Opponents of employment-at-will speak powerfully of defending an employee’s “individual freedom” and private life from oppressive employers. But Arthur Foulkes writes that they do not mean “freedom” in the classical-liberal sense of the word; rather, they mean something quite different. They mean freedom that only comes at other peoples’ expense. FULL ARTICLE
Source link: http://blog.mises.org/3612/in-defense-of-employment-at-will/
In Defense of Employment-at-Will
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While I agree with the bulk of this article, and am in favor of protecting employer rights to further economic prosperity, I nonetheless find myself wondering if employment-at-will should be so staunch as to provide support to an employer who terminates an employee based on religous, political, or moral beliefs. It can be argued that a company is dependant on its customers, and customers certainly make decisions on such whimsical basis, but does that afford the employer the right to the same? Certainly we see the employer’s right to terminate for social indiscretions being played out across the country now. We have to look no further than the case of the excecutive at Boeing who was terminated for having an extramarital affair…but is it really in our best interest to allow companies to make such moral pronunciations? Companies will always cater to their base. On a large enough scale that means that companies will always attempt to appease the majority. If we grant them that right we limit the avenues for growth through minority oppinion and we foster a culture of oppression of difference. If we, on the other hand, free companies from their obligation to appease the masses by removing the option for termination based on race or sexual orientation, don’t we free the way for employment based on merit instead of social mores?
“Companies” (or rather company-managers, qua company managers) have two and only two obligations: (1) Not to initiate aggression against anyone’s person or property; (2) To abide by the terms of their contract with shareholders (to maximize value to shareholders as best as they can). The managers have every right to go about doing this in what-ever manner they wish. Of course, such is subject to check from the shareholders and their proxies.
A company-manager who fires employees because they won’t have sex with him is not engaging in an activity that is improves shareholder-value, thus is probably in violation of his contract. Unless, of course, shareholders deem this acceptable.
Corporations are the private property of shareholders. No-one — including the managers — has a “right” to work there, unless specified by contract. Whether or not managers have the right to fire employees for any particular reason is not a matter of public-law, but rather of contract, and whether or not in firing someone for a particular reason, they are upholding their duties to their shareholders.
Interesting you should mention Boeing. I was there during the Bomarc layoff (1964). An engineer with about 6 months to retirement got a pink slip while in the hospital with a heart attack. Can no longer do that because of the vested rights law. Would anyone also have that law undone? (I was also laid off, turned out to work in my favor)
The essay provides a good argument for union protection. A union contract might raise labor costs in a minor way but any blue collar worker who wants to negotiate his own contract with Boeing is nuts.
given the state forces on into jury duty, should the employer really be allowed to fire someone for going?
I concur with the author, and believe that the underlying principle is that two individuals have the right to make a contract of their choosing. Where would anyone find the right to deprive them of doing so?
Not only should individuals be able to decide that each should be free to terminate the agreement (by one party firing the other, or the other party quitting) but to do so for whatever bigotted reason he may have. People should be free to marry (or divorce) whomever they choose. Why shouldn’t this be the guide for all contracts?
I think that companies should be required to hire two employees for every one that they fire. This would guarantee great employment because there would always be a net increase in employees. Also, we should pass MAXIMUM wage laws, which would clearly eliminated unemployment, as price ceilings nearly always result in shortages. A shortage in labor would mean unemployment is eliminated.
I would, however, eliminate the protection of people with heart attacks – they’re useless employees.
One question I’ve always enjoyed asking of rabid supporters of legislation meant to curtail the allegedly state-like powers of employers: Would you support legislation preventing anyone from leaving a given job sans “justifiable cause?”
Pellinore
1) In the dynamics of society, companies are created to increase shareholder value. At the same time unions are created to increase the power of employees in order to increase employees’ job “value”. Both are justified in a truly free society. This creates conflicts at times but also can be beneficial to everyone. That depends on the relationship that the two groups build with one another. A balance can be created when the two groups join to work towards recognizing the needs and desires of both and then working towards satisfying them, at the same time keeping an eye on their customers who must also agree and who show their agreement with their dollar.
2) Governments’ purpose must be to protect the people. Therefore it must monitor behaviours and intervene when one group or person behaves in a way that is not acceptable to the society. Morals, ethics, etc. have been developed from experience gained over thousands of years and exist to enable society to function. Therefore when a company or union forces its members to act unethically or immorally, government must step in to correct the problem. The members of society have the freedom to elect governments that uphold the values that they deem to be important to them. Government cannot be used to uphold the interests of one group over another. In order to ensure that governments also don’t become corrupt, the constitution governs the behaviour of the government. Institutions that are outside the influence of government must exist to protect the constitution and ensure compliance.
If the people are weak and ignorant, however, then they allow a situation to be created where this system breaks down as it seems to be doing in many countries around the world.
Puzzling comments. Unintended consequences, anyone? It seems to me that with a more free market atmosphere and greater competition for labor, companies that fired for arbitrary reasons would get a bad reputation and have to settle for less desirable employees than other companies.
I would like to comment on the quasi-governmental powers that companies supposedly have.
American companies have become increasingly responsible for providing non-salary benefits to employees, including health, dental, life and disability insurance, as well as retirement plans such as 401k plans. This has increased the cost of hiring an employee. More importantly, it has also increased the supposed bond / implied contract between employee and employer since the employee is obtaining these important pre-tax benefits through the employer.
The key here is that these benefits are pre-tax and are thus advantageously obtained through the employer. It is the obsolete and obscene tax code that has turned America into a collection of mini socialist corporate states.
(I have heard the argument that companies were forced into providing these benefits as a result of FDR’s wage controls, but these no longer exist).
How do we solve the problem?
1. Scrap all of these confusing 401k, 403b, IRA, Roth IRA, SEP IRA plans and implement the Canadian Registered Retirement Savings Plan (RRSP) mechanism: A person can contribute 18% of his prior year’s income to a tax deferred account. Accounts can be held at any bank, trust or brokerage and the money can be invested in any stocks, bonds or funds. The accounts are NOT employer sponsored and are NOT employer restricted.
2. Allow people to purchase health / life / dental / disability insurance plans through their municipalities, counties and/or states. This would create super-groups and reduce overall costs.
Implementing these changes would reduce the supposed implied employer-employee contract since companies would only be paying salary. This would also increase employee mobility. Employees would be more willing to leave bad jobs, since benefits would not be tied to the employer.
An engineer with about 6 months to retirement got a pink slip while in the hospital with a heart attack. Can no longer do that because of the vested rights law. Would anyone also have that law undone?
Of course. It’s an unjust law.
still wondering about jury duty..
In regards to Jury Duty; it seems that the Govt. shouldn’t have the authority to compel people to serve, it is essentially theft of time and there are opportunity costs involved. However, if employers could fire for serving, then few people would serve, and that would tear at the fabric of our society. We seem to have decided a long time ago that membership in our society is compulsory. I can’t abstain from the laws of the land, I can’t refuse to contribute to the highway system or the SS system. Theoretically we should be allowed to do what we choose and abstain from both the responsibility and advantages conferred by membership in this society so long as I don’t violate other’s property rights, but that isn’t a reality…so the govt. must infringe on my property rights (ie: jury duty) and if I must cede some rights to be here, it seems only fair that companies must as well…
Or one might say that the employer has a right to fire for serving on jury duty, but it must be explicitly stated in the employment contract, and how many people are going to work for that company.
I wonder if Mr. Foulkes has tenure.
Does anyone think it’s possible to obtain a contract that includes a minimum term of employment at, say, a 10% salary discount? Many blue-collar workers would jump at the chance – that is, if they could trust their employer not to cheat them.
Disclosure: I currently make more money than 75% of American workers. The comments here would be far more enlightening if everyone would include similar information about themselves.
Dave K. seems to think that only the poor have th right to write about this topic.
O.K. I am not American, but I am poor.
I have worked as a security guard most of my adult life and I live in public housing.
Chubb Security (which is part of the American U.T.C.) should be able to stop employing me for any reason at all (or for no reason). If I do not like this I should sign a contract with Chubb – but that would involve obligations on my side as well as their side.
A job is not property, if someone pays someone to do some work he can decide to stop paying them (and then they stop doing the work).
If someone does not like working for one employer, he should (for example) set himself up as an odd job man looking after the gardens of the old or disabled (or lazy), or doing repair jobs in their houses (some people in my home town have done exactly this – although government regulations make it, at best, only semi legal).
If you do not like someone’s arguments then present counter arguments – not cheap shots about “I wonder if he has tenure”
Attack the argument, not the man.
Mr. Marks-
Take your own medicine, and reply to my question. Does anyone think it’s possible to obtain a contract that includes a minimum term of employment at, say, a 10% salary discount? Would you yourself want such a contract?
Neither of us has presented any arguments so far. I’ve asked questions, and you’ve just repeated what Mr. Foulkes said in his article. As far as I’m concerned, an argument is a series of statements that follow from each other logically, leading from a premise to a conclusion.
Given the 4000-year-old tradition of intellectuals backing up the desires of the rich and powerful, I think it’s totally appropriate to ask if Mr. Foulkes has tenure. Likewise, if you really believe Mr. Foulkes’s arguments, why do you live in public housing, subsidized by the government? And why is this more justified than a restriction on employment-at-will?
Bottom line: a reply is not ad hominem if the argument being made affects the interests of the person making it. This is certainly true of both you and Mr. Foulkes, although in your case I fail to see how it helps you.
Believe it or not, I’m willing to be convinced – but by supported argument. I’ve also read a fair amount of Mises and Rothbard, and I’m not able to understand why there are no discounted minimum-term employment contracts in the free market. I’d really like an answer to this question.
Dave K,
Who cares? So what? If no-one engages in such contracts, people obviously don’t think they’re worth the bother, either in negotiating them, or in setting them up, or in their cost. Maybe the prospect of a “minimum term of employment” for several years isn’t concrete enough to offset a salary-reduction for most people; maybe many businesses (probably rightly) feel that it would be better to pay the premium right now, and have the flexibility to adjust with the times. Maybe business’ don’t think they can attract employees with a salary-range that says “10% lower than everyone else, but you’re guaranteed a lower salary for at least X years”.
Whether or not Prof. Foulkes has tenure is completely irrelevant and nothing more than logical fallacy. So too is it irrelevant whether Mr. Marks lives in public housing or not*. Either the owners of property have a right to kick anyone off of it at any time for any reason, or they don’t (that is, either there are property rights, or there aren’t). No-one has the “right” to work at a particular company. Thus, the companies can fire employees for any reason they damn well want to (subject to the proviso I noted above, abiding by duties to shareholders).
If I’m in the market for a maid, I should be able to hire whoever I want, for whatever reason, based on whatever criteria I choose, rational or not. Likewise, I should also be able to fire that person for whatever reason I want. The same applies for corporations (that is, for the owners of corporations, the shareholders).
*I’d suggest you take a look at Rothbard, Murray. Living in a State-Run World. It is not the responsibility of libertarians to engage in an unending detective game, determining where interventions have occured and what products they can’t use, because they benefit from State-intervention. If this were required, all libertarians would have to starve to death.
I don’t know about specific contracts with such terms, but I do know that many businesses tend to initially hire people for a probationary period (often 90 days), and if they last that long, to get a pay raise. That sounds essentially the same as the above-mentioned contract to me.
And for the record, I guess I qualify as “poor”, earning $22K last year.
Mr. Heinrich-
Thanks for the Rothbard article. I hadn’t read that one, and it sounds quite reasonable. The argument it makes applies equally well to a lot of other political views.
I’m afraid your statement that “If no-one engages in such contracts, people obviously don’t think they’re worth the bother, either in negotiating them, or in setting them up, or in their cost” begs the question. You seem to argue as follows: 1) These contracts don’t exist. 2) The current economic system produces all forms of contract that are “worth the bother”. Therefore 3) these contracts aren’t worth the bother. But my question is exactly whether premise 2) is true. It seems like you’re reiterating Mr. Foulkes’s statements again, without presenting an argument for them.
It’s nice that you’re sometimes in the market for a maid – you must be in a higher tax bracket than me. Personally, I never would have thought of that example.
Mr. Clem-
Thanks for mentioning these contracts. I don’t think they guarantee the employee’s job during the probationary period, though, so I guess they are allowed under employment-at-will.
My statistics before were wrong – it looks like I am only in the top 55% by income.
http://www.census.gov/prod/2004pubs/p60-226.pdf
Dave K,
Actually, you had it right the first time: IF no-one engages in these contracts, then at least one party on one side doesn’t consider it worth the bother (that is, either the employer, the employee, or both), or doesn’t even consider it beneficial (I can see why employers might not consider this kind of contract beneficial). I wasn’t saying that such contracts don’t exist. I was saying that if they don’t exist, then that’s the reason. Either that, or no-one in an entreprising position has thought of them, or thought to ask for them.
If in fact there isn’t one instance of this kind of contract ever existing, then from that we can infer that either: (1) No combination of employer and employee ever both thought this contract was worthwhile; (2) No-one in a position to do anything ever thought to do such.
This is something that one can conclude via logical analysis; just as one can conclude that the fact that I’m typing this message demonstrates that I prefer (in the praxeological, not psychological sense) doing this over any other possible action that occured to me to engage in (that I’m capable of engaging in at the moment).
PS: I use the maid example — and almost always use the maid example — regarding hiring/firing, because I think that’s an example that pretty clearly makes my point, not because I’m in the market for maids. That is, I think that very few people would deny that a house-owner has the right to hire and fire maids on the basis of any criteria he or she chooses.
Mr. Heinrich-
Re your statement “If in fact there isn’t one instance of this kind of contract ever existing, then from that we can infer that either: (1) No combination of employer and employee ever both thought this contract was worthwhile; (2) No-one in a position to do anything ever thought to do such.”
This clearly isn’t true, since there are more possibilities than these two. As we both know, there are many instances in which third parties intervene in the contracting process. These parties can be the government, labor unions, or a variety of others. Mises’s “Interventionism” is largely devoted to this topic. Of course, your possibility (2) can be read in such an absurdly broad sense as to justify your inference, but I assume you don’t mean it that way.
To continue with your example: I can’t actually infer that you prefer typing this message, in any meaningful sense of the word “prefer.” Perhaps someone is holding a gun to your head, though of course it’s unlikely. But if that were true, you would hardly say you “prefer” typing.
In a true free market, it’s reasonable to expect many more types of labor contract to flourish than under the current system. Certainly these can include contracts with provisions for minimum term of employment, at a suitable discount. Austrian economics ought then to be capable of explaining the absence of these contracts in our current system, presumably as a result of third-party intervention.
I’m certainly not aware of any argument of this type. It would be helpful to me if Mr. Heinrich or another commenter would make it or point me to it.
David Heinrich,
I would merely qualify your statement to say that under current circumstances, your statement is true. Thus, we have to look at the current situation and see why such contracts are not considered worthwhile.
Dave K,
You are correct, I forgot about that third possibility: intervention. However, some of that coudl fall under (1), as people might not think it worthwhile if severe punishment is threatened for doing such.
In the praxeological sense, we can say that I prefer doing whatever I’m doing, in that I prefer it to all alternatives available to me at the time. If someone’s holding a gun to my head, I prefer typing this message, as opposed to being shot. Of course, there, we could say that a third party had used coercive force, and that I may not prefer to do that if not for coercsion. That is, in such case, there’s an “interaction” occuring between me and the aggressor which I would not engage in of my own free will, and which in fact lowers my utility (but not as much as what he threatens to do to me if I don’t do as he says).
Of available options open to individuals, they always choose the option highest on their value-scale. This is true both with and without coercsion. That is, the person — say, the libertarian — paying taxes prefers paying taxes to the risk of being caught by the State.
What about work for hire with an initial deposit. It isn’t for a specific time period but could considered to be for the time it took to produce the first part of the work. After that first piece was produced the employer could then walk away (and presumably lose some investment) or continue on with the contractor.
…and how about the structure of many sales people where for an introductory period they are allowed low sales, and given a set hourly rate supplemented by a low percentage of sales, and after the intro period they forfeit the safety of the hourly wages and take a higher percentage of their sales?
Just some thoughts.
A job is property – a contract for services. Contrats may be written or oral but the ability of an employee to enforce an oral contract is zip. (I get about $30k pension)
Dave K. asked why I live in public housing – for the same reason that I use a government road (also unjustified) – because it is there.
If I left this house (where my parents lived before me) it would be given to someone else who would pay no higher rent than I do – the saving to the taxpayer would be zero.
As for this weird stuff about academics supporting the “rich and powerful” – well that confuses two different things.
Many powerful people are not rich, and many rich people find that they have no power.
It is the old point made in a story of Solon the Wise (Solon is shown the gold of a rich man, but he is not impressed as he points out that it is the people who control the most iron [force] who have the power). Gold can buy “iron” in some situations, but there are always rich men willing to back a bigger government (hoping, perhaps, that higher taxes and more regulations will somehow just apply to everyone else – not to them).
As for academics.
Most, academics in most countries (all, as far as know) have supported a bigger government for many decades. Certainly this is true in the United States.
To pretend that academics have mostly opposed the rise of statism is simply not true.
As for the contract you mention. What relevance has it got to anything?
Are you saying that you (or someone you know) wanted such a contract and could find noone who wanted to make it with them?
Some Japanese companies used to offer “lifetime” contracts in which they promised security of employment (with the downside being lower wages than would otherwise be the case). I believe that some companies still offer this in Japan (in spite of Japan’s economic problems).
Is this the sort of thing you have in mind? Perhaps you should set up a business enterprise based on offering this sort of contract – you might prosper. I am not a man of business, but you may have talent in this area.
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