Rethinking the communication of employment-at-will: what to do?

Borstorff, Patricia ; Hearn, W. Mark

INTRODUCTION

Organizations are currently facing a staffing drought, unlike any that has been seen in recent years. Unemployment rates have fallen, and the numbers of newly created jobs and wage rates have increased while fewer people are entering the job market. The confluence of these trends requires an increased vigilance in the process of attracting and recruiting potential employees by organizations (Saltzman, 1997).

The attraction and retention of the best and brightest workers require organizations to develop and use effective recruiting materials when communicating with prospective employees. However, to protect themselves from litigation resulting from employee claims of wrongful discharge, up to 60% of employers in the United States have incorporated into their application forms and other employment materials strongly worded employment-at-will disclaimers (Figure 1).

Potential employees may perceive these statements as offensive or threatening. By using language designed to afford post-employment legal protection, businesses have risked offending, and in some cases, discouraging the very applicants they want most to attract. Companies may need to rethink their policy of using strongly worded employment-at-will disclaimers especially in tight labor markets. Relatively little research has examined applicants' reactions to selection procedures and several authors (Schwoerer & Rosen, 1989; Wayland, Clay, & Payne, 1993) have called for more research on applicant attitudes about selection methods and practices.

This article seeks to provide guidance that will lead to better informed decisions in evaluating one's employment-at-will philosophy and practices. To do so, we will first review the current status and legal considerations surrounding employment-at-will. We examine the reactions, perceptions and evaluations of potential applicants to the communication of employment-at-will disclaimers. Factors to consider when using at-will disclaimers, such as the language, prominence, and placement, are presented. Finally, possible alternatives to the direct communication of at-will are offered.

Employment-at-will generally is defined as the right of the employer to terminate an employee without giving a reason and the right of an employee to resign when he or she wants. Some 78% of American private-sector employment relationships are said to be "at the will" of the employer (Summers, 1996). To protect themselves from litigation resulting from employee claims of wrongful discharge and to communicate their "at-will" status, employers in the United States have incorporated into their application forms and other employment materials strongly worded employment-at-will disclaimers.

Recruiters, human resource managers and executives not only acknowledge the current scarcity of skilled workers, but also predict that the situation will intensify in the next three years. This tightening of the labor market encompasses a wide range of workers: those with a technical background or MBA; constructions tradesmen such as electricians, carpenters, pipe fitters; and, secretaries. And, these shortages are being translated into higher wages. In May 1997, hourly wages, as reported by the Labor Department, were up 3.8 percent from the year earlier (Schlesinger, 1997). Other reports indicate that significantly larger increases are being given. Even hourly workers with minimal skills can find positions that offer signing bonuses, flexible hours, and opportunities to advance. Some manufacturers are so strapped for workers that they are reducing hours, but not pay--effectively increasing the hourly wage--to attract the people they need. (Saltzman, 1997)

The phenomena of higher pay and tighter labor markets should lead to more intensive managerial attention to the recruitment and selection of employees who are loyal, motivated, and contributors of the extra effort needed to counterbalance the resultant squeeze on profits. Given that the labor shortage is not just a temporary blip in the nation's employment picture, companies may need to rethink the strategies they use to find and keep good people. In a competitive labor market, recruitment is the first line of defense (Caudron, 1996). While possibly appropriate under loose labor market conditions, the use of strongly worded employment at will disclaimers may be a chink in this defense when labor is tight. This is especially true given the decreasing support of these statements by the courts.

Until the advent of unionism in the early 1920s, employment-at-will was an assumed, absolute management right under U.S. laissez-faire practices and upheld by a 1908 U.S. Supreme Court decision (Adair v. U.S., 208 U.S. 161). However, with organization of unions and negotiation of contracts providing members immunity from dismissal for other-than cause, and with enactment of the Wagner Act (1935), union members gained the first statutory exceptions from the at-will doctrine. Over the next 30 years, federal and state governments enacted laws providing additional protection from at-will terminations to employees or applicants affected by violation of minimum wage and overtime provisions of the Fair Labor Standards Act (1938), violation of workers compensation or safety law provisions providing for employee claims or complaints, and imposition of pre-employment lie detector tests. With passage of Title VII of the Civil Right Act of 1964, an additional group of protected classes gained protection from at-will dismissal for reasons other than cause.

The results of these acts was that perhaps 30% of the U.S. employee population was protected from dismissal for reasons often perceived as capricious or malicious. In the 1970s state courts began expanding the notion of exceptions to include employees whose terminations violated public policy, employees refusing to commit unlawful acts, employees exercising a statutory right or privilege, those reporting statutory violations and members of protected classes other than those identified in Title VII (Buckley & Weitzel, 1988; Flynn, 1996; Saul, 1984).

With so many individuals having rights to protection from dismissal for reasons other than cause, many others came to view their own relationships with their employers as contractual although not expressly defined as such and began to sue. Courts in the 1970s began to make large awards to plaintiffs who contended general language contained in employee handbooks, recruiting advertisements, and other employment literature supported their contention that they were hired as permanent employees and were immune from summary termination. And, application forms have been recognized as evidence of a contractual obligation and have been held to create a legitimate expectation of benefits on the part of the employee in a number of jurisdictions (Jennings, 1988). Sympathetic juries who also lacked employment protection sometimes inflated awards to "teach management a lesson" about fairness and equity.

The climate worsened for business in the 1980s, with courts viewing implied contracts, oral assurances, evidence of employee promotions, and other subjective material as evidence of management's intent to retain the employee. Since that time, courts have consistently acted to protect employees where written or implied employment guarantees could be found. In many cases, courts have rendered judgments in favor of employees by refusing to recognize the employer's right to terminate under the employment-at-will doctrine (Bockanic & Forbes, 1986). According to Vedder and Gallaway (1995, p.8), "During the 1980s, 32 states modified their view of the dismissal decision in the direction of accepting a more expansive interpretation of the constraints on the employment-at-will principle." Also, even when the employer won in court, there were still court costs, attorney's fees, lost work time, tarnished public image, and damaged employee morale (Keppler, 1990).

While courts have held employers to terms of contracts providing employee protection from at-will provisions, courts have also been adamant that employers enter into such contracts freely and have the right to refrain from making any promises to employees concerning how a termination will be conducted or under what conditions employees may be fired. Generally, courts have upheld discharges due to business requirements or poor employee performance (Buckley & Weitzel, 1988; Paul & Townsend, 1993). Courts have been less inclined to sustain managerial practices in cases where malicious intent or bad faith or retaliation could be demonstrated (Keppler, 1990). In any case, where the employer promises or implies job security in such contracts or other employment documents or communications, he or she is bound by that promise. The cautious position, given the statutes and court decision variations from state to state, would be to assume that at-will employees may have at least limited rights to job security (Manley, 1988).

So, with tightening labor markets and limited court support of employment at will, the case is building against such statements. What do the job applicants say about employment at will usage? The following survey results focus on their reactions.

METHOD Participants in this study were 222 undergraduate seniors and master level graduate students enrolled in the College of Business at two Southeastern universities. These participants were especially appropriate since most were expecting to graduate and be job interviewing within the next year. The sample consisted of 112 females (50.5%) and 110 males; one hundred sixty-eight (75.7%) were Caucasian, one hundred thirty-four (60.4%) were single, one hundred sixty-eight (75.7%) were employed, and 153 (68.9%) were 23 or over.

Anonymous survey questionnaires were distributed in a classroom setting to obtain participant reactions to a typical employment-at-will statement which had been extracted from the employment application of an actual organization. The participants were told to assume that they were applying for a position, and the application form they were asked to complete and sign contained the following employment-at-will statement:

 I understand that this employment application is not a contract of
 employment. I also understand that if I am hired by XYZ Corp., my
 employment and compensation may be terminated with or without cause
 and with or without notice at the option of XYZ Corp. or myself. I
 understand that no manager or representative of XYZ Corp., other
 than the President, has the authority to enter into any employment
 agreement, expressed or implied, for any specified period of time.

Participants read the employment-at-will statement and completed a questionnaire assessing their attitudes towards the statement.

Respondents attitudes and judgments concerning the above "At-Will" statement in an employment contract and the company utilizing such a statement were assessed using 18 survey items. The reaction to the nine "At-Will" statement items are reported. Response options, using a six-point Likert scale, ranged from "strongly agree" to "strongly disagree". (See Appendix A).

RESULTS

The survey reveals significant resistance confusion to the strongly worded "At-Will" statement. A majority of the respondents (68.5%) indicate that they would resent having to sign the statement. Most of the respondents (80.6%) think that the inclusion of this statement suggests a lack of "real caring" for employees on the part of the company. And, a significant portion of the respondents (39%) believe the inclusion of the "At-Will" statements in application forms and employment materials is not legal. So, it is not surprising to find that 64.9% would want more money from a company using the statement.

A substantial number (86.9%) said that they would rather work for a company that did not require signing the statement. 70.3% felt that a long-term relationship was unlikely with a firm requiring the signing of the "At-Will" statement. An even larger segment (73.9%) of the respondents indicated that the statement could influence them to have pro-union sentiments. This influence toward unionization is even more compelling given that most (73.4%) of the respondents report having no familial union affiliations. A significant majority (77.9%) felt that both morale would be low and turnover would be high (76.6%) at a company using employment-at-will disclaimers. Finally, over three fourths of the respondents (77%) feel that they would be signing away their rights if they had to sign the statement.

Table 1 reports the means, standard deviations, and correlations among all the variables. Several demographic variables were examined for possible differences in resistance levels. None were found for gender, race, marital status, employment status or work experience.

DISCUSSION

Based upon this survey's results, potential job applicants appear highly resistant to strongly worded employment-at-will statements and apprehensive about companies that utilize such statements. The results also indicate that the respondents feel that signing an at-will statement would be tantamount to signing away one's rights. The most chilling reaction of respondents is that almost 75% believe that employment-at-will statements could influence them to have pro-union sentiments. The benefits afforded by stating managerial prerogatives under at-will protection could certainly be diluted or negated by having a work force receptive to unionization.

Managers are faced with the decision of communicating strongly worded employment-at-will or choosing a softer worded, indirect approach. A manager is faced with a judgment call between maximizing legal protection and presenting the corporate culture as one that is stiff, legalistic, and mistrustful. Careful consideration of the implications leads one to weigh the advantages and disadvantages of such policies in legal, social, and ethical ways. The use of strongly worded employment-at-will statements follows a legalistic solution which includes using a clear and conspicuous written disclaimer, making no promises about any future with the firm, and requiring a signature acknowledging the at-will waiver (Bockanic & Forbes, 1986; Keppler, 1990).

FIGURE 1

Strongly-Worded Employment-at Will Statements

In consideration of my employment, I agree to conform to the
rules and regulations of Sears, Roebuck and Co., and my
employment and compensation can be terminated
with or without cause, and with or without notice, at any time,
at the option of either the Company or myself. I understand that
no unit manager or representative of Sears, Roebuck and Co. other
than an Officer of the Company, has any authority to
enter into any agreement for employment for any specified period
of time, or to make any agreement contrary to the foregoing."

I understand that nothing contained in this employment application
or interview, and no UHC policies, procedures, correspondence,
or handbooks that I might receive constitute a contract or promise
of employment or employment for any specified period of time. I
further understand that, except for the provisions of the
Employment Arbitration Policy, no UHC policies, procedures,
correspondence, or handbooks establish any specific terms or
conditions or employment between myself and UHC. I understand
that the employment relationship is "at will," which means
that if an employment relationship is established, UHC or I may
terminate the employment relationship at any time and for any
reason, with or without notice or prior discipline."

If the at-will statement is to be included in the contract, careful consideration needs to be given to how the employer would prefer that the statement be interpreted. One approach toward understanding message interpretation in the organizational context is through applying descriptive categories. Eilon (1968) offers a set of four dimensions for describing all organizational messages: (1) "kind" of message, such as routine vs. special, and time-triggered vs. event-triggered; (2) areas of organizational activity referred to in the content of the message, such as finance or performance evaluations; (3) importance of the message; and (4) "intent and impact" of the message, such as to encourage or rebuke. The means of constructing the at-will clause in an employment contract will directly affect the message's categorization and subsequent interpretation.

Eilon's (1968) dimensions provide the framework for emphasizing at-will (special and important) to de-emphasizing (routine and unimportant). Which path should a company use? The emphasizing approach calls for a "clear and prominent" strongly worded disclaimer of the at-will issue as a means of protecting and reducing the company from the number of risks brought on by employee termination (Hilgert, 1991; Nye, 1988; Panaro, 1988; Witt & Goldman, 1988).

If the decision is to de-emphasize the message, then the approach would be inductive, as a type of "bad news", or at least something the applicant will not react to favorably. The goal would be to establish the at-will clause as routine, unimportant, and mutually beneficial. Advice for "pitching" the clause as routine and unimportant includes placing the statement inside a paragraph with other statements versus on its own. Furthermore, it should appear neither first nor last in the paragraph: "Just another tidbit that you might need to know" (Lehman, Himstreet, & Baty; 1996). The mutually beneficial element to the message ("at the option of the prospective employer or myself") helps redirect the intent of the message. The applicant is not just agreeing to accept discharge from the company without notice or cause, but he/she is protecting his/her right to "pack-up" and leave anytime he/she wants. (See Figure 2)

FIGURE 2

Softly-Worded Employment-at-Will Statements

In life there are no guarantees, and so it is in business. A
relationship that either you or I could terminate or dissolve
at any time.

I understand and agree that my acceptance of employment does not
create a contractual obligation upon the company to continue my
employment in the future.

I understand that a acceptance of an offer of employment does
not create a contractual obligation upon the employer to continue
to employ me in the future.

If any employment relationship is established, I also understand
that I retain the right to terminate my employment at any time
and that IBP retains a similar right.

Further steps to de-emphasize the statement might include modifying the text of the at-will statement in the employment application to indicate the employee will be treated fairly and with due process, thereby softening perceptions that at-will termination rights provide management the basis for capricious and arbitrary actions. A caveat: this indirect approach may dilute the legal protection intended (Witt & Goldman, 1988).

According to Parks and Schmedemann (1994), the more overt, explicit and verifiable the promise of employment implied in an employee handbook or policy, the stronger the employee (and court) belief in existence of a contract between the employee and employer. To create ambiguity lending itself to interpretation that language in a handbook is not contractual in nature, management should avoid very specific and precise wording that enhances perceptions that a contract exists; include "conflicting cues" such as clear, blunt disclaimers like "this is not a contract;" legalistic language connoting contract language; specific verbs used to convey actions intended by management in favor of passive verbs yielding to imprecise interpretation; and other appearances of contractual obligation by deleting signatory blocks buttressing the perception of a psychological contractual obligation.

SUMMARY AND CONCLUSIONS

The suggestions in this article are designed to assist managers in evaluating their employment-at-will philosophy and practice; they are not intended as specific legal advice. Consultation should be made with lawyers who are knowledgeable in the area of employee-employer relations concerning the application of these ideas. However, it is important to remember that lawyers and recruiters have different priorities.

In summary, many firms believe that they can protect their employment-at-will rights by using appropriate language, application materials, and other company communications while ignoring the issue of applicant perceptions of such literature. From the current study, it appears that strongly worded employment-at-will statements possibly inflict significant damage on a company's ability to attract sufficient qualified applicants who will be committed and loyal to the company. If choosing to protect employment-at-will rights is the option, softly worded statements or an indirect approach could be the avenue to follow. Regardless of which avenue a company chooses, it is wise to note that choosing your work force carefully and then employing good human resource practices can go a long way in attracting, motivating, and retaining productive employees with a minimum risk of litigation.

APPENDIX A: Survey Items

Six point Likert Scale. Response options ranged from Strongly Agree to Strongly Disagree.

1. It is legal for a company to require applicants to sign the above statement.

2. A company using the above statement would really care for its employees. (Reverse-coded)

3. I would resent having to sign the above statement to get a job.

4. A company using the above statement would have to pay me a higher than average salary if I worked there.

5. I would rather work for a company which did not require me to sign the above statement.

6. A long-term employment relationship would be unlikely with a company requiring me to sign the above statement.

7. The above statement could influence me to have pro-union sentiments.

8. I feel that I would be signing away my rights if I had to sign above statement.

9. When applying for a job, I would like to know about a company's policies regarding termination and expectations of long-term employment.

REFERENCES

Bockanic, W. & Forbes, J. (1986). The erosion of employment-at-will: Managerial implications, SAM Advanced Management Journal, Summer, 16-21.

Buckley, M. & Weitzel, W. (1988). Employing at will. Personnel Administrator. August, 78-82.

Caudron, S. (1996). Low unemployment is causing a staffing drought. Personnel Journal, 58-67.

Eilon, S. (1968). Taxonomy of communications. Administrative Science Quarterly, 13, 266-288.

Flynn, G. (1996). Why at-will employment is dying. Personnel Journal, May, 123-128.

Fulmer, W. & Casey, A. (1990). Employment at will: Options for managers, Academy of Management Executive, 4(2), 102-106.

Hilgert, R. (1991). Employers protected by at-will statements. HRMagazine. March, 57-60.

Jennings, M. (1988). The abolition of the right to fire--no-fault is in divorce only, Business and Society. Spring, 23-28.

Keppler, M. (1990). Halting traffic on the road to wrongful discharge. Personnel, March, 48-54.

Lehman, C.M., Himstreet, W.C., & Baty, W.M. (1996). Business Communications (11th ed.). Cincinnati, Ohio: South-Western College Publishing, 285

Manley, M. (1988). Charges and discharges, INC., March, 124-128.

Nye, D. (1988). Trust is a well-drawn employment contract, Across the Board, October, 33-41.

Parks, J. & Schmedemann, D. (1994). When promises become contracts: implied contracts and handbook provisions and job security. Human Resource Management. 3(3), 403-423.

Panaro, G. (1988). Don't let your personnel manual become a contract, Association Management, August, 81-82, 217, 218, 247.

Paul, R. & Townsend, J. (1993). Wrongful termination: Balancing employer and employee rights-A summary with recommendations. Employee Responsibilities and Rights Journal, 6(1), 69-82.

Saltzman, A. (1997). Making it in a sizzling economy. U.S. News and World Report. June 23, 50-58.

Salwen, R. (1989). Crafting employment contracts and other executive agreements. Directors & Boards. Winter, 34-38.

Saul, S. (1984). Unjustified firings being challenged in courts. The Detroit News. Oct. 14, 11-E.

Schlesinger, J.M. (1997). Jobless rate fell to nearly 24-year low in May as wages continue to advance. The Wall Street Journal, June 9, A2, A6.

Schwoerer, C. & Rosen, B. (1989). Effects of employment-at-will policies and compensation policies on corporate image and job pursuit intentions. Journal of Applied Psychology 74(4), 653-656.

Smither, J.W., Millslap, R.E., Stoffey, R.W., Reilly, R.R. & Pearlman, K. (1996). An experimental test of the influence of selection procedures on fairness perceptions, attitudes about the organization and job pursuit intentions. Journal of Business and Psychology, 10(3), 297-318.

Summers, C. (1996). Protecting all employees against unjust dismissal. Harvard Law Review. Jan-Feb, 132-139.

Vedder, R. & Gallaway, L. (1995). Laws, litigation and labor markets: Some new evidence. Report for the Pacific Research Institute for Public Policy, San Francisco, September, 1995.

Wayland, R.F., Clay, J.M., & Payne, S.L. (1993). Employment At will statements: Perceptions of Job applicants. International Journal of Manpower, 14(1), 22-33.

Witt, M. & Goldman, S. (1988). Avoiding liability in employee handbooks. Employee Relations, 14, 5-18.

Patricia Borstorff, Jacksonville State University

W. Mark Hearn, Jacksonville State University

TABLE 1

Reactions to Employment-At-Will Statement in Contracts
Means, Standard Deviations, and Correlations of All Variables

Variable (b,c) Mean s.d. 1 2

Legal to require signing 3.22 1.60

Used by caring 2.41 1.19 -.39 ***
company (d)

Would resent signing 2.86 1.52 -.31 *** .38 ***

Have to pay me more 2.94 1.48 -.27 *** .32 ***

Prefer company w/o 2.07 1.25 -.20 ** .37 ***
statement

Long employment 2.77 1.47 -.31 *** .45 ***
unlikely

Would push me to union 2.73 1.39 -.18 ** .28 ***

Feel like losing rights 2.55 1.37 -.34 *** .42 ***

Would want more 1.49 0.69 -.07 .18 **
information

Variable (b,c) 3 4 5 6

Legal to require signing

Used by caring
company (d)

Would resent signing

Have to pay me more .41 ***

Prefer company w/o .44 *** .42 ***
statement

Long employment .41 *** .55 *** .50 ***
unlikely

Would push me to union .35 *** .45 *** .36 *** .51 ***

Feel like losing rights .51 *** .50 *** .57 *** .66 ***

Would want more .10 .06 .11 .07
information

Variable (b,c) 7 8

Legal to require signing

Used by caring
company (d)

Would resent signing

Have to pay me more

Prefer company w/o
statement

Long employment
unlikely

Would push me to union

Feel like losing rights .50 ***

Would want more .20 ** .17 **
information

(a) N = 222 for all variables

(b) All items measured on a six-point scale with response
options ranging from Strongly agree to Strongly disagree

(c) See Appendix A for complete question wording

(d) Item was reverse-coded

* p<.05

** p<.01

***p<.001