Federal Court Structure Significantly Influences Development of State Employment Law

Robert C. Bird (left) & Donald J. Smythe (right), The Role of Legal Precedents in the Diffusion of New Employment Doctrines, 1978-99.

The article evaluates the role of legal precedents in the diffusion of three exceptions to the employment at-will rule: the implied contract exception, the public policy exception, and the good faith exception.  The article finds that (1) precedents by other state courts within the same federal district were most influential on diffusion of the doctrines to state courts; (2) precedents by other state courts within the same federal district adopting the implied contract exception seemed to influence the adoption of the other exceptions to employment at-will, but precedents by other state courts within the same federal district adopting the other exceptions did not appear to influence the adoption of the implied contract exception; and (3) labor market conditions had no statistically significant effects on the diffusion of any of the exceptions.

The authors found it significant and surprising that precedents by other state courts within the same federal district seemed to be most influential in the diffusion process.  The federal districts therefore seemed to define an important reference group for the state courts -- i.e., decisions by other state courts within the same federal district seemed to be more influential than decisions by other state courts in neighboring states or the same West reporting region or the same census region.

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