The Employment At-Will Doctrine:Friend or Foe to HR?

MICHAEL C. JACOBSON, J.D.XPERTHR LEGAL EDITOR,

PRODUCT DEMONSTRATOR@HRTERMINATOR

Our agenda for today

• A history of the Employment At-Will Doctrine (EAWD) in context, including its dubious origin

• A close examination of the EAWD as it pertains to HR in the modern American legal system

• Does the EAWD work for you or against you?• Strike a delicate balance• Four steps to (relatively) safe

employee terminations

When did HR become the enemy?

• The Company You Work For Is Not Your Friend – Lifehacker.com• Five Reasons Why HR is NOT Your Friend – LinkedIN.com• HR is Not Your Friend, But It Can Be a Good Sparring Partner –

thebillfold.com• 10 Things You Should Never Tell Human Resources –

humanresources.com• Trouble at the Office: When to Go to HR and When Not to Go to HR –

cbsnews.com• HR is Not Your Friend – Rich’s Management Blog• HR is Not Your Friend – city-data.com• Whose Side is HR On, Anyway? – money.usnews.com• Is Your HR Department Friend or Foe?

– knowledge.wharton.penn.edu• Human Resources, Friend or Foe? – eSkill Blog• Why Human Resources Doesn’t Care About You –

undercoverlawyer.hubpages.com• Is HR Your Friend or Foe – The HR Bonfire• Your Employer Is Not Your Friend, And Young People Know It –

cheatsheet.com• HR is NOT Your Friend – The Buzz on HR

Proliferation of online griping andbickering between employees

• “Facebook Firings” are so routine that the phrase has become common legal parlance

• glassdoor.com• Job applicants ARE looking, so embrace it

• Two dozen states have rolled out Social Media privacy protection laws (and growing)

• Employees bickering online• Damage to your reputation• Damage to your bottom line• Hackers!

Inherent conflict betweenthe EAWD and your missionas an HR professional

• Do you really expect to get candid feedback if your employees always fear for their jobs?

• Do you really expect employees to see you as an ally in this environment?

• How can you accurately report to YOUR managers on things like morale or conflict if you’re not getting accurate information?

Differences b/w US and UK law relating to employee termination

• The EAWD does not exist in the UK• All (or most) terminations must be

“justifiable” in the UK• UK terminations are restricted by

statutes that dictate:• Advanced notice• Due process

• Failure to follow the law can result in an “unfair dismissal” in the UK

Blame it on the…Wood?

• The EAWD was “invented” by Horace G. Wood in “Master and Servant,” a legal treatise published in 1877

• Wood cited 4 cases in support, none of which actually did support the rule• And nobody bothered to check!

• Soon after the book was published, U.S. courts cited the rule in case decisions and it became accepted law

Why did this happen?

• American Revolution, War of 1812, still fresh

• Civil War was very recent

• Prevailing Laissez-faire business attitude at the time

• “Social Darwinism” and “rugged individualism”

• A formal move away from slavery, indentured servitude and ultimately, the UK

Why did it stick?

• Richard Posner, Overcoming Law (Cambridge: Harvard University Press) (1996)

• Richard Epstein, The Global Workplace: International and Comparative Employment Law (New York: Cambridge University Press) (2007)

• Alan Hyde, Working in Silicon Valley: Economic and Legal Analysis of a High-Velocity Labor Market (2003)

Science proves it works

• 1992 EAWD study: recognizing “wrongful termination” claims would cause ~3% decline in aggregate employment

• 2005 EAWD study: recognizing “implied contract” exceptions would cause ~1.5% decrease in employment

• Several international studies: “job security” actually has a negative effect on:• Employment rates• Home values and rent• Wages

The EAWD in 21st Century America

• About 70% of employees are retained at-will• Some strict EAWD states (think “red” states)• Some EAWD states where “at-will” does not

mean much (think “blue” states)• Montana the only true exception

• The other 30%:• Definite term contracts• Independent contractors• Seasonal/temporary workers• Retained by “public” employers• Miscellaneous

Exceptions to EAWD under the law

• All 51 jurisdictions (including D.C.) have their own interpretation of the EAWD

• Implied contract exceptions• Handbooks• Conversations• Documents• Tradition

• Verbal contracts• Lifetime contracts• Temporary contracts

But wait! There’s more…exceptions

• Public policy considerations• State statutes• State constitutional provisions• Municipal codes• Common law

• Implied covenant of good faith and fair dealing• “Tort” exceptions:

• Defamation• IIED, NIED• Fraud/Promissory Estoppel• Tortious interference with a contract

What is the at-will experience like?

• New hires are told of the EAWD prior to day #1• You can be fired at any time for any reason…

• An at-will acknowledgment (warning) is found in the handbook and written policies• You can be fired at any time for any reason…

• Any time there is a rules violation or discipline, employees are reminded of the EAWD• You can be fired at any time for any reason…

• What message are we sending?

Another defect in the EAWD

• We bludgeon employees with the EAWD, but it doesn’t really protect us from lawsuits• Rising cost of employment disputes• We can (and do) still get sued• We’re still more likely to lose in court

• Jurors more sympathetic to individuals• We still have to spend lots of time and money

to defend lawsuits, even if they’re frivolous• No real penalty in the U.S.

• EAWD is clearly good for our economy, but…

Here’s what I’m NOT advocating…

• That we scrap the EAWD• It’s good for the economy• It would not be practical

• That you stop telling your employees that they are at-will• That would be counterproductive

• That you give all of your employees a one-year contract• Remember “high-velocity” is good for

the economy and (likely) your business

How the EAWD Hurts Your Business

• People focus on behaviors that protect their jobs• Any given day can be your last• Discourages airing of ideas or grievances• Individuals less likely to be completely honest• Employees can be fired for nefarious reasons• Employees can be fired for no reason whatsoever• Employees (or ex-employees) driven to gripe on

glassdoor.com, among other sites• HR became the enemy

Here’s what I AM advocating…

• Think about the EAWD differently• Remember, the EAWD originated as a

protection for individuals, not companies

• Stop using it as a stick• You can resign at any time, for any reason…• Advance notice prior to resignation should

not be required in order to secure a reference • Pro tip: it’s not equitable

• Get rid of the “Sword of Damocles”

Here’s what else I’m advocating…

• Get rid of the mentality that firing for “no reason” is appropriate or OK• Sure, it’s legal, but…• Ill will drives lawsuits, not the law• Firing for no reason generates ill will

• Get rid of the mentality that firing for “any reason” is appropriate or OK• Only “lawful” reasons are permissible• Keep flexibility on timing (at any time…)• Restrict motivation

All that is nice in theory, but …

• Some employees should get an employment contract

• Be a team player but…stand under the Sword of Damocles? • Employees don’t buy that

• Create more internal champions• Will afford similar legal protections

• Contract terms: • Use a definite period of time

• Start small• Write termination language into the

contract in clear, broad language

OK…What else you got?

• Conduct “stay interviews” for existing employees• Like an exit interview, but without leaving! • Make frequent check-ins• Use your recruiters to reach out to current employees.

They’re recruiters for a reason!• Document feedback regularly

• Death of the APR• It’s just not frequent enough

in a high-velocity economy• Real-time feedback and solutions• Ditch the voluminous paperwork• HR pros spend ~200+ hours per year on this! • All other employees spend ~40+ hours per year

HR innovations by big players…

• Accenture announced no more APRs in July, 2015• Deloitte will follow a similar model going forward• CEB Research (a best practices insight and technology

company):• 9 out of 10 managers dissatisfied with APRs• 77% of HR execs don’t trust APRs• Most employees view APRs as rigged• Individual performance =/= business results• Don’t ask how your employees are doing,

ask how they’re contributing to the business• Fewer numbers, more substance• What about intangibles?

There’s More? Yup.

• Create an authentic pathway for anonymous feedback in the workplace• Gossip is just a fact of life• Acknowledge different personality types• Do you want it in a “suggestion box,” or do you

want it on glassdoor.com? • Once the genie is out of the bottle, you can’t

put it back in• Emphasis on “authentic”

One last thing…

• Develop a Termination Action Plan (TAP)• If you don’t have one yet, you’re skating on thin

ice every time you fire someone• Should involve multiple people in the

organization for checks and balances• Policy, train, document• Execute consistently

• Four steps to (relatively) safe terminations in an employment at-will economy

Step 1: Why?

• Articulate a business-related reason for termination every time• If your reason is vague, so is your defense• Performance, profitability, attendance,

productivity, insubordination, subversion, financial considerations, waste, misconduct

• Can you prove it with documentation? • Have you discussed it with your manager?• Did the employee get a second chance? • Does the punishment fit the crime? • How will it look to a juror?

Step 2: Assess Risk

• History of violence or threats?• History of complaints or claims internally? • Access to sensitive data or property?• Already griping on Social Media? • Already hired an attorney? • Likelihood of a dispute?• What about solutions?

• Severance• Release of claims• Mediation/arbitration

Step 3: Execute

• Discuss with IT• Discuss with building security• Plan ahead for an optimal time• Conduct an in-person termination

meeting with a witness for support• Four Cs: clear, concise,

consistent, compassionate• Review contractual obligations

• Retrieve company property• Protect the individual’s dignity

Step 4: Follow up

• Recent webinar focused on just steps 3 and 4! • Final paychecks – be early! • Memorialize the conversation with a certified letter,

return receipt requested• Remember the 4 Cs• Provide clear post-termination benefits

information• Provide contact info for questions• Provide information about job

replacement/relocation/training programs, if any• Lay the foundation for a good reference to help

the individual get back on his/her feet

Bring it on home! • Proactive

• Think about the EAWD differently• Don’t condition a good reference on advanced notice if

you aren’t willing to reciprocate• Eliminate firing for “no reason” or “any reason”• Create internal champions• Contracts, stay interviews, new ways to measure

performance, gather feedback

• Reactive• Respond to complaints and concerns in a thoughtful

and meaningful way. Instill faith and confidence! • Create and enforce your TAP when the time comes,

but be consistent

Questions, comments?