The Common Law Attack on Employee Liberty: Time to Recalibrate

all tied upAmerican businesses have fought long and hard to preserve employment-at-will as the bedrock of employment law in this country.  Employment at will represents the power of either party to end the relationship at any time and for any reason.  Theoretically, the power to quit at will should at least preserve some employee bargaining power because an employer knows that if it does not treat employees fairly, honestly, with dignity and respect, they can walk.  Imagine how unfair and potentially abusive it would be if an employer has the right to fire an employee at will but the employee did not have the reciprocal right to quit at will.  Well, that is the direction in which the common law is evolving.

First, as a general matter, just because both parties have a theoretically equal right to terminate employment at will, in reality both parties are NOT equally able to exercise such power.  Add to this employers frequently create penalties for employees who exercise this “right” to terminate employment at will by creating forfeiture provisions for bonuses and/or accrued paid time off.  And, even macroeconomic trends are at play here: Immigration, high unemployment and globalization are quickly eroding the bargaining power of American employees.  It is in this context that non-competes and the new common law mutation “inevitable disclosure” must be viewed.

A non-compete is nreally a mechanism which can effectively eliminate the option of quitting altogether.  An employee can only exercise the at-will quit option if she has sufficient wealth not to work or she can replace her income with another job.  Employment at will is a court created doctrine, and as unfair as it can be, at least it evolved in a labor market that recognized a reciprocal right by employees to use their labor competitively.  A common law that erodes the employee’s right to work while continuing to protect the right to fire an employee at any time and for any reason (even an immoral reason) is bound to lead to unfair and unjust results.

Of course, it appears to be getting worse.  Inevitable disclosure is another court created impediment to the liberty of employees and one that potentially could reach a pandemic level.  If an employee coming into possession of employer information is enough to overcome an employee’s freedom to leave her job and pursue her greatest worth elsewhere, the potential harm to employees (and entrepreneurs to be) is hard to overstate.  When you take away an employee’s options to leave for a better opportunity, what leverage does that employee have to bargain? Inevitable disclosure becomes the modern day “scarlet letter” that scares away prospective employers.

However, it is not only harmful to employees and fundamental liberty, it is harmful to the economy as a whole.  The reason that restraints on trade were historically disfavored to begin with is that they are anticompetitive.  The public benefits when an employee can offer his greatest skills, knowledge and experience in the market place.  We do not allow companies to agree among themselves to restrain trade; why would public policy permit enforcement such an agreement between an individual and a company?  And what policy implications arise from a court creating a non-compete where no such agreement exists under the newest legal fiction of “inevitable disclosure?”

There must be a re-calibrating of employment law to take into account the interrelationship between these common law doctrines, and unless courts or legislatures decide to stop the attack on individual employment rights, employees will have no choice but to return to the strategy of collective action/bargaining.  Although I am not sure this is the most desirable solution to these problems, it is beginning to appear that it might be the only realistic solution.

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