Explaining the Spread of At-Will Employment as an Inter-Jurisdictional Race-to-the-Bottom of Employment Standards

Abstract:     
The at-will employment rule is often attributed to Horace Gay Wood, who described the rule in an 1877 treatise. Over the next forty years, the rule was judicially adopted in most American states. How and why the rule spread, however, has been the subject of considerable academic debate.

This essay argues that the underindustrialized states first adopting the at-will rule likely did so as a means of attracting capital. In any event, and more importantly, this essay argues that once the first underindustrialized states adopted the rule, other underindustrialized states would have been compelled to adopt the rule to remain economically competitive with the early-adopters, and industrialized states would have been compelled to adopt the rule to maintain their competitive advantage in the labor market. The adoption of the at-will rule by a handful of underindustrialized states, therefore, precipitated an inter-jurisdictional race-to-the-bottom in employment standards, culminating in the universal adoption of the at-will rule.

Though the focus of this essay is on labor market conditions that existed as the United States was transitioning from a local to a national economy, the implications resonate today as the United States transitions from a national to an international economy, and attempts to avoid a competitive "race to the bottom" with developing countries that are using low wages and un- or under-regulated working conditions to gain an advantage in the global labor market.

Keywords: employment, at-will, industrialization

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