Academic journal article SAM Advanced Management Journal

Resurrection of an Old but Timely Proposal: Voluntary Arbitration of Employment Discharges

Academic journal article SAM Advanced Management Journal

Resurrection of an Old but Timely Proposal: Voluntary Arbitration of Employment Discharges

Article excerpt


More than 10 years have passed since the controversial idea that small business should voluntarily arbitrate employee discipline and discharge cases was first proposed (Fenton & Timmins, 1982). The proposal was primarily a response to some experts' (e.g., Summers, 1980) interest in encouraging the passage of federal legislation to protect all employees against discharges without cause. Today, the proposal has even more relevance. Crippling damage awards from employment-related litigation have grown to enormous proportions over the last decade. It has been reported that in California three out of four plaintiffs win wrongful termination suits and recover an average verdict of $1.5 million (Dertouzos, Holland & Ebener, 1991). This article reviews the need for arbitrating employee discharge cases and concludes that businesses, particularly small businesses, should adopt this strategy.

The At-Will Doctrine Revisited

Unlike public sector employees, whose individual employment rights are protected by constitutional due process, the "just cause" shield, and, in some cases, the just cause provisions of labor agreements, most of the private sector workforce has no similar protections against loss of employment through discharge. The root cause is the age old doctrine of employment-at-will. In its most basic form, the doctrine states that the employer can terminate a subordinate who is not under contract for good cause, bad cause, or no cause (Pane v. Western & A.R.R.). The quid pro quo in the courts' view is that the employee has the right to quit his employment-at-will at any time with or without notice (Blades, 1967). Thus, the parties are looked upon by the courts as equals in their respective powers.

The reality, however, is that the powers of the parties, employer and employee, are anything but equal. From the employee's perspective, the power is more theoretical than real, since the employee's fear of losing a job far outweighs an employer's fear of losing an employee (Vickory, 1992). Employment has significant meaning to the employee, and his ability to find alternative equal employment, particularly today, cannot be assumed. Further, the propensity of employers to abuse their power to discharge has been well chronicled (see e.g., Aaron, 1976; Himburger, 1989; Peck, 1979; Stieber, 1980).

Exceptions to the Doctrine

Erosion of the at-will rule has come in the form of federal legislation and through the courts. Federal legislation including the National Labor Relations Act,(1) the Civil Rights Act,2 and the Americans With Disabilities Act(3) prohibits employers from discharging workers covered by such legislation.

Courts have modified the at-will rule in three areas: public policy exceptions, breach of an express or implied contract, and breach of the covenant of good faith and fair dealing. According to the Bureau of National Affairs (1991), the public policy exception has been adopted by courts of law in 43 states, the breach of express or implied contract theory is accepted in 34 jurisdictions, and the exception based on the covenant of good faith and fair dealing is followed in 13 states.

The most common limitation to the at-will doctrine is the public policy exception (Holley & Wolters, 1987). In short, this exception recognizes that employers cannot discharge employees for exercising statutory rights, i.e., obeying a law or following recognized public policy. Therefore, for example, where employers discharge employees for testifying under oath in any forum,(4) or because they missed work to sit on a jury,(5) or for refusing to violate a professional code of ethics that was legisla-lively endorsed,(6) a suit alleging the public policy exception to the at-will rule may be triggered.

In addition to these public policy examples are so-called "whistle blowing" actions. Whistle blowing is the act of an employee who discloses improper employer practices or policies typically forbidden by statutory legislation. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed


An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.