Predicting the Future of Employment Law: Reflecting or Refracting Market Forces?

Indiana Law Journal

Volumn 76, Issue 1-2, 2001, Pages 28-47

  Schwab, Stewart J ^a  

^a NONE

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EID: 0346311394     PISSN: 00196665     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (110)

1. RONALD M. DWORKIN, LAW'S EMPIRE 34-35 (1986).
2. Id. at 52-53.
3. See, e.g., Robert C. Tucker, Introduction: The Writings of Marx and Engels, in THE MARX-ENGELS READER, at xvi (Robert C. Tucker ed., 1972) (explaining that, according to Marx and Engels, the Marxist "materialist conception of history had conclusively demonstrated that the human historical process was moving toward a worldwide anticapitalist revolution that would usher in socialism or communism").
4. See id. at xxix (explaining that Marx hoped his theorizing was "actively influencing historical events").
5. E.g., CONN. GEN. STAT. ANN. § 33-756(d) (West 1989); IDAHO CODE § 30-1602 (Michie 1999); IND. CODE ANN. § 23-1-35-1(3)(d) (West 1986); MINN. STAT. ANN. § 302A.251(5) (West 1985).
6. Ronald Daniels, Stakeholders and Takeovers: Can Contractarianism Be Compassionate?, 43 U. TORONTO L.J. 315, 349 (1993) (demonstrating that stakeholder protection arguments apply most forcefully for employees, but only weakly for voluntary creditors); cf. Katherine Van Wezel Stone, Policing Employment Contracts Within the Nexus- of-Contracts Firm, 43 U. TORONTO L.J. 353, 375 (1993) (arguing that corporate stakeholder statutes "do not actually give employees any meaningful protection" and urging worker participation regimes instead).
7. Ronald Daniels, Stakeholders and Takeovers: Can Contractarianism Be Compassionate?, 43 U. TORONTO L.J. 315, 349 (1993) (demonstrating that stakeholder protection arguments apply most forcefully for employees, but only weakly for voluntary creditors); cf. Katherine Van Wezel Stone, Policing Employment Contracts Within the Nexus-of-Contracts Firm, 43 U. TORONTO L.J. 353, 375 (1993) (arguing that corporate stakeholder statutes "do not actually give employees any meaningful protection" and urging worker participation regimes instead).
8. Jonathan R. Macey & Geoffrey P. Miller, Corporate Stakeholders: A Contractual Perspective, 43 U. TORONTO L.J. 401, 405 (1993) (arguing that "the true purpose of these [non-shareholder constituency] statutes is to . . . . benefit a well-organized, highly influential special-interest group, namely the top managers of large, publicly held corporations who wish to terminate the market for corporate control").
9. ROBERT LACEY & DANNY DANZIGER, THE YEAR 1000: WHAT LIFE WAS LIKE AT THE TURN OF THE FIRST MILLENIUM 179-92 (1999).
10. SAM ESTREICHER & STEWART J. SCHWAB, FOUNDATIONS OF LABOR AND EMPLOYMENT LAW ch. 1 (2000).
11. See, e.g., id. at 25-31.
12. Compare RICHARD S. BELOUS, THE CONTINGENT ECONOMY: THE GROWTH OF THE TEMPORARY, PART-TIME AND SUBCONTRACTED WORKFORCE (1989) (arguing that core employment is declining and contingent employment increasing), with Henry S. Farber, Are Lifetime Jobs Disappearing? Job Duration in the United States: 1973-1993, in LABOR STATISTICS MEASUREMENT ISSUES 157-203 (John Haltiwanger et al. eds., 1998).
13. Compare RICHARD S. BELOUS, THE CONTINGENT ECONOMY: THE GROWTH OF THE TEMPORARY, PART-TIME AND SUBCONTRACTED WORKFORCE (1989) (arguing that core employment is declining and contingent employment increasing), with Henry S. Farber, Are Lifetime Jobs Disappearing? Job Duration in the United States: 1973-1993, in LABOR STATISTICS MEASUREMENT ISSUES 157-203 (John Haltiwanger et al. eds., 1998).
14. SANFORD M. JACOBY, MODERN MANORS: WELFARE CAPITALISM SINCE THE NEW DEAL 3-10 (1997).
15. RICHARD B. FREEMAN, THE US ECONOMIC MODELAT Y2K: LODESTARFORADVANCED CAPITALISM? tbl.6 (Nat'l Bureau of Econ. Research, Working Paper No. 7757, 2000) (showing the employment-population ratio for women as 48.0 in 1973 and 67.4 in 1998, while the comparable numbers for men were 82.8 in 1973 and 80.5 in 1998), available at http://www.nber.org/papers/W7757.pdf (last visited Nov. 7, 2000).
16. Id.
17. RONALD G. EHRENBERG & ROBERT S. SMITH, MODERN LABOR ECONOMICS 175 (6th ed. 1997).
18. Id.
19. Jay M. Feinman, The Development of the Employment at Will Rule, 20 AM. J. LEGAL HIST. 118, 118 (1976). For a critique of this avowedly Marxist interpretation, see Andrew P. Morriss, Exploding Myths: An Empirical and Economic Reassessment of the Rise of Employment At-Will, 59 Mo. L. REV. 679 (1994).
20. Jay M. Feinman, The Development of the Employment at Will Rule, 20 AM. J. LEGAL HIST. 118, 118 (1976). For a critique of this avowedly Marxist interpretation, see Andrew P. Morriss, Exploding Myths: An Empirical and Economic Reassessment of the Rise of Employment At-Will, 59 Mo. L. REV. 679 (1994).
21. See J. Hoult Verkerke, Legal Regulation of Employment Practices, 65 U. CHI. L. REV. 115 (1998) (describing defamation law's attempt to minimize problems of churning, scarring, and mismatching through controlling but not choking off employer references); cf. Ramona L. Paetzold & Steven L. Willborn, Employer (Ir)rationality and the Demise of Employment References, 30 AM. BUS. L.J. 123 (showing why efficiency-minded employers might continue to give references despite the (often exaggerated) threat of legal liability).
22. See J. Hoult Verkerke, Legal Regulation of Employment Practices, 65 U. CHI. L. REV. 115 (1998) (describing defamation law's attempt to minimize problems of churning, scarring, and mismatching through controlling but not choking off employer references); cf. Ramona L. Paetzold & Steven L. Willborn, Employer (Ir)rationality and the Demise of Employment References, 30 AM. BUS. L.J. 123 (showing why efficiency-minded employers might continue to give references despite the (often exaggerated) threat of legal liability).
23. The Statute of Labourers, 23 Edw. 3 (1399) (Eng.).
24. "[Workers must] take only the Wages, Livery, Meed, or Salary, which were accustomed to be given in the places where he oweth to serve, the xx. year of our Reign of England, or five or six other common years next before." Id. § I.
25. See generally ROBERT R. PALMER, ENGLISH LAW IN THE AGE OF THE BLACK DEATH, 1348-81 (1993).
26. ANTHONY GIDDENS, THE THIRD WAY AND ITS CRITICS 3 (2000).
27. Id.
28. Id. at 6.
29. TONY BLAIR & GERHARD SCHRöDER, EUROPE: THE THIRD WAY - DIE NEUE MITTE (1999), quoted in GIDDENS, supra note 22, at 6.
30. TONY BLAIR & GERHARD SCHRöDER, EUROPE: THE THIRD WAY - DIE NEUE MITTE (1999), quoted in GIDDENS, supra note 22, at 6.
31. E.g., Linda Keene, Gas, Broken Glass and a City in Dismay, SEATTLE TIMES, Dec. 1, 1999, at A15.
32. KEVIN H. O'ROURKE & JEFFREY G. WILLIAMSON, GLOBALIZATION AND HISTORY: THE EVOLUTION OF A NINETEENTH-CENTURY ATLANTIC ECONOMY 286-87 (1999).
33. See MARTIN FELDSTEIN, THE EUROPEAN CENTRAL BANK AND THE EURO: THE FIRST YEAR 10 (Nat'l Bureau of Econ. Research, Working Paper No. 7517, 2000), available at http://www.nber.org/papers/W7517.pdf (last visit Nov. 7. 2000).
34. Id.
35. MODEL EMPLOYMENT TERMINATION ACT, 7A U.L.A. 428 (1991).
36. REBECCA M. BLANK, No EASY ANSWERS: LABOR MARKET PROBLEMS IN THE UNITED STATES VERSUS EUROPE 11 fig.1 (Jerome Levy Economics Institute of Bard College Public Policy Brief No. 33, 1997); see also ESTREICHER & SCHWAB, supra note 9, at app. D (2000).
37. REBECCA M. BLANK, No EASY ANSWERS: LABOR MARKET PROBLEMS IN THE UNITED STATES VERSUS EUROPE 11 fig.1 (Jerome Levy Economics Institute of Bard College Public Policy Brief No. 33, 1997); see also ESTREICHER & SCHWAB, supra note 9, at app. D (2000).
38. BLANK, supra note 31, at 9 ("In frustration, many Europeans have looked to the United States, with its lower unemployment rates, as a model of labor market flexibility.").
39. See, e.g., Mayer G. Freed & Daniel D. Polsby, Just Cause For Termination Rules and Economic Efficiency, 38 EMORY L.J. 1097, 1097 (1989) (declaring that at-will supporters "confront[] an immediate problem"). "In the private sector and in the absence of unions, employment is almost always at will . . . ." Id.
40. See, e.g., Mayer G. Freed & Daniel D. Polsby, Just Cause For Termination Rules and Economic Efficiency, 38 EMORY L.J. 1097, 1097 (1989) (declaring that at-will supporters "confront[] an immediate problem"). "In the private sector and in the absence of unions, employment is almost always at will . . . ." Id.
41. For arguments along these lines, see Walter Kamiat, Labor and Lemons: Efficient Norms in the Internal Labor Market and the Possible Failures of Individual Contracting, 144 U. PA. L. REV. 1953, 1958-59 (1996); David I. Levine, Just-Cause Employment Policies in the Presence of Worker Adverse Selection, 9 J. LAB. ECON. 294 (1991).
42. For arguments along these lines, see Walter Kamiat, Labor and Lemons: Efficient Norms in the Internal Labor Market and the Possible Failures of Individual Contracting, 144 U. PA. L. REV. 1953, 1958-59 (1996); David I. Levine, Just-Cause Employment Policies in the Presence of Worker Adverse Selection, 9 J. LAB. ECON. 294 (1991).
43. See J. Hoult Verkerke, An Empirical Perspective on Indefinite Term Employment Contracts: Resolving the Just Cause Debate, 1995 WIS. L. REV. 837, 842 (1995) (drawing on empirical evidence to argue for employment-at-will as the default rule in indefinite term employment contracts).
44. Theodore J. St. Antoine, A Seed Germinates: Unjust Discharge Reform Heads Toward Full Flower, 67 NEB. L. REV. 56, 65-66 (1988) ("For most commentators, it is a matter of simple justice.").
45. STEVEN L. WILLBORN ET AL., EMPLOYMENT LAW 709 (2d ed. 1998) ("In the main, unemployment insurance is designed to provide temporary, partial wage replacement to experienced workers who become unemployed through no fault of their own.").
46. Id. at 706.
47. Id. at 707-08.
48. See generally Y. Kotowitz, Moral Hazard, in 3 THE NEW PALGRAVE: A DICTIONARY OF ECONOMICS 549 (John Eatwell et al. eds., 1987).
49. Ronald G. Ehrenberg & Ronald L. Oaxaca, Unemployment Insurance, Duration of Unemployment, and Subsequent Wage Gain, 66 AM. ECON. REV. 754, 764-66 (1976).
50. Id. (estimating that an increase in UI benefits from forty percent to fifty percent of income would prolong unemployment by one-and-a-half weeks, but would increase post-unemployment wages by seven percent, for men aged forty-five to fifty-nine who did not quit voluntarily or return to their previous employer).
51. WILLBORN ET AL., supra note 37, at 706.
52. Id. at 718.
53. Id.
54. Joseph M. Becker, The Location of Financial Responsibility in Unemployment Insurance, 59 U. DET. J. URB. L. 509, 541-43 (1982) ("There have been many proposals to modify the provisions of unemployment insurance so as to perform some of the functions that would otherwise have to be performed by welfare programs.").
55. For a provocative argument that UI should not only be held to the standards of private insurance, but should become private insurance, see Michael B. Rappaport, The Private Provision of Unemployment Insurance, 1992 WIS. L. REV. 61 (1992) (arguing that a private system would be better at overcoming the obstacles of moral hazard, vagueness-of-contract terms, prediction-of-unemployment levels, and avoidance of catastrophes). While the private provision of UI might be consistent with my market-enhancing thesis, I do not predict that it will occur in the foreseeable future.
56. ADVISORY COUNCIL ON UNEMPLOYMENT COMPENSATION, UNEMPLOYMENT INSURANCE IN THE UNITED STATES 73 (1995), quoted in WILLBORN ET AL., supra note 37, at 713.
57. ADVISORY COUNCIL ON UNEMPLOYMENT COMPENSATION, UNEMPLOYMENT INSURANCE IN THE UNITED STATES 73 (1995), quoted in WILLBORN ET AL., supra note 37, at 713.
58. Id. at 78.
59. Id. at 73.
60. Id.
61. Id.
62. Id.
63. Id.
64. Id.
65. Id.
66. WILLBORN ET AL., supra note 37, at 717-18.
67. Martin Feldstein, The Effect of Unemployment Insurance on Temporary Layoff Unemployment, 68 AM. ECON. REV. 834, 834 (1978).
68. WILLBORN ET AL., supra note 37, at 718.
69. Id.
70. Compare Thomas C. Kohler & Matthew W. Finkin, Bonding and Flexibility: Employment Ordering in a Relationless Age, 46 AM. J. COMP. L. 379, 385 (Supp. 1998), with John Pencavel, The Appropriate Design of Collective Bargaining Systems: Learning From the Experience of Britain, Australia and New Zealand, 20 COMP. LAB. L. & POL'Y J. 447, 481 (1999).
71. Compare Thomas C. Kohler & Matthew W. Finkin, Bonding and Flexibility: Employment Ordering in a Relationless Age, 46 AM. J. COMP. L. 379, 385 (Supp. 1998), with John Pencavel, The Appropriate Design of Collective Bargaining Systems: Learning From the Experience of Britain, Australia and New Zealand, 20 COMP. LAB. L. & POL'Y J. 447, 481 (1999).
72. I present the situation in gender-neutral terms, but the burden of this situation typically falls on women workers. This is another example of how UI is slowly adapting to the needs of women workers.
73. 465 N.W.2d 721 (Minn. Ct. App. 1991).
74. Id. at 725.
75. Id.
76. Id.
77. See SUSAN N. HOUSEMAN, JOB SECURITY v. LABOR MARKET FLEXIBILITY: is THERE A TRADEOFF? 3 (Upjohn Inst. for Employment Research, Staff Working Papers, Spring 1994).
78. Id.
79. Id.
80. See PETER J. WIEDENBECK & RUSSELL K. OSGOOD, CASES AND MATERIALS ON EMPLOYEE BENEFITS 988-90 (1996).
81. WILLBORNET AL., supra note 37, at 774 (reporting that over two-thirds of pension plan participants were in defined benefit plans in 1975, while fifty-eight percent were in defined contribution plans by 1991).
82. The Employee Retirement Income Security Act (ERISA) of 1974, 29 U.S.C. §§ 1001-1461 (1994 & Supp. IV 1998).
83. Id. §§ 1081-1086.
84. Id. §§ 1301-1461.
85. See RICHARD A. IPPOLITO, PENSION PLANS AND EMPLOYEE PERFORMANCE 131-39 (1997).
86. Id.
87. See generally MATTHEW W. FINKIN, PRIVACY IN EMPLOYMENT LAW (1995 & Supp. 1999).
88. Id.
89. A well-known case that can be understood on contract grounds is Rulon-Miller v. IBM Corp., 208 Cal. Rptr. 524 (Cal. Ct. App. 1984). There, the court affirmed a judgment of $300,000 for an employee who was fired for dating a worker at a competitor's firm. Id. at 527. The court emphasized, however, that IBM had held itself out through internal memoranda as a company that respected employee privacy. Id. at 530.
90. But see Samuel Issacharoff, Reconstructing Employment, 104 HARV. L. REV. 607, 616-17 (1990) (book review) (arguing that courts resolving employment claims of private-sector workers routinely look to public-sector cases for guidance).
91. 29 U.S.C. § 1144(a) (1994). See generally, WILLBORN ET AL., supra note 37, at 843.
92. Catherine L. Fisk, The Last Article About the Language of ERISA Preemption? A Case Study of the Failure of Textualism, 33 HARV. J. ON LEGIS. 35, 94 (1996).
93. Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 98-99 (1982).
94. WILLBORN ET AL., supra note 37, at 843-44.
95. Id. at 843
96. Id. at 843-44.
97. Lawrence H. Summers, Some Simple Economics of Mandated Benefits, 79 AEA PAPERS & PROCEEDINGS 177 (1989).
98. Sam Peltzman has made an analogous argument that "free" public schools lead to a low-quality trap because parents, who in the absence of public schools would willingly pay for high-quality education, will opt for lower-quality public education that comes free. Sam Peltzman, The Effect of Government Subsidies-in-Kind on Private Expenditures: The Case of Higher Education, 81 J. POL. ECON. 1 (1973).
99. Consolidated Omnibus Budget Reconciliation Act of 1985, Pub. L. No. 99-272, 100 Stat. 82 (codified as amended in scattered sections of 7, 10, 15, 29, 33, 40, 42, and 47 U.S.C.).
100. Id.
101. Health Insurance Portability and Accounting Act of 1996, Pub. L. No. 104-191, 110 Stat. 1936 (codified as amended in scattered sections of 18, 26, 29, and 42 U.S.C.).
102. Id.
103. WILLBORN ET AL., supra note 37, at 877-80.
104. Council Directive 92/85/EEC, 1992 O.J. (L 348) 1. Article 8.1 directs member states to take the necessary measures to ensure that workers "are entitled to a continuous period of maternity leave of at least 14 weeks." Id. at 4. Article 11.2(b) requires member states to ensure that workers on maternity leave receive "an adequate allowance." Id.
105. See Convention (No. 183) Concerning the Revision of the Maternity Protection Convention (Revised 1952), June 15, 2000, at http://ilolex.ilo.ch1567/public/english/docs/ convdisp.htm. Maternity leave shall be not less than fourteen weeks, id. art. 4(1), with at least six weeks' compulsory leave after childbirth, id. art. 4(3). Cash benefits are required. Id. art. 6(1). If based on prior earnings, benefits should be at least two-thirds of prior pay (caps are permissible). Id. art. 6(3). If based on other methods, benefits should be comparable on average to 2/3 of prior pay. Id. art. 6(4). A member state whose economy and social security system is insufficiently developed shall be deemed in compliance with the cash benefits requirement if it provides maternity benefits no lower than those for sickness or temporary disability. Id. art. 7(1). The ILO's prior convention on maternity protection mandated twelve weeks' paid leave, but the level of benefits was specified in less detail than under the current convention. Convention (No. 103) Concerning Maternity Protection (Revised), June 28, 1952, art. 3(2), 214 U.N.T.S. 321, 326.
106. Family Medical Leave Act (FMLA) of 1993, Pub. L. No. 103-3, 107 Stat. 6 (codified as amended at 29 U.S.C. §§ 2601-2654 (1994 & Supp. IV 1998)).
107. 29 U.S.C. § 2612(a) (1994).
108. See, e.g., Duncan Kennedy, Distributive and Paternalist Motives in Contract and Tort Law, with Special Reference to Compulsory Terms and Unequal Bargaining Power, 41 MD. L. REV. 563 (1982).
109. The fall in wages would be between ninety dollars and one-hundred dollars, with the exact amount depending on the slope of the supply and demand curves with and without the health-insurance plan.
110. Adverse-selection problems in providing health insurance, using the numbers I discuss in the text, are nicely illustrated in Lawrence H. Summers, Some Simple Economics of Mandated Benefits, 79 AM. ECON. REV. 177 (Papers & Proceedings Supp. 1989).