Legislative Briefing Kit: Wrongful Discharge


INTRODUCTION TO WRONGFUL DISCHARGE 

There are 80 million people employed in the private sector of the American economy.  1 Only about 20 million of these are union members protected from unjust dismissal by collective bargaining agreements. The remaining 60 million are employed "at will".  2
"At will" employees serve at the unfettered discretion of employers. They can be fired for any reason, even a bad one, or for no reason at all.  3

Unfortunately, employers have frequently exercised this discretion in an arbitrary and unfair way. In one all too common example, Mrs. Dorothy Jamison was fired from her job as a supervisor in a Philadelphia nursing home after 10 years of service because she called in two hours late to advise her employer that she was unable to come to work because her brother, with whom she lived, had died. Other employees have been fired for protesting the concentration of carcinogenic saccharin childrens' aspirins  4 for refusing to vote as their employer wished,  5 to avoid paying contractually earned commissions,  6 for refusing to falsify medical records,  7 and a host of other equally unjust reasons. 

The magnitude of the problem is enormous. Two million at will employees are fired every year. When impartial arbitrators are given the opportunity to review termination decisions, half of them are found to be unjust. Experts believe that at least 150,000 people are unjustly fired every year.  8
The costs of this injustice are enormous. The financial hardship imposed on workers and their families is severe, but the financial loss is only the beginning. The stress caused by trying to support oneself and one's family without a job, and the loss of self-esteem caused by being fired, combine to drive many fired workers to alcoholism, mental illness, and even suicide.  9 

The answer to this injustice is legislation providing that all employees can be fired only for just cause.

QUESTIONS AND ANSWERS: WRONGFUL DISCHARGE

Doesn't such legislation interfere with an employer's right to manage its business?
An employer has a legitimate right to manage its business at it sees fit. That right, however, is not unlimited, and cannot be exercised in a manner which denies fundamental American values.

Employers do not have the right to discriminate on the basis of race, sex, or age in employment decisions. They should not have the right to fire workers without a legitimate reason.

Why is this a civil liberties problem?
Free expression, equal protection, and due process are the basic rights of all Americans.When the government infringes upon these values, it is a violation of the Constitution.It is not a violation of the Constitution for a private corporation to infringe upon these values since the Constitution limits only governmental action. The loss of freedom to an individual, however, is just as great when it is done by a corporation as when it is done by the government. The potential loss of freedom to all citizens is also just as great. America's corporations have grown to a level of size and power undreamed of by the framers of the Constitution. A number of corporations are wealthier than most countries, and dwarf state and local governments. 

Progressive organizations have long opposed racial discrimination in employment and corporate censorship of whistleblowers in the private sector, even though these practices do not violate the Constitution. Corporate policies which inflict penalties without due process also warrant our opposition.

Wouldn't the cost of compliance constitute a burden on employers which would raise prices to consumers and make American industry less competitive?
Protecting employees from unjust discharge will not hurt American industry, and may even help it. The costs of arbitration are relatively small, and the requirement that employees share the cost will minimize the number of hearings. The overall cost will not constitute a significant burden on employers. 

This small cost may be more than outweighed by benefits which industry would receive. Evidence from a number of sources shows that industry can prosper by treating workers fairly.

  • Unionized employers have been providing these protections to their workers for decades. While employers frequently complain about various constraints imposed by unions (such as work rules), complaints about firing only for just cause are conspicuous by their absence. Nor has there been a single recorded case of an employer offering any inducement to a union in exchange for dropping this requirement.  10  
  • Many non-union employers have voluntarily adopted policies of firing only for just cause. These include such spectacularly successful companies as IBM. They adopted these policies because treating employees fairly increased their effectiveness and profits. 
  • Virtually every other industrialized nation has adopted rules similar to those contained in this policy. Two of the most notable are West Germany and Japan.  11 These countries have not found the burden of fair play difficult to bear, as shown by their outstanding success in international trade competition.

Wouldn't the hearings be very complicated and expensive?
No. The issues in such cases are usually fairly straightforward, and the arbitration process has for years demonstrated that it is possible to resolve labor discipline disputes fairly at a reasonable cost. Existing arbitration organizations (such as the American Arbitration Association) already handle thousands of these cases annually (mostly in the context of collective bargaining agreements). An experienced corps of neutral labor arbitrators has learned to conduct fair hearings incorporating the key elements of due process (notice, compulsory discovery, confrontation and cross­examination) without becoming mired in the time consuming and costly legal proceedings that typify judicial proceedings. A labor arbitration can frequently be resolved in 3-6 months, at a cost of approximately $1500. They are frequently held without attorneys (the arbitrator will draw out the relevant evidence). Both labor and management agree that the results are generally fair to both sides.

Workers who lose their jobs are already eligible for unemployment compensation payments. Why is anything more needed?
Unemployment compensation falls far short of complete protection for workers who have lost their jobs.

  1. Unemployment compensation payments have a ceiling. While this ceiling varies from state to state, most workers' UC payments are signifiantly less than their former paycheck. 
  2. Unemployment compensation payments are of limited duration. While most people are able to find another job before their payments end, many are not so fortunate. 
  3. Even where a worker finds a new job immediately at the same pay, there are economic losses, such as seniority, accrued benefits (vacation, etc.), and vested pension and profit sharing plans. 
  4. Unemployment compensation does nothing for the human costs of losing one's job.

Isn't this creating a statutory right to a job?
No. The proposed statute would not require the government or private industry to create a single job. It would not require that any employer give a job to a person the employer did not feel was qualified. And it would not prohibit any employer from eliminating a job if it was no longer needed. 

All this statute would do is prevent people from being fired from their jobs, unless they have done something to justify it.

If employers are voluntarily adopting policies of firing only for just cause, isn't a statute unnecessary?
Unfortunately, only a minority of companies have adopted such progressive policies. There is no assurance that the other companies ever will. There are reasons to believe that many businesses will never adopt such a policy.

Won't this prohibit employers from having layoffs or closing plants when it's required? 
No. The body of arbitration decisions which has evolved to define just cause in the context of collective bargaining disputes make it clear that there is no violation of employees' rights where their job was eliminated for economic reasons. 

Economic terminations can also be specifically excluded from the definition of discharge, as they are in the ACLU model statute.

Can't "Whistleblower" laws and similar laws tailored to the specific wrong solve the problem without taking as much authority away from the employer?
No. The number of unjust reasons for firing an employee is virtually unlimited. To prohibit each one specifically would require literally dozens of statutes (and even then would be incomplete). 

The only practical solution is to have a general statute requiring just cause for firing.

Doesn't this type of legislation hurt the union movement, thereby hurting working people?
Whether wrongful discharge legislation would help or hurt the unions is far from clear. It would provide all workers a benefit currently enjoyed only by those who are organized, thereby removing this from the list of benefits a union could offer in a representation election. The union could still offer many important benefits, such as collective bargaining over wages and working conditions, representation at grievance proceedings and termination proceedings under the model act, and negotiation over economic terminations such as layoffs and plant closings. 

Wrongful discharge laws also offer unions certain benefits. Unions currently lose many certification elections. One reason is that most worker/voters have no experience with the union on which they are voting. If this proposal becomes law, unions could represent workers who were not union members at arbitration hearings. This could build the experience and good will needed to win a representation election. The success of the American Federation of State, County, and Municipal Employees (AFSCME) in organizing government employees with civil service protections against wrongful discharge supports this view.

Isn't it unfair to deprive unjustly fired workers of the right to a jury trial and a full range of remedies? (Commissioners' Model Act)
In a completely fair world all workers would have the right to a just cause for discharge standard and an affordable jury trial providing the full range of remedies. 

The reality, however, is that we may have to choose between the present system, under which over 95% of those unfairly fired get nothing,  12 and a system where everyone unjustly fired is reimbursed for their lost pay and benefits. 

Given this situation, surely the fairest choice is for all to receive some protection.

CURRENT LEGAL STATUS

Numerous attempts have been made to challenge the doctrine of employment at will in the courts. Although the doctrine is common law which was created by judges, and which judges have the authority to change, these challenges have had limited success.

Only in 3 narrow categories have some courts been willing to limit an employer's right to fire arbitrarily.  13

1.Where an employer has agreed to other employment terms. 

If an employer has signed a written employment contract guaranteeing employment for a fixed term of years, or guaranteeing not to fire without just cause, this contract may be enforceable by the employee. The reasoning is that the parties have the right to a legally enforceable agreement which reflects their mutual desires. 

This would logically create a broad exception to the general rule whenever the employee could show that his employer had agreed that his employment was not at will. One common example would be where the employee handbook states that employees will be fired only for just cause, or gives specific grounds or procedures for termination.  14 Another would be where the employer makes oral assurances of job security. 

Employers, however, can easily avoid liability under this theory merely by making it clear in their employee handbooks and other written materials that employment is terminable at will. 

2.Where the employer's reason for firing violates public policy. 

This once appeared to be a promising legal trend. Initial decisions provided redress to employees who were fired for filing a workers' compensation claim,  15 for refusing to give perjured testimony,  16 and for serving on a jury. 17 

Again, however, the promise went unfulfilled, as many courts defined the public policy exception so narrowly as to render it nearly useless. Among the many situations where courts refused to find that a firing violated public policy are filing a complaint with state regulatory authorities regarding illegal stock manipulations, 18 refusing to vote as the employer wished  19, and refusing to give false information to federal inspectors. 20

3.Where the employee is a member of a protected group.

Federal legislation now prohibits employment discrimination against a number of groups including racial minorities, women, the elderly, and the handicapped. 

Millions of employees, however, do not belong to any of these protected groups. 

Moreover, even employees who do belong to a protected group are protected only from being fired because of their race, sex, etc. If they are fired unjustly for any other reason, they have no protection. 

Overall, thirty years of legal challenges have failed to solve the problem of unjust dismissals. Legal experts do not believe this will change in the future. New laws are needed.

The only state which currently has a comprehensive wrongful discharge statute is Montana.  21 While the rights provided by this statute are good, its reliance upon litigation for enforcement is a major liability (see commentary to ACLU model act).

ACLU MODEL STATUTE

A number of bills have been introduced in various state legislatures to protect workers from unjust dismissal.  22 Although they all have the same objective, they vary a great deal in their approaches to implementation.

The following proposal is an attempt to select the best features from each bill. Some affiliates will strike the political and administrative judgments differently, and the proposal should be viewed as a guide, not a finished product.

A. Summary of the Statute

Employers with more than 5 employees are prohibited from discharging employees without just cause.

The statute adopts the "common law" meaning of just cause which has been developed over many years by labor arbitrators. The essence of this standard is that the employee's conduct must adversely affect their job performance in a significant way.

This statute affects only employees who are discharged because of their conduct (inadequate quantity or quality of work or breaking company rules). Decisions by employers to eliminate jobs for economic reasons (layoffs, reductions in force, plant closings and relocations, etc.) are not affected.

Employers are required to notify employees at the time of discharge of the reasons for the discharge and to confirm this in writing within 15 days.

Employees who believe that they have been fired without just cause may file a complaint with the state employment relations commission within 30 days of receiving the written confirmation.

The commission shall appoint a mediator within 10 days to resolve the dispute.
If the dispute is not resolved within 30 days of the appointment of the mediator, the employee may opt for binding arbitration.

The arbitrator shall be selected from a panel of non-state employees maintained by the commission. The arbitrator's fees and expenses shall be divided equally by the parties until the employee has contributed one week's take home pay. All additional expenses shall be paid by the employer.

The arbitrator shall hold a hearing within 60 days to determine whether there was just cause for the discharge, and shall announce a decision within 30 days of the hearing.

The arbitrator's award shall be final and binding and may be enforced by court order if necessary.

UNJUST DISCHARGE BILL

B. Complete Statute

A bill to prohibit the unjust discharge of certain employees; to provide for mediation and final and binding arbitration of these cases under certain circumstances; to provide for the selection and payment of arbitrators and for their authority; to prescribe the procedure for certain hearings; and to provide for the enforcement and review of awards of arbitrators.

THE PEOPLE OF THE STATE OF ______ ENACT:

Sec. 1. For the purposes of this act, the words and phrases defined in sections 2 and 3 have the meanings ascribed to them in those sections.

Sec. 2. (1) "Commission" means the employment relations commission created by Act no. ______ . (The name of the appropriate agency will vary from state to state).

(2) "Discharge" means an involuntary dismissal from employment. Discharge includes a resignation that results from an improper or unreasonable action or inaction of the employer.

"Discharge" does not include termination of employment for economic reasons such as layoffs, reductions in force, or the closing or relocation of all or part of a business.

Sec. 3. (1) "Employee" means any person who has worked for an employer for not less than 20 hours per week except -
(a) Persons who are protected by civil service or tenure against unjust discharge.

(2) "Employer" means a person or an organization that employs not less than 5 persons.

Sec. 4. (1) An employer shall not discharge an employee except for just cause.
The following acts shall under no circumstances be considered just cause.

1.Exercise of rights under the First Amendment to the United States Constitution.

2.Exercise of other legal rights or civic obligations.

3.Revelation of what the employee in good faith believes to be illegal conduct by the employer.

4.Good faith refusal to engage in illegal conduct requested by the employer.

(2) An employer who discharges an employee shall notify the employee orally at the time of discharge, and in writing by registered mail within 15 calendar days after the discharge, of all reasons for the discharge.

Sec. 5. (1) An employee who believes that he or she has been discharged in violation of section 4(1) may file by registered mail a written complaint with the commission not later than 30 calendar days after receipt of the employer's written notification of discharge as provided in section 4(2). The complaint shall contain the names, addresses, and telephone numbers of the employer and of the employee, the date of the discharge of the employee, and a short statement of the reason for the filing of the complaint.

(2) If an employer fails to provide the discharged employee with a written notification of his or her discharge and the reason for it, the discharged employee may file by registered mail a written complaint, as described in subsection (1), with the commission not later than 90 calendar days after the discharge.

Sec. 6. (1) Upon receipt of complaint from a discharged employee, the commission immediately shall appoint from its panel of mediators a mediator to assist the employer and the discharged employee in attempting to resolve their dispute.

(2) If the dispute is not resolved within 30 calendar days after the commencement of mediation, the mediator shall explain to the employer and the discharged employee the process and purpose of final and binding arbitration and the optional methods of selecting and compensating an arbitrator, as described in sections 7 and 8.

(3) After the option of arbitration is made available to the discharged employee pursuant to subsection (2), the employee may request a continuance of mediation if he or she believes that a mutual resolution of the dispute is possible. If a mutual resolution is not likely, the discharged employee may file by registered mail a written request with the commission for arbitration of the dispute, together with a statement of the method, pursuant to sections 7 and 8, that he or she desires of selecting and compensating the arbitrator.

Sec. 7. An arbitrator for a case brought under this act may be selected from 1 of the following 2 alternatives:

(a) Upon the request of a discharged employee, the commission immediately shall select from a list that it maintains of impartial, competent, and reputable arbitrators who are not employees of this state, 5 persons as nominees for arbitrator. Within 10 days after receipt of the names of the nominees, the employer and the employee may each strike peremptorily the name of 2 nominees. If the employer or employee does not return the list within the 10-day period, then each person whose name appears on the list shall be considered to be acceptable to that party. Within 7 days after this 10-day period, the commission shall designate 1 of the remaining nominees as the arbitrator. If each nominee who is considered to be acceptable by the employer and the employee declines or for any reason is not able to serve as arbitrator, then the director of the commission shall appoint an arbitrator from other members of this panel of arbitrators without the submission of any additional lists to the employer and the discharged employee.(b) The employer and the discharged employee may select as arbitrator any person who is acceptable to both parties.

Sec. 8. (1) The employer and employee shall share equally the fee and expenses of the arbitrator until the employee has contributed a sum equal to one week's take home pay. All additional expenses shall be paid by the employer.

(2) A party who produces a witness at the arbitration hearing shall bear the expenses, if any, of that witness. Other expenses similarly shall be borne by the party incurring them.

Sec. 9. (1) Within 60 calendar days after his or her appointment, or within further additional periods to which the parties may agree, the arbitrator designated pursuant to section 8 shall call a hearing and shall give reasonable notice of the time and place of the hearing to the employer and the employee.

(2) The arbitration may proceed in the absence of an employer or the employee, who, after due notice, fails to be present at the hearing and who fails to obtain an adjournment of the hearing, as provided in subsection (3). An arbitrator shall not grant or deny a grievance solely on the default of a party. Rather, the arbitrator shall require the opposing party to submit evidence, as necessary, for the rendering of an award.

(3) The arbitrator, subject to section 10 and for good cause shown, may adjourn the hearing upon the request of a party or upon his or her own initiative, and shall adjourn the hearing when both parties agree to the adjournment.

Sec. 10. (1) The proceedings shall be informal. The arbitrator may conduct the hearing in whatever manner that he or she believes will permit the full and most expeditious presentation of the evidence and arguments of the employer and the employee. Technical rules of evidence shall not apply, and the competency of the evidence shall not be considered to be impaired by the informality of the proceedings. The employer and the employee, though, may not submit a new or different claim to the arbitrator after his or her appointment without the consent of the arbitrator and all other parties. The arbitrator may receive into evidence any oral or documentary evidence or other data that he or she considers to be relevant to the issues under consideration at the hearing, and the arbitrator shall request the submission of any evidence that he or she considers to be necessary for a proper understanding and determination of the issues in dispute.

(2) The arbitrator may administer oaths and require the attendance of witnesses and the production of books, papers, contracts, agreements, and documents that he or she considers to be material to a just determination of the issues in dispute. For this purpose, the arbitrator may iss

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