The Difference Between Contract and At-Will Employment

The Difference Between Contract and At-Will Employment

BenefitMall focuses primarily on payroll processing and administering benefits packages. But because we do offer HR services as well, we often find ourselves answering questions relating to employment. For example, clients may ask the difference between contract and at-will employment.

Knowing the difference between the two has little impact on payroll processing. But it has an enormous impact on employee termination. Legally valid reasons for terminating an employee are subject to whether the employee was a contract worker or someone working at-will.

This is a very sensitive issue of labor law. If you still have questions about the difference between contract and at-will employment after reading this post, please consult with an attorney experienced in federal and state labor laws.


Contract Employment

As its name implies, contract employment is an employment relationship governed by a written and signed contract. Any such contract is legally binding on all who are party to it. Usually this means only the employer and employee. However, contracts can involve independent contractors and third-party umbrella organizations.

Under the law, all persons and organizations party to a contract must uphold the conditions of that contract. Terminating an employee with a contract must be done in according to the contract's language. And if that contract specifies a limited list of reasons for which the employee can be terminated, only those reasons are valid. Termination for any other reason would be a violation of the contract.


At-Will Employment

An employee working under an at-will arrangement is voluntarily agreeing to a relationship that can be terminated by either party, at any time and without cause. However, there are exceptions. At-will employees cannot be terminated for causes that are made illegal by other statutes. You cannot fire an employee solely because he or she suffers from some sort of disability because people with disabilities are part of a protected class.

At-will employees also cannot be terminated for exercising certain rights and responsibilities. For example, a person summoned for jury duty has a legal responsibility to report as ordered. He or she cannot be terminated for responding to that summons. The employee cannot be terminated for sitting on a jury, either.

One last thing to consider about at-will employment is something known as the 'implied contract'. An implied contract can exist even if no written contract is proffered. A good example is a clause in a company's worker manual describing a 90-day probationary period for new employees. That clause implies continued employment after 90 days which, under the law, is an implied contract.


Avoiding Issues at Termination

HR experts recommend being very careful about contract and HR policy language to avoid issues at termination. They also recommend that terminations always be preceded by an adequate amount of time during which an employee's behavior is addressed. Everything the employer does in an attempt to rectify an unacceptable situation should be documented.

Employees who believe they have been terminated without just cause do have the right to seek legal recourse. That's why clear language and proper documentation are so necessary. They are the only things capable of protecting employers against such litigation.

Again, BenefitMall is not an expert in labor law or human resources. We do offer a limited number of HR services in addition to payroll processing and benefits administration. If you are looking for a state-of-the-art, cloud-based payroll solution, we are the company you have been looking for.

We offer everything from full-service payroll processing to a fully comprehensive payroll package. We even offer specialized solutions for restaurants and construction companies. Contact us to learn more.