History of At-Will Employment Law in the USA
Copyright 2000 by Ronald B. Standler
Table of Contents
Introduction
1. History of At-Will Employment
2. Quotations from Court Cases
may terminate employment for morally reprehensible reasons
some modern judicial criticism of at-will employment
3. Sticks out like a sore thumb
why haven't legislatures ended at-will employments?
4. Beginning of the end of at-will employment?
5. Public Policy
sources of public policy
6. Judicial Reluctance
proper role of common law
My Proposal
Contract Law
Conclusion
Introduction
During 1996-1999, I read many cases in which colleges dismissed
professors for having academic standards that were higher
than desired by the administration, dismissed professors over
teaching styles or personality mannerisms, etc.
This reading culminated in my essay on
academic freedom.
During June 2000, I read 47 cases and wrote a long essay,
Professional Ethics & Wrongful Discharge,
that discussed the law of wrongful termination of employment because the employee
upheld a principle of professional ethics, in spite of his/her
employer's objections. In reading all of these cases, I kept asking
myself, "How did the USA get into this mess?" where competent and ethical
employees could have their employment terminated and courts would
not inquire into the reasons for the termination.
This essay presents an answer to this question.
Employees in the USA are divided into two classes:
- at-will employees
- just-cause employees
An at-will employee in the USA can be terminated at any time,
and for any reason or no reason at all
and the courts will generally not intervene to protect the ex-employee
from allegedly unfair treatment by the employer.
Just cause employees can be dismissed from employment only for
a good reason, such as poor job performance by the employee.
I have two purposes in posting this essay:
- to inform citizens of the USA about the doctrine of at-will
employment and urge that they contact their legislators and
push for statutes that will end at-will employment, and
- provide legal research that may assist attorneys for plaintiffs
who need to argue against at-will employment.
This essay is intended only to present general information about
an interesting topic in law and is not legal advice for your
specific problem. See my disclaimer.
I list the cases in chronological order in the citations in this essay,
so the reader can easily follow the historical development of a national
phenomenon. If I were writing a legal brief,
I would use the conventional citation order given in the Bluebook.
1. History of At-Will Employment
According to various legal scholars,
the doctrine of at-will employment first appeared as a statement
in a legal treatise by Horace C. Wood, Master and Servant
§ 134, at pages 272-273 (1877).
Wood cited four American cases in support of his statement about
at-will employment. However, none of those four cases
support Wood's statement!
- Contract of Hiring Duration, 11 A.L.R. 469, 476 (1921);
- J. Peter Shapiro and James F. Tune, Note, Implied Contract Rights
to Job Security, 26 Stanford Law Review 335, 341-342, n.54 (1973-74);
- Jay M. Feinman, The Development of the Employment at Will Rule,
20 American Journal of Legal History 118, 126-127 (1976);
- Toussaint v. Blue Cross & Blue Shield of Michigan,
292 N.W. 2d 880, 887, n.14 (Mich. 1980);
- Weiner v. McGraw-Hill, Inc., 443 N.E.2d 441, 444, n.5 (N.Y. 1982)
(citing Joseph DeGiuseppe, Effect of the Employment-At-Will Rule on Employee
Rights to Job Security and Fringe Benefits,
10 Fordham Urban Law J. 1, 6 and n.13 (1981));
- Magnan v. Anaconda Industries, Inc., 479 A.2d 781, 784, n.8 (Conn. 1984)
("Scholars and jurists unanimously agree that Wood's pronouncement in his treatise,
Master and Servant § 134 (1877), was responsible for
nationwide acceptance of the rule. They also agree that his
statement of the rule was not supported by the authority upon
which he relied, and that he did not accurately depict the law
as it then existed.").
Apparently, Wood simply invented the concept of at-will employment,
but wrongly described it as already accepted by the courts.
Soon after Wood's treatise appeared, various courts began citing
the rule in his treatise, and thus the rule became accepted law.
For example:
- McCullough Iron Co. v. Carpenter, 11 A. 176, 178-179 (Md. 1887) ("[Wood's treatise]
is an American authority of high repute ....");
- East Line and Red River Railroad v. Scott, 10 S.W. 99, 102 (Tex. 1888);
- In re Philadelphia Packing & Provision Co., 1894 WL 3641 at *3 (Pa.Com.Pl. 1894);
- Martin v. New York Life Ins. Co., 42 N.E. 416, 417 (N.Y. 1895) ("... we
think the rule is correctly stated by Mr. Wood, and it has been adopted
in a number of states.");
- Greer v. Arlington Mills Mfg. Co., 43 A. 609, 610 (Del.Super. 1899)
("Wood, in his Law of Master and Servant (§ 134),
very clearly states the difference between the rule which obtains
in this country and the one in England, and
I can find it nowhere more intelligently and satisfactorily stated.
It is as follows:" [quoting nearly one page from Wood])
also "We have no doubt that the great preponderance of the
best-considered cases in this country recognize and affirm the rule
laid down by Wood in his work on Master and Servant, and which
he terms the 'American rule,' ...." Greer at 612.
- Harrod v. Wineman, 125 N.W. 812, 813 (Iowa 1910)
("... in this country it is held by an overwhelming weight of authority
that a contract of indefinite employment may be abandoned at will
by either party without incurring any liability to the other
for damages. The cases are too numerous to justify citation, but see ...."
[citing four secondary sources, including Wood's Master and Servant]).
It is clear that the doctrine of at-will employment was harmonious
with the laissez-faire spirit of the times. In that way,
Wood's mistaken statement was the catalyst for what may have been
inevitable. On the other hand, without Wood's statement,
judges might not have had the courage to make radical new law,
in creating at-will employment.
As an indication of the spirit of that era,
in the first third of the Twentieth Century, the U.S. Supreme Court
upheld individual freedom of contract and invalidated, on due process
grounds, statutes that prohibited employers from terminating
employment of workers because the workers were members of a union.
Adair v. U.S., 208 U.S. 161, 174-176 (1908);
Coppage v. Kansas, 236 U.S. 1, 13-14, 20-21 (1915).
These two opinions of the U.S. Supreme Court were overruled by:
NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1 (1937);
Phelps Dodge Corp. v. NLRB, 313 U.S. 177, 187 (1941);
Lincoln Fed.Labor Union v. Northwestern Iron & Metal Co.,
335 U.S. 525, 536 (1949).
In 1985, an attorney wrote, in a scholarly article:
- The doctrine of employment-at-will emerged in the nineteenth
century in the United States in a climate of unbridled, laissez-faire
expansionism, social Darwinism, and rugged individualism. It is often
referred to as Wood's Rule, named after Horace C. Wood, who articulated
the doctrine in an 1877 treatise Master and Servant.
No doubt the title of the treatise says all that need be said regarding
Wood's view of employment relations and, unfortunately, the view shared
by most of his legal contemporaries. [three footnotes omitted]
- William L. Mauk, Wrongful Discharge: The Erosion of 100 Years
of Employer Privilege, 21 Idaho L. Rev. 201, 202 (1985).
The original statement by Wood, and also the early courts that followed
Wood's rule, contain no reason for the rule. However, the following
reasoning seems plausible. The employee must be free to quit at any time,
otherwise there is the possibility of involuntary servitude,
which is prohibited in the Thirteenth Amendment to the U.S. Constitution.
The doctrine of mutuality of obligations then required a symmetrical
right of the employer to terminate the employee at any time.
See Smith v. Atlas Off-Shore Boat Service, Inc., 653 F.2d 1057, 1061 (5thCir. 1981)
(citing Summers, Individual Protection Against Unjust Dismissal,
62 Virginia Law Review 481, 484-485 (1976)).
The doctrine of mutuality of obligations has long since been repudiated
modern contract law allows any promise that is supported by
consideration. However, the legal doctrine of at-will employment continues
as an anachronism.
As a secondary reason, not mentioned by legal historians, I wonder
if some of the willingness to follow Wood's "American Rule"
was a desire of judges in the USA in the late 1800s
to reject the law of England and to assert a new law of the USA.
Wood, in his treatise, compares the law of the two countries
- In England, it is held that ....
....
With us, the rule is inflexible that a ....
- Horace C. Wood, Master and Servant § 134 (1877).
- Many of the early court opinions in the USA that accept Wood's
rule also seem to emphasize that American law differs from English law.
In fact, the law in this area differed only because of Wood's error.
In its narrowest sense, the doctrine of at-will employment only
speaks to when an employment contract can be terminated:
the contract can be terminated at-will of either party,
i.e., at any time.
A separate issue is why (i.e., for what reasons)
the employment contract can be properly terminated.
From the beginning, the concept of at-will employment meant that the
employment contract could be terminated for any reason by either party.
2. Quotations from Court Cases
may terminate employment for morally reprehensible reasons
An often-quoted statement of at-will employment appears in an old case
from Tennessee:
- All may dismiss their employees at will, be they many or few,
for good cause, for no cause[,] or even for cause morally wrong,
without being thereby guilty of legal wrong.
- Payne v. Western & Atlantic Railroad Co., 81 Tenn. 507, 519-520,
1884 WL 469 at *6 (Sep. term 1884).
This rule of law in Payne has been quoted by a number of modern authorities
as the correct statement of the law:
- Smith v. Atlas Off-Shore Boat Service, Inc., 653 F.2d 1057, 1060-61 (5thCir. 1981)
(citing Payne as correct statement of the nonmaritime common law);
- Magnan v. Anaconda Industries, Inc., 479 A.2d 781, 784 (Conn. 1984);
- John D. Calamari and Joseph M. Perillo, The Law of Contracts,
p. 61, third edition, West Publishing (1987)
(quoting Payne as the "orthodox rule", but also calling it
a "harsh rule");
- Hillesland v. Federal Land Bank Assn., 407 N.W.2d 206, 211 (N.D. 1987)("The classic statement of the at-will rule ....");
- Sheets v. Knight, 779 P.2d 1000, 1005-06 (Or. 1989);
- Darnall v. A+ Homecare, Inc., 1999 WL 346225 at *2 (Tenn.App. 1999)("This principle
is still viable in Tennessee except where modified by statute.")
Written in 1981, Smith holds that
- The maritime employer may discharge the seaman for good cause,
[footnote omitted]
for no cause, or even, in most circumstances, for a morally reprehensible
cause. We conclude, however, that a discharge in retaliation for the
seaman's exercise of his legal right to file a personal injury action
against the employer constitutes a maritime tort.
- Smith, 653 F.2d at 1063.
How could any judge, in either 1884 or 1981, write such words that would
give legal protection to someone who harmed another person
by "morally wrong" or "morally reprehensible" reason?
This statement is simply astounding.
And it is almost beyond comprehension how thousands of judges in the USA could
follow such an unjust rule for more than 120 years.
some modern judicial criticism of at-will employment
It is interesting to read the discussion of the origins of at-will
employment that are found in some recent state court opinions.
In 1983, the Wisconsin Supreme Court wrote:
- In the late nineteenth century, apparently influenced by the
laissez-faire climate of the Industrial Revolution, the American
courts then rejected the English rule and developed their own
common-law rule, the employment at will doctrine.3 The
doctrine recognized that where an employment was for an indefinite
term, an employer may discharge an employee "for good cause, for no
cause, or even for cause morally wrong, without being thereby guilty
of legal wrong."4
- 3Commentators state that many courts were influenced by
H.G. Wood's treatise on master-servant relationships published in
1877. In that treatise Wood wrote:
- "With us the rule is inflexible, that a general or indefinite
hiring is prima facie a hiring at will, and if the servant seeks to
make it out a yearly hiring, the burden is upon him to establish it by
proof.... [I]t is an indefinite hiring and is determinable at the
will of either party, and in this respect there is no distinction
between domestic and other servants."
- H. Wood, Master and Servant, § 134, (1877).
The commentators also generally agree that Wood's analysis was
not supported by the cited authorities.
4Blades, 67 Colum.L.Rev. at 1405, quoting Payne v.
Western & A.R.R., 81 Tenn. 507, 519-20 (1884), overruled on
other grounds, Hutton v. Watters, 132 Tenn. 527, 179 S.W. 134 (1915).
- By the turn of the twentieth century, the at will doctrine was
absolute and was even temporarily afforded constitutional protection.5
However, since the New Deal, government regulation in the
workplace has increased dramatically as Congress and state
legislatures recognized the need to curb harsh applications and abuse
of the rule in an effort to stabilize labor relations.
- 5In Adair v. United States, 208 U.S. 161, 28 S.Ct. 277,
52 L.Ed. 436 (1908) and Coppage v. Kansas, 236 U.S. 1, 35 S.Ct. 240,
59 L.Ed. 441 (1915), the United States Supreme Court held statutes
that were aimed at prohibiting employers from discriminating against
union members unconstitutional. The court retreated from this
position in NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1, 57
S.Ct. 615, 81 L.Ed. 893 (1937).
- Brockmeyer v. Dun & Bradstreet, 335 N.W.2d 834, 837 (Wisc. 1983).
In 1989, the Utah Supreme Court declared:
- The genesis of the at-will rule in its present form in America,
however, can be traced to Horace G. Wood's 1877 treatise on the
master-servant relationship. H. Wood, Master and Servant § 134
(1877), cited in Note, Implied Contract Rights to Job Security, 26
Stan.L.Rev. 335, 341 (1974). Wood proffered his rule without
analysis and cited apparently inapposite authority on its behalf.
Id. at 341-43.
Notwithstanding its dubious antecedents, the rule was
adopted by many jurisdictions without careful or thorough examination.
In the leading case of Martin v. New York Life Insurance Co., 148 N.Y.
117, 42 N.E. 416 (1895), the court repudiated the common law
presumption that a general hiring was for a term of one year and
uncritically embraced the at-will rule as framed by Wood. The Martin
opinion did not analyze any prior authority, but did assert that
several other states had adopted the at-will rule. The Martin
decision was not atypical. Most courts offered no rationale or
analysis for substituting the at-will doctrine for the common law
presumption. By the arrival of the twentieth century, the at-will
doctrine was well-established throughout the United States and served
to reinforce turn-of-the-century ideas concerning laissez-faire
economics and freedom to contract. Note, Implied Contract
Rights to Job Security, 26 Stan.L.Rev. at 340; Note, Protecting
At-Will Employees Against Wrongful Discharge: The Duty to Terminate
Only in Good Faith, 93 Harv.L.Rev. 1816, 1824-26 (1980).
The development and establishment of the at-will rule in Utah was
also accomplished without critical examination. ....
- Berube v. Fashion Centre, Ltd., 771 P.2d 1033, 1040-1041 (Utah 1989).
3. Sticks out like a sore thumb
The concept of at-will employment sticks out like a sore thumb.
Most employees of the U.S. federal government are not at-will
employees, but can be demoted or fired "only for such cause as will
promote the efficiency of the service."
5 U.S.C. § 7513(a), enacted in 1978.
Similarly, most employees of state governments in the USA
are not at-will employees.
And most members of labor unions in the USA are covered by a written
contract, called a "collective bargaining agreement", that
contains a clause specifying that their employment can be terminated
only for just cause.
This clause makes union members not at-will employees.
While most people in the USA do not seem to care about practices in
other countries, several law review articles
have noted that the USA is alone among the industrialized nations
of the world in providing no protection against
wrongful termination of employment.
- Daniel A. Mathews, Note, A Common Law Action for the Abusively
Discharged Employee, 26 Hastings Law Journal 1435, 1447, n.54 (1975);
- Clyde W. Summers, Individual Protection Against Unjust Dismissal:
Time For A Statute, 62 Virginia Law Review 481, 508-519 (1976)
(review of law in France, Germany, England, and Sweden);
- Samuel Estreicher, Unjust Dismissal Laws, 33 American
Journal of Comparative Law 310 (1985) (review of law in
Canada, Great Britain, Germany, France, Italy, and Japan).
A court in Missouri in 1985 reviewed wrongful discharge cases
that were reported between 1977 and 1984 and concluded:
- As many of the decided cases illustrate, the burden of the at-will
employment doctrine seems to be falling most heavily and harshly upon
professional and upper and middle level employees.
[footnote that cites 15 cases]
They have the least protection. Most are
at-will employees and few have job security through union or
individually negotiated contracts. They have the most to lose,
frequently being the long-term employees who have the greatest
responsibility and substantial investment in and the highest
expectations from their careers. Often they are at an age when
replacement of their life and medical insurance programs and their
retirement plans are difficult or impossible. They are the most
vulnerable to the improper demands of employers who find it profitable
to take chances with anti-trust and consumer fraud violations,
environmental pollution, health-related misconduct, defense
procurement fraud, and the like. The at-will employment doctrine does
not include, contemplate or require a privilege in the employer to
subject its employees to the risks of civil and criminal liability
that participation in such activities entails.
- Boyle v. Vista Eyewear, Inc., 700 S.W.2d 859, 877-878 (Mo.App. 1985).
Why haven't legislatures ended at-will employment?
The quick way to stop the propagation of defective common law is
for legislatures to pass a statute. So why haven't legislatures
done that? I agree with the authors of the following
scholarly articles.
A well-known law review article in 1967 tersely concluded:
- The problem [of abusive dismissal of employees]
does seem to be one suited to legislative
inquiry and solution. As a practical matter, however, the prospects
for any kind of general legislative reform in this area are dim.
The obstacles which commonly hinder legislative reforms of this sort
have been commented upon elsewhere.139
Suffice it to say that general statutory limitations on the employer's
right of discharge are unlikely to be enacted so long as there is no
strong lobby to promote them. Employees having diverse job specialties
and working at varying echelons of employment simply are not equipped
to from a cohesive group with enough power to influence legislators.
The unlikelihood that such legislation will be enacted in the foreseeable
future is enhanced by the strong interest groups to be counted on to oppose it.
Nor could organized labor be expected to favor laws which would
give individual employees a means of protecting themselves with need of a union.
Therefore, it appears that protection of all employees from the abusive
exercise of employer power will have to originate, if it is to be
established at all, in the courts.
- 139 See, e.g., Peck, The Role of the Courts and Legislatures
in the Reform of Tort Law, 48 Minn. L. Rev. 265 (1963).
Among the characteristics of the legislative process which the author points
to as generally obstructing statutory reform of tort law are that
legislators are indifferent, lack insight and experience, are paid
inadequate wages, fail to hold satisfactory committee and public hearings,
and are subject to well-organized lobbies and pressure groups.
- Lawrence E. Blades, Employment at Will v.
Individual Freedom: On Limiting the Abusive Exercise of Employer Power,
67 Columbia Law Rev. 1404, 1433-34 (1967).
[five footnotes omitted]
And, in 1979, a law student wrote:
- However, legislative action to protect the private,
non-union employee-at-will from arbitrary or retaliatory discharge
is unlikely to be forthcoming. Statutes are typically the result
of the lobbying efforts of organized interest groups.
The only organized employee groups with sufficient political
influence to effect such a change in established practice are the
unions, but their allegiance is somewhere other than with private,
non-union employees. Moreover, professional societies, the most
obvious candidates for such action on behalf of their members,
have been notoriously reticent and ineffective in this area.
Employers, in contrast, are well organized and at all times stand
poised to lobby against any infringement upon their absolute
right of discharge. For the foreseeable future, unorganized
employees, like consumers in the products liability area,
must look primarily to the courts for protection against
arbitrary or malicious discharges in those areas where
Congress or the state legislatures have not acted.
At present, a discharged employee's chance of finding a court
receptive to his or her claim depends more on the jurisdiction
and the bench before which the case arises than on the strength
of his or her case.
- Alfred G. Feliu, Discharge of Professional Employees:
Dismissal for Acts Within a Professional Code of Ethics,
11 Columbia Human Rights Law Review 149, 162-163 (1979).
A group of law students at Harvard wrote in 1980:
- Regardless of its form, the prospect for statutory chance is
doubtful without a strong lobbying effort that unorganized employees
are probably unable to mount. Strong union support is not likely
either because this kind of statutory reform would take away one of the
unions' principal arguments that protection from unjust
dismissal is available only under a collective bargaining agreement
administered by a union-controlled grievance mechanism.
Such public law solutions need not be the exclusive remedy
for at will employees. Courts possess the legitimate heritage
of common law innovation that develops new principles to accommodate
changing values, and are therefore an appropriate forum for the creation
of job security rights. Because courts have considerable experience with
similar employment relations problems, they possess sufficient expertise
to resolve wrongful discharge disputes. Thus, courts need not await
legislative initiative to effect doctrinal change in the employment
at will area. Courts themselves created the at will rule;
it is therefore entirely appropriate that they now take the lead in
modifying it.
- Note, Protecting At Will Employees Against Wrongful Discharge:
The Duty to Terminate Only in Good Faith,
93 Harvard Law Review 1816, 1837-38 (1980).
[five footnotes omitted]
I agree with what these authors said, but in practice
judges have been reluctant to use their power to modify the common law
of at-will employment. I discuss this judicial reluctance
later in this essay.
Further, in some states, the doctrine of at-will employment is
enshrined in statute, so the only way to end at-will employment in those states
is for the legislature to repeal or revise the statute.
Moreover, waiting for legislatures to act has not been completely
hopeless: in 1987, Montana enacted a statute that abolished at-will employment
for employees in that state who are past their employer's probationary period.
Montana Laws 39-2-904.
4. Beginning of the end of at-will employment?
In 1959, a California District Court of Appeal wrote a frequently-cited opinion,
Petermann v. International Brotherhood of Teamsters,
344 P.2d 25 (Cal.App. 1959),
that held an at-will employee could not be discharged
because he had failed to commit perjury that was desired by his employer.
This landmark case established the public-policy exception to at-will
employment, but it stood virtually alone for many years.
In 1967, Prof. Lawrence E. Blades wrote Employment at Will v.
Individual Freedom: On Limiting the Abusive Exercise of Employer Power,
67 Columbia Law Rev. 1404.
Many state supreme court opinions have cited this influential article:
- Monge v. Beebe Rubber Co., 316 A.2d 549, 551 (N.H. 1974);
- Geary v. U.S. Steel Corp., 319 A.2d 174, 176, 179 (Pa. 1974);
- Harless v. First National Bank, 246 S.E.2d 270, 275, n.4 (W.V. 1978);
- Sheets v. Teddy's Frosted Foods, 427 A.2d 385, 387 (Conn. 1980);
- Tameny v. Atlantic Richfield Co., 610 P.2d 1330, 1333, n.7 (Calif. 1980);
- Pierce v. Ortho Pharmaceutical, 417 A.2d 505, 509 (N.J. 1980);
- Palmateer v. International Harvester, 421 N.E.2d 876, 878 (Ill. 1981);
- Adler v. American Standard Corp., 432 A.2d 464, 470 (Maryland 1981);
- Parnar v. Americana Hotels, 652 P.2d 625, 628, n.7 (Hawaii 1982)(calling
it "the seminal article on the subject");
- Thompson v. St. Regis Paper Co., 685 P.2d 1081, 1086 (Wash. 1984);
- DeRose v. Putnam Management Co., 496 N.E.2d 428, 431 (Mass. 1986);
- Sabetay v. Sterling Drug, Inc., 506 N.E.2d 919, 921 (N.Y. 1987);
- Foley v. Interactive Data, 765 P.2d 373, 376, n.3 (Calif. 1988);
- Burk v. K-Mart Corp., 770 P.2d 24, 26 (Okla. 1989);
- Collins v. Rizkana, 652 N.E.2d 653, 657 (Ohio 1995);
- Anderson v. Douglas & Lomason Co., 540 N.W.2d 277, 282 (Iowa 1995).
Many, but not all, of these cases that cited Prof. Blades' article
found a public-policy exception to at-will employment.
In 1980, California Supreme Court, in
Tameny v. Atlantic Richfield Co., 610 P.2d 1330,
accepted the reasoning in Petermann.
Also in 1980, the New Jersey Supreme Court wrote their landmark
ruling in Pierce v. Ortho Pharmaceutical, 417 A.2d 505,
which I discussed in my essay on
Professional Ethics and Wrongful Discharge.
During the 1980s, many
other state courts recognized the existence of public-policy exceptions
to at-will employment. These courts were influenced by a
large number of law review articles published since the mid-1960s that
condemned the doctrine of at-will employment.
And, as an increasing number of state supreme courts recognized
public-policy exceptions to at-will employment,
other states were willing to join the rapidly growing minority,
which soon became a majority.
Also during the 1980s, many state legislatures passed statutes
that prohibit termination of employment for various reasons,
as well as give limited protection to whistleblowers
who serve the public interest.
The trend in courts and legislatures continued during the 1990s.
Nonetheless, the doctrine of at-will employment remains the law in the USA,
although it may become riddled with exceptions in the Twenty-First Century.
In my opinion, the doctrine of at-will employment was a major mistake,
which continues to be propagated by judges with more respect for
stare decisis, than either respect for
fairness or desire to protect weaker parties from abuse.
Employment contracts are a species of contracts, and, as such,
should be governed by conventional contract law.
As explained later in this essay,
there are a number of rules in conventional contract law that
could ameliorate the harshness of at-will employment.
However, from the beginning of at-will employment in the 1890s to
the recognition of public-policy exceptions to at-will employment in
the 1980s an interval of approximately ninety years the
courts seem to have regarded the doctrine of at-will employment as
somehow completely overriding basic rules of contract law.
I have not seen an adequate explanation for why judges
ignored conventional contract law in the context of wrongful discharge
cases.
5. Public Policy
Before we discuss judicial reluctance to use public policy (or another
principle of law) to end at-will employment,
we should first discuss the legal concept of public policy.
A long-standing principle of contract law states that
courts will not enforce [parts of] contracts that are contrary to
public policy.
An English court in the year 1853 voided a contract
on public policy grounds:
- Public policy ... is that principle of the law which holds that no subject
can lawfully do that which has a tendency to be injurious to the
public, or against the public good, which may be termed, as it
sometimes has been, the policy of the law, or public policy in
relation to the administration of the law.
- Egerton v. Brownlow, 4 H.L.Cas. 1, 196 (1853)(Lord Truro, J.).
More than sixty opinions of state supreme courts in the USA since 1945 have
quoted this rule of public policy from Egerton,
although these opinions often cite either an earlier American case
or a treatise written in the USA, instead of citing the original source.
The following cases are a representative sample
of American state supreme courts in major states, plus some landmark
decisions on wrongful discharge,
that approve of this rule in Egerton.
- McNamara v. Gargett, 36 N.W. 218, 221 (Mich. 1888) (citing Greenhood Public Policy);
- People ex rel. Peabody v. Chicago Gas Trust Co., 22 N.E. 798, 803 (Ill. 1889);
quoted with approval in Palmateer v. International Harvester, 421 N.E.2d 876, 878 (Ill. 1981);
- Consumers' Oil Co. v. Nunnemaker, 41 N.E. 1048, 1050 (Ind. 1895) (citing Greenhood Public Policy at 2, 3);
- Boston & Albany Railroad Co. v. Mercantile Trust, 34 A. 778, 785 (Maryl. 1896) (citing 19 Am. & Eng. Enc. Law 565);
- Veazey v. Allen, 66 N.E. 103, 105 (N.Y. 1903);
- Porter v. Trustees of Cincinnati Southern Railway, 117 N.E. 20, 21 (Ohio 1917)(citing 9 Cyc. 481);
- Hawkins Realty Co. v. Hawkins State Bank, 236 N.W. 657, 662 (Wisc. 1931)(citing Page on Contracts);
- Heath v. Heath, 159 A. 418, 421 (N.H. 1932);
- Council v. Cohen, 21 N.E.2d 967, 969 (Mass. 1939)(citing Egerton);
- Schaffer v. Federal Trust Co., 28 A.2d 75, 79 (N.J.Ch. 1942);
quoted with approval in Mehlman v. Mobil Oil, 707 A.2d 1000, 1012 (N.J. 1998);
- Makinen v. George, 142 P.2d 910, 917 (Wash. 1943)(quoting Words & Phrases);
quoted with approval in Brown v. Snohomish County Physicians Corp., 845 P.2d 334, 338 (Wash. 1993);
- Safeway Stores v. Retail Clerks International Ass'n, 261 P.2d 721, 726 (Calif. 1953)(citing Story's Contracts);
cited in the landmark case Peterman v. International Brotherhood of Teamsters, 344 P.2d 25, 27 (Cal.App. 1959);
quoted with approval in Berube v. Fashion Center, 771 P.2d 1033, 1042 (Utah 1989);
quoted with approval in Coman v. Thomas Mfg. Co., 381 S.E.2d 445, 447, n.2 (N.C. 1989);
quoted with approval in Green v. Ralee Engineering Co., 960 P.2d 1046, 1052 (Calif. 1998);
- Md.-National Capitol Park & Planning Commission v. Washington National Arena, 386 A.2d 1216, 1228 (Maryl. 1978)(citing Egerton);
quoted with approval in Adler v. American Standard Corp., 432 A.2d 464, 471-472 (Maryl. 1981);
- Parnar v. Americana Hotels, Inc., 652 P.2d 625, 631, n.13 (Hawaii 1982);
- Boyle v. Vista Eyewear, Inc., 700 S.W.2d 859, 871 (Mo.App. 1985)
quoted in Gantt v. Sentry Ins., 824 P.2d 680, 685 (Calif. 1992);
- Harper v. Healthsource, 674 A.2d 962, 965 (N.H. 1996).
Taken literally, the rule in Egerton can be used to void any contract
that a judge considers to be either "injurious to the public,
or against the public good". That is a very broad power, as shown
by the following quotation from a case in New Jersey:
- Whatever tends to injustice or oppression, restraint of liberty,
restraint of legal right; whatever tends to the obstruction of
justice, a violation of a statute, or the obstruction or perversion of
the administration of the law; whatever tends to interfere with or
control the administration of the law, as to executive, legislative,
or other official action, whenever embodied in, and made the subject
of, a contract, the contract is against public policy, and therefore
void, and not susceptible of enforcement.
- Brooks v. Cooper, 26 A. 978, 981 (N.J. 1893).
quoted with approval in Bron v. Weintraub, 199 A.2d 625, 628-29 (N.J. 1964).
In practice, judges in most states only consider
public policy that has been explicitly recognized in a narrow
range of sources, as explained in the following section.
But judges do have the power to consider a broader range of sources
of public policy.
sources of public policy
In the majority of states, judges have declared that public policy is
only found in the constitution, statutes,
and sometimes governmental regulations that implement statutes,
because judges are unwilling to function as a legislature and
determine which values of citizens are worth protecting.
See, for example:
- Gantt v. Sentry Ins., 824 P.2d 680, 684, 687-688 (Calif. 1992)(public
policy exception must be "tethered to" either constitution or statute);
Green v. Ralee Engineering Co., 960 P.2d 1046 (Calif. 1999)(expanding
sources of public policy to include federal regulations intended to protect public safety);
- Parnar v. Americana Hotels, 652 P.2d 625, 630-631 (Hawaii 1982);
- Luethans v. Washington Univ., 894 S.W.2d 169, 171, n.2 (Mo. 1995);
- Wieder v. Skala, 609 N.E.2d 105, 110 (N.Y. 1992);
- Winkelman v. Beloit Memorial Hospital, 483 N.W.2d 211, 215 (Wisc. 1992)
(allowing state regulations, in addition to statutes and constitution).
In many states, the public-policy exceptions have been created
by the legislature in statute(s) that specifically
gives the ex-employee the right to sue for wrongful discharge.
In a few states,
public-policy exceptions have also been created by judges,
as part of the common law. See, for example,
- Pierce v. Ortho Pharmaceutical, 417 A.2d 505, 512 (N.J. 1980);
- Palmateer v. International Harvester Co., 421 N.E.2d 876, 878 (Ill. 1981)(Public
policy "is to be found in the state's constitution and statutes and,
when they are silent, in its judicial decisions.";
- Parnar v. Americana Hotels, 652 P.2d 625, 631 (Hawaii 1982)
("Prior judicial decisions may also establish the relevant public policy.");
- Boyle v. Vista Eyewear, Inc., 700 S.W.2d 859, 871 (Mo.App. 1985)("It finds its sources
in the state constitution; in the letter and purpose of a constitutional,
statutory or regulatory provision or scheme; in the judicial decisions
of the state and national courts; in 'the constant practice of
government officials'; and, in certain instances, in professional
codes of ethics." [citations omitted]);
- Burk v. K-Mart Corp., 770 P.2d 24, 28 (Okla. 1989).
The sources of public policy mentioned in Palmateer,
a famous wrongful discharge case in Illinois, can be traced back a long way:
- The public policy of the state or of the nation is to be found in its
Constitution and its statutes, and, when cases arise concerning
matters upon which they are silent, then in its judicial decisions and
the constant practice of the government officials. Bell v. Farwell,
176 Ill. 489, 52 N. E. 346, 42 L. R. A. 804, 68 Am. St. Rep. 194;
Harding v. American Glucose Co., 192 Ill. 551, 55 N. E. 577, 64 L.
R. A. 738, 74 Am. St. Rep. 189; Brush v. City of Carbondale, [82 N.E. 252];
Hartford Fire Ins. Co. v. Chicago, Milwaukee & St. Paul Railroad Co.,
70 Fed. 201, 17 C. C. A. 62, 30 L. R. A. 193; Vidal v. Girard's
Ex'rs, 2 How. 127, 11 L. Ed. 205; United States v. Trans-Missouri
Freight Ass'n, 166 U. S. 290, 17 Sup. Ct. 540, 41 L. Ed. 1007.
- Zeigler v. Illinois Trust & Savings Bank, 91 N.E. 1041, 1045 (Ill. 1910).
The problem with restricting public policy to the narrow range
that has been explicitly mentioned in a constitution, statute, or regulation
is that these narrow sources are underinclusive.
No list of specific bad reasons for terminating employment,
in a statute or elsewhere, can contain all of the possible
abusive, arbitrary, irrational, or wrongful reasons.
A broad interpretation of public policy might be one way
for judges to protect employees from the harshness of at-will employment,
other ways are mentioned
later in this essay.
A venerable treatise on contracts states:
- Bargains may be illegal because they are so declared by the Common Law,
are against Public Policy, or are so treated in the prevailing mores
of the community (contra bonos mores).
- 6A Arthur Linton Corbin, Corbin on Contracts, 5 (1962).
- Some judges have thought that they must look solely to constitutions
and statutes[,] and to earlier decisions interpreting and applying them[,]
as the sources from which they may determine what public policy requires.
This is far from true, even though these are the sources that are first
to be considered and that often may be conclusive. [footnote omitted]
- Id. at 15.
6. Judicial Reluctance
In the previous section of this essay,
I discussed the legal doctrine of refusing to enforce contracts
that are contrary to public policy. Despite having broad powers,
judges have chosen not to use the powers to end the doctrine of
at-will employment. Judges in many states have even been reluctant to
recognize a tort of wrongful discharge.
As a result of judicial reluctance
in the area of creating public-policy exceptions to at-will employment,
the cases cited in my essay on
Professional Ethics & Wrongful Discharge
have sporadically protected only a few employees.
Prof. Summers concluded that protection of employees from wrongful
discharge must come from the legislature, not from courts:
- ... any realistic hope for increased legal protection of employees
must look for fulfillment to legislation, for the courts have thus
far shown an unwillingness to break through their self-created
crust of legal doctrine. Legal theories rooted in torts,
contracts, and property law are readily available. ....
A few bolder judges have pointed the way, but the great majority
have lacked the courage or desire to follow.
- Clyde W. Summers, Individual Protection Against Unjust Dismissal,
62 Virginia Law Review 481, 521 (1976).
In 1983, a group of law students at Harvard Law School wrote:
- The public policy exception appears to provide employees with a
broad source of protection from unjust dismissal. In practice, however,
the public policy exception has limited only slightly the harshness
of the at-will rule.
- Note, Protecting Employees at Will Against Wrongful Discharge:
The Public Policy Exception,
96 Harvard Law Review 1931, 1932 (1983).
- In practice, however, the protection [the public policy exception]
extends to employees is minimal. The inadequacy of this protection arises
in part from the courts' limited view of the sources of public policy ....
- Id. at 1937.
This view seems to still be true in July 2000.
A prominent professor of law, who specializes in employer-employee matters,
concluded in 1988 that a satisfactory solution should come from the legislature.
- Except perhaps in the most egregious circumstances, therefore,
common-law principles of public policy provide no guaranteed recourse
for the wronged worker.
- Theodore J. St. Antoine, A Seed Germinates: Unjust Discharge
Reform Heads Toward Full Flower, 67 Nebraska Law Review 56, 60 (1988).
California
It is worth explicitly considering why, despite the
well-founded criticism of at-will employment, the doctrine of at-will
employment continues to protect employers who terminate employees
for morally or ethically repugnant reasons.
The major problem seems to be refusal of judges to create broad
public-policy exceptions to at-will employment.
I present quotations from opinions of the state supreme courts of
the two states with the largest population in the USA (i.e., California
and New York), California first:
- Second, it is generally agreed that "public policy" as a concept is
notoriously resistant to precise definition, and that courts should
venture into this area, if at all, with great care and due deference
to the judgment of the legislative branch, "lest they mistake their
own predilections for public policy which deserves recognition at
law." [citation omitted] ....
- These wise caveats against judicial policymaking are unnecessary
if one recognizes that courts in wrongful discharge actions may not
declare public policy without a basis in either the constitution or
statutory provisions. A public policy exception carefully tethered to
fundamental policies that are delineated in constitutional or
statutory provisions strikes the proper balance among the interests of
employers, employees and the public. The employer is bound, at a
minimum, to know the fundamental public policies of the state and
nation as expressed in their constitutions and statutes; so limited,
the public policy exception presents no impediment to employers that
operate within the bounds of law. Employees are protected against
employer actions that contravene fundamental state policy. And
society's interests are served through a more stable job market, in
which its most important policies are safeguarded.
- Gantt v. Sentry Ins., 824 P.2d 680, 687-688 (Calif. 1992)
- A later case in the California Supreme Court reiterated this view.
- Gantt's limitation on public policy sources (that they must be
supported by either constitutional or statutory provisions) grew from
our belief that " 'public policy' as a concept is notoriously
resistant to precise definition, and that courts should venture into
this area, if at all, with great care and due deference to the
judgment of the legislative branch" in order to avoid judicial
policymaking. [citing Gantt, supra]
- Green v. Ralee Engineering Co., 960 P.2d 1046, 1052 (Calif. 1999)
I certainly do not "agree that 'public policy' as a concept is
notoriously resistant to precise definition".
A simple test for public policy is to ask whether society would be
better served if employment could not be terminated
because the employee (for example):
- reported to a law enforcement agency his/her reasonable suspicion of a crime,
- refused to endanger the health or safety of other people,
- upheld a principle of professional ethics, in spite of his/her
manager's order to engage in unethical conduct,
- reports misfeasance or incompetence by a government agency, or
- allowed a manager to interfere with the professional opinion
of a licensed professional, when the manager was not
qualified for such a license.
As for the argument in Gantt that confining public-policy
exceptions to the constitution and statutes will give employers notice
of proscribed conduct the concept of advance notice
(i.e., no ex post facto law)
is derived from criminal law, not tort law.
In tort cases (e.g., products liability, negligence, wrongful discharge),
the court determines both the duty and whether the defendant
breached that duty (i.e., engaged in wrongful conduct).
See my essay on the differences between
civil and criminal law.
Further, as noted in the dissenting opinion to Gantt:
- This creates the impression that only statutes or constitutional
provisions provide employers with adequate notice of what is forbidden
by public policy, and that it is somehow unfair for employers to be
bound by other legitimate sources of public policy. This is wrong.
Other legitimate sources of public policy, such as judicial decisions
or codes of professional ethics, for instance, are readily available
to employers or their counsel and thus provide no less "notice" than
do statutes or constitutional provisions.
- Gantt, 824 P.2d at 693 (Kennard, J., dissenting, with whom
Justice Mosk concurs).
New York State
California is not the only state with a timid judiciary.
The second largest state in the USA, New York State, has
equally reluctant judges.
In a case in New York State, a discharged employee was found
to have stated a claim for breach of contract. Justice Wachtler,
joined by another justice, wrote a dissenting opinion:
- For almost a century, the common law of New York has provided that
absent some form of contractual agreement between an employee and
employer establishing a durational period, the employment is presumed
terminable at the will of either party and the employee states no
cause of action or breach of contract by alleging that he or she has
been discharged (Martin v. New York Life Ins. Co., 148 N.Y. 117, 42
N.E. 416 [N.Y. 1895]).
- Weiner v. McGraw-Hill, Inc., 443 N.E.2d 441, 446 (N.Y. 1982) (Wachtler, J., dissenting).
- In view of today's record high unemployment, and considering that
between 1975 and 1980 approximately 60,000 industry-related jobs in
New York were lost as a direct result of business migration, I cannot
join the majority's bestowal of contractual rights based upon
documents which make it all too clear that no contractual rights were
ever intended.
- Id. at 447 (Wachtler, J., dissenting).
Wachtler's first paragraph shows that his respect for blindly following precedent
that was established 87 years earlier in Martin.
As was argued at the beginning of this essay, the doctrine of at-will
employment in Martin was shown to be bad law,
which followed a mistake in Wood's treatise.
Even after scholarly criticism by authors of law review articles
clearly revealed the mistake in Martin, the judges in
New York State continued to follow the law established in Martin.
It is not just a problem with New York State, as judges in other
states have also followed old cases that are based on Wood's mistake.
It is scary that judges have a greater respect for blindly following
precedent than desire to make a fair decision.
The second paragraph that is quoted above from Wachtler's dissent
is even more alarming: Wachtler shows a concern for possibly offending
employers and causing a "migration" of businesses from New York State.
Wachtler's deference to businesses and to the economic policy of
New York State is inappropriate.
A judge should base his/her decision on the controversy before the
court, without regard to "partisan interests, public clamor, or
fear of criticism." American Bar Association Model Code of Judicial
Conduct, Canon 2(B)(2) (1990).
There is no doubt that many judges and legislators fear a
reaction from businesses if at-will employment law is ended.
However, if all states in the USA changed their law at about the
same time, there would be no refuge in the USA for employers
who wanted to abuse their employees, hence, there would be
no migration.
One year later, the highest court in New York State heard another
wrongful discharge case. The facts of this following case are simple:
a employee was terminated in 1980 at age 59 years, after 23 years of
service. The employee alleged that he was fired because of his age and because
he disclosed accounting improprieties to top management.
The issue before the court was whether plaintiff's claim for
wrongful discharge was a valid cause of action in New York State.
The court said:
- ... plaintiff urges
that the time has come when the courts of New York should recognize
the tort of abusive or wrongful discharge of an at-will employee. To
do so would alter our long-settled rule that where an employment is
for an indefinite term it is presumed to be a hiring at will which may
be freely terminated by either party at any time for any reason or
even for no reason. [two citations omitted]
Plaintiff argues that a trend has emerged in the courts of other
States to temper what is perceived as the unfairness of the
traditional rule by allowing a cause of action in tort to redress
abusive discharges. He accurately points out that this tort has
elsewhere been recognized to hold employers liable for dismissal of
employees in retaliation for employee conduct that is protected by
public policy. Thus, the abusive discharge doctrine has been applied
to impose liability on employers where employees have been discharged
for disclosing illegal activities on the part of their employers,
where employees have been terminated due to their service on jury
duty, and where employees have been dismissed because they have filed
workers' compensation claims. [six citations omitted]
Plaintiff would have this court adopt this emerging view. We decline
his invitation, being of the opinion that such a significant change in
our law is best left to the Legislature.
Those jurisdictions that have modified the traditional
at-will rule appear to have been motivated by conclusions that the
freedom of contract underpinnings of the rule have become outdated,
that individual employees in the modern work force do not have the
bargaining power to negotiate security for the jobs on which they have
grown to rely, and that the rule yields harsh results for those
employees who do not enjoy the benefits of express contractual
limitations on the power of dismissal. Whether these conclusions are
supportable or whether for other compelling reasons employers should,
as a matter of policy, be held liable to at-will employees discharged
in circumstances for which no liability has existed at common law, are
issues better left to resolution at the hands of the Legislature. In
addition to the fundamental question whether such liability should be
recognized in New York, of no less practical importance is the
definition of its configuration if it is to be recognized.
Both of these aspects of the issue, involving perception and
declaration of relevant public policy (the underlying determinative
consideration with respect to tort liability in general,
[two citations omitted] are best and more appropriately
explored and resolved by the legislative branch of our government.
The Legislature has infinitely greater resources and procedural means
to discern the public will, to examine the variety of pertinent
considerations, to elicit the views of the various segments of the
community that would be directly affected and in any event critically
interested, and to investigate and anticipate the impact of imposition
of such liability. Standards should doubtless be established
applicable to the multifarious types of employment and the various
circumstances of discharge. If the rule of nonliability for
termination of at-will employment is to be tempered, it should be
accomplished through a principled statutory scheme, adopted after
opportunity for public ventilation, rather than in consequence of
judicial resolution of the partisan arguments of individual
adversarial litigants.
Additionally, if the rights and obligations under a
relationship forged, perhaps some time ago, between employer and
employee in reliance on existing legal principles are to be
significantly altered, a fitting accommodation of the competing
interests to be affected may well dictate that any change should be
given prospective effect only, or at least so the Legislature might
conclude.
For all the reasons stated, we conclude that recognition in
New York State of tort liability for what has become known as abusive
or wrongful discharge should await legislative action.
[footnote omitted]
- Murphy v. American Home Products, 448 N.E.2d 86, 89-90
(N.Y. 1983).
The above words from Murphy are not an aberration
by the highest court in New York State. Nine years later, the same court again
expressed the same view: if the tort of wrongful discharge
were to exist in New York State, then this tort
would need to be created by the legislature, because the judges were
unwilling to add it to the common law of New York State,
despite the fact it was the common law in most other states of the USA.
Wieder v. Skala, 609 N.E.2d 105, 110 (N.Y. 1992).
The concern expressed by the New York Court of Appeals in Murphy
seems strange. The Court is correct that
"standards ... applicable to the multifarious types of employment"
is something that a legislature might properly consider. But such
considerations are not part of the common law, which
evolves one case at a time, each case being decided on its specific facts.
I read the court's words in Murphy as an excuse, not
a principled reason. Indeed, many of the alleged reasons in Murphy
are conclusory assertions, without any citations to authority.
Later in Murphy, the following sentence appears:
- We are of the view that this aggregate of rights and obligations
should not be approached piecemeal but should be considered in its
totality and then resolved by the Legislature.
- Murphy, 448 N.E.2d at 92, n.2.
I'm sorry, but waiting for the perfect resolution means we will wait
forever. It is the nature of the common law that judges approach one
case at a time, piecemeal. This is not a criticism of the
common law, but an essential way that common law differs
from statutes. Looking backwards at dozens of cases, one can abstract
general principles from many cases, which is how the broad view
of the common law is created.
A legislature can take a broad view in a few days or weeks of deliberations,
but that does not mean that statutes are better solutions
to society's problems than common law.
Both the common law and statutes are valid ways
of solving disputes and making law serve the needs of society.
In a more recent case in New York State, which is discussed in my essay on
Professional Ethics & Wrongful Discharge,
the New York Court of Appeals refused to recognize plaintiff's
potential cause of action for abusive discharge, because that
court insisted that only the state legislature could create
public-policy exceptions to at-will employment and the legislature
had not done that.
Wieder v. Skala, 609 N.E.2d 105, 110 (N.Y. 1992).
Incidentally, the court in Wieder admits that
"the arguments are persuasive and the circumstances here compelling"
for creating such a public-policy exception to at-will employment.
This is one of the qualities of judges that most
exasperates me. As a research scientist (I earned a Ph.D. in
physics in 1977 and I had 18 years of post-doctoral research experience
before I enrolled in law school.), I would be a fool
to follow a rule in science or engineering that did not make sense.
But judges routinely follow rules that are either nonsensical or antiquated,
instead of doing what needs to be done to effectuate justice and fair play.
Maybe the legislature should establish public policy, but the fact
is that the legislature has not done that, despite the need.
So, courts should do what needs to be done to protect individuals
who have been wronged.
Moreover, the court's creation of an implied-in-fact contract, which
the employer breached by terminating Wieder, was an artifical
solution to the problem. A much more direct and satisfying
solution would be to declare that Wieder's employment had been
wrongfully terminated, and then award Wieder both compensatory and
punitive damages. But, to find wrongful termination, the court would
first need to find a public-policy exception to at-will employment,
and the court was not willing to create public policy.
But isn't it obvious that requiring an attorney to violate
the Rules of Professional Responsibility is contrary to public policy?
If it is not obvious, then let's change the Rules of Professional
Responsibility, to make the Rules accurately reflect good public policy!
In a case in which the Massachusetts Supreme Court refused to make
a public-policy exception to at-will employment, Chief Justice Liacos
gently chided his colleagues in a dissenting opinion:
- I disagree with the court's conclusion that a hospital employer
violates no public policy when it fires an employee for alerting
supervisors to matters detracting from good patient care. The court
has construed far too narrowly the public policy exception to the doctrine
of employment at will. Moreover, in demanding a statutory basis for
public policy, the court has relinquished to the Legislature its role
in shaping the common law. I dissent.
- Wright v. Shriners Hospital, 589 N.E.2d 1241, 1246 (Mass. 1992) (Liacos, J., dissenting).
- It is a proper role of the courts to construe the boundaries of
"public policy" and thereby develop common law remedies available to
at-will employees who are terminated. [citation deleted]
I find it disturbing, therefore, that the court would relinquish
this role, by requiring a statutory basis for public policy.
- Id. at 1246-47 (Liacos, J., dissenting).
proper role of common law
In the USA, the three branches of government (i.e., executive,
legislative, and judicial) are equal. One of the good features
of these three equal branches is that each branch checks and balances
the other two branches.
Judges should defer to legislation that has a rational basis,
unless the statute is unconstitutional.
However, on topics where the legislature has been silent, judges
are free to create and revise the common law. Not just "free" to
create and revise the common law it is the responsibility of judges
to participate in the evolution of the common law.
In particular, judges created the legal doctrine of at-will employment,
and judges are free to abolish or modify the doctrine of at-will employment.
If the legislature believes that the common law is mistaken, the
legislature as part of the system of checks and balances
can pass a statute that, in effect, overrules the common law.
Legislatures which are not only popularly elected but also dependent
on businesses, people, and organizations for campaign contributions
are notoriously reluctant to address a political "hot potato"
like ending at-will employment, which would offend businesses.
As mentioned above, ending at-will employment
might also offend the executives of labor unions,
by removing one of the reasons for the existence of labor unions.
Hence, legislators might be happy if judges would reform the common law,
and correct the problem without involving the legislators.
Judicial reluctance to alter the absolute nature of at-will employment
has restricted the availability of judicial remedies for
wrongful discharge in the USA,
with the consequence that prudent employees will follow the three monkey rule
(i.e., hear no evil, see no evil, speak no evil)
in order to avoid termination of their employment.
The lack of protection for whistleblowers has resulted in damage
to American society, in which wrongs and even illegal conduct
are concealed. Just as bad, unjust or unethical decisions
by management are legally protected.
As a result of judicial reluctance in this area, even in states which
do permit the tort of wrongful discharge of at-will employees for public
policy reasons, the tort offers little or no protection to most employees,
because the public-policy exception is so narrowly construed by judges.
As mentioned earlier
legislatures are unlikely to end at-will employment.
And, as mentioned here, judges have been reluctant to make an
expansive public policy exception and judges have absolutely
refused to end the doctrine of at-will employment.
So, we have a stalemate.
my proposal
The quick way to stop the propagation of defective common law is
for legislatures to pass a statute.
In my essay on
Professional Ethics & Wrongful Discharge,
I made a proposal for a limited statute that would protect a learned professional
who acts ethically and lawfully, in defiance of their employer's wishes.
It is not difficult to draft a statute that entirely abolishes at-will
employment. The problem is obtaining consensus and getting
the statute enacted into law.
Legislatures could improve the current situation in one of two ways:
- abolish at-will employment
A statute should say that an employer can terminate employment only for a
"good cause", as determined by impartial arbitrators,
a judge, or a jury.
(Such a statute should require "good cause" for termination of
employment, because specifically listing protected activities that
are not grounds for termination of employment risks being
underinclusive.) or,
- make an explicit finding of public policy
The legislature could enact a statute that says "It is the public
policy of this state that employment not be terminated for either
abusive, arbitrary, irrational, or wrongful reason(s).
Judges hearing wrongful discharge cases shall consider this public
policy."
Several commentators have noted that there has been abundant
experience in the USA with using arbitration to decide wrongful discharge
claims presented by members of labor unions.
- Clyde W. Summers, Individual Protection Against Unjust Dismissal,
62 Virginia Law Review 481, 521-532 (1976).
- Theodore J. St. Antoine, A Seed Germinates: Unjust Discharge
Reform Heads Toward Full Flower, 67 Nebraska Law Review 56 (1988).
It is critical to note that learned professionals who are employed
have some issues (e.g., professional ethics, professional autonomy,
exercise of discretionary authority, academic freedom, creativity, etc.)
that have not been encountered in situations involving
laborers in labor unions. If arbitration is to be
used for wrongful discharge cases involving learned professionals,
the nonattorney member(s) of the arbitration panel should include
learned professionals, not laborers, and
not managers of manual laborers.
Contract Law
Employment contracts are a species of contracts.
As such, breach of employment contracts should be
interpreted according to conventional rules of contract law.
However, courts routinely grant the employer's motion for summary
judgment in wrongful discharge cases,
because the doctrine of at-will employment says that
an employer can terminate an employee at any time and
for any reason (even a "morally repugnant" reason),
hence, as a matter of law, it is not possible for an employee to
be discharged for an unacceptable reason.
The following section of this essays shows that the courts'
interpretation of at-will employment contracts is inconsistent
with conventional contract law, which is yet another reason to
change the way courts treat at-will employment.
I am not the first attorney to recognize that courts do not apply
conventional contract law to cases involving an alleged breach of an
employment contract. For example, see:
Note, Protecting At Will Employees Against Wrongful Discharge:
The Duty to Terminate Only in Good Faith,
93 Harvard Law Review 1816, 1825-1839 (1980)
(suggesting that courts use the duty of good faith in contract law
to protect employees from wrongful discharge);
J. Peter Shapiro and James F. Tune, Note, Implied Contract Rights
to Job Security, 26 Stanford Law Review 335, 354-356 (1973-74)
(discussing, in passing, detrimental reliance by employee);
Lawrence E. Blades, Employment at Will v.
Individual Freedom: On Limiting the Abusive Exercise of Employer Power,
67 Columbia Law Rev. 1404, 1420-1421 (1967) (tersely mentioning
adhesion contracts).
There are two court cases in which the employee prevailed and in which
conventional contract law was applied to an at-will employment contract.
The New Hampshire Supreme Court held, in
Monge v. Beebe Rubber Co., 316 A.2d 549, 551 (N.H. 1974),
that contract law prevents terminations of employments that are
"motivated by bad faith or malice or based on retaliation",
but six years later this same Court retreated from that broad view.
Howard v. Dorr Woolen Co., 414 A.2d 1273, 1274 (N.H. 1980)
("We construe Monge to apply only to a situation where an
employee is discharged because he performed an act that public policy
would encourage, or refused to do that which public policy would
condemn.").
A Court of Appeal in California held, in
Cleary v. American Airlines, 168 Cal.Rptr. 722 (Calif.App. 1980),
that an at-will employee's 18 years of satisfactory service,
together with the employer's policy,
estopped the employer from discharging the employee without "good cause".
Cleary is often ignored, perhaps because the California Supreme Court,
in Foley v. Interactive Data, 765 P.2d 373, 401, n.42 (Calif. 1988),
disapproved of Cleary providing a tort remedy for breach of contract.
The opinion in Cleary is unusual in that it considers
conventional contract law (e.g., implied-in-law covenant of good faith
and fair dealing, common law of the job) in an at-will employment contract.
conventional contract law
The doctrine of at-will employment overrides
basic concepts in well-established contract law, such as:
- refusing to enforce an agreement that is contrary to public policy
Restatement Second of Contracts §§ 178-179 (1981).
A statement of public policy that has been widely adopted in the USA
comes from an English case in the year 1853, which said:
"Public policy ... is that principle of the law which holds that no subject
can lawfully do that which has a tendency to be injurious to the
public, or against the public good, which may be termed, as it
sometimes has been, the policy of the law, or public policy in
relation to the administration of the law."
Egerton v. Brownlow, 4 H.L.Cas. 1, 196 (1853)(Lord Truro, J.).
(A long list of citations to cases in the USA that accept
this statement is found above.)
- applying the requirement of "good faith and fair dealing"
Restatement Second of Contracts § 205 (1981).
- refusing to enforce an unconscionable term
Restatement Second of Contracts § 208 (1981).
- giving effect to reasonable expectations
Restatement Second of Contracts §§ 203(a), 204, 211(3),
and comment e to § 211(1981).
- if a term is ambiguous, choosing a reasonable meaning that
operates against the drafter of the contract.
Restatement Second of Contracts § 206 (1981).
And, as discussed above,
when judges did consider public policy, judges interpreted
public policy very narrowly basing public policy only on
constitution, statutes, and sometimes government regulations.
Those limited sources of public policy are too narrow to protect employees
from most cases of wrongful discharge.
adhesion contracts
A developing concept in contract law is the notion of adhesion contracts,
which have the following characteristics:
- inequality of bargaining power between the parties to the contract and
- weaker party is offered a Hobson's Choice: either accept all of
the terms in a standard form contract prepared by the stronger party or
go elsewhere.
In an adhesion contract, there is no opportunity for bargaining,
which is a basic element of contract law.
Hence, it is illusory to speak of either a "negotiated bargain" or
"freedom of contract" in the context of adhesion contracts.
The concept of adhesion contracts comes from France, and was introduced
into the USA by Patterson, The Delivery of a Life-Insurance Policy,
33 Harvard Law Review 198, 222, n.106 (1919).
The concept was further described
in a frequently cited paper by Kessler, Contracts of Adhesion:
Some Thoughts About Freedom of Contract,
43 Columbia Law Review 629 (1943).
Around the middle of the Twentieth Century, the term "adhesion contract" began
to be used by courts in the USA that examined insurance policies.
See, e.g.,
Bekken v. Equitable Life Assur. Soc., 293 N.W. 200, 212 (N.Dak. 1940);
Farkas v. New York Fire Ins. Co., 76 A.2d 895 (N.J. 1950);
Steven v. Fidelity and Casualty Co., 377 P.2d 284 (Calif. 1962).
Insurance companies are heavily regulated by the state
A state executive examines and approves the form contracts used by
insurance companies in each state, to protect consumers.
In other common situations involving adhesion contracts (e.g.,
transportation, electric power, water, telephone, etc.)
there is also regulation by government agencies to protect consumers.
Terms of hotel/motel contracts with "guests" are generally specified
in state statutes, again to protect the consumer.
However, employment contracts for at-will employees have generally
escaped scrutiny by the government, except for a few statutory exceptions for
racial discrimination, age discrimination, denial of pension benefits, etc.
Once courts determine that there is an adhesion contract, the courts
generally scrutinize the terms of the contract, instead of accepting
the contract as written. Courts sometimes strike terms in adhesion contracts
on the above-mentioned grounds of being contrary to public policy,
bad faith/unfair dealing, refusing to enforce an unconscionable term,
or giving effect to the reasonable expectations of the weaker party.
Restatement Second of Contracts
comments c and e to § 211 (1981).
The concept of adhesion contracts is not a
new rule of contract law, but a label that signals the need for a
higher degree of judicial scrutiny.
The U.S. Congress made findings of fact in a labor statute
that noted "the inequality of bargaining power between employees
who do not possess full freedom of association or actual liberty
of contract and employers ...." 29 USC § 151.
This official recognition of inequality of bargaining power
should also be applicable to nonunion employees.
Occasionally, one finds an employment contract case where the judge
recognized, in passing, that the employment contract is an
adhesion contract. Most of these cases concern either
(1) clauses in employment contracts to use arbitration or
(2) clauses in employment contracts that contain a covenant
not to compete after the employment contract is ended.
For example:
- Neal v. State Farm Ins. Co., 10 Cal.Rptr. 781, 784 (Calif.App. 1961);
- Hopfauf v. Bismarck Tire Center, Inc., 234 N.W.2d 224, 225 (N.Dak. 1975);
- Vasquez v. Glassboro Service Ass'n, Inc., 415 A.2d 1156, 1164-1166 (N.J. 1980);
- Landro v. Glendenning Motorways, Inc., 625 F.2d 1344, 1354 (8thCir. 1980);
- Graham v. Scissor-Tail, Inc., 623 P.2d 165, 170-173, 175-177 (Calif. 1981);
- Maynard v. Bd. Edu. of County of Wayne, 357 S.E.2d 246, 251 (W.V. 1987);
- Stirlen v. Supercuts, Inc., 60 Cal.Rptr.2d 138, 145-147 (Calif.App. 1997);
- Herweyer v. Clark Highway Services, Inc., 564 N.W.2d 857, 860 (Mich. 1997);
- Armendariz v. Foundation Healthcare, 80 Cal.Rptr.2d 255, 263-266 (Cal.App. 1998),
review granted, 973 P.2d 51 (1999);
- Potter v. Hawaii Newspaper Agency, 974 P.2d 51, 64 (Hawaii 1999).
In nearly all employment contract cases, and in nearly all wrongful discharge
cases that I have read, the phrase "adhesion contract" does not
appear in the reported opinion, as if employment contracts are
somehow exempt from conventional contract law. Judges do not mention
"adhesion contract", even when they find a public-policy exception
to at-will employment.
I did a search of all the reported cases from state courts in the USA,
in the WESTLAW database on 29 July 2000 that mention
"at-will", "employ!", "adhesion", and "contract" all in the same paragraph.
I found only four cases involving an employment
contract. The most interesting of these cases was
Jennings v. Minco Technol. Labs, 765 S.W.2d 497 (Tex.App. 1989),
which involved an at-will employment contract modified by the employer
to include mandatory urine testing for use of illegal drugs.
Jennings argued violation of her privacy rights by such testing.
Jennings not only lost her case, but was also
ordered to reimburse her employer for $ 45,000 in legal fees.
Adding insult to injury, the court in Jennings just barely mentioned
the adhesion contract argument of Jenning's attorney,
without really considering the concept of the employment contract
as a contract of adhesion:
- ... [Jennings] views the "at will doctrine" quite differently: it is a
monster having a lawful face and a wicked heart. Jennings argues,
without attempting to establish, that modern conditions enable
employers generally to impose, through contracts of adhesion, the
"at will" employment relation. Having then the legal right to
terminate the relation "for any or no reason," employers use the right
to coerce employee submission to degrading work conditions, such as
the invasion of privacy feared by Jennings.
- Jennings, 765 S.W.2d at 502, n.3.
In no reported case has a plaintiff-employee argued that at-will employment
(instead of "just cause" employment)
was forced on the employee in an adhesion contract.
I would expect courts to reject this argument, because
the doctrine of at-will employment for reasons not explained
by courts overrides conventional contract law.
(It is particularly ludicrous when judges often write several pages
of excruciating detail to explain a well-known rule of law in the
context of commercial contracts, with citations to many cases.
But these same judges zip through an at-will employment contract case
in just a few sentences, skipping analytical steps, omitting legal
reasoning, ignoring the bogus origin of at-will employment,
failing to apply rules of conventional contract law, ....)
However, a courageous state supreme court that is willing to change the common law
might accept the argument that, given that employment contracts are
adhesion contracts, freedom of an employer to dismiss an employee
for either a bad reason or no reason is either
unconscionable, bad faith, or contrary to the reasonable
expectations of the employee, and therefore a breach of the employment contract.
I personally prefer to keep wrongful discharge as a tort action,
but, one way or another, we must end the doctrine of at-will employment.
The real point here is that the courts' rigid application of the doctrine
of at-will employment is inconsistent with conventional contract law.
Conclusion
The doctrine of at-will employment, in which an employer can
terminate employment at any time and for any reason,
was invented by Horace Wood in his legal treatise that
was published in 1877. Despite the fact that he offered no reason
for his rule, and that none of his four citations supported
his rule, courts in the USA rapidly adopted Wood's Rule
as the common law.
The Tennessee Supreme Court in 1884 declared that any reason
included a "morally wrong" reason, a statement that is still
the law in most of the USA today.
In my opinion, the doctrine of at-will employment was a major mistake,
which continues to be propagated by judges with more respect for
stare decisis, than either respect for
fairness or desire to protect weaker parties from abuse.
Several commentators have expressed
reasons why legislatures
are unlikely to end the doctrine of at-will employment. And judges are
reluctant to make broad
public-policy exceptions to the doctrine of at-will employment.
Thus, the law in the USA is currently in a stalemate.
I hope this essay encourages people in the USA to write their
state legislators and demand a statute that protects employees from
arbitrary, abusive, or wrongful termination of employment.
Given:
- the lack of genuine bargaining on each individual employment contract,
- the unreasonably harsh rule of at-will employment
(i.e., allowing the employer to terminate employment for
"morally repugnant" reasons, such as the employee's
insistence on both ethical and lawful behavior, or the employer's
invasion into the private life of the employee),
- the need to protect the weaker party (i.e., employee) from abuse
by a stronger party (i.e., employer),
- the difficulty of professionals in finding another job in their
narrow specialty (or looking at the issue from the other direction:
employers generally only seek new senior employees who already have
experience in a particular narrow area),
- the immense importance of employment to people in the USA, and
- the potential for coercion by an employer to cause an employee
to behave in an unlawful or unethical way, or
to behave in a way that harms the public interest,
it is appropriate for a statute to regulate employment contracts
to fairly protect the employees from
abusive, arbitrary, or irrational dismissal from employment.
this document is at http://www.rbs2.com/atwill.htm
revised 30 Sep 2000
return to my homepage