From Just Cause to Just Notice in Reforming Employment Termination Law
Rachel S. Arnow-Richman
University of Denver Sturm College of Law
October 30, 2012
RESEARCH HANDBOOK ON THE ECONOMICS OF LABOR AND EMPLOYMENT LAW, Michael L. Wachter and Cynthia L. Estlund, eds., 2012
U Denver Legal Studies Research Paper No. 12-42
For the last quarter century, the discourse surrounding employment termination law has focused almost exclusively on the desirability of changing from an employment at will to a just cause regime. This chapter asserts that such a result is neither inevitable nor desirable. A better approach would be to require employers to provide advance warning of termination or, at the employer’s election, pay separated workers their salary and benefits for a designated period. This “just notice” approach has several advantages. First, as compared to a universal just cause rule, and perhaps even to the current system of “at-will plus exceptions,” a just notice rule is likely to engender fewer administrative costs and protect a wider swath of the workforce. Second, the rule has a clear foundation in American jurisprudence. Outside the employment context, contract law requires a party whose performance is discretionary to act in accordance with principals of good faith and fair dealing, including providing reasonable notice prior to terminating an indefinite contractual relationship. Adopting a just notice rule would bring the law of employment contracts more in line with broader contract doctrine. Finally, a just notice rule would refocus the goal of employment termination law on enabling employee transition rather than constraining employer discretion. A just notice system addresses workers’ most immediate need upon job loss – income continuity -- while preserving employers’ ability to determine whom to terminate and why. Such an approach can be normatively justified as giving force to the contemporary social contract of employment. To the extent that expectations of long-term employment with a single employer have been replaced with expectations of long-term employability in an external market, it makes sense that employers should directly bear at least some of the costs of employee transition in the inevitable event of job loss.
This chapter proceeds as follows. Part I presents and critiques the current debate over employment at will reform. Part II turns to the advantages and disadvantages of a just cause rule, laying the foundation for a just notice approach that capitalizes on the best aspects of a just cause rule – the extent to which constraints on employer discretion to terminate operate as a de facto severance pay system for workers. Part III sketches a possible just notice system, drawing on models from foreign jurisdictions and comparing this chapter’s proposal to domestic sources of law, including the federal WARN Act and federal/state system of unemployment compensation. Part IV then turns to the doctrinal and normative bases for a just notice rule drawing on the implied duty of good faith and social contract theory. Finally, Part V touches on some of the pragmatic implications of adopting a just notice rule, including the relative costs and benefits of such a rule and the ability of employers to insist on employee waiver of notice rights.
Number of Pages in PDF File: 35
Date posted: October 31, 2012