The At-Will Rule
Excerpted from: Cynthia L. Estlund,
THE CHANGING WORKPLACE: Wrongful Discharge Protections in an
At-Will World, June, 1996, U.T. Law Review Symposium
The at-will
rule in its original form was short and simple: "Men
must be left ... without interference ... to discharge
or retain employees at will for good cause or for no cause,
or even for
bad cause without thereby being guilty of an unlawful act
per se." The at-will rule grew out of broad notions
of employer property rights and freedom of contract. Freedom
of contract,
while it is no longer a constitutional barrier to most
regulation of employment, remains the crucial background
against which
all workplace regulation operates and effectively governs
most of
what takes place within the employment relationship.
Freedom of contract permitted employers to fire or refuse
to hire union supporters, African Americans, women, or
other disfavored
classes. As particular exercises of employer discretion
provoked public disfavor, legislatures carved out exceptions
from
the general rule of freedom of contract, while disavowing
any attempt
to disrupt that general rule. The first important exceptions
to the employer's power to hire and fire at will were in
support of the young labor movement. First in the railroad
industry and
later in nearly the entire private sector, federal legislation
prohibited employers from firing (or refusing to hire)
individuals for joining or supporting a labor union. The
National Labor
Relations Act of 1935 remains perhaps the most sweeping
limitation on employment
at will, for it prohibits employers from firing or disciplining
employees not only for union activity but also for a range
of peaceful protests by two or more employees, including
complaints,
grievances, petitions, strikes, and other activity that
the employer genuinely and even reasonably perceives as
contrary
to its economic
interests.
The NLRA also contained a second and far less
dramatic anti-retaliation provision that prefigured numerous
statutory
provisions enacted
in the 1970s and later: what is now section 8(a)(4) of
the NLRA prohibited employers from retaliating against
employees
based
on their filing charges or giving testimony in National
Labor Relations Board proceedings. The logic of the provision
was
obvious, making it one of the few noncontroversial provisions
in a highly
controversial statute: the enforcement of the Act depended
almost entirely on the willingness of employees to bring
complaints
or to testify about employer conduct. Yet employers might
be tempted to deter and punish such activity by the power
and the
threat of discharge. The law must protect its own proceedings
and facilitate its own enforcement by prohibiting retaliation
against employees who participate in these processes.
The next great reconstruction of employment law, and
of the power to fire at will, began with Title VII of
the
Civil
Rights Act
of 1964, which established the prohibition of employer
discrimination on the basis of "race, color, religion, sex, or national
origin." What had begun as a battle against the legacy
of slavery thus took shape in Title VII as a much broader
ban on
discrimination based on a variety of immutable group traits.
The extension of the anti-discrimination principle to private
employment, though strongly opposed at the time and not
yet fully vindicated, has come to occupy a virtually unchallenged
place
in the national conscience.
The NLRA and Title VII can
be
seen as the templates for two important kinds of exceptions
to employment
at will: anti-retaliation provisions protecting voluntary,
socially-valued activities and anti-discrimination provisions
prohibiting adverse
employment decisions based on traits that have been but
should not be the basis for group disadvantage. The latter
are the
most familiar and most significant: in the wake of Title
VII, Congress
passed the Age Discrimination in Employment Act, the
Pregnancy Discrimination Act, and the employment provisions
of the
Americans with Disabilities Act, all based on the antidiscrimination
model pioneered by the Civil Rights Act of 1964.
The anti-retaliation principle of the NLRA has also been
echoed in a less familiar set of anti-retaliation or "whistle-blower
protection" provisions of statutes regulating working conditions
or other employer conduct. Such provisions are routinely included
in federal statutes regulating terms and conditions of employment,
such as health and safety laws, minimum wage and maximum hours
laws, and pension laws, as well as in the anti-discrimination
laws. In addition, many federal laws that regulate the conduct
of private firms outside the employment context, such as pollution
control laws, prohibit retaliation against employees who report
violations or participate in proceedings against their employer.
Several states have enacted broader "whistle-blower protection" statutes
providing limited remedies for employees who suffer employer
retaliation for reporting specified kinds of wrongdoing
to public authorities.
Many of these legislative inroads on employment at will
were in place when the more highly-publicized judicial
assault
got underway. Most relevant here are the public policy
cases, which
have largely escaped the economic counterattack waged
on behalf of employment at will. The public policy cases
fall
largely
into three categories: discharges based on the employee's
exercise of a clear legal right (such as the filing of
a workers' compensation
claim); discharges based on the employee's performance
of a clear
public duty (such as the performance of jury duty); and
discharges based on a refusal to violate the law (such
as the refusal
to engage in perjury or, in one well-known case, to engage
in indecent
exposure by "mooning"). Some cases have extended the
public policy doctrine to protect employees who disclose or "blow
the whistle" on illegal conduct within the organization.
Most of these public policy cases fit comfortably into
the anti-retaliation model pioneered by the federal and
state
legislatures: they afford
a remedy for discharges based on voluntary employee conduct
that society values and seeks to encourage.
These anti-retaliation and anti-discrimination doctrines
make up what I will call the law of "wrongful discharge":
unlike the doctrines of "implied covenant of good faith" or
of implied contract, each of them requires proof of a particular
wrongful motive on the part of the employer. Together these
wrongful discharge doctrines have dramatically altered
the at-will environment.
What we are left with is a version of at-will employment
that differs dramatically from its forbears: employers
are free
to fire employees for good reason or for no reason, but
not for
the many bad reasons that are condemned by law.
The Causes
and the Consequences of Consensus
The "bad motive" doctrines have garnered a surprisingly
broad consensus. They occupy a patch of common ground in an otherwise
sharply divided battleground. I do not mean to ignore the controversy
over certain applications and extensions of the core anti-discrimination
and anti-retaliation concepts. There is active debate over the
doctrines of "disparate impact," sexual harassment,
and affirmative action under Title VII, over the demise of mandatory
retirement under the ADEA, and over the application of the discrimination
model to pregnancy and disability. There is plenty of controversy
over the size of verdicts and the cost of litigation under the
common law doctrines, sometimes including the public policy doctrine.
But there remains a core of "bad motive" exceptions
that are widely accepted.
Employee advocates accept the "bad motive" exceptions
as a good beginning, and as the harbingers of more sweeping inroads
on at-will. Indeed, the rapid proliferation of "bad motive" exceptions
in the 1960s and 1970s led some optimistic observers to predict
the complete demise of at-will employment in favor of a general
regime of "just cause." This has not come about,
of course. But these commentators nonetheless regard
the existing wrongful discharge regime as a partial victory
over the worst
consequences of employment at will. The at-will rule
is
perceived to be in retreat, and its impact confined to
cases in which
the
employer's reason is simply arbitrary or insufficient
to justify discharge.
Most of those who defend employment at will also largely
accept the existing "bad motive" exceptions. With respect
to the common law "public policy" exceptions, this
is sometimes explicit. Judge Richard Posner, for example, has
asserted that "[a] common law tort of unjust termination
[is] sensibly applied to cases where a worker is fired for exercising
a legal right - for example, giving truthful but damaging testimony
against his employer in a suit by the government against the
employer for tax evasion ...." Even Professor Epstein would
recognize a narrow public policy exception for discharges based
on a refusal to commit perjury or perhaps other crimes. With
respect to the statutory wrongful discharge exceptions, the evidence
of assent is indirect but powerful: with the voluble exception
of Professor Epstein, the defenders of at-will mount no serious
challenge to the numerous statutory anti-discrimination and anti-retaliation
exceptions. In this context I believe it is fair to take silence
as assent: insofar as a defense of at-will does not include a
defense of discriminatory or retaliatory discharges, I take it
to accept the existing prohibitions. What the mainstream defenders
of at-will employment thus defend is a modern and more moderate
version of the rule under which an employer may fire an employee "for
good cause or for no cause, or even for bad cause," except
for a variety of particular bad causes condemned by law.
It is worth considering why this is so. First, the "bad
motive" exceptions do not intrude deeply into the core of
what the defenders of at-will regard as legitimate employer discretion
- the power to evaluate employee conduct and performance and
to make judgments about what is best for the organization without
being second-guessed by outsiders. A general "just cause" requirement,
and the broad-gauged "good faith" doctrines, pose a
broader challenge to legitimate employer discretion.
Second,
the "bad motive" exceptions at their core rest
on strong and widely shared moral commitments that reach
well
beyond the
workplace. The basic anti-discrimination principle has
constitutional roots and has been extended through legislation
into nearly
every sphere of public and economic life; its meaning
is contested and its realization very partial, but its
status
is secure.
The
scope of the anti-retaliation principle is less sweeping,
but it too resonates with a basic constitutional principle
- that
of the First Amendment - and extends beyond the employment
sphere. Many of those who defend broad employer discretion
nonetheless
recognize limits on that discretion in some egregious
cases. Moreover, as a tactical matter, the defense of
at-will
would be a steep uphill battle if it required a direct
confrontation
with the broad moral consensus behind the anti-discrimination
and anti-retaliation principles. It is far easier to
defend a narrower at-will rule that merely requires us
to tolerate
discharges
based on reasons that are not good enough.
There is a third and related reason, I believe, for the
relatively firm consensus in favor of the "bad motive" branch
of wrongful discharge law. Many of these wrongful discharge
doctrines protect not only the interests of employees
but also the interests
of third parties or of the public - interests that would
suffer if employers were given the full power over their
employees
that the pure at-will regime would afford. That is true
in different
ways for both the anti-discrimination and the anti-retaliation
doctrines.
Professor Richard Epstein's attack on Title VII has spurred
the growth of a rich scholarly literature on the social
costs - economic,
political, and moral - of employment discrimination,
particularly that based on race. Given the importance
of jobs to economic
and psychic well-being, social status, and integration
into civic life, employment discrimination based on immutable
traits or
group membership contributes to economic stratification,
division, and conflict. Racial discrimination also tends
to promote under-investment
in human capital, to the detriment of the economy as
a whole.
Moreover, just as some individuals may have a "taste for
discrimination," many have a "taste for equality" that
would be defeated by widespread employment discrimination
and its consequences. Title VII places the weight of
federal law
on the side of equality.
The anti-retaliation doctrines also support public interests
beyond the employment relationship. The public costs
of prohibited retaliation are easy to grasp, for example,
when an employer
retaliates against an employee who refuses to engage
in
unlawful conduct. If the underlying law - the law against
perjury
or fraud or pollution, for example - makes sense and
promotes public purposes,
then so does the prohibition of employer coercion of
the unlawful conduct. Similarly, many anti-retaliation
provisions
protect
employees who disclose illegal conduct. To the extent
that law enforcement depends on, or is aided by, voluntary
employee
informants
and complainants, retaliation against those employees
undermines law enforcement. A thorough justification
of these anti-retaliation
provisions would require a defense of the underlying
regulations. The present analysis offers a more limited
defense: assuming
that the underlying regulations serve the public good,
the protection of employee informants from employer retaliation
serves the same
public good.
The most important remaining anti-retaliation provision
protects conduct that the employee has a right to engage
in but that
perhaps less obviously serves public objectives: the
NLRA's prohibition
on discrimination against union activity. Still, employee
free choice regarding unionization lies at the foundation
of the entire
existing legal regime for the governance of labor-management
relations; employee free choice, at a minimum, is deemed
necessary to promote industrial peace. Much labor law
is under political
scrutiny, but the core premise of employee freedom to
choose unionization is not up for grabs. Unless we revisit
that
entire regime - and I do not intend to do so here - we
must acknowledge
that employer retaliation against employees who exercise
that choice undermines the objectives of national labor
policy.
There is thus a fairly wide consensus among the leading
commentators on at-will employment that the law has legitimately
and more
or less adequately taken care of the most egregious unjustified
discharges - those that are based on particular discriminatory
or retaliatory motives that society has explicitly disapproved.
Both critics and supporters of the modern at-will regime
tend to regard the at-will rule, and the debate over
the at-will rule,
as concerning a different set of cases in which the employer's
reason for discharge is not particularly bad, or at least
not illegal, but is arguably arbitrary or inadequate.
Once the debate is framed in these terms, it becomes
readily amenable to economic analysis: the costs and
benefits of
what remains of the at-will rule and of its just cause
alternative appear to be basically economic in nature.
Most crucially,
those
costs and benefits accrue to the parties to the employment
contract. Much of the debate has thus revolved around
the contractarian
model and its standard economic qualifications - information
costs and disparities, collective action problems within
the workforce, and other transaction costs.
The early challenges to at-will employment produced a
near consensus that the rule was unfair and outmoded.
These
critics argued that
the prevalence of at-will employment reflects the enormous
inequality in bargaining power between employers and
employees, that it
gives too little protection to workers' stakes in their
jobs, and that it countenances a significant number of
precipitous,
ill-informed, or opportunistic discharges. They argued
for the recognition of a kind of property right based
on the
investment
that individuals make in their jobs and on the catastrophic
consequences of discharge. These critics also appealed
to basic notions of
fairness and to procedural norms developed in the public
sector under the Due Process Clause.
Supporters of at-will responded, and laid down the terms
of the current debate, with a vigorous defense of the
market and
the
choices it generates. In a competitive labor market,
they argue, arbitrary discharges are costly to the employer
and therefore
rare. They argue that the at-will rule functions largely
as a shield against erroneous and costly second-guessing
of employers'
judgments about employee performance and conduct, particularly
when employee "shirking" or misconduct is difficult
to detect. They reject the claim of unequal bargaining
power, arguing that employees are fully capable of demanding
protection
against the risk of unjustified discharge by choosing
employers who offer such protection. However, given the
costs of
such protection to the employer, employees would have
to pay a
premium for just
cause protection; and given the low risk of unjustified
discharge, for most employees such protection is simply
not worth the
price. It is therefore probable that the continuing currency
of at-will
employment simply reflects the preferences of the parties,
and that imposition of a just cause alternative would
make both employers
and employees worse off.
The critics of at-will counterattack on two fronts: they
challenge the effectiveness of the external labor market
in vindicating
employee preferences in light of inadequate information
about an employer's practices regarding discipline and
discharge,
biases in individuals' decisionmaking and assessment
of risk, and the
high cost of exit, particularly to the career employee.
These critics emphasize instead the importance of the
internal labor market, workers' investment in human -
and sometimes
firm-specific
- capital, and the life-cycle wage model, as well as
the related problems of public goods, employer opportunism,
and
the virtues
of employee voice. These arguments undermine the claim
that actual contractual practices, and the prevalence
of
at-will
employment
contracts, reflect the genuine preferences of employees.
This debate has immeasurably advanced the understanding
of employment contracts and their legal regulation. But
it is
based on the
premise that we have taken care of the recognized social
problems of discrimination and retaliation through existing
wrongful
discharge laws, and that all that is at stake in the
debate over at-will
employment is the middle ground of not-clearly-justified
discharges affecting only the individual worker and her
employer. I want
to dispute that premise. I will argue that the at-will
regime exists not just alongside the established wrongful
discharge
laws, but underneath those laws. It governs not only
the residual cases to which existing wrongful discharge
laws
do not apply;
it also undermines and distorts the operation of those
laws. To the extent that this is true, the economic defense
of
at-will is incomplete and vulnerable.
The Continuing Influence
of Employment
at Will on Wrongful Discharge Law
Proof of a wrongful
discharge requires the plaintiff to prove one particular
unlawful
motive on the part of the employer, of whom the law otherwise
requires
no reason at all. The at-will regime is thus actively
and aggressively present in every wrongful discharge
dispute.
What is therefore
at stake in the debate over the modern version of at-will
employment is the efficacy of each of the policies underlying
the existing
and largely uncontested "bad motive" exceptions
to the at-will regime.
This is true for both of the two large categories of
wrongful discharge doctrines: those that prohibit discrimination
based on some trait or group membership, such as race,
sex, religion,
ethnicity, age, or disability, and those that prohibit
retaliation for some socially valued activity, such
as the exercise of
a legal right or duty or the disclosure of wrongful
conduct. The
efficacy of both types of wrongful discharge doctrines
is undermined by problems traceable to the surrounding
at-will
environment.
One set of problems is common to both the anti-discrimination
and anti-retaliation areas; other problems are peculiar
to each.
Proving Bad Motive
The fundamental problem with the existing "bad motive" exceptions
to employment at will is the inherent difficulty of proving
that bad motive. The burden invariably lies with the employee
(or an agency on the employee's behalf) to prove a particular
prohibited motive on the part of an employer who is almost
certainly better advised than the employee and who creates
and controls virtually all of the relevant documents and
employs most of the potential witnesses.
This burden is all the greater for imperfect employees who
have made mistakes, fallen short of the employer's standards
on occasion, or sometimes been absent or late or irritating.
Although the law protects imperfect as well as perfect employees
from discrimination and retaliation, the burden of proving
the bad motive may be overwhelming for the former. The problems
of proof are further magnified to the extent that employers
and their supervisors are reasonably well-educated about
the employment laws, reasonably cautious in avoiding statements
evidencing bad motives, and reasonably diligent in documenting
employee shortcomings. The cautious, liability-conscious
employer
has means, motive, and opportunity to create a plausible
record in support of what may in fact be an illegally motivated
discharge.
But in fact the employer need not document any legitimate
motive; that is what the at-will rule means in the context
of a wrongful
discharge action. This point was driven home in the context
of Title VII by the Supreme Court's recent decision in St.
Mary's Honor Center v. Hicks. The plaintiff in Hicks had
made out a prima facie case of race discrimination: he was
black,
he was fired, and he was replaced by a white employee. This
showing shifted to the employer the burden of coming forward
with a nondiscriminatory explanation for the decision. The
employer did so, but Hicks refuted this explanation to the
satisfaction of the lower court, leaving his prima facie
case unanswered. The Supreme Court held that this was not
enough
to establish Title VII liability; the plaintiff must still
prove the presence of a discriminatory motive. Whether that
interpretation of Title VII is right or wrong (and it is
not obviously wrong), it vividly illustrates the gravitational
pull of the at-will presumption even within the most entrenched
province of wrongful discharge law. When liability depends
on proof of a particular bad reason for discharge, "no
reason" or even a demonstrably false or fabricated reason
is good enough for the employer to escape liability.
The at-will rule continues to rear its head even after proof
of an unlawful motive. For once an employee has shown that
her discharge was motivated in part by an unlawful consideration
such as race, sex, or protected activity, the employer still
has an opportunity to prove that it would have made the same
decision anyway for permissible reasons. These are the "mixed
motive" cases. As a justification for giving the unlawfully
motivated employer this opportunity to escape liability, the
Supreme Court has cited "employer prerogatives," which
are epitomized by employment at will. Employment at will also
makes this employer defense an especially potent weapon against
plaintiffs, for employment at will means that "permissible
reasons" need not be fair or just or reasonable, but
simply not unlawful. Employment at will means that the entire
universe
of foolish, petty, unfounded, or arbitrary reasons for discharge
- as long as they are not unlawfully discriminatory or retaliatory
- are available to the employer to excuse a discharge that
has already been proven to be motivated in part by unlawful
reasons.
The problems of proof are magnified by the procedural hurdles
that employees face in making their claims. Some wrongful
discharge doctrines are enforced through administrative
procedures, while
others are enforced through a private right of action;
Title VII combines the two. But either sort of remedial scheme
poses hurdles that inevitably screen out many meritorious
claims
and that undermine the underlying anti-discrimination or
anti-retaliation policies.
In the case of administrative schemes, an agency may reject
many meritorious but hard-to-prove cases, particularly
when enforcement resources are tight. For the vast majority
of
these statutory schemes that afford no private cause
of action, the
agency's decision not to prosecute is the end of the
matter. Perhaps in part for that reason, most of these provisions
are virtually unknown to employees and even lawyers.
Some
combination
of employee ignorance about these provisions, short limitations
periods, inadequate agency resources, lack of political
will, and vagaries of proof have rendered many statutory
anti-retaliation
provisions virtually dormant. An important example is
Section 11(c) of the Occupational Safety and Health Act, which
prohibits retaliation against employees who report workplace
health
and safety violations. Most workers are unaware of this
section's protections, so there are few complaints, only
a tiny fraction
of which result in any relief. Even administrative processes
that are comparatively well known, such as those of the
EEOC, have pitfalls that either delay or deny a remedy
in many
meritorious
cases.
In the case of private rights of action
under statutes and common law doctrines (such as the public
policy
torts), the
difficulty of establishing motive, together with the
relatively limited economic damages that most plaintiffs
can hope
to recover, make it difficult for middle- and lower-income
plaintiffs
to
find a lawyer. The typical discharged (and probably
unemployed) employee cannot afford to pay a lawyer, and
the likely
recovery in most cases does not promise a big contingency
fee. The
normally modest recoveries, difficulties of proof,
delay, and expense
of litigation make many of these protections the near-exclusive
province of professionals and white-collar employees.
Indeed, while employers continue to deplore the rising
cost of
wrongful discharge litigation, plaintiffs' actual success
rates and
recoveries in these cases appear to be quite modest.
I want to stress the extent to which all of these problems
are traceable to the at-will background against which
these wrongful discharge doctrines play out. The
at-will rule
presumptively concedes to the employer the power
to fire at any time for
any reason; unless and until the employee can overcome
all the hurdles of delay, cost of litigation, and
difficulties of proof in establishing a wrongful discharge,
she
remains out of a job and without relief.
Excerpted from: Cynthia L. Estlund, THE CHANGING
WORKPLACE: Wrongful Discharge Protections in an
At-Will World,
June, 1996, U.T. Law Review Symposium
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