Voters in the State of Colorado may have a chance to amend their state constitution to require that employers have just cause to terminate an employee.

Opponents of the measure are already bringing out the big gun. They argue: If employers must have a reason to fire an employee, then the sky will fall. In particular, Colorado employers will be unable to compete. But is this true?

Here is an example from last week's Rocky Mountain News of the argument that is being made:

Dan Pilcher, Op-Ed - In the clenches - Business climate in state would instantly worsen (April 19, 2008)

This initiative would clearly explode Colorado's long-standing "employment-at will" doctrine for employers and workers and wreak havoc with state employment law.

Only one other state in the country has apparently chosen to modify the employment-at-will concept with a statute similar to this proposed amendment: Montana, which in 1987 enacted the "Wrongful Discharge from Employment Act."

Placing Colorado into such a restrictive labor-law category can only harm our state's economic competitiveness.

The idea that our economy depends on at-will employment, on an employer's ability to fire an employee for a bad or no reason, just boggles the mind. Yet it is a belief held by the highest levels of our government.

A few years ago, when I gave a briefing on US employment law to a delegation of Chinese Labor Ministers who were doing a study tour as a basis for drafting their new employment contracts law, the leader of the delegation told me that officials in the US Department of Labor had insisted that if Chinese law provided for just cause, China's economy would be destroyed. They were put off by such an idea and curious if everyone in the US thought that way.

Is At-Will Good For the US?

What at-will employment proponents fail to understand is that our current system of at-will employment is expensive and may be undermining US business. Many employers - and even attorneys - believe that if they have employment at will they will not be second guessed and will not be subject to lawsuits.

It is puzzling in the extreme that this belief persists. I get legal updates daily, and what I see is news of lawsuits filed against employers who have at-will employment. While in the end many of those employers will prevail because they have an at-will regime, they will do so only after they have spent time and money fighting a law suit through the courts. I see cases that make it to the state courts of appeals, and by then the costs are huge.

So if at-will employment does not prevent lawsuits, is it at least neutral in terms of letting employers get on with their businesses?

Again, I think the answer is that an at-will regime is destructive to the way business are conducted, and that US employers should reconsider their attachment to at-will employment. There are many reasons for this, but one is that employers who want to be certain they have only at-will employment must tell their employees at every point that nothing in the employment manual or rules creates a binding contract and stating over and over that employment is at-will and the employee can be fired for a good, bad, or no reason.

This sort of information does not exactly cause employees to have warm attachments to their employers.

There are many other ways in which at-will gets in the way of a good business relationship and may even make it more likely that an employer is sued.

For those who are interested, I have a short article that lays out this discussion in more detail - Why At-Will Employment is Bad for Employers and Just Cause is Good for Them. You can download a copy free from this link at SSRN.

For those who would like more information on the Colorado initiative, here are some links.

Proposed initiative measure 2007-2008 #62, concerning just cause employee suspension and discharge

Selections from proposed Article XVIII of the Colorado Constitution as amended BY THE ADDITION OF A NEW SECTION 13:

The major purposes of the proposed amendment appear to be:

1. To prohibit an employer from discharging or suspending an employee unless the employer has first established just cause for the discharge or suspension;

2. To define "just cause" to mean:

a. Incompetence;

b. Substandard performance of assigned job duties;

c. Neglect of assigned job duties;

d. Repeated violations of the employer's written policies and procedures relating to job performance;
e. Gross insubordination that affects job performance;

f. Willful misconduct that affects job performance; or

g. Conviction of a crime involving moral turpitude.

3. To specify that any employee who is notified that he will be or has been discharged or suspended shall receive the employer's written documentation of the just cause used to justify such discharge or suspension;

4. To allow an employee who believes he was discharged or suspended without just cause to, within thirty days after notification of the discharge or suspension, apply for mediation of a claim for wrongful discharge or suspension;

5. To state that a hearing shall be held before a private mediator within one hundred twenty days after an employee files for mediation;

6. To permit the employee and the employer to present evidence and make legal argument at the hearing;

7. To allow a mediator who finds that an employee was discharged or suspended without just cause to award the employee all back wages or reinstatement in his former job or both;

8. To require the mediator to assess the costs for his or her services to the losing party;

9. To allow the mediator to award attorney fees to the prevailing party as to any claim made by the employee.