Employment Law Class Course Materials

Class 2: Employment At Will

Topics Overview:

The At-Will Employment Doctrine: The default rule in U.S. employment law that an employer may terminate an employee at any time, for any reason or even no reason at all, and likewise an employee may quit at any time. We explore the origins of this doctrine and its prevalence – employment at will is often called the cornerstone of American employment law.
Limits and Exceptions to At-Will: Over time, several important exceptions have emerged to temper the harshness of at-will. We cover:
- Public Policy Exception: An employer cannot fire an employee when it would violate a clearly mandated public policy. For example, terminating someone for filing a workers’ compensation claim or for refusing to engage in illegal acts gives rise to a wrongful discharge tort in Illinois (retaliatory discharge) despite at-will status.
- Implied Contract Exception: Employer handbooks, policies, or oral assurances can create an implied promise of continued employment or specific termination procedures, which some courts will enforce. (Illinois recognizes that a sufficiently definite policy statement in an employee handbook, not disclaimed, can form an implied contract that the employee will only be fired for cause or after certain steps – e.g., Duldulao v. St. Mary Nazareth Hosp., Ill. Sup. Ct. 1987.) We also discuss the role of disclaimers: modern employers often include handbook disclaimers stating the manual is not a contract and that employment remains at-will, to avoid such claims.
- Covenant of Good Faith (Limited use): Some states recognize an implied covenant of good faith and fair dealing in employment, which can prevent terminations made in bad faith to deprive employees of earned benefits (e.g., firing a salesperson right before a big commission vests). Illinois does not generally recognize a tort or broad claim for “bad faith” discharge beyond the public policy context; as the course readings note, courts refuse to create a free-standing tort of “bad faith breach” of an employment contract. However, if an employer’s bad-faith conduct also breaches an express or implied contract term, the employee can pursue a contract remedy.
Statutory Exceptions: Anti-discrimination laws, whistleblower protection statutes, and other laws impose their own limits on at-will. (For example, an employer cannot lawfully fire someone because of their race, sex, or other protected characteristic, or in retaliation for reporting discrimination or unsafe conditions – those terminations are illegal, effectively carving out exceptions to at-will.) We will cover many of these statutory schemes in later classes, but note here that they operate as external constraints on at-will freedom.
Modern Realities: We consider why many employees mistakenly believe they have more job security than at-will actually provides, and how employers often voluntarily give protections (like progressive discipline policies) without legally binding themselves. We’ll also introduce Illinois-specific nuances, such as the Illinois Whistleblower Act (which protects employees from retaliation for reporting unlawful conduct, adding a layer of protection beyond common-law public policy claims).
Drafting Assignment: You represent a small company that wants you to review its employee handbook. Provide suggested language for the handbook to assure that employees remain at-will. Try writing it on your own before looking to AI, Internet examples, etc!

Overview of Required Readings:

Casebook: Overview of the at-will doctrine in American law, including comparisons to just-cause regimes elsewhere, and seminal cases on exceptions.
Illinois Cases/Statutes: Excerpts from Palmateer v. International Harvester Co. (Ill. 1981) – a leading Illinois Supreme Court case finding it unlawful to fire an employee for reporting a crime (violating public policy). Also, a summary of the Illinois Human Rights Act’s provision that firing someone for certain protected activities (like opposing discrimination) is illegal.
Twitter and Elon Musk Lawsuit: Contract, Declaration

Supplemental Materials:

Illinois Specific: Illinois’s Workplace Transparency Act 2019 (mentioned for context) prohibits employers from requiring employees to waive certain rights or remedies as a condition of employment – effectively preventing contract terms that would undermine at-will exceptions like discrimination claims. The Illinois Supreme Court’s decisions in Turner v. Memorial Medical Center (2000) can be referenced for how strictly Illinois courts handle public policy claims (e.g., requiring that the employee’s conduct involve a matter “strike at the heart of a citizen’s social rights, duties, and responsibilities”).

Hypothetical Questions & Model Responses:

Hypothetical: Acme Co. fires an employee, John, out of the blue. John had received good performance reviews. He suspects it was because he reported to HR that the factory was illegally dumping chemicals. Does John have any recourse?

Model Response: Under the at-will rule, Acme can generally fire John for any or no reason – except for reasons that violate public policy or a specific law. Here, if John was fired because he blew the whistle on illegal dumping, that termination violates a clear public policy favoring environmental law compliance. In Illinois, John could sue for the tort of retaliatory discharge, as protecting citizens who report crimes or violations is a well-established public policy (Illinois courts have allowed claims when employees are fired for reporting illegal or unsafe practices). He would need to prove the reporting of the chemical dumping was the motive for his firing. If successful, Acme could be liable for damages despite John’s at-will status. If Acme’s motive was something else (e.g., a legitimate business reason), at-will would permit the firing – but the timing and lack of other reason point toward a retaliatory motive. John should also consider filing a complaint under the Illinois Whistleblower Act, which provides statutory protection and remedies for employees fired for reporting unlawful conduct.

Hypothetical: LargeCorp requires all new hires to sign a form stating “I understand I can be fired at any time without cause” and that any disputes will be resolved internally. After ten years of work and steady promotions, Maria is let go with no explanation. Company policy documents say employees will be warned and put on a PIP (Performance Improvement Plan) before any termination. Maria never got such a warning. Can she claim the firing was wrongful since it violated the policy?

Model Response: Maria faces the at-will doctrine and an explicit acknowledgment she signed, which favors LargeCorp. However, there’s a tension: the company’s own policies promised progressive discipline. Courts will ask whether those policies create an implied contract that modified Maria’s at-will status. In Illinois, an employee handbook can form an enforceable contract if it contains a clear promise that employees will only be fired for cause or after certain procedures, the handbook was disseminated to employees, and the employee continued working in reliance on it. Here, the PIP policy might be such a promise of advance warning. BUT, LargeCorp will point to the form Maria signed as a disclaimer, reaffirming at-will and perhaps waiving reliance on handbook policies. Illinois courts generally uphold clear disclaimers that preserve at-will employment. If the disclaimer is prominently placed and unambiguous (“can be fired at any time without cause”), it likely means Maria cannot claim an implied contract requiring warnings. Thus, while the company’s handling seems unfair and contrary to its handbook, legally Maria probably cannot recover unless she shows the disclaimer wasn’t effective or some exception applies (for instance, if evidence shows the real reason for firing violated public policy or discrimination law). This scenario underscores that without a contract or statute to the contrary, at-will employment allows even unjust or arbitrary terminations.

Hypothetical: An employee is fired one day before her annual bonus vests. There is no contract guaranteeing employment for that year. She believes the company timed it to avoid paying the bonus. Is that legal under at-will?

Model Response: Generally, at-will allows an employer to fire an employee for any reason even if the motive is to avoid paying a bonus or other benefit – unless doing so breaches a specific agreement or violates a law. Some states recognize a covenant of good faith exception in such cases, treating a bad-faith termination to deprive an earned benefit as wrongful. The employee’s best argument would be that the bonus was part of her earned compensation (for work already performed) and the firing was just a pretext to deny wages she had essentially earned – potentially a wage law violation if the bonus is considered wages. But if the bonus was truly not vested or guaranteed, at-will permits even morally questionable timing. Absent a statute (like an Illinois Wage Payment Act claim) or an express promise of that bonus, the termination is likely lawful. But, she may be able to recover the amount promised if the termination was done in bad faith to avoid paying a bonus. This harsh outcome is a prime example of at-will’s reach.

Real-World Example:
Retaliatory Discharge in Illinois: An employee was fired after filing a workers’ compensation claim for a job injury. This was technically an at-will termination (no contract promised job security), but the Illinois Supreme Court created an exception, recognizing a new tort for retaliatory discharge. The court reasoned that allowing such firings would undermine the public policy behind the Workers’ Compensation Act, which grants employees the right to benefits for workplace injuries. By making it unlawful to fire someone for exercising that right, the court carved out an important limit to at-will employment. Today, Illinois employees fired in retaliation for asserting legal rights (like filing a comp claim or reporting illegal activity) have a remedy in court. This case shows the evolution of at-will: it remains the default, but egregious abuses (firing someone for obeying or upholding the law) are not tolerated. Handbook Disclaimers: Many employers added bold disclaimers to their handbooks after Duldulao in Illinois. For example, a bank in Chicago revised its handbook to state: “This manual is not a contract. Employment is at-will and can be terminated at any time.” Illinois courts generally uphold such disclaimers. If you want to read a full disclaimer, here is a sample you can look at that the Small Business Administration provides (see p. 33).

Federal vs. Illinois Law:

The employment-at-will doctrine is a creature of state law; there is no federal statute establishing at-will, though federal laws create many exceptions (discrimination laws, etc.). Illinois follows the general at-will rule but has developed its own common-law exceptions. Notably:

Public Policy: Both Illinois and federal law protect whistleblowers, but Illinois recognizes a broader common-law claim for discharge violating state public policy. Federal whistleblower protections (e.g., OSHA or Sarbanes-Oxley retaliation provisions) cover specific areas; Illinois’s tort can fill gaps (for example, firing for reporting a crime to police, which no federal statute might cover). Illinois requires the public policy be well-defined (usually in the state’s statutes or constitution).
Implied Contracts: There’s no federal law on this; it’s state-by-state. Illinois allows implied contract claims via employee handbooks (as in Duldulao), aligning with a majority of states, whereas a few states do not recognize any handbook-based rights.
Statutory Overlay: Illinois law often goes beyond federal minimums. For instance, the Illinois Human Rights Act, as mentioned, covers smaller employers for harassment claims, creating a statutory exception to at-will for even the smallest workplaces in harassment situations. And Illinois’s new Pregnant Workers Fairness amendments (even before the federal PWFA of 2023) made it illegal to fire someone due to pregnancy, even if the employer had under 15 employees. In practice, these laws limit at-will by prohibiting certain reasons for termination. In summary, federal law sets baseline prohibitions (no firing based on race, etc.), and Illinois adds more (no firing based on off-duty legal behavior, no firing small-office employees for pregnancy, etc.).

Impacts on Employers and Employees:

For Employers: At-will gives employers flexibility in managing staff, but it’s not absolute – employers must train managers to understand that you cannot fire for illegal reasons (discrimination, retaliation for protected activity) or in violation of an implied promise. In Illinois, employers should implement and honor internal procedures fairly or clearly disclaim them. Documentation of performance issues remains crucial; while not legally required to fire at-will, good records can defend against false claims of illegal motive. Employers who want to maintain at-will status should use clear offer letters and handbook disclaimers to avoid inadvertently creating job security promises. However, they should also be mindful of morale – using at-will punitively (e.g., sudden firings without explanation) can damage reputation and invite scrutiny, even if legal. Arbitration agreements and severance packages with releases are tools employers use to manage litigation risk when ending at-will employment (see Class 12).
For Employees: Most Illinois private-sector employees are at-will, which means they can be terminated without notice. Employees should be aware of this reality. However, they should also know their rights: if they suspect a firing was due to discrimination or retaliation, they can seek legal counsel; at-will does not shield employers from those claims. Employees might negotiate for an employment contract or at least clarify expectations in writing if they are relocating or giving up something major for a job – sometimes executives or specialized employees can get a clause requiring “good cause” for termination or severance if let go. In unionized settings (governed by collective bargaining agreements), the vast majority of union contracts include just-cause termination protections – effectively contracting out of at-will. Illinois public employees often have civil service or CBA protections as well. So, employees may pursue unionizing or bargaining for greater job security as a means to overcome at-will. At a minimum, employees should familiarize themselves with their employer’s policies: if an employer does have a progressive discipline policy, an employee can expect it to be followed, and a sudden deviation might signal an improper reason.

Additional Commentary & Resources:

Proposed Reforms: There is an ongoing debate in legal scholarship about adopting a “just cause” standard more widely. Some have argued that at-will employment undermines employee loyalty and encourages arbitrary management, whereas just-cause promotes fairness and industrial peace. On the other hand, defenders argue at-will is essential for managerial discretion and economic efficiency.
Employment Contracts in Illinois: Remember that high-level employees or executives often work under individual contracts that override at-will. For example, a CEO might have a 3-year contract stating termination only for defined “cause” or with severance. These are enforceable according to their terms. One notable Illinois case is Dow v. Columbus-Cabrini Medical Center (Ill. App. 1986), where a hospital’s letter promising a one-year term of employment was held to negate at-will for that year. This shows that even in an at-will state, clear contractual terms will be honored – at-will is a default, not mandatory, when parties agree otherwise.

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