Employment Law

Now with a basis in agency law, we turn our attention to the numerous laws that govern the relationship between employer and employee. It will be important to remember the distinction between employees and independent contractors because the laws discussed in this chapter apply only to employees.

Employment at Will

A foundational feature of U.S. employment law is that of employment at will. Under this doctrine, the employee can quit at any time for any reason and the employer can terminate the employee at any time for any reason. The at-will doctrine is central to the employment relationship in the United States, but it is not necessarily the law in many other countries.

For example, in many European countries, there is a strong presumption of continued employment that can only be overcome if there is a reason for terminating the employee. In other words, these countries have adopted the doctrine that an individual's job can only be terminated for good cause.

Most employees in the U.S. are at-will. However, a number of statutes and judicial decisions have created exceptions to the at-will employment doctrine. As a result, the presumption of at-will employment can be overcome based on exceptions to the doctrine.  These exceptions are based on contract, tort, and public policy theories.

Contract Theory

Courts have held that an employer may create an express or implied contract that strengthens the employee's job security. For example, an employer may state (either orally or written) that employees will only be fired or let go for "good cause" (i.e., budget cuts or the employee's performance that negatively affects the workplace).  In such cases, courts have found that the employee's reasonable expectations are key as to whether the employer has altered the typical at-will arrangement to create a good cause employment agreement. 

Courts will look at a variety of factors when determining if the contract has been altered via this theory. The human resource (HR) policy is a starting point. Many HR policies indicate that an employee will only be terminated once the company has moved the employee through a disciplinary process. This process is evidence of the employer altering the at-will doctrine to one of good cause. Courts may also consider the amount of the time (quantity) that the worker was employed. Someone working for only 2 months is more likely to be at-will as opposed to someone that has worked at the company for over 15 years. Finally, courts will look to the quality of the work period. Workers that received praise or numerous awards have an argument that the employers altered the employment arrangement to one of good cause. 

Tort Theory

This theory typically plays out when an employer fires an employee in a particularly abusive way. Imagine being let go from your job via an email that went out to the entire workforce. Worse, the email discloses personal and embarrassing information. In such a case, you may be able to bring a suit against the employer for intentional infliction of emotional distress. Bringing a lawsuit based on tort is unlikely to get your job back, but being awarded a pile of money against your former employer may dull the pain. Another example includes fraud. For example, an employer induces a worker to leave a lucrative job in New York to come to LA knowing full well that the job will be eliminated in 2 months.

Public Policy

The most common exception to the at-will doctrine occurs when an employee is fired for reasons that violate that state's statutory public policy. For example, in 2015, Utah passed a law that prohibits employment decisions based on sexual orientation and gender identity. As a result, if an employee is fired in violation of this policy, the individual could bring a lawsuit against the employer for violating the public policy of non-discrimination.

Successful suits based on the public policy exception to at-will employment usually involve similar fact patterns. These include:

  1. The employees refusal to commit illegal activity (accounting fraud, violation of antitrust laws, etc.),
  2. The employee attempting to exercise a legal right (filing a workers's compensation claim), and
  3. Performing an important public obligation (jury duty or whistleblowing).

As mentioned above, public policy protects whistleblowers. Whistleblowing occurs when an employee tells a government authority or upper-management of unsafe or illegal activities that could negatively affect the public. However, the laws of each state vary someone on what is required to be protected under the whistleblower statutes (e.g., whether the employee must first make the complaint up the management chain, or if the employee is permitted to contact a government agency outside of the company), so it is important to research these.

Wrongful Discharge

Whenever an employee is fired in violation of law or contract, that employee can bring a wrongful discharge lawsuit against the employer.

Child Labor

The Fair Labor Standards Act (FLSA) created wage-hour requirements for all employees in the U.S. and is the basis for federal minimum wage laws. It applies to almost all employers with 2 or more employees as long as the company is engaged in interstate commerce. Beyond minimum wage, it also prohibits oppressive child labor. Children under the age of 14 are allowed to perform limited types of non-hazardous work, including delivering newspapers (though no one really does this anymore, right?), agricultural work, entertainment, and working for their parents. Children ages 14-15 are allowed to work, but cannot work in hazardous conditions. Children ages 16-18 likewise cannot work in hazardous conditions, but are allowed to work longer hours. After turning 18, these limitations no longer apply.


Under the FLSA, many workers who work more than 40 hours a week are entitled to 1.5 times their regular pay for all hours over 40 per week. These laws do not apply, however, to workers that are classified as executives, administrators, or professional workers (also known as except workers). Employers frequently try to classify more and more workers as exempt from the overtime provisions of the FLSA. It is another reason why many employers classify their workers as independent contractors rather than employees.

Family and Medical Leave

The Family and Medical Leave Act (FMLA) allows employees to take time off of work for family or medical reasons. While a growing list of employers offer paid time off for medical reasons, the federal laws do not require that this time be paid. This law applies only to employers who have 50 or more employees. It requires that employers give up to 12 weeks of unpaid leave during a 12 month period. It applies to workers that have worked for their employer for at least a year. The following reasons that employees can take the time off:

  1. To care for a newborn child within a year of birth.
  2. To care for an adopted or foster child within one year of the time the child is placed with the employee.
  3. To care for the employees immediate family with a serious health condition.
  4. If the employee suffers from a serious health condition and is unable to perform the essential functions of the job.

While the employee is taking the FMLA leave, the employer cannot terminate the employee's job or medical coverage. After returning to work, the employee must be restored to the same or comparable position with equivalent pay and benefits. If the employer violates this law, it is required to pay damages to compensate the employee for lost benefits, compensation, and actual losses. It may be required to reinstate the employee's position and promote the employee if the employee can prove that he or she was entitled to such.

Other Worker Protections

Workers' Compensation

Every state has laws that provide financial benefits to workers that are injured while at work. Worker's compensation is an exclusive remedy, meaning that if an employee files a workers' compensation claim, he/she cannot later sue the employer for actions that led to the injury. As such, workers' compensation does not apply when the injury was intentional (i.e., the employer intended to injure the employee, or the employee intentionally injured him/herself). Moreover, the injury must have arisen out of the employment, meaning that the employee was working at the time of the injury. This requirement has sometimes been liberally interpreted to allow claims where the employee was injured while playing for a work softball team, but not in this recent case. Workers' compensation benefits include lost pay, medical costs, and rehabilitation. 

Unemployment Insurance

If an employer is let go after working for a minimum amount of time, he/she may apply for state unemployment benefits. You can access the Idaho eligibility requirements here. Unemployment is not available to those fired for egregious behavior (i.e., theft, frequently failing to come to work, etc.). To qualify, workers must be willing and able to work and must be actively looking for new employment. Benefits are based on past earnings and only last for a limited time.

Social Security Disability

If a worker becomes disabled for any reason and is unable to work, Social Security disability benefits may be available. To qualify, claimants must generally show that they cannot work any full-time job (40 hours/week) on a consistent basis. For example, if a business analyst for an investment bank suffers a stroke and cannot perform her prior job duties, she would not qualify for federal disability benefits if she was able to fold towels for the local Holiday Inn Express. While this may seem harsh, Social Security Disability benefits are designed for those that are completely unable to work any position, despite prior work experience. There are exceptions, however, for older workers (over age 50) which make it easier to qualify for disability benefits.

Affordable Care Act

The ACA, also known as Obamacare, requires that medium and large companies offer medical insurance to employees or face penalties. These employer mandates have been upheld as constitutional by the U.S. Supreme Court, but continue to be a contentious area of law. A major element of the ACA, however, is that low-paid individuals may have their health insurance subsidized in order to make coverage more affordable.


Workplace privacy seeks to balance the employer's ability to supervise its workers, while also protecting employee's expectation of privacy. We start with the foundational principle that employees have no expectation of privacy while at work. Work emails, for example, can typically be monitored by the employer. Similarly, phone calls and communications with others at work may be recorded. Personal communications (e.g., email on your personal account that you send while at work, personal Facebook activity, etc.) are usually protected from employer monitoring.  However, if the employee has a reasonable expectation of privacy, the employer is not permitted to monitor those activities. For example, an employer may wish to monitor all internet activity for its workforce. In doing so, it would be a best practice to inform all employees that the company will indeed institute this action. As a result, no employee has a reasonable expectation of privacy when browsing the internet at work.

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