Modifying At-Will Employment Contracts

67 Pages Posted: 5 Feb 2016 Last revised: 12 Jul 2016

Rachel S. Arnow-Richman

University of Denver Sturm College of Law

Date Written: February 3, 2016

Abstract

Long-term employment relationships are constantly in flux: terms of compensation, company policies, and a variety of other conditions of work are routinely altered over the course of an employee’s job. In cases involving at-will employment, the economic realities and power dynamics are such that changes in terms are likely to be introduced unilaterally by the employer, often without advance notice. To date, however, neither courts nor commentators have holistically considered this problem of “midterm modifications” - contractual documents imposed post-hire on implicit or explicit threat of termination. Bringing together the law of noncompetes, arbitration agreements, and employee handbooks, this Article calls for a universal reasonable notice rule for all midterm modifications. Under this rule, courts would enforce midterm modifications only where the worker received reasonable advance notice of the employer’s proposed change. The Article justifies this move as a means of achieving good faith modifications consistent with contemporary modification law against the backdrop of employment at will. Under employment at will, employers are permitted absolute subjective discretion to choose whom to employ under what terms. However, the duty of good faith must be understood as imposing procedural limitations in addition to substantive constraints. Procedural good faith means that the employer must act fairly in carrying out discretionary modifications otherwise immune from substantive review. An employer’s choice to impose new terms with immediate effect precludes an employee from exercising what is often his or her only form of bargaining power - the ability to convincingly threaten to leave. Rejecting retrograde approaches to unilateral modifications that turn on the presence or absence of consideration, the Article argues that courts should police directly the risk of coercive modifications. Midterm modifications that significantly affect terms of employment should be permitted only where the employer provides enough advance notice to allow the employee time, not only to meaningfully consider the proposed change, but also to compare and secure alternate work.

Suggested Citation

Arnow-Richman, Rachel S., Modifying At-Will Employment Contracts (February 3, 2016). 57 Boston College Law Review 427 (2016).; U Denver Legal Studies Research Paper No. 16-05. Available at SSRN: https://ssrn.com/abstract=2727326

Rachel S. Arnow-Richman (Contact Author)

University of Denver Sturm College of Law ( email )

2255 East Evans Avenue
Denver, CO 80208
United States
303-871-6264 (Phone)

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