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A Lesson in Differentiating "At-Will” Employment and "For Cause” Termination

Aug 07, 2017

by Reed F. Morris:

Concepts of “at-will” employment and termination “for cause” are interrelated and often confused. The easiest way to understand these terms is to think of them as entirelyreed.jpg separate concepts altogether. Terminating employment that is “at-will” need not be for any cause at all. Terminating employment that is something other than “at-will” generally requires "cause" or even "good cause" prior to termination.

"At-Will" Employment

Since 1876, the Colorado Supreme Court has adopted the traditional American rule of “at-will” employment, including the presumption that an employee is “at-will”. “At-will” is employment for an indefinite period of time. Such employment may be terminated by either party without cause, without notice, and such termination not giving rise to any cause of action. Continental Airlines Inc. v. Keegan (1987).

While there are other exceptions to the “at-will” employment doctrine beyond the scope of this post, the primary exception is where there is a contractual limit on the employer's right to discharge the employee. Such contractual limits are where the concept of "good cause" or “for cause” typically comes into play.

Good Cause for Termination

A contract that would take an employment relationship out of the general “at-will” category may be written, oral, express, or implied by law. Employers can inadvertently find themselves as having entered into a contract or subject to closely related concepts such as promissory estoppel. Continuously and deliberately monitoring your communications policies and conduct away from what could be deemed a contract (oral or written) or making promises on which an employee may rely on are the safest ways to avoid being bound by an agreement and taking the employment relationship outside of its “at-will” status.

So what happens if claims are alleged as to an employment contract or promissory estoppel claims? You may need to demonstrate "good cause," which may come in two forms. First, if the employer consciously entered into a written contract with the employee, the term "cause" should be clearly defined. Cause should be defined broadly in such agreements, including instances where the conduct would be detrimental to the employer or its reputation, or otherwise affect the ability of the employee to continue their work. The clauses should also be drafted to provide the employer discretion in exercising its termination. Employees would want such provisions drafted narrowly, to describe specific instances of conduct that would trigger the "cause" determination, and also provide a right to cure or change such conduct or a written warning.

If the term "cause" is not defined, then whether or not the conduct was valid cause for termination will be up to a judge or jury. Instances that would likely found to be valid would be a failure to obey the employer’s reasonable instructions with regard to the employee's performance of their job duties. By the same token, the reasonableness of such instructions will themselves be the question for the judge or jury to decide.

In conclusion, the best way to avoid a judicial determination of whether something is valid cause for termination is to be outside the contractual or promissory relationship with the employee. If an express employment contract is considered or adopted between the parties, then "cause" should be as clearly defined as reasonably possible and as the parties are able to negotiate.

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Mallon Lonnquist Morris & Watrous is a business and real estate law firm. Reed F. Morris is a Colorado business and real estate litigation attorney with MLMW, based in Denver, Colorado. Reed regularly represents businesses and individuals in business transactions and disputes, from pre-filing through trial, and can be reached at rmorris@mlmw-law.com.   

 



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