The True Cost of Employment-at-will to American Employers - Essay Example

? The True Cost of Employment-at-will to American Employers of The True Cost of Employment-at-will to American Employers It is agreeable that many workers in the United States, just like most countries across the world, believe that satisfactory job performance need to be rewarded with benefits such as job security. This expectation has however been eroded in recent years as the employees face the reality of reducing the workforce of companies, job turnover, and mass layoffs (Abbasi, et al., 1997). Since 19th century last half, employment in the United States has been “at will”. In legal terms, employment-at-will refers to the employment contract that can be terminated for any reason (except for a few spelt out illegal reasons) and at any time either by the employee or the employer (Sentell and Robbins, 2008). The doctrine of employment-at-will avows that, in cases where the employee does not have an express or written employment contract and the employment term is of indefinite period, the employer can terminate the employee for no cause at all, bad cause, or good cause (ABA Section of Labor and Employment Law, 2011). In the United States, at- will employee can be terminated for no reason at all, or for any reason, and at any time, and the courts cannot intervene to protect such an employee from employer’s alleged unfair treatment. Over the years, there has been raging debate among employers, employees, and policy- makers as to whether the doctrine of employment-at-will is really good for the United States or not. More specifically, employers have been trying to evaluate the “goodness” of the doctrine to them, both in short and long run. This paper will evaluate the true cost of employment-at-will to American employers. Among the major industrial powers, the United States is the only bone that still maintains a general rule of employment-at-will. Countries like Great Britain, Sweden, France, and Italy have statutory provisions that require that employers should show good cause before firing employees. In most part of the America’s history, the courts upheld firmly employer’s freedom to dismiss employee-at-will. However, in the mid-20th century, some courts’ rulings seemed to rule in favor of the employees (Ballam, 2000). Some of the court rulings coupled with the scholarly writing on the scrapping of employment-at-will prompted most employers to think on the cost of the doctrine as well as its effectiveness. For example a law review article by Professor Lawrence Blades called for scrapping of the doctrine as it threatened the freedom of individual workers just like authoritarian government would do. As a result of this review article, courts recognized some kinds of exceptions to the doctrine; the exception of public policy being the most often- used. This exception allowed the judges to consider a dismissal as “unjust” if it was as a result of an employee exercising or upholding some public policy right (Blades, 1967). Muhl (2001) notes that recent years there has been revolutionary departure from the doctrine of employment-at-will especially based on the exception of the covenant-of-good-faith. This exception emphasizes on fair dealing and good faith as being very important in employment relationship. Courts that are using this exception usually rule that dismissal of employees should meet the standard of “just cause” and that such dismissals can be invalidated if they were done in bad faith or were inspired by malice (Roehling, 2003). In the light of evolution of employment-at-will doctrine, it is important to evaluate its true cost to the American employers in order to determine whether it is good for them or not. Willey (2009) explains that the proponents of the doctrine point to the essence of employer’s discretion in all the employment issues impacting his or her “business”. On the other hand, the opponents of the doctrine point out to the essence of defending the freedom of individuals and protecting employees from oppressive employers. Various studies have indicated that the American current system of employment-at-will tend to be expensive in the long-run, a situation that sometimes undermines business in the country. Covey (2000) argues that this reality seems to escape the owners of business and the attorneys as they believe that by using the system they will not be subject to lawsuits, as well as not being second guessed. However, the reality seems to be different from the believe held by employers and their attorneys; businesses that uses employment-at-will system have a higher likelihood of lawsuits as employers seek legal redress for their employment predicaments arising from such a system. Even though employers often prevail in cases relating to employment-at-will, they frequently do so after spending considerable amount of money and time fighting lawsuits in courts against their ex-employees. The costs are much higher when such cases make to the state courts of appeals (Rudy, 2002). The American employers continue to pay heavy price as a result of employment-at-will system being the country’s default employment law. Statistics show that employment law litigation has been and continue to be on the rise. For example, between 1970 and 1989, the overall employment litigation in federal courts went up by about 125%. Dannin (2007) observes that Fulbright and Jaworski’s annual survey found out that employment disputes dominated the type of litigation thus causing greater concern; the survey found out that 54% of general counsels in the United States cited labor litigation as their major concern. Similarly, employers especially the middle- level ones were distressed by the employee-related litigation prospect. Dannin (2007) goes further and observes that although employees lose if the court finds they were at-will employees, the costs of getting those results should not be ignored. In order to get the case dismissed, the employer has spent time and money on attorney fees and has to disrupt his routine in order to respond to the lawsuit. Along with that is the fact that when law changes, the employers are required to educate themselves on new changes and take appropriate steps to comply with the provisions of these new changes. It is important to note that Employment-at-will law is complex and very unstable, thus making it nearly impossible to predict legal outcomes. Complexity and instability not only makes the doctrine to be more expensive to the employers but also difficult for them to plan (Weiss, 2003). Additionally, employment-at-will system is destructive to how businesses are conducted and may impact negatively on the performance of the business. This type of system requires the employers to tell their employees more often that nothing in employment rules or manuals creates a binding contract. They are required to state over and over that since the employment is at-will, the employee can be fired for no reason, or for good or bad reason (Muhl, 2001). It is no doubt that the nature of this system undermines employees’ productivity, as well as their commitment and dedication to their employer and work. Besides, employees and their employers do not have warm attachments. ABA Section of Labor and Employment Law (2011) states that management and human resources specialists agree that lack of good business and working relationship between employer and employees can be very costly to the business as optimum productivity can rarely be achieved. This type of a system is does not make employees to feel empowered because they always feel vulnerable to firing. In addition, employment-at-will system has had serious cost implications to employers especially on personnel relations under implied employment contract. Since most companies employing employment-at-will doctrine do not have express employment contracts, they resort to implied employment contract (Gibson and Lindley, 2010). For instance, they may mention to the employees that their period of employment will be based on their job performance. In most cases, implied employment contract creates situations that are legally- binding. The use of performance appraisal system creates a continued employment perception. Therefore, if a company has a culture of goal-setting which sets performance targets for employees, the employer may find it difficult to terminate employment using the approach of employment-at-will. Along with that, employers are incurring “costs” by conducting business in a manner that is not in their best interests due to fear of litigation that arise from employment-at-will doctrine. They are inclined towards retaining at-will at the expense of effective workplace management. As a result, they fail to achieve the ultimate goal of any business- profitability (Sentell and Robbins, 2008). Many employers have been alarmed by the increasing number of suits relating to wrongful dismissal. So, how have employers responded to high costs relating to employment-at-will? Rising threat of high court costs, considerable potential damage awards, and high legal costs have forced employers to add express employment-at-will clauses to the contracts of employment. Besides, the declining collective bargaining power has given most employers the freedom to insert new clauses in the employment clauses. Employers believe that these measures are aimed at reasserting their rights under the doctrine of employment-at-will. However, most opponents of the doctrine believe that these actions are aimed at cheating employees out of the gains they have made over the years in regard to job security (Gibson and Lindley, 2010). In conclusion, it is evidently clear that the doctrine of employment-at-will is the default employment law of the United States. The doctrine has evolved over the years and can be said to be “watered down” by a number of exceptions. Even though the doctrine aims at according employers a considerable level of freedom to make personnel decisions, it seems to be quite counterproductive. As noted, increasing number of lawsuits, reduced productivity, and inadequate commitment can prove to be very costly to the business, thus inhibiting it from attaining optimal profitability. References ABA Section of Labor and Employment Law. (2011). Employment at Will: A State-by-state Survey. BNA Books, A Division of Bureau of National Affairs. Abbasi, S et al. (1997). Employment at Will: An Eroding Concept in Employment Relationships. Labor Law Journal, 38(1), 21-32. Ballam, D. (2000). Employment-at-will: The impending death of a doctrine. American Business Law Journal Austin, Vol. 37, Issue 4.  Blades, L. (1967). Employment At Will Vs. Individual Freedom: On Limiting the Abusive Exercise of Employer Power. Columbia Law Review, Vol. 67, p. 1416. Covey, A. (2000). 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