EMPLOYMENT LAW Selmi Spring 2011

EMPLOYMENT LAW – Selmi – Spring 2011

I. INTRODUCTION

-Employment law is the law of the non-unionized workplace (outside of the NLRA)

-High percentage of public workers are unionized, but most public employees can’t strike

-Industries with high levels of organizing: nursing, restaurants/hotels, janitors

-The main reason for decline in unionization: shifting in structure of the economy

Unionized workplaces:Non-unionized workplaces:

-are collective-are individual

-have arbitration to resolve grievances-do not have arbitration or just cause protections

-place a special value on speech-place a special value on privacy

-are based around seniority-are uniform and not about seniority

-The labor market theory: the market as a restraint that will “discipline” the worst employers because the good employees will gravitate toward better employers

Essential elements to the labor market theory:

-Mobility (employees must be able to move to change employers)

-Workers can obtain information on various employers and employment opportunities

-Some employers will provide alternatives (no “race to the bottom”)

-The market is particularly rigid (not much flexible, part time, telecommute, etc.)

“New psychological contract”

-Previously, there was much more company loyalty as companies invested in their employees who in turn stayed with and improved their employer

-In the modern era, the onus is on the employees to invest in themselves and use their employers to obtain skills and knowledge while the employer knows that the employee is bettering the company only temporarily until the employee moves on to another employer

-Human capital is what the employee brings to the labor market (education and experience)

General Human Capital and Specific Human Capital

-For most private employers, wages increase with seniority (not usually merit-based)

-Employers typically prefer to lay off employees than to reduce wages

Who is an employee?

-Most of the laws that govern the workplace only apply to employees

-None of the federal employment laws (ADA, ERISA, etc.) apply to independent contractors

-Independent contractors do not get benefits; must sue employers for employment injuries

-Employees have statutory remedies; ICs do not

-Employees injured in the workplace must use worker’s comp system; IC’s must file for tort remedies in court

-The label of the employee is irrelevant (“independent contractor” or “employee at will”)

The law will determine your employee status

-Courts confronting the issue of which entity is functioning as an employer look beyond labels and ostensible relationships to determine whether an employment relationship exists.

Estrada v. FedEx

-CA state case where FedEx drivers were seeking reimbursement of certain expenses

-FedEx tells its drivers how to do their jobs and where to go (more like employee) but doesn’t control the drivers’ profits (more like independent contractor)

-Deferential standard of review (because employee status is not a jurisdictional element)

-“Control of details” test – common law agency test

(1) Whether the worker is engaged in a distinct occupation or business

(2) Whether, considering the kind of occupation and locality, the work is usually done under the principal’s direction or by a specialist without supervision

(3) The skill required

(4) Whether the principal or worker supplies the instrumentalities, tools, and place of work

(5) The length of time for which the services are to be performed

(6) The method of payment, whether by time or by job

(7) Whether the work is part of the principal’s regular business

(8) Whether the parties believe they are creating an employer-employee relationship

-Court finds that the drivers are employees, not independent contractors

FexEx v. NLRA

-Federal case where union attempted to organize drivers and FedEx objected to the classification

-De novo review (because employee status is a jurisdictional element)

-D.C. Circuit uses a different test: whether the position “presents the opportunities and risks inherent in entrepreneurialism”

-Court finds that the drivers can make their own hours, figure out their own routes, and may hire their own employees for routes, and finds that they are independent contractors, not employees

-There are some industries where the employee/IC issue comes up regularly (i.e. agriculture)

-As a general matter, agricultural workers are treated about as badly as you can be treated, both by their employers and under law (they are excluded from the NLRA and the FLSA)

-Volunteers typically do not have any protection in the workplace (b/c they aren’t employees)

-To work for free for a for-profit business (i.e. law firm), the business must receive no real benefit and must provide a benefit to the volunteer/intern

-In the law firm context, the question is whether a partner is an employee or an employer

-No automatic exclusion based on the “partner” label (it’s about the function of their jobs)

-In Clackamas Gastroenterology Associates v. Wells, the Supreme Court established a test for assessing whether physician shareholders in a professional corporation were employees:

(1) Whether the organization can hire or file the individuals or set rules and regulations of the individual’s work

(2) Whether and to what extent the organization supervises the individual’s work

(3) Whether the individual reports to someone higher in the organization

(4) Whether and to what extent the individual is able to influence the organization

(5) Whether the parties intended that the individual be an employee, as expressed in written agreements or contracts

(6) Whether the individual shares in the profits, losses, and liabilities of the organization

-The Clackamas test has been used to draw the line between ownership status and employee status

-Under the “joint employer” doctrine, the contracting employer and the subcontractor may be held liable for statutory violations if the contracting entity maintains significant control over the work and the works are economically dependent upon the contracting entity

II. COMMON LAW REGULATION OF THE WORKPLACE

-“At-will” employment in the U.S. is the default rule (but you can change it by contract)

-In the employment context, damages are much more limited for contract claims than tort claims

-Contractual claim will generally be much easier to establish than a tort claim

A. Contract Actions

(i)Express contracts

-A written contract for a fixed term remains the most straightforward way to overcome the at-will presumption

-Even when the contract is silent on the issue of termination, courts presume that contracts for a fixed period of time cannot be terminated without cause during the term of the contract

-In Guiliano v. Cleo, Inc., the company sent plaintiff home and stripped him of his duties, but still paid him

The court found that he was constructively discharged (and terminated without cause)

-To establish constructive discharge, employee must prove that “no reasonable employee could have been expected to continue working in those circumstances”

-In a definite term contract, the terms of the contract govern (employment period, pay, etc.)

-When definite term contracts fail to specify the circumstances under which they can be terminated, courts must imply terms to fill the gap

-Generally, a fixed-term contract can be terminated for just cause, even if the contract does not specifically reserve that right to the employer

-Most modern courts are willing to enforce indefinite-term contracts restricting the employer’s power to terminate where the parties’ intentions are clear (see, e.g., Sheon v. Amero from Supreme Court of NV)

-A few courts persist in the traditional view that indefinite-term contracts are per se unenforceable, even when protections of job security are included in a written contract

-In an indefinite term contract, there is no fixed time period, and the indefinite terms imply “just cause” termination

-Adverse business conditions usually suffice for cause in indefinite term contracts

-But financial resources are usually insufficient to constitute cause to terminate a definite-term contract

-When a prospective employee inquires about job security and the employer agrees that he employee shall be employed as long as he does the job, a fair construction is that the employer has given up his right to discharge at will without assigning cause and may discharge only for cause (Toussaint v. Blue Cross Blue Shield of Mich.)

-Although many courts have abandoned the requirement of additional consideration for job security, some jurisdictions require additional consideration when plaintiffs rely on oral promises

-Another hurdle is the statute of frauds – generally the SoF bars enforcement of oral contracts not capable of performance within a year; in the employment context, many courts take the position that indefinite-term just-cause contracts are not barred because performance could be completed within a year (i.e. because of death or layoff)

(ii) Implied contracts

-Two types of implied contracts: (1) Oral and (2) Written

-Implied contracts do not have the formalities of an express written contract, and usually did not involve actual official agreements between the parties (Most involve promises by employer like “Your job will be secure here”)

-Business reasons, such as financial difficulties, constitute good cause under an implied contract

-Implied written contracts do not need to come from official handbooks; they could be from employment letters or other written documents provided to employees

Woolley v. Hoffmann-LaRoche, Inc.

-Plaintiff alleged that express and implied promises in the company’s employment manual created a contract under which employees could only be fired for cause

-Regular contract law requirements (offer, acceptance, consideration) do not apply when implying contracts

-Court reads handbook as constituting an offer from the employer to the employee

But this doesn’t make sense, because there’s no real consideration or reliance

-The court treats the handbook as a unilateral contract (but this also doesn’t make sense)

What this means is that the employer can take away the handbook at any time

-A specific and clear disclaimer in the handbook that the document creates no binding rights will almost always be respected by the courts

-In a case like Woolley, the terms of the handbook become the contract

-To the extent the disclaimer is (1) bold and prominent and (2) not inconsistent with the terms of the document, it will found to be valid and override any arguments that the document is a contract

-If you put the disclaimer on every page, that’s a good way to make sure the disclaimer counts

-When there is ambiguity in a document, that ambiguity is construed against the employer

-A majority of states have held that personnel manuals can give rise to binding obligations

-Other courts, however, rely on basis fairness arguments rather than formal contract theory to justify holding employers to the promises contained in employee handbooks

-Even in states willing to enforce promises contained in employee handbooks, courts will not find contractual rights to exist if the language in a particular handbook is not sufficiently clear to create a promise

Asmus v. Pacific Bell

-There was a contract between the parties (not an implied agreement) whereby PacBell created a policy to give its employees continued employment

-PacBell throws out the agreement when the economy tanks without additional consideration or mutual agreement

-CA Supreme Court doesn’t see the need for additional consideration to modify the contract, because they find that it was a unilateral contract

-Three different approaches:

1) Employer can change the agreement anytime (promise is illusory) – Govier v. North South Bank (WA)

2) Modification/Removal requires additional consideration – Demasse v. ITT (AZ)

3) Middle of the road - Asmus

-Three requirements to change a preexisting agreement not to terminate (without cause)

1) Reasonable period of time – no false pretenses or illusory promises

2) Reasonable notice of the change – fairness/negotiation

3) Abrogation of the contract can’t interfere with any vested rights

-The court inTouissant v. Blue Cross Blue Shield of Mich.suggested that employee handbook provisions guaranteeing job security should be enforced because the employer derives the benefit of “an orderly, cooperative, and loyal workforce” as a result of its promsies

(ii) Promissory estoppel claims

- For the most part, promissory estoppel does not work in the employment context

-Where promissory estoppel does work: significant relocation in reliance on offer of new job

Goff-Hamel v. OB&GYN, P.C.

-Plaintiff left her job at an old doctor’s office to work at a new one; before she started her job the offer was withdrawn and she had no job

-She had no incentive to leave her old job and she was enticed to come to the new job, so court awarded damages

Pugh v. See’s Candies, Inc.

-No written materials, but a verbal promise to Pugh of continued employment if he did well + his long tenure of service and promotions + See’s policy of only firing people for good cause

-Pugh’s argument was that all the above created his reliance and induce him to stay at See’s

-Court found an implied-in-fact promise that Pugh would only be terminated for cause

-Promissory estoppel claims may also be based on a promise of something other than at-will employment, like a promise of job security at the current job (see Blinn v. Beatrice Community Hospital, NE Supreme Court)

-Promissory estoppel is difficult to establish, and usually reserved for those limited circumstances where an employee has reasonably incurred expenses in reliance on the promise and the employer is aware of those expenses

Cotran v. Rollins Hudig Hall Int’l, Inc.

-Employee accused of sexual harassment, employer conducts investigation and terminates the employee, employee sues for wrongful discharge

-Issue is whether, when an employee is hired under an implied agreement not to be discharged except for “good cause” and is fired for misconduct, the employer needs to prove that the misconduct actually occurred

-Court holds that employer need not actually prove that the misconduct occurred; all that is required is a “reasoned conclusion…supported by substantial evidence gathered through an adequate investigation that includes notice of the claimed misconduct and a chance for the employee to respond”

Fortune v. NCR

-Employee was terminated before he received commissions that he would otherwise be due; issue is whether the “bad faith” termination constitutes a breach of the employment at will contract

-The court found that NCR paid Fortune all the commissions he was due under the contract

Employees are always due the compensation which they have earned

-Court holds that implying good faith here won’t do anything to hurt at-will employment

-Employers can’t terminate an employee to avoid paying them commissions which they have previously earned, just as they can’t terminate an employee to prevent a pension from vesting

Murphy v. American Home Products Corp.

-Employee claims that he was terminated because of his disclosure to top management of illegal account manipulations of pension reserves

-NY Court of Appeals refuses to imply a good faith term which would limit at-will employment

-The whole principle of at-will employment is that it permits termination for anything, and might very well involve bad faith

-Courts refuse to read an obligation of good faith and fair dealing into employment contracts when it would contradict other terms

-Although many courts refuse to recognize a duty of good faith in employment at all, other courts have held that the duty exists, but does not limit the employer’s ability to discharge an at-will employee without cause

-Many states simply refuse to recognize employee claims based on the covenant of good faith and fair dealing at all

B. Public Policy Protections

Three things to know about public policy action:

1) Tort not a contract

2) Different from just cause (more limited)

3) The tort is designed to protect the public, not the individual (although individual benefits)

(i) Public policy tort

-You can’t fire someone because

(1) they refuse to commit perjury (Petermann v. Int’l Brotherhood of Teamsters)

(2) they file for worker’s compensation benefits (Frampton v. Central Ind. Gas Co.)

(3) they perform jury duty (Nees v. Hocks)

-Also, if they engage in union activity (Glenn v. Clearman’s Golden Cock Inn)

-The possibility of criminal prosecution if an employee acts or doesn’t act also may be a basis for a public policy tort

Sheets v. Teddy’s Frosted Foods

-Employee was the QA person, an at-will employee who could have been prosecuted criminally for failing to properly do his job under the CT Uniform Food, Drug, and Cosmetic Act

-Issue is whether an employer has a completely unlimited right to terminate the at-will employee, or whether he is protected from complete at-will employment by a public policy tort exception