The nature and scope of the employment relationship may be determined by the employer and employee, through a contract, or left to the default rule under the law. The default rule is that employment is “at-will.”
The Default Wrongful Termination Rule
At-will means that the employee is free to quit at any time, just up and leave, without explanation and for any reason. It also means that the employer may fire the employee at any time, without cause. The employee may be fired even if the employee has done nothing wrong, as long as the basis for termination is not based upon discriminatory reasons.
There are three exceptions to the at-will rule:
- where there is a separate promise or action, beyond the employment services performed by the employee, a contract may be created limiting termination of employment only to circumstances where there is good cause,
- where one person promises something to another , that promise causes the other to take some action in reliance on the promise, and a decision not to enforce the promise would harm the other party, the promise will be enforced, and
- where the termination provisions in an employee manual are specific and definite enough to form a certain type of contract, a unilateral contract, the terms of the employment will no longer be at-will. Termination is for good cause if the employee does not comply with the standards of the job performance that the employer established and uniformly applied.
Contract Away from the At-Will Default
Employers and employees are free to decide that they do not want to be governed by the standard at-will rule, and contract or agree to something else. Employers and employees are free to agree to terms of employment including length and circumstances permitting termination of employment.
Where there is an employment contract, whether written or oral, basic rules of contract law apply. These applicable basic contract rules include how to determine whether a contract has been created and whether it has been breached, or broken.
Basic Contract Rules
These basic contract rules are found in the principles of offers, acceptance, and consideration.
- An offer is an expression of a willingness to enter into a particular agreement by one party.
- An acceptance is an expression of a willingness to enter into that same agreement by the other party.
- Consideration is what each party does or gives up in exchange for the other’s promise.
If I give you one hundred dollars to dig a ditch, the consideration I am giving is one hundred dollars. The consideration you are giving is digging the ditch. All contracts, even employment contracts, require consideration.
There are many other relevant basic contract rules that apply to the negotiation of contracts. Not all offers made are accepted. Sometimes they are rejected. Sometimes counteroffers are made. Each action has a consequence. Each action has time limits and rules related to when the action is no longer permitted.