Fire-at-Will Clauses Put Force of Law Behind Unfair Play

Sharp management lawyers have come up with an offensive little device they believe will return to corporations their once-unfettered power to wreck the lives of competent, dedicated non-union workers: fire-at-will clauses that let companies arbitrarily dump workers at a moment’s notice.

Increasing numbers of companies around the country--including Sears Roebuck, investment banker Donaldson, Lufkin & Jenrette and the Los Angeles Times--are beginning to accept their lawyers’ advice that by just adding a few words to their job applications they can avoid costly legal battles with employees who claim they have been “wrongfully discharged.”

This ominous sentence, or some slight variation of it, is added to applications that many prospective employees must now sign to get a job:

“I may be terminated at any time, with or without cause, at the sole discretion and option of the company.”

Once a person has signed the application, employers are legally immunized from wrongful discharge suits, the management attorneys contend.

Even longtime employees can be pressured to sign the stipulation by making it a condition of getting a pay raise, bonus or stock options.

Companies traditionally were allowed to fire non-union workers with or without giving--or even having--any reason. In California, the state labor code still specifically says employers have the right to fire a worker “at will.”

But in 1980, court decisions began reversing that unhappy tradition.

The California Supreme Court, among others, said in effect that such callous treatment of employees is not in the public interest. The courts so far generally have agreed with the argument long accepted in almost every other industrialized nation that employers don’t have absolute control over the economic lives of their workers.

As a result, thousands of workers have collected millions for both real and punitive damages by proving that they have been wrongfully discharged.

The lawyers’ idea for beating down wrongful discharge claims is somewhat similar to the simplistic solution concocted many years ago by an earlier generation of clever lawyers to resolve another mangement problem: keeping workers from joining unions.

Until the practice was outlawed by Congress in 1932, job applicants had to sign what were popularly called “yellow dog” contracts, promising not to join or assist a union in any way. If they refused to sign, they didn’t get the job.

The pejorative name--yellow dog contracts--came from the contention that only cowardly workers would sign them. But vast numbers did sign, not out of cowardice but because doing so was less onerous than the terrible alternative: unemployment.

For the same reason--to get a job--many workers today will sign statements saying they accept management’s right to fire them at any time for any reason.

Obviously, not all of the estimated 3 million non-union workers who are fired each year in this country are booted unfairly, and truly conscientious employers can be stuck with huge legal bills defending themselves even in cases they win.

But the modern yellow dog contract is not a good solution.

A major goal of most enlightened employers these days is to increase efficiency and profits by seeking cooperative, competent workers who have some loyalty to the firm and a commitment to its success.

To increase company loyalty, many firms have such programs as profit sharing plans, employee stock ownership plans and extensive programs giving workers a voice in managing the company.

This sensible approach to management is destroyed if employees are expected to loyally commit their working lives to the company but are warned at the same time that they can be fired at any time, with or without a reason, at the sole discretion of their bosses. It is hard to build company loyalty with that carrot-and-big-stick approach.

The lawyers’ advice may save some companies money in wrongful discharge cases, if it isn’t thrown out by the courts or outlawed by Congress as the obnoxious yellow dog contracts were 56 years ago.

However, the relatively recent trend by the courts to help protect workers’ jobs is itself not enough. Decisions could even be reversed soon when some long-pending decisions of the conservative California Supreme Court are issued.

There are more than a dozen test cases before the high court now that could restore the legal standing of the “at will” doctrine in this state and thereby eliminate the employers’ desire to put the threat of discharge on job applications.

The justices are said to have delayed their decision in a key test case for more than 18 months partly because they are badly divided. One wag says the seven justices have arrived at 14 different opinions so far.

While the legal maneuvers of management lawyers or the courts themselves may return non-union workers to their previous precarious employment status, there is an obvious alternative that would be good for both workers and management: arbitration of alleged wrongful discharges.

There is growing support in both management and labor circles for laws that would give non-union workers the protection union workers already have: the right to a quick, relatively inexpensive grievance procedure giving discharged workers a fair in-house hearing. If that doesn’t settle the dispute, the wrongful discharge allegation would go to a neutral third-party arbitrator for a binding decision.

The goal in cases concerning the dismissals of non-union employees ought to be the assurance that the workers were not treated cavalierly and there was just cause for firing them. Where there isn’t just cause, the workers should be reinstated with full back pay or, if their jobs really are no longer available, additional money as well.

Critical decisions about such questions cannot be left to those accused of treating their employees unfairly.

Many management lawyers want arbitration as a voluntary alternative to court action because it would sharply limit the high legal costs, particularly hefty punitive damages companies have to pay if found guilty in a wrongful discharge case. And in cases that go to court, management lawyers insist on a $25,000 limit on punitive damages, no matter how badly an employee is treated.

A much better proposal comes from Stanford Prof. William Gould, who wants arbitration not just as a possible alternative to the courts, but as the legally mandated procedure.

Gould says arbitration, which usually would eliminate punitive damages against employers, would be better for workers because it gives them significant job protection. In addition, arbitration would allow employers to fire workers when justified.

But no matter how some job protection is achieved for workers who don’t join unions, there should be no return to the unconscionable system that allows employers to fire workers at any time, with or without a reason, even after many years of competent, loyal service.

California Carpenters Union to Open a Bank

When the California Carpenters Union opens its new bank next year, it will look like some wood shavings compared to the mountain-sized Amalgamated Bank of New York, owned by the Amalgamated Clothing and Textile Workers of America.

The Carpenters’ United Labor Bank, which will have offices in Los Angeles and Oakland and an initial capitalization of $8 million, is dwarfed by Amalgamated Bank, with assets of $1.5 billion.

But then, Amalgamated Bank has been around for 64 years. There are a few small savings banks run by unions in other states, but the idea has never spread significantly and probably will not.

Anthony Ramos, a retired carpenters union officer and chairman-designate of the union’s bank board, said that while it will be open to any depositors and borrowers, the bank “is going to be a union-label, full-service bank oriented to the needs of all union members.”

C. Robert Wheeler Jr., who will be the bank’s president, said it will focus on short-term construction loans to unionized contractors.

Also, it will specialize in banking services for union offices, and will offer services designed particularly to meet union members’ needs. For example, it will allow construction workers to make 10 loan payments a year instead of the usual 12 since often they can find work only 10 months a year.

As Amalgamated’s experience shows, a union can do well in the banking business, and the carpenters’ bank may thrive.

But more traditional bankers seem to be in no danger of being seriously challenged by the incursion of unions into their jurisdiction.