Constitutional Law

New ACS Issue Brief Examines 'Just Cause' Employment Standard

by Barry D. Roseman, partner at the Denver-based law practice of McNamara, Roseman, Martínez & Kazmierski

In an Issue Brief published by The American Constitution Society For Law and Policy (ACS), I explore the history of the rule of at-will employment, the common-law and statutory exceptions to that rule, the grossly unfair results that flow from that rule and arguments for and against it. This issue is especially timely now, since the November ballot in Colorado will contain a proposed state constitutional amendment that would abolish the at-will employment rule in that state.

The United States is the only advanced industrial country that does not require employers to have just cause to terminate the employment of non-unionized employees. One of the arguments for retaining the at-will employment rule is an economic one, that requiring just cause would increase unemployment rates and reduce the rate of job growth. 

I have examined the unemployment and job-growth rates for Montana, the only state with a just-cause statute. The Montana legislature enacted that statute in 1987, in response to decisions by the Montana Supreme Court that held that all employees, even probationary ones, were covered by the implied covenant of good faith and fair dealing. Those employees could recover tort relief, including punitive damages, for an unfair dismissal.

My analysis compares the Montana rates not only with those of the country as a whole, but also with those of the neighboring states of Idaho, North Dakota, South Dakota and Wyoming. I have looked at the rates before Montana extended the implied covenant of good faith and fair dealing to employees, after it adopted that implied covenant and after it enacted the Montana Wrongful Discharge Act (MWDA).

I have found that the Montana just-cause statute has had no discernable effect on that state’s unemployment or job-growth rates. Montana’s and Idaho’s unemployment rates rose in tandem with each other before and after Montana adopted the implied covenant, and Montana’s unemployment rate and the unemployment rates in surrounding states declined after it enacted the MWDA. The Montana unemployment rate, as of December 2007, was among the lowest in the nation.

The job-growth rates for Montana and surrounding states have followed the same trends. The rates for Montana and for those states – all of which have adopted the at-will employment rule – have moved in tandem with each other.

Based on my analysis, I have concluded that that unemployment and job-growth rates for Montana have been the result of larger economic trends, such as the impact of recessions on that state’s timber industry, bust and boom cycles in petroleum and natural gas exploration, and droughts. As I say in the Issue Brief, “twin bogeymen of higher unemployment and lower job-growth rates should not shape the public policy debate on the abolition of the doctrine of employment at will.” See Roseman’s entire Issue Brief here.

Full post as published by ACS Blog on September 03, 2008 (boomark / email).