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Employment Law Research Paper

August 26th, 2009 Leave a comment Go to comments

In the recent past, employees of large, stable firms and workers with valuable skills had reason to believe their jobs were secure as long as they adhered to company policies and performed satisfactorily. Many retired from their positions with sizable pensions accrued over many years with an employer. As surely as 401(k) plans have replaced company pensions, longevity has been traded for high turnover by both firms determined to stay competitive and workers seeking greater opportunity. However, when the economy weakens, workers become less willing to job-hop; security is much more important than new challenges. Businesses often react to a downturn by trimming nonessential people from the payroll – employee cost is often the largest controllable company expense and the first place budget cuts are made. Companies that claim “our people are our greatest asset” can save substantially by reducing their “greatest asset” and splitting up the workload among those remaining.

Though the previous generation seems to have enjoyed greater job security than the present one1, in fact jobs in the United States have never been what many Americans would consider “secure.” Many believed then and many now think they cannot be fired except for a good reason, including poor performance and stealing, but in reality ours is an “at-will” country. Though the economic rationale for company terminations cited above would be unpleasant but acceptable to a large number of workers – after all, the firm has to make money to pay its employees – such a good reason for termination is not at all necessary in most situations.

The American job culture continues to evolve from rewarding job longevity to emphasizing innovation and lifelong learning in an atmosphere of ever-increasing global competition.2 As well, ours is a litigious society, and an increasing number of challenges to current employment law is serving to shift the balance of power between employer and employed. These challenges are taking place in the nation’s state courts, and therefore statutes vary strikingly from California to Georgia or from New York to Texas. While decisions in one court may be influenced by previous decisions in another, plaintiffs’ likelihood of winning – and the amount of damages awarded – is dependent first on the locality in which a suit is brought. All in all, the United States remains for the present ruled primarily by at-will employment policies enforced unevenly across the country. The Model Employment Termination Act proposed by the National Conference of Commissioners on Uniform State Laws could, if adopted nationwide, provide a reliable standard for both firms and the people they hire. It is interesting to note that we are the only industrialized country that maintains the at-will doctrine, but this is not remarkable given America’s long emphasis on and protection of business interests.

Origin, Exceptions and Cases
The employment-at-will doctrine, which has its roots in the 19th century, dictates that either an employer or employee can terminate an employment arrangement without cause or notice unless other terms are specified by contract. This body of law is based on the public good of maintaining an efficient labor market and the assumption that each party has power in and benefits from the relationship: The employee keeps the job if he or she is productive and the employer has the labor to stay in business. Neither is liable if either terminates the arrangement.

Over time, courts recognized the need to adjust employers’ hiring and firing rights by allowing public policy exceptions to the at-will doctrine. Activities that fall under this exception must have a specific impact on the public. For example, an employer can be held liable for terminating an employee who refuses to give false testimony against co-workers, reports criminal activity at work, serves on a jury or files a workers’ compensation claim. Public policy exceptions also include employee absence for military service as well as cooperation in a criminal investigation.

These exceptions are narrowly defined; in a recent case, a single mother sued her employer for firing her when she refused to work long hours. She claimed that her employer’s demands meant she could not be home to care for her family, a violation of public policy regarding the protection of children. The court refused to set aside the at-will rule based on one person’s “special domestic circumstances.” In Singh v. Marshalls (U.S.D.C., Dec. 15, 1999), employees of a Marshalls store were fired when shoplifting charges were filed against them. The charges were dropped, but the court did not find the employer in violation of any public policy for terminating the employees. Care has to be taken by the courts as well as employers in determining what is public policy and what constitutes private interests.

A second type of exception to the at-will doctrine exists when there is an implied contract between employer and employee. Employee handbooks may include phrases like “employment is for an indefinite term,” language that really means employment is at will. However, an employer remarking, “You have a job here as long as you keep sales up” can be construed by the courts as an implied contract because it states a definite if-then relationship.

In Ronnie Loper Chevrolet-Geo, Inc. v. A.D. Hagey, Jr., a written proposal stating salary and length of employment took precedence over the hiring company’s clearly at-will policy. The Texas court ruling on the case cited the “English rule”: hiring for a specific sum and period constituted an employment contract that could not be arbitrarily concluded.

However, courts apply the implied contract concept unevenly. In a case against Bechtel National Inc., a California court disregarded criteria established to differentiate at-will and contractual employment – including longevity, salary increases and favorable reviews – and came down in favor of Bechtel instead of the plaintiff, who was terminated because the company’s workload had decreased.

Some employees have greater protection between jobs than on the job. The plaintiff in Goff-Hamel v. Obstetricians & Gynecologists, P.C. was repeatedly approached by OB/GYN to quit her job and come to work for them. She eventually agreed to an interview and was offered the job. On the day before she was to begin work at OB/GYN, the plaintiff was informed she was not to be hired after all. The Nebraska Supreme Court found that though she would have been an at-will employee beginning on her first day on the job, she was not afforded that opportunity and could recover for damages for detrimentally relying on OB/GYN’s promise.

Yet another exception exists, but it is the least accepted and hardest to defend. The covenant-of-good-faith exception assumes a responsibility for fair dealing by employers in every employment situation. Instead of relying on specific public policy issues or the implied contract concept, a fired employee may sue his or her former employer for any actions that were not performed in good faith. The courts have been very reluctant to accept such a broadly defined exception.

Though legislatures and courts are softening the edges, the employment-at-will policy is troubling for several reasons. First, discrimination can occur behind the veil of no-fault firing; unfortunately (from the employee’s point of view), proving this kind of discrimination is generally difficult to do. Loopholes that make it easy for employers to terminate workers for anything but just cause may seem advantageous to companies but may actually expose them to litigation under any of the myriad laws prohibiting discrimination. Even lawsuits that are won by firms cost money.

Second, a key rationale behind at-will employment – that employer and employee have similar bargaining power – is inaccurate. Employees are in a potentially one-down position at the moment of hiring. If terminated, they stand to lose a lot more than income; an arbitrary firing can follow them for the remainder of their careers. What equivalent risk does the employer have in the employment relationship? If an employee quits without notice, the employer could certainly be inconvenienced and lose income by way of unfinished work. The employer would not, however, lose its sole source of income or have to explain the situation to new employees.

Yet businesses need protections too. Unsuitable or underperforming employees have a negative impact not only on the firm but on fellow workers as well. When market conditions worsen, companies may need to reduce their payrolls in order to stay afloat, and inevitably employees are terminated who did nothing to deserve it. A company barred from terminating unsuitable workers could be seen as a company coerced, a very anti-American business concept. Some employers may well ask, “Who owns the job?” Who is permitted to say when a job ends or the manner in which it ends? One argument for the at-will doctrine points out that the employer makes hiring decisions based on public and private criteria and should therefore be able to make firing decisions with the same freedom. A counter to this idea is that a multitude of suits have been launched because of what was seen by applicants as discriminatory hiring practices.

In his employment law research paper defending at-will employment, McPherson takes a pro-business stance that goes beyond economic concerns into the realm of ethics:
Far from “granting” to employers some “unfair advantage” over employees, at will employment law serves the important moral purpose of recognizing the converse of the dreadful system of slavery abolished in this country by the Thirteen Amendment, namely that a person offering a job should never be the slave of the person accepting it. If one seeks terms of trade with an employer, he ought not to be able to do so with the club in his hand. If the person seeking the work is unhappy with “at will” conditions (versus contract employment in a particular work place) then, as the saying goes, nobody’s holding a gun to his head.

But in the American employment marketplace, nearly everyone is holding a gun to the worker’s head if McPherson’s example is taken to its logical extreme. Explicit contracts, union bargaining agreements and government positions offer protection from at-will policies, but the vast majority of jobs do not. Many, even most, employees do not have a choice – they work at will whether they like it or not.

The courts are doing their job by examining and allowing public policy and implied contract exceptions (and disallowing attempts to expand their definitions too broadly). This process is refining employment-at-will law in the right direction. A next logical step is to provide more protection for employees and fewer reasons for employers to object.

Avoiding Lawsuits
Firms should become well acquainted with trends and statistics relating to employee terminations and corresponding legal actions. Managerial employees tend to be much more successful in winning a wrongful termination suit, in part because they usually have higher salaries and can absorb the cost of litigation more easily. Managers’ on-the-job responsibilities and job nature – getting measurable results within specified parameters or time frames – frequently make claims of breach of an implied contract more compelling. Many workers at lower employment levels may not attempt to sue their employers because of the expense such an action would entail.

To guard against claims of wrongful discharge, employers should ask the following questions:

· Do written employment policies exist, and do they clearly state that employment with the company is at will? Such written policies are an absolutely necessity; they are where a good defense to a wrongful discharge suit begins.

· Were employees required to sign an acknowledgement that they received written employment policies? This will derail a claim that a worker was not informed of his or her at-will status.

· Do employees understand the consequences of inadequate performance? Human resources policies need to be clear and workers need to be aware of them. Employees who were unaware that their action or inaction could lead to firing are often more likely to sue for wrongful discharge.

· Were company termination procedures strictly followed? Employers leave themselves open to litigation if they neglect to provide warning of inadequate performance or if they apply policies unevenly to different employees. Companies are wise to insist on documentation of any warnings or disciplinary actions.

· Are all comparable occurrences treated in a similar manner? Termination policies must be applied across the board, from employee to employee and for each event over time. A violation that results in termination for one employee must be grounds for firing any employee.

Specifically, if an employee commits a rule violation and is subsequently terminated, the courts will examine the following issues to determine if termination was an appropriate penalty:
· Was the employee aware of the rule?
· Was he or she warned about possible consequences of breaking the rule?
· Does the employee have a history of similar violations?
· Have other employees received the same penalty for similar violations?

The ability to answer “yes” to all the above-listed items means a company is well on its way to being well protected from wrongful discharge claims. All businesses would benefit by consulting with an attorney for further methods of protection against lawsuits.

A Uniform Answer to the At-will Question
The proposed Model Employment Termination Act (META), which provides for just-cause firings only and mandates arbitration instead of litigation, is a promising solution to the complex at-will employment question; it ensures that a qualified employee may not be fired except for “good cause” (unless the employee was fired from a firm that employs five or fewer workers; these small businesses are exempt from META’s provisions).9 To be recognized as qualified, a worker must have been employed for a year or more and have worked at least 520 hours in the six months preceding termination. In this way, employers have up to a year to assess a worker and terminate him or her for any or no reason without fear of legal reprisals.

For employees, META offers greater protections than many current state laws, including a limited and specific definition of “good cause” – either an employee’s inadequate or improper job performance or a company’s economic or strategic goals. If a qualified employee is terminated without good cause, remedies include back pay, severance pay, continued benefits coverage and reemployment. Attorneys’ fees are also recoverable, making it more possible for people of modest means to bring suit. Also, META allows for waiving of the good-cause standard if both parties agree; the terminating company is then obligated to provide severance pay based on a fired employee’s length of tenure with the firm. Each alternative carries a monetary benefit for workers, helping to equalize the balance of power between employer and employee. The latter provision ensures a firm can release employees it no longer wants or needs.

META offers a rule of thumb by which the employment relationship may be measured. It offers benefits to both firms and the people they hire and, most importantly, may significantly reduce the number of suits brought against companies for employment termination. Less litigation supports a key business value shared by U.S. firms: unhampered trade in a free-market system.

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