In all states but Montana, employees are generally considered to be have “at will” employment meaning that either party (the employee or the employer) can terminate the employment relationship at any time, with or without notice, and for any reason or no reason at all (outside of reasons prohibited by law). Most employers have established policies to create the at will employment as it is beneficial both to the business and the employees. In other cases employers create employment contracts with employees which generally specifically address reasons for termination and how a termination should be handled.
For employers with an at will employment policy, terminating for no reason or using “at will employment” as a reason for termination is not usually advisable. While you legally CAN terminate and cite no reason or “at will employment,” outside of a termination for lack of work, you generally want to have a documented reason for all terminations to prevent trouble down the road.
“At will employment” is not considered a reason for a former employee to be disqualified from receiving unemployment benefits. Unemployment laws vary from state to state, but in most states it is the employer’s burden to prove that a former employee was terminated for a disqualifying reason. Disqualifying reasons include things such as gross misconduct (theft, violence, etc) and repetitive violation of company policy (continued after multiple warnings). When a former employee files for unemployment and you do not have documentation to support your reason for termination, or you cite “employment at will” as your reason for termination, you will most likely be on the hook for the liability associated with that former employee’s unemployment claim.
An even bigger problem could be a potential lawsuit from the former employee for wrongful discharge. Without a documented reason to prove why a termination occurred, it’s very difficult to defend yourself against claims like discrimination. If an employee claims they were terminated because they were part of a protected class (i.e., age, gender, race, etc), it is the employer’s responsibility to prove that there was a non-discriminatory reason for the termination to take place. “At will employment” is not a strong defense. Similar to with unemployment claims, you need to be able to show a documented reason for termination such as theft, repetitive violation of company policy, documented poor performance, etc.
it can’t be stressed enough how important having documentation is regarding any disciplinary action or termination. See our previous post A Manager’s Guide to Employee Documentation for tips on documenting!