Individual Employment Law
Introduction pp. 3-11: Class 1
A. Default Rule: Employment at will
Ø Employer (ER) can fire Employee (EE) for any reason or for no reason at all
Ø EE can leave for any reason
Ø The course focuses on erosions of the employment at will doctrine
The essence of the employment at will presumption is that the decision to discharge an EE is best left to the managerial prerogative and generally will not be reviewed in a judicial form. The other side of the rule is that an employee may resign at any time, for any reason, or for no reason at all. Veno v. Meredith (87)
If there is a dispute over the discharge of an EE, the threshold inquiry is whether or not the employment was at-will. Id.
The employment at will presumption represents society’s interest in market forces as the best way to promote efficient enterprise.
Three Major Exceptions to Employment at Will:
Ø Public Policy Under the public-policy exception to employment at will, an employee is wrongfully discharged when the termination is against an explicit, well-established public policy of the State. For example, in most States, an employer cannot terminate an employee for filing a workers’ compensation claim after being injured on the job, or for refusing to break the law at the request of the employer. The majority view among States is that public policy may be found in either a State constitution, statute, or administrative rule, but some States have either restricted or expanded the doctrine beyond this bound.
Ø Implied Contract The second major exception to the employment-at-will doctrine is applied when an implied contract is formed between an employer and employee, even though no express, written instrument regarding the employment relationship exists. Although employment is typically not governed by a contract, an employer may make oral or written representations to employees regarding job security or procedures that will be followed when adverse employment actions are taken. If so, these representations may create a contract for employment.
Ø Covenant of Good Faith Recognized by only 11 States, the exception for a covenant of good faith and fair dealing represents the most significant departure from the traditional employment-at-will doctrine. Rather than narrowly prohibiting terminations based on public policy or an implied contract, this exception— at its broadest—reads a covenant of good faith and fair dealing into every employment relationship. It has been interpreted to mean either that employer personnel decisions are subject to a “just cause” standard or that terminations made in bad faith or motivated by malice are prohibited.
Ø EEs can recover for both tort and contract claims: lost wages, salaries, commissions, fringe benefits, loss of future earnings
Ø Tort Damages: pain and suffering, mental distress, compensatory damages, punatives, loss of reputation
o Both tort and contract
o Not usually preferred; except in the case of T7—preferred because some ERs would be willing to pay damages in order to be at to discriminate (Price Waterhouse v. Cooper)
Legal Boundaries of the Employment Relationship
B. EEs vs. Independent Contractors & Covered EEs pp. 13-26; 30-33: Class 2
Do you have an ER/EE relationship?
Rule: Two tests for EE status have developed in the courts. The dominant approach is call the “common law” or “right to control” test; there is also a second test,, sometimes called the “economic realities” or “economic dependency” test, that has been recognized in the case of certain statutes, most notably the FLSA.
Case: Secretary of Labor v. Lauritzen  v For the purposes of social welfare legislation (i.e. remedial in nature) such as the FSLA, “employees are those who as a matter of economic reality are dependent upon the business to which they render services.”
Ø FLSA: “to suffer or permit to work”
o Determining the economic reality: 6 factors
§ ER’s control (most important)
§ Investment in capital equipment/capital investment
§ Extent to which the EE is an integral part of the alleged ER’s business
Note: these factors represent one court’s interpretation under one specific statute. Easterbrook’s concurrence: (1) Does not like the subjectivity of the factors and (2) Argues: only look to “suffer or permit to work”
Volunteers: Generally you must have a compensatory relationship; therefore volunteers generally do not count under Title 7
Case: Wolf v. Coca-Cola Co.  v To assert a claim under ERISA plaintiff (P) must be either a “participant” or a “beneficiary”
Ø A “participant” is defined as “any EE or former EE of an ER. . .who is or may become eligible to receive a benefit of any type from the ERISA plan
o Must be an EE
o Must be “eligible”
§ Companies are not required by ERISA to make their ERISA plans available to all common law employees
C. Covered ERs and Introduction to Employment at Will pp.35-41; 47-52: Class 3
Statutory Minimums to be an ER
Ø FMLA: 50
Ø Title 7: 15
Ø ADA: 15
Ø ADEA: 20 (Age Discrimination in Employment Act)
Ø FLSA: $500,000 in business transactions per annum (virtually every business)
Note: By defining an ER in such a way, small ERs are protected from the cost of frivolous lawsuits
Case: Zheng v. Liberty Apparel Co.  (Joint ER)
v In the FLSA context, which involves a broad statutory definition of the “employ,” the Labor Department recognizes the joint-employment principle and has brought litigation to impose individual and joint liability for failure to pay minimum wages and overtime for all work performed for all joint employers. In this case, the court held that the following factors were to be considered in determining whether garment manufacturers (Liberty Defendants) who hired contractors (Contractor Corporation) to stitch and finish pieces of clothing were joint employers for FLSA purposes of the garment workers directly employed by the contractors (the plaintiffs):
Factor list on page 38
Whether Liberty’s premises and equipment were used for the plaintiff’s work
* Whether the Contractor Corporations had a business that could or did sift as a unit from one putative joint employer to another
* The extent to which plaintiffs performed a discrete line-job that was integral to Liberty’s process of production
* Whether responsibility under the contracts could pass from one subcontractor to another without material changes
* The degree to which the Liberty Defendants or their agents supervised plaintiffs’ work
* Whether plaintiffs worked exclusively or predominantly for the Liberty Defendants
Ø Sympathetic EEs
o Facts are always important in these types of cases because the more sympathetic the EEs the more likely the court will try to provide recovery
o Question: Where do the equities lie?
Historical Foundations of Employment at Will & Introduction to Contract Erosions pp. 55-63; 68-71: Class 4
Ø Statute of Labourers (1349)
o Black Plague = Shortage in Labor Supply
o Requires workers to continue to work at their previous wages
o Punishment for failure to comply: Imprisonment of worker
Ø Statute of Artificers (1562)
o Presumption of a 1 year employment contract
o ER fined 40 shillings
o Provided procedure for workers who believed they were unjustly fired
Ø William Blackstone (1765)
o Default Rule: Hiring for 1 year (later became reasonable standard in the industry)
Ø Horace Gay Wood (1877)
o Modern form of Employment at will
o Hiring at will
o EE has burden of demonstrating an agreement to the contrary
o Questionable foundation
o Right after Civil War
o Gave rise to capitalism
E. Employment at Will in Practice
Agreements for an Indefinite Term Limiting Termination of Employment
Rule: Some courts still follow the historic practice of finding oral promises of “permanent” or “lifetime” employment as per se unenforceable either for want of consideration (independent of the employee’s continuing to provide services) or mutuality of obligation (because typically the employee has not agreed to a “cause” limit on voluntary termination). The modern tendency is to evaluate indefinite term agreements under the usual rules of contract: If the purported agreement limiting termination of employment meets the requirements of bargained-for exchange, it should be enforceable, whether it is oral or written, and for a definite or indefinite term, so long as it does not run afoul of the applicable statute of frauds.
Contract to furnish permanent employment is no more than an indefinite hiring terminable at will; “lifetime employment” is employment at will.
Case: Skagerburg v. Blandin Paper Co.  v A promise of permanent employment is unenforceable for want of consideration; therefore, the position is terminable at the will of either party.
Ø Plaintiff, a consulting engineer, had developed a clientele affording him a weekly income of $200, and was considering Purdue University’s attractive offer of an associate professorship. Knowing these facts, defendant corporation proposed by telephone that
te 3 pg. 75] (Michigan’s retreat from Hete’s case)
Statue of Frauds (Ohanian) and Promissory Estoppel (Grouse)
Statute of Frauds: If an employment agreement is oral, the statue of frauds may limit enforceability. Almost all states have a statute of frauds providing that contracts not to be performed within one year are not enforceable unless written and signed by the party to be charged with the obligation. This means that parties could enforce an oral contract of employment for any term of one year or less, but not an oral contract of employment for, say, a two-year period. If the only way to terminate a contract within one year is through breach, it does not escape invalidation under the statue of frauds.
Promissory Estoppel: Requires a showing of detrimental reliance—that in making the promise the employer “should reasonably expect to induce action or forbearance” and in fact did “induce such action or forbearance” on the employee’s part. Moreover, the promise “is binding if injustice can be avoided only by enforcement of the promise.” See Rest. (2d) of Contracts, § 90. As a general matter, application of the doctrine of promissory estoppel in the employment context enjoys substantial judicial support. In some cases, courts have enlisted the doctrine as a way to enforce a promise otherwise rendered unenforceable under the statute of frauds. See Rest. (2d) of Contracts § 139.
Case: Ohanian v. Avis Rent A Car System, Inc.  (Statute of Frauds)
v Statute of Frauds: Court analyzed an indefinite term oral contract as capable of performance within a one-year period based on the possibility of its termination for reasons other than breach, such as an economic downturn; therefore, the contract was not rendered unenforceable by the statute of frauds.
v Parol Evidence: A fundamental principle of contract law is that where parties have reduced their bargain to writing, the parol evidence rule applies to prevent its variance by verbal evidence. However, verbal evidence is excluded only when used as an attempt to vary or modify the terms of an existing contract; the rule does not preclude a party from attempting to show that there never was an agreement. Therefore, where, as here, the jury finds that the writing is not a contract, parol evidence is admissible.
 §139:A promise which the promisor should reasonably expect to induce action or forbearanceon the part of the promisee or a third person and which does induce the action or forbearance isenforceable notwithstanding the Statute of Frauds if injustice can be avoided only by enforcementof the promise. The remedy granted for breach is to be limited as justice requires. In determining whether injustice can be avoided only by enforcement of the promise, thefollowing circumstances are significant:(a) the availability and adequacy of other remedies, particularly cancellation and restitution;(b) the definite and substantial character of the action or forbearance in relation to theremedy sought;(c) the extent to which the action or forbearance corroborates evidence of the makingand terms of the promise, or the making and terms are otherwise established by clear and convincing evidence; (d) the reasonableness of the action or forbearance; (e) the extent to which the action or forbearance was foreseeable by the promisor. Comment: d. Partial enforcement; particular remedies. The same factors which bear on whether any relief should be granted also bear on the character and extent of the remedy. In particular, the remedy of restitution is not ordinarily affected by the Statute of Frauds (see §375)….In some cases it may be appropriate to measure relief by the extent of the promisee’s reliance rather than by the terms of the promise.