Why At-Will Employment is Bad for Employers and Just Cause is Good for Them

Abstract

Many employers believe that if they set up an at-will system and police it vigorously they will be safe from lawsuits. However, despite almost universal acceptance of at-will relationships in the United States, employment litigation is on the rise and is now a large percentage of cases on court dockets.

Dissatisfaction with at-will doctrine has led courts to develop common law contract and tort doctrines that are mere patches on an unstable system. They are viewed as exceptions to at-will and thus must fit within that system yet not destroy it. They are also similar to patches in that they are more a product of incrementalist legal development than logic.

Distortion of the law that leads to greater complexity and uncertainty are not the only costs created by at-will. In fact, its greatest costs may be its effect on employers in the management of their workplaces. In order to gauge its costs, we must start by asking what most employers gain from having an at-will system. The greatest benefit would be if most employers frequently wanted to fire their workers for a bad reason or for no reason. By now most bad reasons for firing workers have been made illegal, so an at-will regime is limited to firing workers for a good reason or no reason. It also seems unlikely that most employers want to fire their employees for no reason, because, by definition, this means firing good employees.

If these assumptions are correct, then employers are bearing the cost of exercising the vigilance necessary to keep and defend a system that is not useful and may not even be much used. What is the benefit to employers of this strategy? And what are the costs?

Keywords: At-Will, Labor, Employment, Law, Work

JEL Classification: K31, L23, M51, M53, J53, J63