bargaining agreements, as do many highly skilled and sought-after employees such as professional athletes and television personalities.
The one standout from the nearly uniformly-adopted at-will employment doctrine is the state of Montana. Montana requires that private employers have just cause for firing employees even in the absence of a contractual agreement to do so. Within one year of being discharged, a worker in Montana may file a claim against his former employer alleging the discharge was wrongful because the employer lacked proper cause for the termination. If the court agrees, the plaintiff worker may recover their lost wages and benefits for up to four years. If an employer is shown to have fired the employee due to malice or for fraudulent reasons, the employer may be subject to additional punitive damages. While some policymakers criticize Montana’s decision to require just cause termination, arguing that it limits freedom of contract and can have a negative effect on the state economy, unemployment rates in the state have decreased steadily since the law was passed. [5]
Employment by Contract
Beyond the protections afforded to at-will employees by state and federal nondiscrimination laws, an employer’s ability to terminate its workers at-will can be modified by implied or express contract.
Some employment arrangements are established by contracts that include terms and conditions for employment. Employment contracts are usually enforceable for a fixed, pre-determined time and typically create an enforceable right to employment for this entire period. If an employer wishes to terminate a contracted worker before the end of the agreed term, it must do so according to the terms of the contract or another agreement. For example, assume a professional football team signs a new quarterback to a three-year contract. After one year, the ticket sales at the football stadium slump, and the team wishes to replace the quarterback with someone more exciting to fans. If the employment agreement included a condition stating that the team may terminate the player due to poor ticket sales, then the employer may fire him. However, if the employment agreement is mute on the subject, the team must negotiate with the player and find a mutually agreeable solution. If the quarterback agrees to leave in exchange for compensation, such as a severance payment, then the employment can be terminated. Otherwise, if the player refuses to negotiate, he is entitled to continued employment for the remainder of the three-year term.
Unlike express contracts, which are typically clear and well documented agreements, implied employment contracts are created when an employee has a reasonable basis to believe that he has a contractual guarantee of employment based on facts and circumstances that that would imply an agreement to guarantee employment. For example, an implied contract affecting a company’s ability to terminate an employee at will may arise if a supervisor tells the employee that she would never be dismissed without first being given a chance to find other employment. In this case, the employee has a reasonable basis to believe that if her company ever decides to let her go, she will be given notice sufficient to allow her time to search for another job. There was no express, written contract to this effect, but it was reasonable for the employee to infer that a guarantee was implied by the supervisor’s statement. Implied contracts are recognized in nearly all U.S. jurisdictions, so employers and employees should communicate their intentions clearly to avoid confusion regarding implied contractual employment rights.[6]
The Kermit the Frog firing incident has not given rise to a civil suit for breach of contract or wrongful termination, but if the aggrieved puppeteer did decide to sue, his case will likely argue breach of implied contract. In addition to his long tenure as the puppeteer of the beloved Muppet, Whitmore claimed that he had been in talks with Disney management about taking on additional responsibilities in the production of the show. These conversations led him to believe that he would continue with the show and even possibly see his career advance. Furthermore, Whitmore might argue that he lends a unique talent to the Muppet cast that is reflected in his character, and that the longevity of each puppeteer’s career is integral for the consistency of the show.[7] In other words, based on the facts and circumstances, Whitmore may have had a reasonable belief that he and his employer had an implied contract guaranteeing continued employment, notice of pending termination or termination only for cause.
Layoffs
Layoffs occur when employees are terminated due to circumstances unrelated to their job performance. Businesses may face market downturns or other business needs that call for a reduction in their workforces. Layoffs may be temporary or permanent, and many laid off workers are entitled to unemployment compensation or other benefits that can help them return to the labor force.
Temporary Layoffs
Employers in businesses that often have increased demand at certain times of the year may need to hire new people to cover the busy periods and lay them off when demand drops. Workers in these industries can expect these types of temporary layoffs to last for a set time, after which they can often return to work. Companies that temporarily lay off workers often continue to pay non-active employees at a reduced rate and offer ongoing benefits such as health insurance or paid days off.[8]
The Migrant and Seasonal Agricultural Worker Protection Act was passed in 1982 to protect migrant and seasonal workers employed in the agricultural industry.[9] This law requires employers who regularly hire migrant or seasonal agricultural workers to provide fair wages as well as adequate housing and transportation. Agricultural employers must also ensure that migrant workers are aware of their rights by disclosure in a language common to the workers. Some agricultural employers, however, including some small businesses, seed operations, and tobacco farms, are exempted from the requirements.
Migratory agricultural workers who believe that their rights under the Act have been violated may bring a claim for damages, though they do not enjoy the same rights as full-time employees. Employers may terminate migrant workers more easily, and they usually do not receive the same benefits as permanent staff members. However, just like the at-will employment doctrine, migratory and temporary workers may acquire additional rights from their employer by means of express or implied contract. [10]
To help temporary or seasonal workers get through the periods without regular wages, employees who are temporarily laid off typically qualify for unemployment insurance benefits.
Permanent Layoffs
Some businesses experience slowdowns and must downsize their workforce permanently. Over the past twenty years, hundreds of thousands of American workers have been laid off from their jobs across all industries. Between 2011 and 2015, technology giant Hewlett-Packard laid off around 80,000 employees – enough people to populate a small city. Another well-known tech company, IBM, laid off 60,000 workers in the early 1990s, and retail outlet operator Sears Roebuck & Company laid off 50,000 of its workers around the same time.[11]
Layoffs can be difficult to deal with, but companies are generally free to eliminate positions when they need to for business purposes. However, layoffs of such a large scale can impact the overall economy. As a result, the United States and many other countries regulate when and how businesses can downsize their workforce. In Germany, for example, companies must seek government approval before eliminating a large portion of its workforce within a single month. France requires corporations to have a jobs plan in place if the company must lay off more than 10 employees in one month. This plan must include a process that the company intends to follow to preserve jobs as well as the details of a severance package, which is a bundle of benefits given to an employee when he or she leaves a position. Furthermore, French law requires that companies intending to lay off 100 employees or more give notice to the affected workers sufficiently early to ensure that they have fair opportunities to find new jobs.[12]
In the United States, The Worker Adjustment and Retraining Notification Act requires businesses planning to close facilities or lay off substantial numbers of employees to give the affected workers notice of the company’s impending actions. Specifically, WARN requires employers of 100 or more permanent, full-time workers to provide at least 60 calendar days’ notice of layoffs affecting 50 or more employees at a single worksite. Layoffs due to unforeseen circumstances and natural disasters are exempted from this requirement.[13] Notice is also not required for temporary employees affected by mass layoffs, as employees who do not have a reasonable expectation of continued employment are exempted from the Act. It is important for employers to be aware of the WARN requirements, as violations of the act may expose an employer to financial penalties and liability for back pay.[14]
Best Practices When Terminating Employees
Employers may expose themselves to legal liability if they make any number of common mistakes when terminating employees. As a result, many employers have developed clear Human Resources policies that provide procedures for documenting employee misconduct or substandard performance. This documentation can serve as evidence that the employee was fired for lawful and appropriate reasons, which may prove significant in a potential wrongful termination lawsuit. Additionally, the practice of formally documenting conduct that may affect the employee’s job can provide advanced notice to the employee and give her an opportunity to fix her mistakes. There is no law requiring employers maintain documentation of work-related employee behavior or give employees advanced notice of potential disciplinary actions but doing so may improve the employer-employee relationship and facilitate a healthier and more functional labor force.[15]
Employee Best Practices Immediately Following Termination
Being fired from a job can be an extremely unsettling experience and so it is important to stay calm and not do anything rash after being fired. For example, a terminated employee may be offered a severance agreement in exchange for a waiver of liability for wrongful termination. Before signing any agreement waiving legal rights, employees should make sure to consider all options. Employees are entitled and would be well advised to engage in discussions regarding severance, transition of benefits and how the employer will handle references and inquiries from potential employers. Employers are often willing to negotiate terms to decrease the chance of acrimony and litigation following a termination.
From the other side of the table, employers are well advised to negotiate terms with an employee being let go rather than presenting a “take it or leave it” package or using threats to coerce employees to sign liability waivers. Keep in mind that courts may refuse to enforce liability waivers if they are unfair and/or were not the product of real negotiation and agreement.
Conclusion
Most employees in the United States work at-will, meaning that their employer has broad rights to terminate them for any reason, regardless of how arbitrary or irrational, so long as the firing does not violate a law. Employees do have certain rights, though, when being dismissed and productive negotiation and settlement of severance terms usually works out best for all parties. In our next module, we will discuss wrongful termination and the liability and remedies it can create.
[1] Stump, S. (2017, July 20). Former Kermit puppeteer: I was ‘stunned’ to be fired with ‘no advance warning’. Retrieved from Today: http://www.today.com/popculture/former-kermit-puppeteer-i-was-stunned-be-fired-no-advance-t114079.
[2] National Conference of State Legislatures. (2017). The At-Will Presumption and Exceptions to the Rule. Retrieved from http://www.ncsl.org/research/labor-and-employment/at-will-employment-overview.aspx
[3] Rassas, L. (2014). Employment Law: A Guide to Hiring, Managing, and Firing for Employers and Employees. 419-21. Frederick, MD: Wolters Kluwer.
[4] Lansford, T. (2017). Employment & Workers Rights. 53. New York, NY: Mason Crest.
[5] Roseman, B. (2008). Just Cause in Montana: Did the Big Sky Fall? American Constitutional Society for Law and Policy. Retrieved from https://www.acslaw.org/files/Roseman%20Issue%20Brief_0.pdf.
[6] National Conference of State Legislatures. (2017). The At-Will Presumption and Exceptions to the Rule. Retrieved from http://www.ncsl.org/research/labor-and-employment/at-will-employment-overview.aspx.
[7] Stump, S. (2017, July 20). Former Kermit puppeteer: I was ‘stunned’ to be fired with ‘no advance warning’. Retrieved from Today: http://www.today.com/popculture/former-kermit-puppeteer-i-was-stunned-be-fired-no-advance-t114079
[8] Lansford, T. (2017). Employment & Workers Rights. 49-50. New York, NY: Mason Crest.
[9]29U.S.C. §§ 1801-1872
[10] U.S. Department of Labor Wage and Hour Division. (2008). Fact Sheet #49: The Migrant and Seasonal Agricultural Worker Protection Act. Retrieved from https://www.dol.gov/whd/regs/compliance/whdfs49.pdf.
[11] U.S. Department of Labor Wage and Hour Division. (2008). Fact Sheet #49: The Migrant and Seasonal Agricultural Worker Protection Act. Retrieved from https://www.dol.gov/whd/regs/compliance/whdfs49.pdf.
[12] Lansford, T. (2017). Employment & Workers Rights. 50. New York, NY: Mason Crest.
[13] U.S. Department of Labor. (n.d.). Plant Closings & Layoffs. Retrieved from Termination: https://www.dol.gov/general/topic/termination/plantclosings.
[14] Rassas, L. (2014). Employment Law: A Guide to Hiring, Managing, and Firing for Employers and Employees. 447. Frederick, MD: Wolters Kluwer.
[15] Taylor, R. (n.d.). Best Practices for Terminating Problem Employees. Retrieved from http://hrprofessionalsmagazine.com/best-practices-for-terminating-problem-employees/.