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Employment At Will Outline

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This is an extract of our Employment At Will document, which we sell as part of our Employment Law Outlines collection written by the top tier of Harvard Law School students.

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Employment At Will Why does the at-will default rule matter, if it can be bargained around?
? Information failure: Employees do not bargain for just-cause protection because they do not realize they have to.
? Bargaining unlikely to establish just-cause protection because of concerns over (1) signaling and (2) adverse selection. o Signaling: Employees do not want to signal to employers that they are going to need just-cause protection. o Adverse selection: Employers do not want to offer just-cause protection for fear of attracting all employees who are insufferable.

A: Historical Foundations Horace Gay Wood:
? The default rule is that a "general or indefinite" hiring is prima facie a hiring at will.
? "But when from the contract itself it is evident that it was the intention of the parties that the contract was for a fixed period, their understanding ... will control." Jacoby:
? The at-will rule "was at variance with the contractarian principle that the courts were supposed to give effect to the parties' manifest intent." o In cases where the contract specified a rate of payment, the presumption of at-will was used to permit termination before the conclusion of at least one pay period. o The at-will doctrine was used to convert "lifetime" contracts into atwill contracts, in obvious disregard for the parties' intentions. See Skagerberg. Feinman:
? At-will "was an adjunct to the development of advanced capitalism in America"
? At-will "conformed to ... the beliefs of the owners in the existence of and the need for an industrial elite of owners of capital with absolute control of their businesses." o Keeping middle managers - educated, responsible, and increasingly numerous - from seeking a greater share in the profits and control of their enterprises Epstein:
? Freedom of contract is an end in itself, like freedom of marriage partner or freedom of speech o Whose freedom? Individuals and firms do not have symmetrical interests. Firms do not have autonomy interest in choosing workers akin to the interest in choosing a marriage partner. Employees do have

such an interest in choosing their employer, but there is no need for symmetry. Even if we wish to allow employees to quit at will, it does not follow that we should let firms fire at will. Skagerberg:
? A contract of service for "permanent" employment shall be construed as for employment at-will, unless the employee purchases continuous employment with valuable consideration in addition to the services which he renders dayto-day.
? Demonstrates the strength of court's commitment to the at-will rule; in this case, at-will is being treated as a mandatory term that cannot be bargained around, rather than as a default interpretive rule.

B: Contract Erosions of Employment At Will Chiodo: Courts will imply a "just cause" provision into a fixed-term contract, allowing the employer to fire the employee for failing to render "honest, faithful, and loyal service." Meaning of Just Cause in Union Contracts (Profs. Abrams & Nolan):
? Just cause for discipline exists only when an employee has failed to meet his obligations under the fundamental understanding of the employment relationship.
? Satisfactory work has four components: o Regular attendance o Obedience to reasonable work rules o A reasonable quality and quantity of work o Avoidance of conduct which would interfere with the employer's ability to carry on business effectively
? Termination must further one of management's three legitimate interests: o Rehabilitation of a potentially satisfactory employee o Deterrence of similar conduct o Protection of the employer's ability to operate the business successfully
? Employees entitled to (1) industrial due process (constructive notice of expected standards, decision based on facts after opportunity to be heard, proportionality in penalty); (2) industrial equal protection; and (3) individualized treatment. Hetes: A contract for "just cause" employment is enforceable even if it is of indefinite length; oral statement that an employee will not be fired as long as she does a "good job" may be sufficient to establish a "just cause" standard if the jury finds it was intended to constitute a legally binding agreement.1

1 See also Veno (atwill presumption can be overcome by an implied contract).

Ohanian: "Just cause" for termination may exist even if the employee does not breach his employment contract (e.g., if termination is required by adverse market conditions); an oral promise for lifetime employment - if made in "critical one-on-one negotiation regarding the terms of future employment" - is enforceable.2
? SUMMARY: For the purposes of the statute of frauds, an oral contract is not binding if it cannot be terminated during its first year absent breach. The court holds that, even without breach, there may be "just cause" for termination within a year (e.g., if employee's performance is poor, despite his best efforts, due to adverse market conditions). Thus, an oral "just cause" contract is not barred by the statute of frauds
? DISSENT: The contract was not for "just cause." Rather, it prohibited termination unless the employee "screwed up badly." This suggests that only the employee's breach would constitute grounds for termination, such that the contract was not capable of being performed within a year without breach. Grouse: (1) Promissory estoppel provides a basis for relief where an employee relies to his detriment on an offer for at-will employment that the employer should reasonably have expected to induce such reliance. (2) An at-will employment contract can give rise to an action for reliance damages if anticipatorily repudiated or repudiated at an early point in employment; employee has a right to assume that he will be given a good faith opportunity to perform his duties to the satisfaction of the employer (a mandatory probationary period). Veno: (1) Vague aspirational statements are insufficient as a matter of law to establish an at-will relationship. (2) The at-will presumption may be overcome where the employee gives the employer sufficient consideration in addition to those for which he was hired on the assumption that he is securing a just-cause protection. a. Detriments suffered that are commensurate with those suffered by every salaried professional are insufficient to establish just-cause protection. Pugh:
? Independent consideration is not required for implied-in-fact "just cause" contract; although it can serve an evidentiary function
? In determining whether just-cause protection has been implied-in-fact, courts look to "the totality of the parties' relationship." In this case, there was sufficient evidence from which a jury could find an implied "just cause" agreement: o Duration of the appellant's employment (32 years) o Commendations and promotions o Lack of any direct criticism of his work o Employer's policies 2 Brown v. Safeway Stores, distinguished (assurances made in group meetings or casual conversations may not be binding); see also Veno.

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