Sources of regulation
The United States is one of the
few countries in the world that still embraces the employment at-will concept.
Although, as elsewhere, a pure practice of this doctrine has been eroded
somewhat by jurisprudence, it is still predominant, particularly when one
compares it to employment security law in other Western and developed countries.
Consequently, with the exceptions of the States of Arizona and Montana,[1] the Commonwealth of Puerto Rico, and the
non-metropolitan territory of the US Virgin Islands, as yet there is no legislation
specifically focused on employment termination.
Notwithstanding the absence of specific legislation on termination of employment,
an attempt has been made to provide legislative guidelines for dismissals
under a model act. In 1991, the National Conference of Commissioners of Uniform
State Laws adopted a Model Employment Termination Act (META) which would
protect workers employed on average 20 hours a week for at least 26 weeks
in the preceding year if they are dismissed without good cause by an employer
of at least five persons. The model legislation, which has not been enacted
into law, is similar in scope and intention to the ILO
Termination of Employment Convention, 1982 (No. 158). Remedies would
include reinstatement and back pay or severance pay, plus reasonable attorney
fees and costs. [2] The META envisages eliminating the common law
claims and remedies previously available to the employee. This differs, for
example, from similar legislation in other countries, such as Canada,
which merely supplements the common law. Although the META was the product
of sustained efforts by the Commissioners to produce a balanced piece of
legislation that would be fair to employers and employees alike, this act
has yet to be adopted by any state and thus has proved far less influential
than its sponsors had hoped. [3]
Other legislation is relevant to the issue of termination
of employment at the initiative of the employer. In the main, these statutes
concern protection from discriminatory treatment on various grounds. The
most important of these for present purposes include: the National Labour
Relations Act (NLRA) (governing collective bargaining agreements and protection
of freedom of association); the Civil Rights Act of 1964 (Title VII), which
seeks to prevent discrimination on the basis of race, national origin, sex
or religion; the 1967 Age Discrimination in Employment Act (ADEA); the 1974
Pregnancy Discrimination Act (PDA); and the Americans with Disabilities Act
of 1990 (ADA), prohibiting discrimination against disabled persons. In addition,
many federal regulations also protect “whistleblowers” – employees who call
the attention of law-enforcement officials to violations of the regulations. The
broadest of these protections, the Sarbanes-Oxley Act of 2002 (SOX), protects
employees from retaliation for reporting any commission of a federal offence
by their employer.
Scope of legislation
These federal statutes, which generally apply to employers having a certain
minimum number of employees (e.g. 15 or more under Title VII), are supplemented
in many of the fifty states by similar legislation that covers smaller employers,
as well as by state and local government.
Contracts of employment
Federal legislation does not distinguish between the various types of employment
contracts in relation to termination of employment. If the nature or duration
of employment is not specified in a contract, the employee or employer may,
with a few exceptions, terminate the relationship for any reason, or for no reason at all. This is the basis of the
employment at-will doctrine.
As regards the contracts of employment concluded for a specific period of
time, the courts have established the general principle under which termination
of a fixed-term employment contract prior to its completion is justified
only for good cause and the party asserting that there has been a substantial
failure of performance should have the burden of proving the fact. [4]
Termination of employment
While there is no federal law that specifically applies to employee-initiated
termination of employment, the thirteenth amendment to the United Stated
Constitution prohibits involuntary servitude. This provision largely prevents
judicial bodies from ordering an employee’s performance of specific work
tasks. Although an individual cannot be forced to work for an employer,
the employee might face civil charges if his or her (employee-initiated)
termination breaches a contract. Generally, an employee will not face such
repercussions if he or she terminates his or her employment under certain
circumstances, including:
- employee
resignation on the appropriate notice;
- employee
retirement;
- the
expiry of a fixed-term contract; and
- the completion
of the task for which the contract was concluded.
Dismissal
The employment at-will doctrine allows for the dismissal of workers for
any reason, or for no reason at all. In 2007, the rate of layoffs and discharges
was 1.7% of the total labour market, which is a similar level to that of the
previous
year. [5] From January 2003 through December 2005,
3.8 million workers were displaced, which is a decrease of 5.3 million workers
from the previous survey (over the period from January 2001 to December 2003. [6] Nevertheless,
American workers in various sectors have four primary protections from arbitrary
termination of employment. First,
collective bargaining agreements usually contain provisions requiring that
employees are only dismissed for “just cause” – the employer must have a
valid reason to dismiss an employee. Usually, these agreements also contain
various disciplinary measures of a lesser severity that an employer must
implement before terminating the employee. The low collective bargaining
coverage rate, which was 12.6% in 2006, [7] however,
makes this an insufficient avenue to maintain employment security for the
working population at large, and does
not counterbalance the limited legal protection of individual employee rights.
Second, the NLRA has provisions that protect organized activity, and establishes
a structure by which organized employees can collectively bargain for a common
labour contract. Section 7 of the NLRA gives employees the right
to join and form unions, and to bargain collectively, while Sec. 8(a)(1) makes
it an offence for an employer to restrict an employee’s Sec. 7 rights. Such
restrictions often include terminating employees for engaging in organized
activity. Sec. 8(a)(3) of the NLRA makes it an unfair labour practice for
an employer “by discrimination in regard to hire or tenure of employment
... to ... discourage membership in any labour organization.” Sec. 8(a)(4) also makes it an unfair labour practice for an employee
to be discharged if he or she has filed charges or given testimony against
the employer.
Third, several statutes provide employees with protection against discriminatory
termination. Thus, the ADEA prohibits dismissal based on age discrimination;
Title VII prohibits discrimination on the basis of race, colour, national
origin, sex or religion; and the ADA prohibits dismissal arising out of discrimination
against disabled persons. In addition, the SOX protects all employees from
retaliation resulting from disclosure of information about their employers’
illegal activities, while the PDA outlaws dismissal on grounds of pregnancy,
childbirth or related medical conditions. Finally, it is unlawful for an
employer to dismiss a beneficiary of a defined benefit pension plan for exercising
any right under an employee benefit plan or to prevent any entitlement under
such a plan from being attained.
The fourth protection against employment at-will comes from case law, in
which there are three major exceptions. However, there is a lack of uniformity
both among state courts and between the federal and state courts, and the
law on termination of employment is in flux. [8]
One widely accepted exception to employment at-will
is the notion of a breach of an implied contract of employment, which requires
that dismissal be for just cause. An implied contract can come from an oral
or written representation, or from an employer’s past practice, leading to
an employee’s legitimate expectation that his or her employment will not
be terminated without just cause.
In the case of Foley v. Interactive Data Corp., [9] for
instance, the employee was dismissed from his job at the bank for reporting
to the bank’s vice-president that
his immediate supervisor was being investigated for embezzlement of funds.
It was successfully argued that an implied contract existed, which limited
the employer’s right to terminate his employee arbitrarily. This implied
contract was premised on oral assurances given to him by the employer that
his job was secure as long as his performance was adequate.
The adoption of the breach of an implied contract doctrine in employment
law is, in truth, not so much an exception to the employment-at-will concept
as the application of basic contract principles to employment agreements.
In essence, promises and assurances by the employer that can be seen as having
binding contractual effect will be enforced. One of the most popular avenues
for claiming such implied contracts has been the “employee handbook rule”.
Many courts now recognize that specific promises embodied in personnel handbooks
may be binding upon employers when they are seen as bestowing beneficial
enforceable rights on the employee. [10] However,
courts have also stated that an employer could avoid stating specific personnel
policies, unilaterally revise
its handbook, or include a disclaimer if it wished to remain an at-will employer. [11]
Despite the widespread acceptance of the implied contract theory, it does
not effectively provide employment security. This is because, first, not
all courts and states recognize the implied-contract exception, and not all
of those that do find fault in an employer’s unilateral change of an employee
handbook. [12] Second, it is often difficult for an employee
to displace the burden of proof to substantiate the claim that assurances
were made. This is particularly true in situations where an implied contract
is based on oral assurances. Finally, as employers have now been alerted
to the potential application of the doctrine in the employment relationship,
they are able quite easily to avoid making any assurances that could lead
to liability.
Basic contractual principles have also given rise
to recognition of an implied covenant of good faith and fair dealing in labour
and employment law, leading to an assumption that dismissals should be fair
and for just case. This theory holds that a duty of good faith and fair dealing
is owed in the performance and enforcement of all contracts.
Nevada’s Supreme Court case, K-Mart Corporation v. Ponsock, [13] was
a landmark decision for the good faith and fair dealing exception. Ponsock
was a ten-year employee who was terminated six months before his retirement,
at which time K-Mart would owe him retirement benefits. K-Mart argued that
Ponsock was employed at-will, and that his employment was justifiably terminated
for spilling paint on a forklift. A trial jury found that K-Mart terminated
Ponsock so that the company would not have to pay retirement benefits. The
court agreed, finding that K-Mart’s action gave rise to tort liability, because
between the employer and Ponsock was “a relationship of trust and special
reliance…allowing [Ponsock] to rely and depend on continued employment and
retirement benefits.” The court, then, found that an employer that terminates
an employee for “its own financial ends” does so “wrongfully, and in bad
faith,” and is liable for tort damages.
As is the case with the implied contract doctrine, the usage and applicability
of this exception varies by state. As of 2000, only eleven states recognized
the above exception. For comparison, thirty-eight states recognized the
implied-contract exception.
The most widely accepted exception, recognized by forty-three states, [14] is the public policy exception. The public policy
exception under case law is available largely to protect employees from dismissal
in those situations where they refuse to commit an illegal or unethical act
requested by the employer [15] or where they choose to exercise a statutory
right, for example rights under the Occupational Safety and Health Act, 1970,
or the Fair Labour Standards Act, 1938 (covering minimum wage and overtime).
Again, the recognition and applicability of this exception varies from state
to state. Even among the forty-three states that accept the public policy
exception, the definition of “public policy” varies. “States either narrowly
limit the definition to clear statements in the constitution or statutes,
or permit a broader definition that enables judges to infer to declare a
State’s public policy beyond the State’s constitution or statues.” [16]
Wrongful dismissal actions may also give rise to independent tort actions,
such as claims of intentional infliction of emotional distress. For a claim
to be successful on this ground, the defendant’s conduct must have been egregious,
should have intentionally or recklessly caused harm to the employee, and
must have resulted in distress. This type of claim is not normally available
for typical kinds of dismissal. [17]
Collective dismissals are permissible, but may be subject to certain procedures
(see below).
Notice and procedural requirements
There is no legal requirement for notice to be given prior to termination
of employment. Collective agreements usually include provisions for a reasonable
period of notice. However, these do not always guarantee compensation in
lieu of such notice.
There is no legal policy or statute that requires the employer to grant
the worker a fair hearing or follow any other natural justice process before
dismissing him or her. Typically, collective agreements provide a mechanism
for challenging dismissals for cause, normally through a grievance arbitration
procedure or other alternative dispute settlement mechanism. Where states
have enacted statutes on non-discrimination or wrongful discharge, these
sometimes contain due process clauses, which mandate that certain procedures
be followed.
The Worker Adjustment and Retraining Notification
Act of 1988 (WARN), which is also known as the Plant Closing Act, requires
employers to give 60 days’ advance notice of redundancies, plant closure
or mass lay-off of workers. The WARN generally covers employers with 100 or more employees who have
worked more than six months during the past year, excluding part-time employees.
A “plant closing” occurs when a facility is shut down for more than six
months, or when 50 or more employees lose their jobs during any 30‑day
period. A mass lay-off consists of at
least 500 workers. If between 50 to 499 workers
are laid off, the employer action is still a mass layoff if the affected
employees are 33 percent of the workforce. The number of affected workers
is the total number laid off during a 30‑day (or in some cases 90‑day)
period. [18]
Under the WARN, the notice must be given to the employees or their union
representatives, as well as to local officials. If the employer does not
provide the requisite advance notice, the employer must provide a day’s wages
for each day notice was not given.
The employer is excused from the notice obligation if:
- he
or she provided reasonably accessible alternative work opportunities;
- the
workforce reduction was compelled by unpredictable business changes or
natural disaster;
- good
faith efforts to avert the reduction compelled the employer not to publicize
his or her adverse business situation;
- the
reductions were caused by labour disputes; or
- on hiring,
the employees were told the duration of the project was for a specified
period.
Several states have enacted legislation supplementing the provisions of
WARN. Provisions relating to redundancies may also be included in collective
agreements or privately negotiated in individual contracts of employment.
As the NLRA requires that employers bargain with unions regarding certain
conditions of employment, the legislation may be used to force employers
to bargain over those partial closures of businesses that would result in
mass lay-offs. Under a typical agreement, employers are obliged to bargain
over the effect of the redundancy and must notify the representative union.
However, employers are under no legal obligation to consult with or inform
the workers themselves about operational modifications or plans leading to
redundancy.
Severance pay
There is no requirement in the Fair Labour Standards Act (FLSA) for severance
pay. However, severance pay may be granted to employees upon termination
of employment. It is usually a matter of agreement between an employer and
an employee, and based on length of employment for which an employee is eligible.
Severance pay may also be governed by the terms of, if available, a collective
bargaining agreement. As a matter of practice, most large employers not bound
by collective bargaining agreements voluntarily provide some redundancy pay
for employees terminated for economic reasons.
Avenues for redress
Different avenues for redress of dismissal claims
are dependent on the applicable statutory provisions and on the route, which
the employee has taken in order to pursue such claims.
Employees in labour unions generally have more tools
for redress than do non-unionized employees. Such employees usually have
access to an appeals procedure as outlined in their collective bargaining
agreement, in the event that an employer action violates the contract. If
the union and employer cannot resolve the issue administratively, almost
every collective bargaining agreement requires that an arbitrator decide
the issue. In discipline cases, the employer has the burden of proof.[19]
Cases involving wrongful terminations under the
NLRA (specifically, the “unfair labour practices” as defined by Sec. 8)
may be decided before a special judicial body established by the act, called
the National Labour Relations Board (NLRB).
Although employees not in labour unions have few
resources to combat wrongful termination, they are covered by those federal
and state statutes that protect all employees from termination based on discrimination
by employer. Charges based on these statutes must be settled before the
ordinary courts of law if attempts to resolve the matter administratively
do not succeed.
There is a recent trend to conclude individual contracts of employment with
clauses that stipulate a designated procedure for resolving claims, including
dismissals. The National Academy of Arbitrators has opposed mandatory arbitration
as a condition of employment when it requires a waiver of direct access to
a judicial or administrative forum for the pursuit of statutory rights. [20] Nevertheless, mandatory arbitration is
an increasingly popular practice. [21]
Regardless of unionized or non-unionized employees, where dismissal has
been found unlawful, the particular remedies vary, depending on the circumstances
surrounding the termination of employment. These specific remedies may include
reinstatement and the reimbursement of back pay, traditional remedies of
damages, as well as a reasonable attorney’s fee.
Where common law actions based on contract or tort are successful, these
will attract the usual remedies available for actions in such suits. Litigants
may be awarded equitable relief such as reinstatement and back pay, monetary
damages such as reimbursement for lost wages, compensatory damages for pain
and suffering and punitive or exemplary damages where the employer is found
to have acted maliciously.
In general, the reinstatement is provided as a remedy for breach of a collective
agreement or the violation of a constitutional liberty, rather than a remedy
for the breach of an individual contract of employment.
Recent developments in case law have brought confusion to the
remedies available to illegal immigrants. A 2002 Supreme Court decision, Hoffman
Plastic Compounds, Inc. v. National Labour Relations Board [22] determined
that it is illegal for the NLRB to award back pay for wrongful termination
to an illegal immigrant, because such an award encourages “the successful
evasion of apprehension by immigration authorities…condon[es] prior [and
future] violations of the immigration laws.” [23]
This case has since prompted a range of responses from various state and
federal agencies. Some, such as the Equal Employment Opportunity Commission
(which is in charge of administering federal civil rights laws), rescinded
directives that undocumented workers are eligible for back pay as a remedy
for statute violations. Others, such as agencies in California and Washington,
have all but ignored the decision, expressly stating that “nothing in Hoffman pre-empted
state laws allowing even back pay.” [24] In 2004, the U.S. Senate included a
section in an immigration reform legislation that would provide monetary
relief for
illegal aliens. Called the Safe, Orderly, Legal Visas and Enforcement (SOLVE)
Act of 2004, the bill is not yet law.
Further information
- US Department
of Labor resources regarding dismissal
- National Labour Relations Board
- Database of case law and academic journals
- Library of Congress THOMAS Bill Locator
- National
Whistleblowers Center resources regarding employee rights
- Befort, Stephen F., “Labour and Employment Law at the Millennium: A Historical
Review and Critical Assessment” in Boston College Law Review. March
2002. Vol. 43, p. 351.
- Corbett, William R., “Waiting for the Labour Law of the Twenty-First
Century: Everything Old is New Again” in The Berkeley Journal of Employment and Labour Law. 2002
Vol. 23, p. 259.
- Craver, C.: “Rearranging deck chairs on the Titanic: The inadequacy of
modest proposals to reform labour law”, in Michigan Law Review,
1995, Vol. 93, p. 1616.
- Libenson Daniel J.: « Leasing Human Capital : Toward
a New Foundation for Employment Termination Law » in The Berkeley Journal of Employment and Labour Law. 2006
Vol. 27, Number 1, p. 111.
[1] In 1987 Montana enacted the Wrongful Discharge from Employment Act, and Arizona adopted the Employment Protection Act in 1996. The scope of the Montana statute (Mon. Code Ann., sec. 39-2-901)
is broader as regards protections for employees.
[2] Summary of META
[3] A. Goldman, R. White: “USA”,
in R. Blanpain (ed.): International encyclopaedia for labour law and industrial
relations (The Hague,
Kluwer Law International, 2002), p. 91.
[4] Goldman, op. cit., p.91.
[5]“Job
Openings and Labor Turnover Survey.”
[6] A displaced worker is a worker 20 years or older
who has been terminated because his or her plant has closed, there was insufficient
work for them to do, or their position was not needed. From “Displaced
Workers Summary.”
[7] “Union
Members Summary” Bureau of Labour Statistics
website
[8] Muhl, Charles J., “The
employment-at-will doctrine: three major exceptions” in Monthly Labour Review. 2001
Vol. 24, No. 1, pp. 3-11
[9] 47 Cal. 3d at 654, 765 P. 2d. at 373
(Cal. 1988). See also Bernard v. IMI Sys. Inc., 131
N.J. 91, 618 A. 2d. 338 (1993).
[10] R. Pratt: “Unilateral modification of employment handbooks:
Further encroachments on the employment-at-will doctrine”, in University
of Pennsylvania Law Review, 1990, Vol. 197, p. 208.
[11] See Toussaint v. Blue Cross & Blue Shield
of Michigan. 292 N.W. 2d. 880 (Mich. 1980), p. 894.
[12] Kohn, Brian. “Contracts of Convenience: Preventing Employers
from Unilaterally Modifying Promises Made in Employee Handbooks” in Cardozo
Law Review. 2003, Vol. 24, p. 799.
[13] 103 Nev. 39
[14] Muhl,op. cit., p.4.
[15] See, for example: Petermann v. International
Brotherhood of Teamsters, 344 P. 2d. 25 (Cal. C. App.
1959), where dismissal for refusing to lie before a legislative
committee at the employer’s request was found to be void on public policy grounds.
[16] Muhl, op.cit., p. 7.
[17] For further discussion of this and other collateral
sources of relief for dismissal, see Goldman, op. cit., pp.74-6.
[18] The Workers Adjustment and Retraining Notification
Act
[19] Martin, Warren. “Employment At Will: Just Cause Protection Through Mandatory Arbitration.” Washington Law
Review. January, 1987.Vol. 62 No. 151
[20] “Arbitrations’ Academy votes to oppose mandatory arbitration
of job disputes”, in Labour Relations Week (Washington, DC, BNA), 4 June 1997, Vol. 11,
No. 22, p. 585.
[21] Bachman, Jill. “Mandatory
Arbitration Clauses and the ADEA.” December 1999. p.1
[22] 535 U.S. 137
[23] 2002 U.S. LEXIS
2147
[24]Fisk, Catherine and Wishnie,
Michael J. “The
Story of 'Hoffman Plastic Compounds v. NLRB': Labour Rights without Remedies
for Undocumented
Immigrants”, in Cooper, Laura J. and Fisk, Catherine L., Eds. Labour
Law Stories, Chapter 10. Foundation Press. 2005
|
 |
|
|
|
