13: Employment Law
13.1 Introduction
LEARNING OBJECTIVES
- Understand the principle of employment at will and the exceptions to the doctrine.
- Learn important employment laws that affect businesses across industries.
- Examine the laws that govern the relationship between employers and employees who belong to a union.
Until the early Twentieth Century, there were not many laws that regulated the employer-employee relationship. The belief was that the free market system would ensure that employers treat employees fairly or else they would not be able to attract and keep good workers. However, the reality of the Industrial Revolution proved that the traditional employment relationship favored the interests of the employers at the expense of workers, including children. As a result, Congress and state legislatures started passing employment and labor laws to protect the interests of employees. Today, employment law is a very robust area of the law that impacts businesses across industries.
13.2 Employment At Will
In general, employees are free to quit a job at any time for any reason, with or without notice. Similarly, employers are free to end a worker’s employment at any time for any reason, with or without notice. This principle is called employment at will . This doctrine is based on the concept that employment is a form of an implied contractual relationship. Therefore, as long as both parties want to continue their contract to work together, the law presumes they will. When one party does not want to continue, then they may end their working relationship.
There are five major exceptions to the employment at will doctrine:
- Contract;
- Good cause;
- Discrimination against an employee based on membership in a protected class;
- Violation of public policy; and
- Whistleblowing.
Figure 13.1 Exceptions to the Employment at Will Doctrine
Contract
Employers and employees may modify the employment at will doctrine through contract. In addition to formal, written employment contracts, courts have also enforced oral promises made during the hiring process. Promises made to job applicants are generally enforceable, even when the promises are not approved by the employer’s executives or upper management. Therefore, it is important when hiring employees that companies do not make promises that can be reasonably interpreted to be guaranteed employment or employment for a certain period of time.
Employee handbooks also may create implied contracts that modify the employment at will doctrine. Often handbooks state that the company follows a progressive discipline policy and that employees may only be fired for “just cause” or after receiving warnings, notice, hearing, or other procedures. Policies such as this create an implied contract that require businesses to follow the progressive discipline policy before terminating a worker’s employment, in absence of good cause.
Good Cause
The definition of “good cause” for terminating the employment of a worker varies from state to state. And businesses often define “good cause” in their policies. However, most states recognize the following as good cause to fire an employee without going through progressive discipline first:
- Theft;
- Fraud;
- Damage to company property;
- Being under the influence of illegal drugs or alcohol at work;
- Fighting;
- Threats against other employees or customers;
- Domestic violence;
- Having weapons on premises;
- Unethical behavior; and
- Willful or malicious misbehavior.
Poor performance also constitutes good cause for firing an employee. Employers need to be careful, however, to document the performance issues and to engage in progressive discipline when appropriate. If an employee has not been counseled that their performance is unsatisfactory, then the employee is more likely to bring a charge of wrongful discharge against the employer. Courts are more likely to rule that poor performance constitutes good cause when an employee has notice of the performance issue(s) and has a reasonable opportunity to fix them.
Discrimination Against a Protected Class Member
Anti-discrimination laws make it illegal to take adverse actions against a member of a protected class based on their membership in the class. A protected class is a group of people who are protected by laws that prohibit discrimination based on a personal characteristic, such as race, color, religion, gender, national origin, age or disability.
As discussed in Chapter 14, adverse actions include failure to hire, failure to promote, demotion, and termination of employment. That is not to say that someone who is a member of a protected class may never be fired. Rather, it is illegal to fire them because of their race, color, religion, gender, national origin, age or disability.
Violation of Public Policy
The public policy exception occurs when an employee is fired for:
- Refusing to perform an action that violates a law or public policy; or
- For exercising a legal right or advancing a public policy.
In other words, an employee can’t be fired for refusing to do something illegal or doing something legal that the employer does not want done. For example, an employee cannot be fired for not falsifying reports, for refusing to testify falsely in court, for filing a workers’ compensation claim, or for serving on a jury.
Whistleblowing
A whistleblower is an employee who reports the employer’s illegal behavior to a governmental or law enforcement agency. Many different laws have whistleblower provisions that encourage people who have knowledge of illegal activity to report it without fear of retribution or losing their jobs. Whistleblower protections apply to good faith reports of wrongdoing, even if it turns out that the activity is not illegal. However, whistleblower protection does not usually protect employees who make reports that they either know, or should have known, do not include illegal activity.
13.3 Common Employment Law Torts
Employees may assert various tort claims against their employers. Tort claims are often decided on the basis of generalized duties of care rather than specific types of conduct prohibited by law. Tort claims vary state to state but most states recognize the following claims between employers and employees:
- Negligent hiring, retention, and supervision;
- Negligent investigation;
- Negligent infliction of emotional distress;
- Intentional infliction of emotional distress (also called outrageous conduct);
- Tortious interference with contract and/or prospective business advantage;
- Defamation (libel and slander);
- Invasion of privacy; and
- Fraud.
Torts are discussed in more detail in Chapter 9. However, it is important for businesses to understand that they owe their employees and managers a duty of care. If they violate that duty, then they may be subject to legal liability.
13.4 Wage and Hour Laws
The Fair Labor Standards Act (FLSA) is a federal law that was passed in 1938 that nationalized standards for pay, record keeping and child labor for businesses with two or more employees that engage in interstate commerce. The FLSA prohibits “oppressive child labor,” which means that children under fourteen cannot work unless it is a family business, babysitting, newspaper delivery, entertainment, or agriculture. Fourteen and fifteen year olds are permitted to work limited hours after school in nonhazardous jobs, such as retail and restaurants. Sixteen and seventeen year olds may work unlimited hours in nonhazardous jobs.
Figure 13.2 FLSA Facts
The FLSA also provides for a national minimum wage and a standard forty hour work week. Under the FLSA, an employee who works more than forty hours is entitled to overtime pay. However, the Act provides exemptions to the overtime requirement. Employees who earn more than a certain amount and perform specific types of work are not entitled to overtime pay.
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