Contracting for Employment: The Limited Return of the Common Law

Contracting for Employment: The Limited Return of the Common Law

Description

Over the past ten to fifteen years, the common law has returned to the field of the law governing employment. A number of factors had contributed to the relative obscurity of the inherited presumption of at-will employment as the "norm" in the American workplace. The decline in the role of the common law resulted, in part, from the emergence of unions and their collective bargaining powers, the dramatic growth in the public sector and its attendant constitutional constraints upon employee discipline and discharge, the emergence of a strong regulatory apparatus overseeing the public consequences of private employment, and the far-reaching constraints upon managerial discretion that fell under the general rubric of antidiscrimination law. In part as well, the common law receded in importance because of the growing disutility of doctrinal components such as the independent consideration requirement in contract law and the constricted proof for tortious interference with professional opportunity. But re-emerge the common law did. Unions dwindled, leaving open a wide array of claims of deep injustice to the lifelong aspirations of working people. The economy turned down and then entered a period of rapid reorganization. The post-War pattern of relatively stable career employment for key sectors of the workforce began to fray. The result was a re-emergence of claims uncomfortably fitted into the familiar common-law forms of contract and tort. There is little dispute about the re-emergence of a common-law component to the overall legal regulation of the workplace. There is also a general consensus that the application of legal doctrine to these new employment claims has been rather helter-skelter. As many commentators have noted, there is more than a touch of doctrinal peculiarity accompanying decisions purporting to rest on formal contract law but presuming that all of the elements of a contract exist, or those that find a public policy tort based on highly contestable articulations of basic societal values. Early scholarly reviews of the renewed common-law engagement with the at-will rule focused primarily on chronicling the fate of this century-old doctrine at the hands of the contemporary common-law courts. To a large extent, these early reviews drew heavily from labor law scholarship and were highly influenced by the strengths and limitations of analogies to the union sector. As a general matter, these reviews applauded efforts at providing legal protection to the job-holdings of unorganized workers, with the common-law courts serving as a rough proxy for the grievance and arbitration systems found in union shops. The publication of Paul Weiler's Governing the Workplace in 1990 marked the fullest expression of the labor-law based review of the emerging common law. Weiler's book also represented the first systematic effort to bring independent tools from comparative law and from economic analysis to bear on the nascent debates over the new common law. Weiler and other commentators drew on the labor economic analysis of post-War American employment as reflecting a “life-cycle” or “career-term” relationship. The conception of a career-term helped explain some of the anomalous features of employment contracts, most notably the tendency for wages to rise steadily over an employee's career even when there are no increases in productivity, and the manifest inability of older employees to find comparable employment if fired or laid off. “Life-cycle justice,” to use Stewart Schwab's title from a critically important Michigan Law Review article, also provided a coherent explanation for the apparent solicitude of common-law courts for late-career employees, regardless of the actual doctrinal explanation for their holdings. Although the life-cycle model holds promise as a justificatory explanation for why the courts may be acting as they do, Schwab went one step further and tried to fashion a doctrinal coherence in the common law based on an imputed and intuitive judicial understanding of this economic model of the employment contract. This in turn prompted a strong response from Professor Verkerke, not only challenging the empirical validity of Schwab's claim of doctrinal incorporation of the life-cycle model, but arguing for the desirability of the continued use of the at-will default rule. According to Verkerke, a departure from the at-will presumption not only is uncalled for, but also would violate the desires of contracting parties as evidenced by an empirical study of what parties actually contract for. I wish to enter this debate, even though cognizant of its limitations. The career-term model of employment has suffered serious disrepair in the past fifteen years. In fact, the disruption of long-term employment relationships is what prompted the sudden development of doctrinal pressure on common-law courts, as mid- and late-career employees sought legal redress for their dashed employment expectations. Economic reorganization has brought with it an increase in part-time, more marginalized employment even among the fully employed. Nonetheless, it is those employees who continue to work in the career-term sector of the workforce that bring the current crop of cases before the courts. And the re-emergence of the common law is the predicate for the liability judgements observed in studies by the RAND Corporation and Professor Edelman, which in turn serve as the backdrop for the contracting behavior of employers surveyed by Professor Verkerke. My efforts in this chapter will be focused on the incompleteness of the contractual bargain at two critical times in a life-cycle relationship: at the formation of the contract and at its final stages. My aim is to draw upon some of the insights available from economics, psychology and game theory to illuminate the limitations of narrow contractual interpretations of the employment relationship. I will conclude by arguing for a limited “penalty default” in the interpretation of early-stage contract formation and for an analysis of late-stage employment relatively untethered to the initial contract formation. This paper aims to manipulate default rules so as to allow a robust contractual voluntarism at the early stages of employment. I then argue for the limitation of contractualism for long term employment relations and the need to develop administrative models to offer some meaningful shelter for employees who experience late-stage discharges.

Source Publication

Global Competition and the American Employment Landscape: As We Enter the 21st Century: Proceedings of the New York University 52nd Annual Conference on Labor

Source Editors/Authors

Samuel Estreicher

Publication Date

2000

Contracting for Employment: The Limited Return of the Common Law

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