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Chapter 16
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  1. Chapter 16 Employment Relationships: Contractual & Tort Theories

  2. Employment at Will • Common Law: An employee can be terminated without legal liability for good cause, bad cause, or no cause at all (Payne v. Western & Atlantic R.R. Co, 1884). • Not applicable where there is an express statutory prohibition or formal contract – a union contract for example. • In absence of specific legislation, handled on a case-by-case basis.

  3. Exceptions • 1. The tort theory that discharge violates established public policy (whistleblowing cases). • 2. The tort theory of abusive discharge; (intentional or reckless infliction of emotional distress). • 3. The contract theory of express or implied guarantee of continued employment except for just-cause terminations; (handbook and policy manual cases). • 4. The theory of an implied covenant of good faith and fair dealing in employment contracts (Fortune v. National Cash Register Co., case)

  4. Exceptions • Most union contracts have contract terms that employee can not be discharged except for “just cause”. Contract terms remove employee from at-will status. • Statutory restrictions – NLRA was first – • Retaliation – Discrimination section of a statute does not have to be violated.

  5. Mixed Discharge • Employee violates company policy or has poor performance but also engages in protected activity when discharged. (Price Waterhouse v. Hopkins, 1989 – key US Supreme Court case) • If plaintiff can demonstrate that an impermissible element was part of the decision, even though other permissible factors may have motivated the decision. Difficult burden for employer once plaintiff demonstrates discrimination on an impermissible basis is involved.

  6. Public Policy Exceptions • Broad term and often not defined by the court until violated. Case-by-case basis. • Three reasons for discharge have been held to be contrary to public policy: 1. Exercising a right under a statute; 2. Refusing to disobey a law when requested to do so by the employer; 3. Whistle-blower cases.

  7. Preventing Wrongful Discharge • “Gun-shy” about discharging an employee? • General Strategy – regular audit of selection and discharge processes: • 1. The Application Form – Does it generate job related info. – • 2. The Interviewing Process – Properly trained interviewers a must – No Promises! • 3. The Job Offer Letter – • 4. Complaint Procedures – May eliminate up to 70% of wrongful discharge exposure. • 5. Performance Appraisals – consistency and objectivity. • 6. Just-cause Policy – • 7. Handbooks and Policy Manuals – • 8. The Discharge Process – Minimize provocation.

  8. Causes of Provocation in the Discharge Process • Indecisiveness • Humiliation • Misrepresentation • A rejected feeling • Preventing Provocation: Preparation is the key – develop a concise reason for the discharge – be brief & to the point.

  9. Suggested Elements of a Discharge Process • Centralize the process as much as possible • Should be fair, firm, and friendly • Reasons for discharge should be logical from the employee’s point of view • Proper investigation to determine the facts • Timing & Place of Discharge: Never on Friday – Suspend 1st (without pay) Investigate – final filter – Exit Interviews.

  10. Constructive Discharge • When an employer deliberately makes employee’s working conditions so intolerable that the employee is forced into voluntary resignation. • Reasonable person rule utilized. Conditions must be more than just disagreeable (Bourque, 1990). • Clearest form – Alternative of Resigning or Discharge. • • • CONSTRUCTIVE DISCHARGE AND THE EMPLOYER'S STATE OF MIND: A PRACTICAL • STANDARD by Steven D. Underwood in U. PA. JOURNAL OF LABOR AND EMPLOYMENT LAW [Vol. 1:1] 1998.

  11. Preventing Constructive Discharge • Educate and train supervisors. • Formal Complaint System & encourage employees to use it. • Encourage the employee to accept a demotion or transfer. • If you intend to discharge – be honest and open. • Beware of resignations – always ask for a reason.

  12. Whistleblower Protection Under Sarbanes-Oxley Act (SOX) • To date, SOX whistle blowers have not fared very well in administrative proceedings and the courts(Watnick, 2007). • To Facilitate Compliance, Employers should: • Develop Codes of conduct/ethics • Establishment of clear publication of hotlines and other avenues for confidential, anonymous complaints • Training, training, & more training • Hiring practices to properly screen employees (especially executives) (Smith, 2007).

  13. Non-Competition Agreements • Agreements will be enforced when: • They are limited as to duration and geographic area; • They must be based on some good consideration; • They must be reasonable, affording only fair protection to the employer in whose favor they are made, and not interfere with the interest of the public.

  14. Employer Liability for Torts of Employees • Respondeat superior – imposes liability on employer when an employee is acting within the course of employment. • Employee or Independent contractor – Studebaker case & Vizcaino v. Microsoft Corp. – • Figure 16-1, p. 606 –IRS – The degree of control the employer exercises over the individual’s work is pivotal in making the proper determination. • Issues – Purchase of appropriate liability insurance, proper care in selection & supervision.

  15. Negligent Hiring & Retention • Hiring • A situation in which an employer is liable to third persons for injury and employer knew or should have known of the employee’s dangerous characteristics. • The employer’s negligence must be the proximate cause of the injury • Employer’s liability will depend on the soundness of the pre-employment investigation into the employee’s background.

  16. Retention • An employer who has knowledge of dangerous tendencies of an employee has a duty to other employees to do something • Pre-employment investigations: • More duty imposed when jobs have a public relationship or expose the employee to opportunities to injure others.

  17. Steps to Avoid Exposure to Litigation • Confirm claims of skills and experience for all applicants • Abate the risks of harm by extensive training of employees who work with equipment, material, or processes that are dangerous. • Include procedures to protect 3rd parties health and safety (including employees) • Evaluate the training activity to determine its effectiveness to reduce negligence risks.

  18. Use of Credit Checks of Job Applicants: • “One of the most effective ways to avoid hiring a liar or preserve the right to fire one is to use a standard application” (Babcock, 2003). Look for “gaps” in employment history – No national criminal database available to most private employers – 10,000 courthouses across the US (Babcock, 2003).