The US has some of the most employer-friendly labor laws in the world. This is especially true regarding employee dismissal.

In Europe and the UK, strict laws govern what can be considered a fair reason for dismissal, and there are strict notice periods for legally valid terminations. In the US, employers can generally terminate employees "at will." At-will employment means that the employer does not need any reason for terminating an employee (although there are exceptions, as we'll see below). At-will employment also works the other way, and employees can quit their jobs for any reason without notice. Moreover, employers are not obliged to pay severance to the employee after the termination unless a contract states otherwise.

At-will employment makes the US an attractive market for employee temporary assignments, not just for independent contractor (C2C) assignments. However, it's important to understand the nuances of at-will employment and how this affects your staffing agency.

What states allow at-will employment?

At-will employment applies to all US states, with the exception of Montana. In Montana, after a reasonable probation period ( 6 months), good cause is required for termination. US states tolerate at-will employment primarily because most states are relatively generous with unemployment insurance, which pays up to 6 months of lost wages for terminated employees. The length and eligibility for unemployment benefits vary on a state-to-state basis. For example, California provides 26 weeks of unemployment benefits, while Florida only provides 12. However, as a general rule, as long as an employee was not terminated for misconduct, they're eligible for state benefits. 

Are There Any Exceptions To At-Will Employment? 

There are many exceptions to at-will employment.

You cannot terminate an employee due to discrimination, regardless of the state's at-will law. If an employee is discriminated against by race, age, gender, country of origin, or other protected class characteristics, a dismissal will be considered unfair. Even the appearance of discrimination can give rise to an Equal Employment Opportunity Commission (EEOC) claim by the terminated worker, which can be expensive to defend.

Relatedly, at-will termination cannot go against public policy. For example, employees are entitled to worker's compensation claims in every US state except Texas. If an employee is fired for filing a workers' compensation claim, they will be considered wrongfully terminated since this goes against the intent of the workers' compensation law.

Another exception is if there is a formal employment contract that suggests employment is not at-will. Even an informal agreement that implies that a worker cannot be terminated, has a fixed length agreement, or can only be terminated for certain reasons, the contract will take priority. This can be anything from an oral agreement to a section in an employee handbook that states that an employee will only be terminated for a just cause. One of the reasons US employers almost never have "employment contracts" is due to this risk. US employers generally only have employees sign acknowledgments of policies and offer letters during onboarding but rarely will have employees sign something that suggests the relationship is anything other than at-will.

Furthermore, if an employee is a member of a union or in the public sector and protected by a collective bargaining agreement that explicitly prohibits at-will termination, they will also be protected from at-will termination. 

Another crucial exception to at-will employment is the covenant of good faith. In practice, this means that if an employer terminates an employee before they are due to receive a bonus or stock option for no other reason, it would be considered wrongful termination.

These exceptions to at-will employment mean that the US employment market can be fluid but still limit extremely unfair practices.

How Does At-Will Employment Affect Staffing Agencies?

Staffing agencies stand to benefit from At-Will employment in several ways. First, it reduces the number of legal battles involving wrongful termination, effectively reducing a staffing agency's legal liability. Unless the termination violates one of the exceptions outlined above, staffing agencies can generally end employment when assignments end with clients.

At-will employment also means that staffing agencies can adjust quickly to client demands. If they find more demand in a particular industry or location, they can quickly hire and terminate employees when needed. For example, if a client requires numerous engineers for a long project developing a web app, a staffing agency could quickly hire software engineers without having to worry about the termination process down the line.

The At-Will employment model can also help reduce a staffing agency's costs. Severance packages alone in places like the UK can be up to $30,000+. With state benefits in place, staffing agencies will not have to pool their resources for severance packages, notice periods, and legal fees that come with more regulated employment models. 

Typically, in places like the UK, staffing agencies may be reluctant to engage employees for contract work and may prefer independent contractors ("corp-to-corp" or "C2C") due to the limitations of notice periods. However, in the US, the fluidity of the at-will employment model means that 90% of US staffing is W-2 employee-based.

Ascen and Employer of Record (EOR)

America's at-will employment model provides a significant advantage for staffing agencies expanding and operating in the US; however, to truly take advantage, staffing agencies must stay compliant.

That's why we developed Ascen; Ascen provides a dedicated employer of record for your US-based employees and a back-office management platform built for staffing agencies in the US. You can ensure you comply with all regulations, regardless of the state you want to operate in. Ascen acts as the legal employer of record for your contract employees so you can work with clients and candidates with peace of mind while you grow across the US.