While the employment-at-will doctrine does give employers and employees certain freedom to enter and exit the employment relationship, employment contracts may limit when and why the relationship can be terminated. A signed contract can give employees protection against being terminated for the life of the contract or provide them with a specified monetary compensation if they are terminated before the contract expires. For the employer, the contract also protects their investment in the employees by requiring them to serve the company for the entire duration of the contract. This helps to limit the threat of turnover by highly skilled and desirable employees.

Implied contracts can also impact the employer’s legal ability to terminate an employee. These specific situations can really get employers into legal trouble if they are not aware that their oral assurance that employment with their company is guaranteed as long as the employee "keeps their nose clean" and is just as binding and defensible in a court of law as a written contract making the same claim. To avoid being trapped in this situation, avoid making any kind of statement at the onset of employment that could be interpreted as a guarantee of employment regardless of circumstances or the employee’s performance.

The final issue that can determine the legality of a termination is the covenant of good faith and fair dealing outlined in the Uniform Commercial Code that states that "every contract…imposes an allegation of good faith in its performance or enforcement." What this means in regards to an employment relationship is that employers must act in good faith when entering into an employment contract with an employee. They must not set out intending to act in a manner that is devious or malicious. This includes not entering into an employment contract intending to terminate the employment relationship prematurely or on a whim.

In order to protect your right to terminate the employment relationship at-will, you need to document this agreement when an employee is first hired. To do this, simply write out a statement that dictates that the nature of your business relationship with the new employee will be as an employee-at-will . Further outline that you can terminate the employment  at any time, for any legal reason, and that the employee can terminate the employment at any time for any reason. Conclude the statement with the following statement for the employee to sign and date:

I have received a copy of the above statement, I have read and understood the information provided, and I agree to the terms set herein.

Signed Date

Printed name

A court of law will usually uphold this statement as a binding agreement between you and the employee. However, even with this signed document you may need more evidence to defend yourself against wrongful termination lawsuits.