I am a white collar, exempt employee. I have worked for my current employer for about 3 years. I have had good performance reviews, and absolutely no reprimands or anything like that. In fact, I have earned bonuses (not everyone in the company gets them).

The department I work in is being reorganized. The total number of employees will stay the same, as will the skill levels of the people employed (no upgrading or downgrading of any positions in terms of educational credentials required). What will change is some of the reporting relationships. My position might end up reporting to a lower level of manager than is currently the case.

A senior management employee has hinted to me in an informal conversation that she feels I may not be happy with the change ... that maybe I should consider looking for a job outside the company. My hunch is that if I was to resign, they might be able to hire someone of equal education to me, but with less years of experience, who would accept a salary that is lower in the established salary range for my position.

I am uncertain of what to make of the informal hint I received.

Question is - Is it legal in Washington State to terminate someone who has been a good performer, just so that the company can re-hire an alternate person for the same job, but at a slightly lower salary?

One follow up point to my earlier post. I have heard of something called a "covenant of good faith" which protects employees in at-will states. Wondering if that applies to my situation.

There hasn't been anything illegal done at this point by your employer. From what I have read in your post, the senior management employee made a suggestion to you, probably based on the fact that you wouldn't be happy with the change.

As far as the "covenant of good faith" This is known as good faith and fair dealing and isn't really accepted as a legal grounds for a wrongful discharge.
This means that although an employee is informed that he or she may be terminated at any time and no public policy or implied contract exceptions apply, the employer may still be held to a standard of conduct requiring employees to be treated fairly and in good faith in the termination process. As of 1987, only three states accepted this as legal grounds for suing an employer for wrongful discharge.

Yes, it is legal in an at-will state to fire an employee under the circumstances you describe. In an at will state, which is every state except Montana (and even includes Montana in some circumstances) you can quit at any time and for any reason, and you can be fired at any time and for any reason not prohibited by law.

According to my understanding of the concept of "Covenant of Good Faith", even assuming Washington subscribes to it (not all states do) it would only apply if you had been given some promise of continued employment on a permanent or indefinite basis.

Lets say my company proceeds and lets me go. I have access to financial data. I know that the company has in the recent past, when they have chosen to let people go as a result of downsizing, given severance (as long as the employee worked there for a year or more, and the person was not being terminated for policy violations - I would be good on both these counts).

I know it was not contractually required for the other former staff who received it.

Is this a precedent that they would have to follow for me? In other words, would it be discriminatory if they gave severance to others, but not me?

Not unless you have valid evidence that you were not paid severance when others were BECAUSE OF your race, religion, national origin or other protected characteristic.