20 Pages Posted: 8 Oct 2014
Date Written: September 28, 2014
The American Law Institute (ALI) has just completed the Restatement of the Law Third, Employment Law. Chapter 2 is entitled "Employment Contracts: Termination." As the name suggests, the Chapter focuses on the law's difficult challenge of applying contract law to distinguish lawful terminations of employees from wrongful ones. The question is especially problematic because, on the one hand, employment law's long-existing default rule allows employers to terminate employees "at will" and without cause. Advocates of the at-will doctrine present several policies to support it, including freedom of contract and efficiency. On the other hand, employers seek to attract talented employees and, once employed, establish an "orderly, cooperative and loyal work force." Toward that end, numerous judicial decisions and scholarly research reveal unsurprisingly that employers design their communications to attract employees and create loyal workers.
It is no wonder, then, that contract law's approach to indefinite-duration employment issues includes decisions policing employer overreaching and thereby creating rules that limit employment at will.
Given this clash of policies, the primary challenge for the reporters of the new employment restatement in Chapter 2 was to search the cases and identify the circumstances in which terminated employees should be entitled to legal protection, no easy task given the multitudinous and amorphous case law on employment discharge, the dynamic labor market atmosphere and, perhaps most important, contract law's lack of a unifying theory of its own. Related to this challenge, the ALI's conception of a restatement seemingly allows reporters to venture beyond describing the law (but cautiously). The reporters therefore had to decide what constitutes the appropriate mix of description and prescription in their efforts to assess the contradiction in employment policies.
This essay focuses on Chapter 2's treatment of employment at will, on the one hand, and promissory estoppel and good faith, on the other, as examples of how Chapter 2 meets these challenges. The essay concludes that Chapter 2 establishes a useful framework and helpfully identifies the issues for the courts. Because promissory estoppel and good faith (and other contract doctrines) are themselves indistinct, however, Chapter 2 often cannot resolve the principle and counter-principle dilemma in particular cases and therefore cannot fully satisfy ALI's goal of clarifying and modernizing the law through restatements. For the same reason, I doubt that a project in the form of a restatement will be particularly helpful in enhancing employee protection if the playing field is uneven.
Keywords: Employment law, labor market, contracts, employees
Suggested Citation: Suggested Citation
Hillman, Robert A., Drafting Chapter 2 of the ALI's Employment Law Restatement in the Shadow of Contract Law: An Assessment of the Challenges and Results (September 28, 2014). Cornell Legal Studies Research Paper No. 14-29. Available at SSRN: https://ssrn.com/abstract=2506264 or http://dx.doi.org/10.2139/ssrn.2506264