Small Business Legal Advice: Don’t Promise Perpetual Employment

The following is a guest post by Gary Lightman at attorney in the United States who focuses on small business.

As a small business owner, you’re likely very familiar with the concept of doing your best to keep commitments. After all, you’ve already put so much of yourself into your business that you’ve probably started to see it as a natural extension of yourself. You believe that the way people feel about your business reflects on the type of person you are. For you, business is personal. Adding to the complexity is the fact that you’ve got your clients, your family, your creditors, and your employees—all of whom have some stake in the way your business is run. You have promises to keep to all of them, and making sure that you keep everyone satisfied is no easy task. While moving heaven and earth to fulfill all your promises should continue to be at the core of what you do, you might also ask yourself if all the promises you’re making are in the best legal interest of your business. There’s one promise in particular that you should never make—not only because it may actually be impossible to keep, but also because it can land you and your small business in legal hot water.

While there may be many promises that are legally imprudent to make, one in particular merits mention here: promising perpetual employment to one or more of your employees. As your business is just getting starting, this may seem like a natural promise to make; you likely employ friends or family, many of whom are willing to work for little pay. They’re laboring and sacrificing right along with you toward the common goal of helping your business succeed, so you may wonder why you shouldn’t promise them perpetual employment.

The promise is legally problematic (especially if you put it in writing) because it effectively reclassifies your employees from “at will” employees to “just cause” employees. “At will” is an arrangement that favors the employer—his or her employees can be let go at any time and for any reason, short of those specifically prohibited by law. On the other hand, “just cause” employees are guaranteed employment except in the event they create a legitimate reason for you to terminate them—in other words, the employee would have to engage in sexual harassment, theft, use drugs on the job, or participate in another type of similar behavior. This arrangement definitely favors the employee. While most employers don’t secretly think about firing employees left and right, terminating an employee can sometimes be the best move for the company. If you’ve inadvertently made one of your hires into a “just cause” employee, you’ve also just inadvertently made your company’s legal situation a bit trickier.

So save yourself a good deal of legal stress—don’t promise continued or perpetual employment. Reward hard work and treat your employees with kindness, but also recognize that no one knows everything that the future has in store.

Leave a Reply