In this series, you’ll learn more about the "employment at will" doctrine and what it means for you.
An introduction to employment at will
You are at your desk, and your stomach rumbles with fear and tension. You are finally going to do it. For months now, you have been looking at the status reports on Jim from accounting, and you have been noting his gradual but steady decline in performance.
He knows something is up, and he has been avoiding you whenever possible. But the company is in trouble, the whole industry is in trouble, and you need employees who are willing to work, not just show up from time to time. There is a knock at your door, and you tell Jim to come in.
"Jim, I’m afraid we’re going to have to let you go."
His first reaction is relief. But then, unexpectedly, he gets angry.
"Why me? What did I do? Where do I go now?!" he shouts. You wish he hadn’t left the door open, but you try to be as calm as possible.
"I’ll be more than willing to help you transition to a new employer, but as you know, the company is going through a transitional period, and we are being forced to do some downsizing. I’ve done a great deal of thinking about this, and I wouldn’t do it if I didn’t have to."
"Why are you doing this to me? You’re violating my rights!"
Eventually, he calms down and resigns himself to the situation. But you are nonetheless troubled. Aren’t his claims legitimate? What are his rights? And what are yours?
The hardest part of having employees is occasionally having to fire them. Sometimes it’s not so bad. Sometimes they simply stop coming, effectively resigning their position. Sometimes their sloppy, shoddy work or outright misconduct speaks for itself--and firing them is an act of justice that improves morale all around.
Often, the situation is much more complicated, and company protocol becomes a nightmare. It often falls upon a company’s human resources department to deal with problem employees. Human resources must determine whether an employee can be salvaged--and if not, how best to work within the law, agreements and policies to ensure a smooth termination.
As in all things, it is easiest to deal with a problem when there is a plan and everybody knows their responsibilities and expectations. In this series of articles, we will explore the ins and outs of the "employment at will" doctrine and try to come up with valuable strategies for overcoming its difficulties and planning ahead to avoid legal difficulties when investigating misconduct.
Whether from a union or nonunion perspective, everyone on all sides of the equation can benefit from a little clarity on this often muddy issue, and we hope to shed some light on what can be a baffling quagmire of conflict, pressure and frustration.
First of all, what is the employment-at-will doctrine? Most of us are familiar with it--at least what it means traditionally. Where employment at will applies, an employer can hire, fire, promote, demote, transfer, discipline or otherwise alter the terms of a worker’s employment at will--that is, for a good reason, a bad reason or no reason at all.
At least theoretically, an employer could tell each of his or her employees to pick a card from a deck of 52, and then fire everybody who doesn’t draw face cards. Perhaps the joker gets a cushy promotion. While not recommended (you won’t win any friends, and you may have a hard time getting people to ever work for you again), you’ll at least know who all of the lucky people in your office are.
But, as you might expect, there are definite limits to employment at will, and even warnings to keep in mind.
First, it is possible that employers and employees may agree somehow that employment not be at will. Such agreements may be expressed or implied--written, vocalized or just mistakenly assumed--depending on state law. Disputes usually arise from the language of an employer’s policies (contained in employee handbooks), through written agreements or from alleged verbal promises.
Second, illegal termination procedures aren’t protected, such as discrimination or revenge. Here’s where things get tricky. In between employment at will and the law is a whole mess of claims, counterclaims, lawsuits, disputations and confusion. It’s enough to make anybody scratch their head. However, coming to terms with the situation is not impossible.
Ways employment at will can be encroached upon
The materials your company produces speak for you. When you aren’t around, the guides, handbooks, publications and memos that your employees turn to for guidance are right there representing what you say. Permanently. Above, we defined the employment-at-will doctrine and the expansive rights it gives to an employer--at least in theory--as far as hiring, firing, promoting, demoting, transferring, disciplining or otherwise altering the terms of a worker’s employment. In this part, we will examine the ways in which employment at will can be trumped by careless management and the imprecise wording of documents.
If your goal is not to limit your employees’ employment-at-will status, your employee handbooks and manuals must not be drafted counter to what you intend. A poorly drafted employee handbook can be the difference between a good-hearted shake at the end of a term, and messy legal battles that no one really wants. It isn’t fair to your prospective employees to lure them in with false promises of unlimited job security, and it isn’t fair to your business to risk its integrity on correctable mistakes.
Keep in mind that the law varies from state to state. What’s true in California may not be true in Texas. By way of example, let’s take a look at case law in New York in order to examine the types of disputes that have come up. Remember: Your goal is not just to win, but to avoid the dispute in the first place. These examples will show you where problems can arise.
In New York, the situation got sticky in a 1982 case. The employment application for the publisher McGraw Hill (which incorporated the employee handbook) stated that the company’s "firm policy" was not to fire anybody except for a "just cause," and that the company would take "all practical steps toward rehabilitation or salvage of the employee" before termination. An employee was also given the same verbal assurance by the employer’s representative. When taking the job, the employee claimed he relied on these assurances, and the court held that he could therefore assert breach of contract.
A manual dispute happened again in 1999, in Waldman v. Nynex Corp. Even though the employer had put a strong disclaimer in the handbook that nothing inside altered the at-will employment status of its employees, the court ruled that there was something inside that most definitely did. The handbook said that whistle-blowers--employees with knowledge of illegal or fraudulent acts--would be protected if they came forward to discuss their concerns with a supervisor. Since that is what the employee had done, the court ruled that his termination was a breach of contract.
However, New York’s highest court had the final say (at least so far) on the issue in Lobosco v. New York Telephone Co. in 2000. The circumstances were similar to Waldman v. Nynex. But the court clarified the matter in this case, saying that if an employee was going to rely on a provision that protected them from getting fired for whistle-blowing, he or she must also be prepared to deal with the provision that says nothing in the handbook alters their at-will status. The court explained that "an employee seeking to rely on a provision arguably creating a promise must also be held to reliance on the disclaimer," and that "routinely issued employee manuals, handbooks and policy statements should not lightly be converted into binding employment agreements."
So what can we learn from all of this? In New York, prominent disclaimers are very, very important in your handbook. Without adequate disclaimers, a carelessly drafted handbook provision can get you into serious trouble. That’s not to say that some employers won’t actively choose to limit their employment-at-will rights. But, at least this should be a conscious decision--don’t be vague about where you stand.
Of course, that’s only the situation in New York, and the law in your jurisdiction might be different. But you can see how important an employee handbook or application can be, and how important it is to understand what contracts might be implicitly formed by careless wording.
Discrimination laws, and how they erode the employment-at-will doctrine
Now that we understand the ways in which employment at will can be limited by contractual literature, it’s time to take a look at the ever-expanding, ever-growing list of ways employers violate anti-discrimination statutes and judicially created employee protections. Each one of these is important to think about, and some might surprise you. Brace yourself. Here are some of the many traits courts in one or more jurisdictions have ruled are protected:
Family and medical leave
Genetic trait or test
Lawful consumable product
You have to assume that almost every termination at your business can be somehow challenged on the basis of discrimination. It’s not fair, but sometimes juries find against employers even without plausible evidence of intentional discrimination, merely because an employer and employee shared past animosity.
Since this is the case, one has to start thinking about the legal ramifications of employee misconduct as it happens, and make sure that the procedures in place for its investigation are pitch perfect. You may slide by with mediocre procedures 99 times, but it’s the 100th time that puts your company on the long list of employers successfully sued for discriminatory termination.
How can you inoculate yourself? Is the situation as hopeless as it seems? Should one just plan and prepare for the occasional lawsuit like one plans and prepares for the occasional trip to the dentist? Perhaps. But just because you know you are going to get your teeth cleaned this year doesn’t mean you stop brushing. There are common-sense ways to make sure that when your employees get fired, they get the velvet ax rather than the sharpened sword, and remember more of the good than the bad.
Think about it logically. Employees charged with misconduct are not all the same. For instance, some are guilty and some aren’t. Of those who are guilty, some are downright nasty and would do it again given half a chance, and some just made a one-time mistake. Some are otherwise hardworking and productive, and others are actually enjoying the time spent being investigated because it gives them a chance to catch up on their soaps. Some know lawyers, and others do not.
Every employment situation is also different. Some businesses have formal, even extensive workplace rules and procedures; others do not. Some are bound by one or more collective bargaining agreements; others are not. Some businesses aggressively enforce their written rules; others are more relaxed. Therefore, at a minimum, employers must know ahead of time how they will respond when confronted with misconduct, and must be consistent.
Juries are pooled from the real world, and in the real world there are more employees than employers. People want to be treated with dignity and respect, and only rarely should the employer want the situation to get personal. It’s in your best interest to be methodical and to at least give the appearance of fairness: You wouldn’t want to accidentally fire the wrong person, and you don’t want to get a reputation as a soulless tyrant. Jurors put themselves in the position of the person being fired and ask how they would want to be treated, even if they were "guilty" of the alleged offense.
When terminating an employee, consider the following. How would you fire a jury of your peers? What would you say to a collection of people with the ability to pull huge sums of cash right out of your pocket? You would probably go out of your way to be as considerate and thoughtful as possible. You might even take extra steps to avoid the situation entirely. Certainly, you would want the experience to reflect the best of your business, to be professional and positive, fair and impartial. You would want to err on the side of generosity and make sure that you knew all of the facts before sitting down.
Also consider the nonscientific, informal impression that union environments breed fewer discrimination lawsuits. Union employees typically know their side of the story will be heard. They have "just cause" provisions, and expect an investigation where they will be represented, culminating in a hearing in their honor.
Does this mean you should enthusiastically support collective bargaining in your business? Not necessarily. The point is to see whether typical collective bargaining agreement procedures can be implemented, even in a nonunion setting, to provide fair investigations and thereby cut down on claims of discrimination.
Replacing whim with cold, steely justice
You’ve thought about it, you’ve done the research, and you’ve decided that your usual policy of throwing darts at a picture of last year’s employee picnic is no longer the ideal method to determine who you are going to fire this week. The employees you really value are talking about maybe seeking employment elsewhere. It’s time to investigate alternative procedures. Perhaps you would like to fire only people who are flagrantly flouting the sensible rules you’ve struggled so long to put in place. Perhaps you would only like to fire people who are stealing from you, or who haven’t shown up in a month.
This is where a good, consistent program for investigating employee misconduct comes into play. If you want to create an atmosphere at your workplace of justice, equality and incentives for doing the right thing, there are at least four critical steps to conducting investigations that meet these qualifications.
These steps are (in chronological order): (1) notice of the rules and a notice of the charges; (2) an opportunity to be heard; (3) deliberation; and (4) rational decision-making. While these can be incredibly formal processes--or just something you are keeping in your head as you go along--they ought to be considered independent components and be separated by some amount of time, even if just a day, or sometimes even less.
Let’s look at each step separately.
(1) Notice of the rules and a notice of the charges
It’s not really fair to punish people for things they don’t know about. You want your internal justice system to mirror the rules of the outside world, and one of those rules is trying to make sure everybody knows what’s wrong and right. To keep your employees from falling back on claims that they weren’t informed, and that they "just didn’t know!" it is vital to provide notice of the rules upfront, before they have a chance.
Once you’ve made sure that everybody in your company knows what’s acceptable and what isn’t, then you can begin dealing with infractions. Once an employee appears to violate rules that are "on the books," you can consider levying charges.
Once you’ve told an employee you are concerned they may have messed up, you want to set a separate time and place to meet and discuss the matter. This means that even before you let the employee know that their every move is being watched, you ought to have done some preliminary investigation, even just to find the matter worthy of attention.
The notice can be long, formal and detailed, but it doesn’t have to be. It doesn’t even have to be written down at all. The size and form will depend on a number of factors, such as the severity of infraction that has been committed and the kind of organization in which it has been committed. Not every piece of misconduct will get the same level of attention, but very serious matters should be treated as such--very seriously.
There ought to be a delay between the notice of charges and any other action taken, so that your employee can consider the charges and think about how to respond. Should they get a lawyer? Should they contact their union representative? Should they meet with other co-workers? Should they find that all-important missing file?
Some amount of delay also contributes to the appearance of fairness. You don’t want to look like you are railroading your employees before they even have a chance to think about how to respond. Being confronted with charges of wrongdoing makes anybody nervous, and juries understand this.
But you don’t want to wait too long before taking action. If the crime is really serious, employees might start thinking about how to impede future levels of investigation. Should they shred those sensitive documents, close out their Swiss bank account and get a one-way ticket to Peru?
(2) An opportunity to be heard: the investigative interview
The initial interview with the suspected wrongdoer is the heart of most investigations. It is the most difficult and the most important means to getting at the meat of the matter. Everybody will conduct these differently, but you should really consider inviting another manager to the meeting to take notes. Consider asking the employee to review the notes at the end of the interview, inviting him to make any changes to them, and sign at the bottom.
Beware: The employee may have a tape recorder and not share that fact with you. As a general rule, employers should not conclude the interview until three questions have been settled: (1) Is there anything you wish to add? (2) Is there anyone else I should speak to or documents I should look at? (3) What would you do if you were me?
Union employees have the right to a union representative at any investigative interview the employee believes will result in disciplinary action. However, the employee cannot use this right to unduly delay the interview. If the union rep is unavailable, they have three options--choose another union rep, do the interview without representation or not do the interview at all, in which case you may tell them that any decisions will be made without their input.
The National Labor Relations Board frequently changes its mind as to whether these rights apply to employees in a nonunion workplace. Currently, they don’t.
(3) Due deliberation
Researchers have concluded that many employers are not very careful and consistent when it comes to punishing wayward employees. Since employers are forced to be judge, jury and executioner, it is imperative that they pay very strict attention to how they conduct themselves. Time should be spent. Foreheads should be knotted, brows should be furrowed, and consequences should be carefully weighed. An employer should wait until the investigation is completely over before coming to any conclusions, even if it intends to exonerate the offender. All evidence should be carefully sifted through, sorted, and considered. The appropriate level of discipline should be meaningfully assessed.
This doesn’t mean you should take forever. To everyone else, failure to reach a decision may mean that you’ve decided in favor of the employee. Delay is a decision itself. Usually not a very good one, either.
Once you’ve thought it through, it’s time to make your decision. That brings us to the next step…
(4) Rational decision-making
This article has been intended to convey a simple truth: Appropriate investigative procedures, coupled with an understanding of the risks and benefits of the employment-at-will doctrine, will ultimately lead to fairer discipline across the workforce--with all the attendant monetary and diplomatic benefits.
However, not all managers investigate employee misconduct with the same vigor, and this is a problem when it comes to discrimination lawsuits. It is important to consider why this happens.
Managers do not always react harshly to their subordinates’ supposed misconduct, even when it is serious. Often, it is because they have become dependent on them. Their subordinates perform some vital function and they therefore know that they can get away with murder. Their supervisors let them because they have no choice: Both of their careers are at stake. They may even go so far as to cover up for them, or blame their mistakes on someone else.
The problem comes into even sharper focus when somebody less vital is disciplined harshly for the same type of infraction. Then, the appearance of institutional unfairness may be overwhelming to a jury.
But that’s not all. Another factor that causes managers to discipline subordinates inconsistently is whether the poor performance is deemed to be a result of internal or external factors. Internal factors include things like personality, effort, attitude and education, while external factors are things that may appear to be the fault of the managers, things like the task being too difficult, a lack of adequate support or insufficient information. Managers tend to punish people more harshly when they consider infractions to be a result of internal factors. That’s not surprising: Otherwise, it’s the manager’s fault.
Finally, the outcome of situations also unfairly determines the level of punishment. If something terrible happens, companies look for a scapegoat. If serious malfeasance occurs but leads to nothing, sometimes it is perceived to be more trouble than it’s worth to investigate and discipline.
All of these factors contribute to a climate of inequitable decision-making, which can have serious legal consequences. Rational decision making insists that punishments follow infractions--consistently, appropriately and irrelevant of future consequences. Human resources has the unique ability to step in and take control--to intervene at every level to impose fairness where there is a potential for favoritism to take root.
If employees are terminated in a manner that that does not totally offend their sense of equity and fair play, they are less likely to sue. If they know the rules and see them applied without favoritism or discrepancy, they are less likely to make mistakes. If employees are happy and well-treated, companies will last longer and businesses will prosper. There will always be people who are upset about the loss of their job and who want compensation for insults and injuries--but to the extent that a workplace has a fair, consistent, open policy for dealing with terminations, juries are more likely to deliver favorable verdicts to employers.
The top five reasons companies lose
At core, the investigation of employees sets an ambitious goal: exposing misconduct and setting appropriate punishments. Even though employers have the right to fire their employees at any time for any reason, the lawsuit-happy society we live in can make firing even the most troublesome employee a challenge. Human resources professionals should consider the investigative protocols we have outlined, and seek to implement them as comprehensively as possible.
Remember Jim from the first part of this article? Remember how mad he got when suddenly confronted with the termination he was expecting? Imagine how the situation would have turned out had we applied what we know now.
Imagine the same situation--but now you are a canny, savvy human resources manager and you’ve been doing some reading. The first thing you do is send him a notice of the charges. You inform him formally that due to his recent poor performance, his presence is requested at an investigative interview. If your company is unionized, he will consider finding a union representative to accompany him.
During the interview, you confront him with the situation as you see it, and let him know the potential outcomes. You take notes and he does the same. The interview goes about how you’d expect, and when added up, the evidence certainly seems damning.
"Is there anything you’d like to add?" you ask.
"It’s funny," he says, "But I’ve actually been thinking about moving to a completely new field for some time now. I’m tired of numbers. I’ve always wanted to drive race cars."
"Is there anyone else I should talk to?" you ask.
"I wasn’t going to say anything," he says, "But there’s something you should know. As bad as my status reports seem, I’ve actually been doing 10 times worse. Patricia, my supervisor, has been covering for me because I’m the only one who knows how to use the computer database."
"Golly," you say, "that’s terrible. What would you do in my situation?" He shakes his head. He says he honestly doesn’t know.
You take some time to think about it, and you decide you still want to let Jim go. The next day, you call him into your office…but you get Patricia instead.
"Jim quit today," she says, "He joined a NASCAR pit crew." You aren’t surprised, and you’re glad she’s here. You’ve also got a notice of charges for her too now.
A significant body of research literature suggests (1) that there is significant room for improvement in the efficiency and fairness with which employers investigate and punish employee misconduct, and (2) that employer failings lead to unfair results and often to reversals of disciplinary actions by arbitrators. Employers (particularly smaller employers) can take steps to formalize their procedures to promote consistency in their procedures and fairness in their results. It doesn’t take a complete overhaul or massive restructuring campaign, but it does take concern, attentiveness and desire to change.
At least one professional researcher has concluded that employers can significantly reduce the number of arbitrations they lose by improving their disciplinary procedures. In Why Arbitrators Overturn Managers in Employee Suspension and Discharge Cases, George W. Bohlander concluded that five reasons accounted for more than 71.5 percent of the cases in which an arbitrator reversed the disciplinary imposed by the employer (in other words, cases in which the arbitrator ruled on behalf of the employee).
1. Lack of supporting evidence. Bohlander found that the most common reason for a reversal (26 percent) was that the employer did not provide sufficiently persuasive evidence to support the disciplinary action.
2. Mitigating circumstances. The next most common reason (18 percent) Bohlander found for a reversal was the presence of mitigating evidence.
3. Procedural due process errors. Bohlander found that the reason for reversal in almost 13 percent of the cases was that "management committed procedural faults serious enough to prejudice the rights of the grievant to a fair defense." Bohlander expressly included denial of the right to union representation among the possible procedural due process errors.
4. Harsh punishment for rule infraction. Bohlander found that arbitrators reduced the penalty (such as firing someone or a lengthy suspension) as too harsh in about 8 percent of the cases.
5. Management partly at fault. In just over 7 percent of the cases, Bohlander found a reversal because the management--and not just the employee involved--was partly at fault.
Based on these findings, Bohlander concludes that "employers need to improve their investigatory skills in disciplinary matters," and includes the training of supervisors among his recommendations. Bohlander’s study takes place within the context of the grievance machinery of a collective bargaining agreement; it is at least possible that the results of a similar study in a nonunion environment might be even more dramatic.
The next time you find yourself confronted with a problem employee, don’t make a snap decision and fly off the handle. Take the time and follow the steps. Give them the velvet ax: Let them know you’ve considered the situation thoroughly, and that your decision is neither light nor easy.
You don’t want to fire an asset. And make sure that whatever you do, you do it consistently, fairly and without illegal prejudice. In the end, the results will speak for themselves.
The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.
Workforce Management Online, January 2005 -- Register Now!