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					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”            19th C American workforce: Not
  relations to employer in             everyone was free to resign.

  emerging industrial world?
   Wood’s “At Will” Doctrine
    And 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 Industrialization
     And 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 Cross
       The 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 of
  discharge “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 and        Before Toussaint,
  collective bargaining.               a skeptical judiciary

• Toussaint: E might intend, and could reap real
  advantages from binding contract.
Second: The Lack of Mutuality
 In a One-Sided Commitment
• Problem: Employer promised not to discharge, but
  employee retained right to resign.
• Would employer likely intend
  one-sided obligation?
                                    A ball and chain for the employer,
                                        but not for the employee?
• Is there consideration for
  one-sided obligation (“is there mutuality”)?
• Toussaint: One-way commitment possible in
  unilateral contract; consideration is loyal workforce.
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. But
  neither are consumer contracts.
• Subject to unilateral change. But so
  is contract in at will employment.      “Policy?” Contract? Or Both?


• Toussaint: Disciplinary policy could be promise. It is
  employer‟s responsibility (and opportunity) to be clear
  about its intention.
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   Does it matter if you read the employee
  of knowledge of details.        handbook before you accepted the job?
Ohanian v. Avis Rent a Car System




    Good enough for a contract?
   The Statute of Frauds
 And 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 for       Are oral promises of
                                    security binding?
  economic reasons?
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 faith
                                     An implicit promise of reward
  in termination of employment?          for climbing a ladder?
A Depressing View of a Career
 An Economist’s View of You and Pugh
                  Vice Pres.




  $
  $
  $
  $                            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       A factory worker at See’s Candies:
  simple express disclaimer?     Did she get the same promise?
    The ADEA: Alternative
  To Implied Contract Theory?
                                           • What does it prohibit,
                                             and when?
                                           • Advantage over
                                             contract theory?
                                           • ADEA‟s limits: Would
  The ADEA approach: still subject to
discharge for any reason other than age.     it apply to Pugh?
                                           • Practical impact on
                                             employment practice?
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 not
  be terminated except for
  “good cause” or “reason.”
• Circumstances suggesting
  real bargaining between       Is an oral assurance of job
  theparties?                 security enforceable in Texas?


• Reasons for growing judicial skepticism over
  alleged informal promises of job security?
  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 Promise
Ever 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 Presumption
 Unequivocal 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       Clearing the bar: Difficult,
                                            but not impossible.
  could open competing business).
  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-Measures
 Against 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 & Countermeasures
   In 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.      Is Guz layoff-proof?

• Disciplinary policy: Procedure and list of causes.
• Layoff policy: Procedure for selection, transfer.
      Do Disclaimers Bar Guz’s
      Evidence of the Contrary?
                               • Effect of disclaimer on
                                 admissibility of evidence
                                 (parol evidence rule)
                               • Effect on reasonable range
                                 of interpretation of contract.
                               • Effect on implied K claim?
Will the disclaimer preclude
proof of alleged promises?
                                 Evidence in this case?
                               • Caveat on likely Texas rule.
Bankey v. Storer Broadcasting Co.


                  Diamond?
                 Or Zirconia?




 Are promises of job security forever?
Bankey: Revocation of Promise
   Of Indefinite Duration
                          • Bankey: 13 years on job.
                          • Policy „80: “May be
                            discharged for cause.”
                          • Toussaint (1980).
                          • Policy „81: Employment
 Storer Broadcasting
 hits the delete button     “at will.”
                          • 3 mos. later: Discharge.
   Unilateral Modification:
 Limits on Employer’s Right?
• Is employer able to
  revoke the promise?
• Must E expressly
  reserve 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.
  Should employment
contracts be devil proof?
                            • does Court: Good faith does
                              not limit ultimate right to
                              terminate.
Extra-Contractual Remedies




    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 Services
Circumventing “At Will” Rule?
                          • Why no contract claim?
                          • Employer‟s promise?
                  JOB
                          • Certainty of intent?
                  OFFER

                          • Was Roberts‟ reliance what
                            Geosource expected?
                          • How will court enforce the
  The “now you see,
                            promise?
 now you don’t” job.
                          • Consistent with at will rule?
       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 Oil
 The 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.
                                  Is Marathon’s animosity toward an old
• Was Marathon privileged?          adversary reason enough to object?
     Beyond Sterner: Implications
      For 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?
Could you be liable for complaining
 about someone else’s employee?       • If you give a bad reference
                                        about an ex-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. Green
 Adapted 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
                                  A formula for an inference
  filled with a Protestant).          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   What does an untruthful
  fact for judge/jury to resolve.      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 Actions
Deserve 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.
 What Conduct Is Protected?
Possible Employee Motivations
• Joining, organizing or supporting a union.
• Other concerted employee action for mutual aid.
• Asserting a right under an employment statute.
• Initiating or aiding investigation or enforcement
  of employment law.
• Initiating or aiding investigation or enforcement
  of other laws.
• Acting to support other public policies or interests.
What Conduct Is Protected?
Possible Employee Methods
       • Filing a claim or complaint with
         a government official or agency.
       • Filing a claim or a complaint
         w/in the employer organization.
       • Questioning or investigating
         possible wrongdoing.
       • Refusing to obey illegal order.
       Reasons for Caution
     In Extending Protection
• How free is employee in choosing
  method? Can he be insubordinate?
• Can employee forestall adverse
  action by opportunistic action?
• Could allegedly protected purpose
  be pretext for work a stoppage for other goals?
• Potential for workplace gridlock because of
  disputes over personal ethics and values.
Banaitis v. Mitsubishi Bank, Ltd.




   When an employee goes beyond
   (and against) the call of job duty
   Banaitis v. Mitsubishi Bank
    What Is Public Policy?
• How did Benaitis act in the “public interest?”
• Why is protection uncertain?
• The court‟s solution: General
  rule of protection for conduct
  in support of public policy.
• Sources of public policy?
• Risks of this approach?      Is it illegal for a parent company peak at
                                the records of a subsidiary’s customer?
                       Problems
• Employee objects to employer‟s method of making a product,
  on the ground that it presents a serious risk of injury to
  consumers. He writes a memo outlining risks.
• Driver receives call from boss, urging him
  to reach a certain destination “at once.”
  Driver refuses (or fails) to drive in excess
  of the speed limit.
• Employee receives call from friend‟s
  lawyer asking her to courthouse to testify for a TRO against
  friend‟s violent ex-boyfriend.
• Salesman fails to steer customers to a product employer is
  pushing because he believes it is not the best model.
    Austin v. Healthtrust, Inc.:
Texas Courts Hit the Breaks Again

• Pre-Austin common law in Texas: Sabine Pilot.
• How might Sabine Pilot be expanded for Austin?
• Do statutes make expansion
  of common law unnecessary
  or inappropriate?
• Advantages of legislation?
• Why no statutory protection
                                Will the whistle be silenced in Texas?
  for Austin?
Does Protected Employee Conduct
       Need a “Title VII?”
                              • Not all employment laws
                                include retaliation provisos.
                              • Not all industry regulations
                                include retaliation provisos.
                              • Arbitrary statutory limits on
                                employer coverage.
 Is protection one-statute-
at-a-time the best answer?
                              • Arbitrary statutory limits on
                                employee purpose and method.
  Wichita County v. Hart




What Happens If the Employee Misfires?
Wichita Cty.: If an Employee’s
 “Report” Is Off the Mark
• Alleged protected conduct?
• Statutory protection?
• The statutory limit?
• Does good faith mean right?
• A combined subjective/        Does a badge mean a higher
  objective standard.            standard of knowledge?


• Must employee be without malice?
Burlington Northern v. White




Adverse Actions Short of Discharge
Retaliatory Adverse Actions:
What Actions Are Unlawful?
                         • The problem of ongoing relations
                           after whistleblowing.
                         • An “any adverse difference in
                           treatment” approach?
                         • A “material” action approach?
                         • Pre-Burlington Northern 5th Cir.
 In this case, the “A”     approach: “Ultimate employment
stands for “Agitator.”
                           actions.”
   Unlawful Adverse Actions:
  “Employment” Actions Only?
• Must action affect terms or
  conditions of employment?
  Compare §§ 703(a), 704(a).
• How might employer retaliate
  without affecting terms and
  conditions of employment?
                                    Can what an employer says
• Court: Sec. 704(a) not limited    hurt you after you’re gone?

  to actions affecting terms and conditions with the
  defendant employer.
  Unlawful Adverse Actions:
 How Severe Must Action Be?
• Reasonable employee would
  find the action materially
  adverse.
• Materially adverse means it
  “well might have dissuaded
  a reasonable worker from”     Would the threat of such action
  protected conduct.            deter her from blowing the whistle?


• Might be less than “ultimate employment action”

				
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