If you enter into a formal employment contract with an employee (or a union contract with a group of employees), you'll frequently specify in the contract the proposed length of the employment relationship and the reasons for which either party can end the relationship. In other words, the contract's terms will generally govern your ability to fire the employee, as well as the employee's ability to quit. If either party attempts to terminate the relationship in violation of those terms, a potential breach of contract claim arises.
Assuming that a formal contract does not govern your employment relationships, as is generally the case, what limitations restrict your ability to fire your employees?
In all states other than Montana, such relationships are governed by the "employment-at-will" doctrine. "Employment-at-will" means that there's a presumption that the employee is employed at the employer's will for an indefinite period rather than for a fixed term. (Montana law has abolished the "employment-at-will" status. In Montana, an employer can fire an employee who has completed a probationary period only for good cause. "Good cause" is defined as reasonable job-related grounds for dismissal based on a failure to satisfactorily perform job duties, disruption of operations, or other legitimate business reason.)
Traditionally, both the employer and the employee have had the ability to end an at-will relationship at any time and for any reason. However, at least from the employer's perspective, the unlimited freedom to fire at-will employees at any time for good cause, bad cause, or no cause at all has been eroded in recent years by the federal and state governments and the courts. The exceptions that these institutions have carved into the employment-at-will doctrine form the foundation for most wrongful discharge claims, in which employees sue you for lost wages, punitive damages, and occasionally, reinstatement in their job.
Courts, too, have taken steps to limit an employer's ability to fire at-will employees. In doing so, they generally rely on one of the following theories: