“At-Will” Employment and the Fight for Job Security

The legal framework for the American layoff can be traced back to 1877 when a lawyer named Horace G. Wood channeled the laissez-faire spirit of the Gilded Age into a legal treatise. Wood invented the doctrine of “at-will” employment that would soon become common law: employers were entitled to dismiss any employee at any time “at will . . . for good cause, no cause or even for cause morally wrong, without thereby being guilty of legal wrong.”

Workers, too, were entitled to terminate employment, but the title of the essay hinted at the false equivalence: “A Treatise on the Law of Master and Servant.” Workers’ legal status was thus codified: as pure commodities, they were free to be bought and sold according to the whims of employers.

Although unemployment was a national concern during Wood’s time, the concept of a “layoff” didn’t exist yet: work was so inherently unstable and workers so disposable that the formal termination of a job was as yet unnamed. But as the labor movement gained steam in the twentieth century, workers collectively manufactured a new kind of employment relationship.

With the rise of labor unions, work contracts were developed. This established a policy of “just cause” dismissal. Workers could no longer be terminated at the unquestioned “will” of the boss; the employer in a union shop needed to prove to an independent arbiter (and their union workers) that they had “just cause” to do so. Further, when broad layoffs did occur, union contracts rationalized the process. Organized workers installed a system of seniority that managed economic downturns according to their own moral calculus.

A culture of workplace rights and due process emerged from these contracts that extended beyond union shops. The giant corporations of the postwar decades took up the norms of job security and seniority, in spirit if not in contract. It was in this context that the term “layoff” entered the American lexicon, not as a regular part of working life but, as Louis Uchitelle put it, as a “sign of corporate failure and violation of acceptable business practice.”

The American workers’ relationship to the labor market had changed. Workers were no longer commodities for capitalists to deal at will; they were agents of their own with rights and collective control over work.

But the restraints on capital were tenuous. Union contracts only covered a third of the workforce at their peak in the 1950s, and, beyond binding agreements, job security balanced on benevolent corporate culture. The New Deal sowed an additional safety net with unemployment insurance, but it failed to remake the legal foundation of the employment relationship. At-will employment remained the default law of the land.

Layoffs Unleashed

At the first opportunity, capital began to wind back the gains won by workers.

The opening salvo came from the Oval Office in 1981, when Reagan summarily fired eleven thousand striking air traffic controllers. Employers followed suit with increasingly cutthroat anti-union tactics. In the 1980s, the number of employers that illegally fired union activists during organizing campaigns tripled. The new aggression worked: the percent of private-sector workers covered by union contracts — and “just cause” provisions — fell by 50 percent between 1980 and 2000.

Even in ascendant union strongholds like education, employers searched for other ways to assert the right to fire, pushing for a whole new line of nonunion shops — in the form of charter schools — where they could cut teachers back down to at-will status.

With the war on unions in full swing, white-collar employers targeted the cultures of job security that had been baked into the corporate world.

Jack Welch, the two-decade CEO of General Electric (GE), exemplified a new management machismo that would rebel against any limits on managers’ authority. Welch earned the nickname “Neutron Jack” for the massive downsizings he ordered of his workforce in the 1980s and ’90s, even in boom times, as he sought to boost shareholder value. He eliminated 130,000 jobs from GE in his first six years (one-quarter of all company employees) and popularized the management practice known as “rank and yank” in which every year, without fail, firms cull the lowest-performing 10 percent of their workforce.

Once a sign of failure, layoffs became a sign of corporate progress. Wall Street began to reward downsizing, setting off waves of mass layoffs. When Xerox announced plans to terminate ten thousand employees in 1993, the company stock jumped 7 percent. And corporate leaders personally gained from aping Welch’s scorched-earth tactics. In 1995, Robert Allen, the CEO of AT&T, saw his salary package rise from $6.7 million to $16 million after laying off fifty thousand employees.

Crusading capitalists like Welch and Allen had help. A whole industry of consultants emerged to facilitate layoffs in a white-collar workforce grown accustomed to security. The euphemistically named “outplacement services” industry coached managers on best practices for firing employees, for example, using a passive voice while carrying out the deed (“A decision has been made. Your position has been terminated.”). Consultants would even continue talking to the terminated workers as they escorted them out of the building.

After a boom in the 1980s and ’90s, the layoff-support industry has now contracted. But this isn’t because of a decline in layoffs: outplacement consultants were simply the training wheels, now employers ride the bike all by themselves.

Laboring on a Knife’s Edge

In some ways, we are back where we started. More than 93 percent of private-sector workers today labor “at will.” Their employers can terminate their contracts at any time, and for no reason at all.

In the international context, the United States trails far behind its European counterparts, which long ago generalized “just cause” and severance pay as basic rights for all workers, whether protected by union contracts or not. Further, in the current crisis, Germany, France, and the UK have all implemented expansive systems of work-sharing and wage subsidies that have suppressed layoffs and kept paychecks flowing to workers. Italy banned layoffs for three months.

The US employment regime needs a radical restructuring. Until then, workers will continue to labor on a knife’s edge.