Employment Security

Employment Security What Protection Against Discontinued Employment?

Employment at Will Doctrine:Nineteenth Century Origin • Pre-industrial classes of labor: (1) slave; (2) indentured servant; (3) free laborer. • Advantages of “at will” relations for the employee? • Advantages of “at will” relations to employer in emerging industrial world? 19th C American workforce: Not everyone was free to resign.

Wood’s “At Will” DoctrineAnd Employer Regret • A presumption—not an absolute rule. Possible express or implied contractual variations. • Employer tactics to prevent at will resignation: term contracts; forfeiture of deferred pay; company stores; payment in script; blacklisting. A coal mining company’s “script” for miners

Ongoing IndustrializationAnd Employee Regret • The closing of the frontier. • Immigration, business cycles,and periodic labor surplus. • Employer monopsony. • Replacement by technology. • Psychological dependence on jobs: The ideal of lifetime employment takes hold. • Employee tactic: labor unions; collective contracts.

Toussaint v. Blue Cross & Blue Shield Are disciplinary “policies” enforceable contracts?

Toussaint v. Blue CrossThe Alleged Promises • Ebling (v. Masco): Interviewer stated, if Ebling was “doing the job,’ he would not be fired. • Tousssaint: Interviewer said he would be with the company “as long as I did my job;” handbook described probationary period and a policy ofdischarge “for just cause only.” Insured against job loss?

First: The Problem of Promises Of Indefinite Job Security • E.g., assurance of “lifetime” or“permanent” employment. • Could E really intend binding,indefinite or lifetime commitment? • Precedents in civil service andcollective bargaining. • Toussaint: E might intend, and could reap real advantages from binding contract. Before Toussaint, a skeptical judiciary

Second: The Lack of MutualityIn a One-Sided Commitment • Problem: Employer promised not to discharge, but employee retained right to resign. • Would employer likely intendone-sided obligation? • Is there consideration for one-sided obligation (“is there mutuality”)? • Toussaint: One-way commitment possible in unilateral contract; consideration is loyal workforce. A ball and chain for the employer, but not for the employee?

Third: Objections to Treating“Policies” as Contracts • Policies are instructions. But some policies appear to promise (e.g., pay and benefit policies). • Not a product of bargaining. Butneither are consumer contracts. • Subject to unilateral change. But sois contract in at will employment. • Toussaint: Disciplinary policy could be promise. It is employer’s responsibility (and opportunity) to be clear about its intention. “Policy?” Contract? Or Both?

Fourth: Must Employee Prove Reliance and Knowledge? • The likely difficulty of proving reliance. • Toussaint: Bargained for exchange, not reliance, is foundation of contract. • Employees accept policies by continuing job, regardless of knowledge of details. Does it matter if you read the employee handbook before you accepted the job?

Ohanian v. Avis Rent a Car System Good enough for a contract?

The Statute of FraudsAnd Promises of Job Security • Promise: “until you screw up.” • Why might it be within SOF? • Would Avis perform in a year if Ohanian resigned in a year? • If Ohanian performed badly during the first year? • If Avis eliminated job foreconomic reasons? Are oral promises of security binding?

Pugh v. See’s Candies, Inc. Does seniority imply security?

Pugh’s Implied Contract(No Express Promise) • Thirty-two years of service. • Advancement from dishwasher to VP, director for subsidiary. • Oral assurances re “loyalty.” • Adoption of disciplinary policy. • An implied duty of good faithin termination of employment? An implicit promise of reward for climbing a ladder?

A Depressing View of a CareerAn Economist’s View of You and Pugh Vice Pres. Your value to the employer $$$$$ Your cost to the employer Unemployed Time dishwasher

Is an Implicit Bargain In Employment a Solution? • Is longevity essential? • Is career advancement essential? • For long-term white collar employees only? • Can E avoid promise by simple express disclaimer? A factory worker at See’s Candies: Did she get the same promise?

The ADEA: AlternativeTo Implied Contract Theory? • What does it prohibit, and when? • Advantage over contract theory? • ADEA’s limits: Would it apply to Pugh? • Practical impact on employment practice? The ADEA approach: still subject to discharge for any reason other than age.

Montgomery County Hospital District v. Brown Texas Holds Its Nose to Pugh

Employer’s Alleged Promise In M.C.H.D. v. Brown • Interviewer: You will notbe terminated except for “good cause” or “reason.” • Circumstances suggestingreal bargaining between theparties? • Reasons for growing judicial skepticism over alleged informal promises of job security? Is an oral assurance of job security enforceable in Texas?

MCHD v. Brown: Bolstering The “At Will” Presumption • An employer “must unequivocally indicate a definite intent to be bound not to terminate … except under clearly specified circumstances.” • Employee with no “formal agreement … cannot construct one out of indefinite comments, encouragements, or assurances.” • Compare: Toussaint. The Texas court raises the bar

Could an Oral PromiseEver Be Binding After Brown? • Statute of Frauds not a bar. (recall Ohanian). • “It would be unusual, however, for oral assurances of employment for an indefinite term to be sufficiently specific and definite to modify an at-will relationship.” • When would oral promise suffice? Writing not absolutely required?

Rebutting the PresumptionUnequivocal Oral Assurances? • Goodyear v. Portilla (1994) (oral promise not to apply nepotism rule). • El Expresso v. Zendejas (2005) (oral promise not to retaliate for cooperating in investigation). • Miksch v. Exxon(1998) (oral assurance that employee’s spouse could open competing business). Clearing the bar: Difficult, but not impossible.

Problems: (Compare Texas, California and Michigan Law) • E hires Employee subject to 6 month probationary period, during which employee is subject to discharge for “at will.” • Written individual contract says, “we may discharge you for just cause.” • HB lists specific grounds for discharge. • Employee has served E for 20 years, with consistently “average” to “superior” evaluations. Supervisors often assured him that loyalty would be rewarded by regular raises and job security.

If the Employer Did Promise: What Is “Cause” for Discharge? • Substantive standards v.procedural rights. • Objective cause v.subjective E satisfaction. • De novo v. deferential judicial review. • Is cause needed for other adverse action/inaction?

Problem Boar is an inventive and valuable but temperamental engineer. Straightlace is a young and unproven engineer. She was assigned to work for Boar, but Boar and Straightlace were in constant conflict because of vastly different personalities. Conflict made productive work impossible. Boar wrote an evaluation of Straightlace showing that her performance was “unacceptable.” Under company policy, employees “may be discharged for cause,” and “cause” includes “unacceptable performance.” The policy allows an employee to challenge a performance rating, and Straightlace did so, but a manager who decided the challenge sided with Boar. 1. If the company fires Straightlace, will it have breached its contract with her? 2. If the company transfers Staightlace to a less important job, will it have breached its contract with her?

Guz v. Bechtel National, Inc. What the Handbook giveth, the Handbook taketh away.

Employer Counter-MeasuresAgainst Alleged Promises • Express reaffirmation of employment at will. • Disclaimer of job security. • “Not a contract” proviso. • “No oral modification” clause • Limitation on authority to modify.

Promises & CountermeasuresIn Guz v. Bechtel National • Guz: 20 years on the job; steady raises/promotions. • Cause of Guz’s termination? • HB: Disclaims agreement; affirms “at will” relation. • Disciplinary policy: Procedure and list of causes. • Layoff policy: Procedure for selection, transfer. Is Guz layoff-proof?

Do Disclaimers Bar Guz’s Evidence of the Contrary? • Effect of disclaimer on admissibility of evidence(parol evidence rule) • Effect on reasonable rangeof interpretation of contract. • Effect on implied K claim? Evidence in this case? • Caveat on likely Texas rule. Will the disclaimer preclude proof of alleged promises?

Bankey v. Storer Broadcasting Co. Diamond? Or Zirconia? Are promises of job security forever?

Bankey: Revocation of PromiseOf Indefinite Duration • Bankey: 13 years on job. • Policy ‘80: “May be discharged for cause.” • Toussaint (1980). • Policy ‘81: Employment “at will.” • 3 mos. later: Discharge. Storer Broadcasting hits the delete button

Unilateral Modification:Limits on Employer’s Right? • Is employer able torevoke the promise? • Must E expresslyreserve a right to revoke? • First: Must act in good faith. • Second: Reasonable notice. • Third: Cannot destroy employee’s vested rights.

Is Job Security Too Important For Private Negotiation? • Recall risks in long-term employment relations (“A Depressing View of a Career”). • Widespread refusal or failure to negotiate long-term commitment. • Short-comings of implied contract theory. • Should law require good faith in any termination? Should the law impose implicit vows in employment?

Implied Duty of Good Faith In Termination? Guz Revisited • Guz’s proposed duty of good faith v. implied contract theory of Pugh? • One definition of “bad faith:” interfering with other party’s enjoyment of fruits of contract. • does Court: Good faithdoesnot limit ultimate right to terminate. Should employment contracts be devil proof?

Extra-Contractual Remedies Anti-Discrimination Laws Torts! Promissory Estoppel Escape from the Fine Print?

Promissory Estoppel:Basic Elements of the Claim • Employer made promise; • Employer should have expected promise to induce reliance; • The promise did cause the employee’s reliance; and • Justice requires enforcement of the promise.

Promissory Estoppel:Advantages Over Contract • No need to prove “bargained for exchange” or consideration. • Possible avoidance of SOF (in some states). • Avoidance of “uncertainty” defense (damages might be reliance instead of expectation). • Possibly reconcilable w/ ultimate right to terminate.

Roberts v. Geosource ServicesCircumventing “At Will” Rule? • Why no contract claim? • Employer’s promise? • Certainty of intent? • Was Roberts’ reliance what Geosource expected? • How will court enforce the promise? • Consistent with at will rule? JOB OFFER The “now you see, now you don’t” job.

Tortious Interference:Potential Advantages • A tort arising from breach of a contract. • Asserted against non-party to the contract. • Paradox: Is it unlawful to cause termination of “at will” relations? • A need for caution in identifying unlawful interference. When others get in the way of your job.

Sterner v. Marathon OilThe Customer as a Defendant • Cause of Marathon’s hostility? • Court: Recognizes tortious interference with prospective or at will contract. • Potential defense: Privilege, based on economic interest impaired by the contract. • Was Marathon privileged? Is Marathon’s animosity toward an old adversary reason enough to object?

Beyond Sterner: ImplicationsFor Third Party Liability • What if Marathon solicited Sterner for employment? • If you complain about someone else’s employee? • If you recommend discharge of your subordinate? • If you give a bad reference about an ex-employee? Could you be liable for complaining about someone else’s employee?

Discharge for an Illegal Reason Status Discrimination in Discharge

Discharge for an Illegal Reason: Identifying & Proving Motive • Even in at will relations, some reasons are illegal. • Examples based on protected status: Race, gender, religion, age, disability. • Examples based on protected conduct: filing ERISA or w.c. claims; safety-based work refusal. • Proof of intent: Recall McDonnell Douglas’s formula for minimal facts proving discrimination.

McDonnell Douglas v. GreenAdapted to Discharge Cases • Identify cause of unlawful discharge (I am a Wiccan). • Describe adverse action (I was discharged). • Circumstances consistent with unlawful intent (job still exists but is vacant or filled with a Protestant). A formula for an inference of unlawful intent

McDonnell Douglas v. Green:The Shifting Burden of Proof • Plaintiff bears burden of producing prima facie evidence of illegal intent. • E articulates legitimate non-discriminatory reason (LNR). • Employee attempts to rebut E’s LNR. A formula to require employer to undergo cross-examination.

When Employer’s LNR Is False: St. Mary’s Honor Center v. Hicks • If LNR is untrue, is plaintiff claim unrebutted? Is he entitled to judgment as a matter of law? • St. Mary’s: Prima facie case plus rebuttal of LNR creates permissive basis for inference. • There is usually still an issue of fact for judge/jury to resolve. What does an untruthful employer have to hide?

Not All Prima Facie Cases Are Equal • Employer hired Agis when he was 25. When Agis was 50, Employer discharged him and replaced him with a 43 year old woman. • Same as above, but the replacement is 25. • Employer hired Jones, an African American female. The supervisor who hired Jones is an African American male. Six months later, he fired Jones and hired a white male replacement. • Same as above, but a different company official, who was a white male, fired Jones.

Not All Failed Employer Explanations Are Equally Suspect • At trial, Employer said it fired Plaintiff because his performance was substandard, but the supervisor who observed Plaintiff’s work had died before giving any sworn testimony in the matter. • Employer said it fired Plaintiff because of substandard work. However, Plaintiff’s evaluations were always “excellent” until he wrote an internal memo warning that Employer’s most profitable product was unsafe.

Discharge for an Illegal Reason: Protected Conduct Supporting the Public Interest, and Other Employee Conduct Worth of Protection

Do Some Employee ActionsDeserve and Need Protection? • Employee rights laws depend on employee assertiveness. • Enforcement of other laws might depend on “insiders.” • Contract theories and retaliation? • Prevailing solution: retaliation provisions in (1) in employment statutes; (2) specific industry regs.

Employment Security