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Arnow-Richman on Employment Termination Law

By Lawrence Solum

Rachel S. Arnow-Richman (University of Denver Sturm College of Law) has posted Just Notice: Re-Reforming Employment At-Will for the 21st Century on SSRN. Here is the abstract:

This Article proposes a fundamental shift in the movement to reform employment termination law. For forty years, there has been a near consensus among employee advocates and worklaw scholars that the current doctrine of employment at will should be abandoned in favor of a rule requiring just cause for termination. This Article contends that such calls are misguided, not (as defenders of the current regime have argued) because it grants workers too much protection vis-à-vis management, but because it grants them too little.

A just cause rule provides only a weak cause of action to a narrow subset of workers ? those able to prove their firing was for purely arbitrary reasons. It fails to account for the justifiable, but still devastating, termination of workers for economic reasons, by far the most common reason for job loss today. In this way, the rule is not only inadequate, but anachronistic. Just cause protection is consistent with a mid-twentieth century view of the social contract of employment, which anticipates a long-term, symbiotic relationship between employer and employee in an economy dependent on internal labor markets. Under such a system, the just cause rule gave legal force to parties? social contract of employment.

In contrast, today?s employers operate principally in an external labor market in which implicit promises of long-term employment have been replaced by implicit promises of long-term employability. Both companies and workers anticipate significant job turnover both in times of economic turbulence, such as the current downturn, in which employers are forced to shed numerous workers due to financial hardship, as well as during economic bubbles, in which companies lay off workers and reorganize for strategic reasons. Given these practices and expectations, the goal of termination law ought not to be protecting individual jobs but rather assisting workers in the inevitable situation of job loss.

To that end, the Article proposes the adoption of a universal ?pay-or-play? system of employment termination. Absent serious misconduct, employers would be required to provide advance notice of termination or offer wages and benefits for the duration of the notice period. In contrast to just cause proposals, ?pay-or-play? recognizes the necessity and value of employment termination. Rather than encouraging parties to maintain status quo relationships, ?pay-or-play? seeks to facilitate transition. It affirms managerial discretion in hiring and firing by eliminating fact intensive inquiries into employer motive. At the same time, it makes real employers? implicit promise of employability by granting workers a window of income security in which they can comfortably search for the next opportunity.

Full post as published by Legal Theory Blog on February 17, 2010 (boomark / email).