Wednesday, February 17, 2010

Arnow-Richman on Reforming At-Will Employment

Arnow-richman-full Rachel Arnow-Richman (Denver) has just posted on SSRN her article Just Notice: Re-Reforming Employment At-Will for the 21st Century.  Here's the abstract:

This Article proposes a fundamental shift in the movement to reform employment termination law. For forty years, there has been a near consensus among employee advocates and worklaw scholars that the current doctrine of employment at will should be abandoned in favor of a rule requiring just cause for termination. This Article contends that such calls are misguided, not (as defenders of the current regime have argued) because it grants workers too much protection vis-à-vis management, but because it grants them too little.

A just cause rule provides only a weak cause of action to a narrow subset of workers – those able to prove their firing was for purely arbitrary reasons. It fails to account for the justifiable, but still devastating, termination of workers for economic reasons, by far the most common reason for job loss today. In this way, the rule is not only inadequate, but anachronistic. Just cause protection is consistent with a mid-twentieth century view of the social contract of employment, which anticipates a long-term, symbiotic relationship between employer and employee in an economy dependent on internal labor markets. Under such a system, the just cause rule gave legal force to parties’ social contract of employment.

In contrast, today’s employers operate principally in an external labor market in which implicit promises of long-term employment have been replaced by implicit promises of long-term employability. Both companies and workers anticipate significant job turnover both in times of economic turbulence, such as the current downturn, in which employers are forced to shed numerous workers due to financial hardship, as well as during economic bubbles, in which companies lay off workers and reorganize for strategic reasons. Given these practices and expectations, the goal of termination law ought not to be protecting individual jobs but rather assisting workers in the inevitable situation of job loss.

To that end, the Article proposes the adoption of a universal “pay-or-play” system of employment termination. Absent serious misconduct, employers would be required to provide advance notice of termination or offer wages and benefits for the duration of the notice period. In contrast to just cause proposals, “pay-or-play” recognizes the necessity and value of employment termination. Rather than encouraging parties to maintain status quo relationships, “pay-or-play” seeks to facilitate transition. It affirms managerial discretion in hiring and firing by eliminating fact intensive inquiries into employer motive. At the same time, it makes real employers’ implicit promise of employability by granting workers a window of income security in which they can comfortably search for the next opportunity.


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Two comments:

1. Under "for cause" job security, the employer has to prove it had a good reason. The terminated employee does not have to prove that the employer lacked good cause.

2. The system proposed is essentially the Canadian system. Canadian law has, however, made it complicated by having statutory notice requirements but with a common law overlay, requiring the employer to determine a reasonable period, given all the circumstances. And, of course, that leads to litigation challenging the determination made by the employer.

Posted by: Mike Zimmer | Feb 17, 2010 1:24:36 PM

There is no way I could sit in chair the way Rachel is in this picture!

Posted by: Paul | Feb 17, 2010 3:28:01 PM

I see no reason not to make the suggested change. In fact, one could go further and argue that no layoffs for economic reasons should be allowed until the company itself is required to close its doors, which it would not be allowed by law to do so long as the owner retained any substance at all. It's only fair.

Probably need to wait until we get that wall built before we pass it, though.

Posted by: Uno Hu | Feb 26, 2010 9:14:38 AM

Prof. Arnow-Richman essentially recognizes the narrowness of the traditional American perspective on termination of employment in that most scholars have challenged prevailing orthodoxy only on terminations related to cause, but have offered no arguments challenging the prevailing views on "redundancies" (the British term for being terminated because one is superfluous to the needs of the business, rather than for anything having to do with one's performance).

In contrast, ILO Convention No. 158, Termination of Employment at the Initiative of the Employer (1982) covers both types of termination, and lists procedures to follow for each. Shortly after Convention No. 158 was adopted, I wrote an article suggesting how the U.S. could comply. See Bellace, Janice R., A Right of Fair Dismissal: Enforcing a Statutory Guarantee, 16 U.Mich.J.Law Reform 207 (1983).

Posted by: Janice Bellace | Feb 26, 2010 10:13:43 AM

Wow. Umm, what she suggests isn't, well, possible. If a company is at risk of going out of business if it continues employment, it should still be forced to continue that employment? Really? Have you never studied math?

Posted by: Dan | Feb 26, 2010 9:55:37 PM

When employees have to show a just cause for leaving a job then it might be fair to consider that employers have to show just cause for firing an employee. Freedom is a two way street.

Reading ill informed, illogical and idiotic articles like the above show that you can be both articluate and stupid at the same time.

Posted by: scattergood | Mar 3, 2010 6:24:08 AM

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