Just a decade ago, a little-known company called Netflix pushed boundaries by offering a streaming service in addition to their DVD and Blu-ray rentals. Netflix is now a massive corporation reaching numerous countries around the world.

One reason for Netflix’s success may lie in its company culture. Businesses large and small look to the streaming giant as a model for efficiency, ambition and innovation. However, there is one aspect of Netflix’s culture that many employers find controversial: Its firing policy.

Using firing as motivation?

Some people describe Netflix’s workplace culture as competitive; others describe it as cutthroat. Management is reportedly encouraged to fire any employee who does not measure up to rigorous standards.

If a manager feels that they would not fight to keep an employee, then they let him or her go—even if the employee was performing well. While this practice can encourage healthy workplace competition, it can also backfire and make employees feel discouraged and stressed.

This policy—called the “keeper test” by Netflix insiders—is harsh. But is it legal?

Employers can fire employees—within reason

When an employer considers whether to fire a worker, they must take care to obey state and federal employment law. Any company that has 15 or more employees must follow EEOC regulations. It is illegal to fire an employee based on:

  • Discrimination against a person’s age, gender, race, religion or ability
  • Retaliation for whistleblowing
  • Refusal to take a lie detector test
  • Immigration status
  • Pregnancy

However, Netflix’s “keeper test” is not based on any of these categories. As an at-will employer, Netflix is perfectly within its rights to fire employees based on dauntingly high standards. Other companies can adopt this policy as well. Still, all employers would be wise to carefully examine whether their firing policies comply with the law.