Magazine article Personnel

Halting Traffic on the Road to Wrongful Discharge

Magazine article Personnel

Halting Traffic on the Road to Wrongful Discharge

Article excerpt

Halting Traffic on The Road to Wrongful Discharge

A proctive approach to HR policy creation and implementation helps protect against wrongful-discharge lawsuits. Few HR issues dominated the 1980s as much as wrongful discharge, a legal development that potentially affected more than 60 million private-sector employees in the United States. "Wrongful discharge" refers to lawsuits brought by nonunion ("at will") employees who charge that their terminations violate a contractual right or legal duty. After a decade of vacillation, judicial decisions regarding wrongful discharge are developing a sharper focus.

As we enter the 1990s these legal developments, coupled with new social and economic realities, necessitate that most companies abandon a purely reactive approach to the wrongful discharge problem that emphasizes the "at will" nature of the employment relationship. A reactive strategy in this business environment is at best shortsighted, and at worst, counterproductive. Human resources (HR) professionals need to adopt a more proactive strategy.

The Shifting Balance of Power

Before the 1980s, there was not much need for an employee termination strategy. The employment relationship was subject entirely to the will of either party: An employer could fire an employee "...for good cause, no cause, or even for cause morally wrong without thereby being guilty of a legal wrong." Except for certain federal and state statutory exceptions (for example, collective bargaining laws and fair employment practices laws), the overwhelming majority of employees could be fired at the employer's will.

During the 1980s, however, the "at will" rule came under increasing attack. Ex-employees began filing lawsuits against their former employers on a variety of legal grounds and winning headline-grabbing jury verdicts. Racquel Welch, for example, walked away with an $11 million judgment against a movie studio that had wrongfully terminated her $200,000 contract.

Ex-employees began to win often and win big. Stanford Professor William Gould reported, "In California between 1982 and 1986, employees won more than 70% of the cases tried before juries. The average total award was $652,100." Ironically, even employers who won in court "lost" when they tallied up the attorneys' fees, court costs, lost work time, public relations damage, and reduced morale.

"At Will" Reactions

Human resources departments (HRDs) reacted quickly and began to look for ways to reinforce the "at will" nature of the employment relationship. This reactive strategy consisted of making sure that all company documents (for example, employment applications) and employee handbooks were amended to include "at will disclaimers." These provisions typically state that the employer has absolute power to fire anyone with or without cause, that no promise of any kind is contained in those documents, and that the employer is free to change any condition of employment at any time. Employers also purged their documents of any reference to "just cause," "fairness," or "job security."

Not surprisingly, 75% of the HR executives who responded to a recent study revealed that they had taken some action to limit their companies' exposure to wrongful discharge liability. Another study found that almost half of the companies surveyed had revised their employee handbooks for this purpose in the last three years.

Although some clarification of termination policies may have been necessary, employers have lost more than they have gained by embracing a reactive strategy. While providing occasional protection from minor contract claims, this strategy has mostly reinforced negative employee perceptions by heightening fears of job insecurity. Over time, these fears may manifest themselves in lower worker commitment, expressed in ways ranging from employee apathy to quitting without notice. In between, there is a whole universe of such potentially negative consequences as tardiness, absenteeism, substance abuse, and, ironically, complaints to outside governmental agencies. …

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