AN ACT abolishing at‑will employment and recognizing a covenant of good faith and fair dealing in employment contracts.

Whereas, the origin of the employment at‑will doctrine has been traced back to an 1877 treatise that legal scholars have since questioned; and

Whereas, the employment at‑will doctrine is disfavored by several states and by almost all modern, industrialized nations; and

Whereas, the employment at‑will doctrine means that an employer can terminate an employee because they do not like their haircut, clothing, choice of automobile, or for no reason at all; and

Whereas, the imbalance of power created by the employment at‑will doctrine adversely affects personal freedom and economic security; and

Whereas, the implied covenant of good faith and fair dealing is an important legal doctrine that underpins the Uniform Commercial Code in Section 1‑304; and

Whereas, the implied covenant of good faith and fair dealing is recognized by the American Law Institute as Section 205 of the Restatement (Second) of Contracts; and

Whereas, good public policy dictates that acts of bad faith should not be tolerated just because they are committed as part of an employment contract; Now, therefore,

The General Assembly of North Carolina enacts:

SECTION 1.  Article 1 of Chapter 95 of the General Statutes is amended by adding a new section to read:

§ 95‑31.1.  Covenant of good faith and fair dealing; at‑will employment abolished.

(a)        The General Assembly finds that every contract for employment, whether the contract is written or oral, consists of both express and implied terms that are legal covenants between the parties to the contract. Further, the General Assembly declares that an implied covenant of good faith and fair dealing is part of every employment contract in this State. Therefore, it is the public policy of this State that the employment at‑will doctrine is inconsistent with the implied covenant of good faith and fair dealing that is part of every employment contract in this State.

(b)        The doctrine of at‑will employment is abolished in this State.

(c)        An employee in this State may only be fired for just cause.

SECTION 2.  This act is effective when it becomes law and applies to employment in this State on or after that date.