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Employment Law
University of Dayton School of Law
Perna, Richard P.

I. Introduction to Employment Law

a. Themes of Employment Law, 3-11

i. Regulation between employer and employee. Law is secondary in structuring the employment relationship.
1.Also secondary to the labor market.
a. Employment laws try to change how the labor market works.

ii. 1960 Fair Labor Standards Act
1.Set minimum wage
2.Req. premium pay for overtime
3.Restriction on child labor

iii. 1963 Equal Pay Act and Title VII of the Civil Rights Act of 1964
1.Prohibited discrimination in workplace

iv. 1970 OSHA
1.Gave feds control over health and safety at work

v. 1974 Employee Retirement Income Security Act
1.Protects workers pensions and benefits

vi. 1990 Americans with Disabilities and Family and Medical Leave Act

vii. Employment at will doctrine began to erode in the mid-1970s
1.Either party can terminate an employment at any time for any or no reason.

viii. The National Labor Relations Act FAILURE
1.Had assumed the market could be regulated by collective bargaining – not by legislation.
2.Worker rights guaranteed by collective agreement – not law.
3.Instead of expanding – collective bargaining began shrinking in the 1950s.
a. Now covers less than 13% of workers

ix. Employment laws pursue broad social goals (discrimination, work safety, job security) Thus understanding policy goals is important.

x. Distinguish Immutable v. Default Rules
1.Immutable rules – parties cannot change by agreement
a. E.g. Minimum wage – at least at the bottom end.
2.Default rules – state the applicable rules unless the parties agree to alter them
a. E.g. Employment at will doctrine
i. “Absent an agreement to the contrary, EE or ER free to terminate employment at any time for any reason.”
ii. Primacy of K: Employers and employees are free to modify K.
b. Why not the default somewhere that neither the employer or employee would want – thereby encouraging negotiation?

xi. Understanding Immutability of employment laws can be enhanced by considering:
1.the extent to which they infringe on the preferences of employers and workers
2.the concern of those opposed to immutable rules, and
3.justifications offered for the infringements such as
a. informational problems
b. public goods issues, and
c. third party effects

II. The Rise and Fall of Employment at Will

a. Foundations pp. 47-65

i. There is a lack of formal contracting in the employment field, so default rules are abundant to help determine the inevitable disagreements.

ii. In the absence of an agreement to the contrary, employment is at will.
1.AT WILL: EE or ER may terminate at any time for any reason, or no reason at all.
a. A common K erosion of this is to set a fixed term.


1.Contract Erosions of the Employment at Will Doctrine
a. Express Modification
i. Fixed Term Contracts – just cause termination requirement
ii. Satisfaction Contracts – good cause termination requirement
b. Reliance and Implied in Fact Modifications
i. Promissory Estoppel – promise of ER relied upon by EE to EE detriment
ii. Permanent Employment – Circumstances suggest good cause term. req.
c. Employee Handbooks
i. Words in an EE handbook can create binding K when relied upon
ii. Modification of handbook K requires acceptance and consideration

2.Tort Erosions of the Employment at Will Doctrine
a. Wrongful Discharge in Violation of Public Policy
i. ER may not fire EE for a socially undesirable motive
1. E.g., EE exercised statutory right, refused to commit illegal act, fulfilled a public obligation, or blew whistle on misconduct.
b. Intentional Infliction of Emotional Distress
i. ER ‘s intentional extreme or outrageous conduct caused distress of a severity that no reasonable person could be expected to endure.

b. Express Contract Modifications of At-Will Contracts pp. 67-85

i. Fixed Term vs. Satisfaction Contracts
a. EE may only be fired for just cause (jury question)
i. Much higher burden on the ER.
a. EE may be fired where ER is subjectively dissatisfied with EE’s work
b. Mental state of ER need not be shown.
c. ER must show they acted in good faith.
i. E.g., good faith belief that EE was using drugs.

ii. An employer who prematurely discharges an employee from a definite-term contract must show just cause for the discharge.
1.E.g., Termination lacked just cause where ER fired EE for “insubordination,” after 3 years of a 10 year K, but EE had valid reasons for doing alleged acts.
a. See Chiodo p.68.
2.Moral Hazard
a. Will an employee work as hard if he doesn’t fear discharge?

a. The jury should not be instructed to measure damages including possibility of a future business downturn because that would not have been caused by Δ, but rather the future market or the poor performance of Π’s future employer.
4.Narrow Reading of Ohanian
a. The second circuit later found void a K for “employment for life” and claimed Ohanian “peculiar to its own facts.”
5.Statute of Frauds Issues
a. An employee might die within a year – but that does not bar the K.
b. Illinois holds that an oral K can be made to last until retirement, because that may occur within a year – though Indiana refuses this interpretation.
c. Virginia held that the SOF prevented enforcement of the employer’s oral promise not to fire without cause.
6.Requiring Written Agreements
a. SOF writing requirement is perhaps justified on the grounds of requiring what most parties would have wanted had they focused on the issue.
b. However, employees might have difficulty getting such promises in writing.
c. How about penalty-default laws to encourage employers to put disclaimers in writing if they do not want to provide job security?
7.Parol-Evidence Rule
a. The PE rule does not apply in cases where an employee signs a written employment at will K which is later modified by the oral assurances of an employer – because the E’e is not denying the validity of the written K, but arguing that the oral agreement modified the writing. Consideration may still be an issue here.

c. Reliance and Implied in Fact Contracts pp. 85-100

i. Promissory Estoppel: A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promise and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.
E.g., Pharmacy school grad offered and accepted job A and turned down job B