Business Ethics

EMPLOYMENT RIGHTS

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 CHAPTER SUMMARY

I. UNJUST DISMISSAL

II. DEFINITION OF EMPLOYMENT AT-WILL

III. JUSTIFICATION OF THE EMPLOYMENT AT- WILL

A. Property right argument and Employment-at- will
B. Contractual Freedom argument and Employment-at- will
C. Efficiency argument and Employment-at- will

IV. EXCEPTIONS TO THE EMPLOYMENT AT-WILL

V. JUST COMPENSATION
A. Workers’ Wages
B. Market Mechanism
C. Minimum Wage
- Meaning and purposes of “a minimum wage”
- Supports and objections to the minimum wage Law
(Advantages and Disadvantages of setting a minimum wage)

VI. CASE SUMMARY AND QUESTIONS

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 I. UNJUST DISMISSAL

There are several different reasons for employment dismissal, but the most common
are excessive absenteeism or tardiness, poor job performance, and dishonesty.
Sometimes people are also dismissed from their jobs because they harassed co-
workers or patrons of businesses and also because they failed mandatory drug and
alcohol tests.
Different places of employment tend to have different rules regarding what
constitutes employment dismissal, and workers are occasionally given a specific number
of warnings for every offense that violates the rules.
After a certain number of warnings have been issued for either the same or various
offenses, dismissal will likely occur.

Unjust termination happens when an employee is discharged from employment

for illegal reasons or if company policy is violated when the employee is fired.

Other reasons that could be construed as wrongful termination include retaliation i.e.
being fired for being a whistle blower or complaining, or for not being willing to commit
an unethical act when asked to by an employer.

Discriminatory reasons that can be considered wrongful termination include firing an

employee because of race, nationality, religion, gender, or age.

In many cases, unless there is a contract or bargaining agreement, employees are

considered covered under Employment at will, which means your employer doesn't need
a reason to fire you. However an employee can be wrongfully or unjustly terminated if
bad malice is involved in the termination, if public policy is violated, or if termination
contradicts the company policy or the implied employment contract that state the
guidelines for termination .
There are always exceptions to the “employment at will doctrine”

 Effects of Unjust dismissal on the company:

Unjust dismissal cases have an ability to negatively affect a company in at least two
major ways.
- Monetary damage: if the company was found guilty, it may be required to pay
out a substantial amount of money. A portion of it could be awarded as damages
for the victim, and the other portion may be for fines.
- Reputation Damage: some cases of unjust dismissal provoke a stream of public
reaction and criticisms that can severely damage a company's stature.

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 III. DEFINITION OF EMPLOYMENT AT-WILL

Employment at will is NOT A Law ; it is a Doctrine according to which, in the absence

of a contract, employment is an at-will relation, so that employees can leave at any time
and, more importantly, employers can dismiss an employee for any reason, good or bad,
or for no reason at all.
• Employment at will doctrine is applied:
1) When there’s no explicit employment contract; OR
2) When the employment contract does not specify Job duration or conditions for Job
termination.
3) When the terms of the employment contract are not clear.
In most countries; employers are free to adopt at-will employment policies.
This principle is applied in most of countries of the world with certain limitations and
exceptions.

III. Justification of the Employment at Will Doctrine:

A. Property right argument and employment at will:

- The property rights argument supports employment at will by assuming that

employers and employees possess some kind of property and that both parties are
free to exercise the rights of property ownership in the employment relation.
- Persons have a natural right to property and a property right in their own labor.

- However, the property rights argument is limited by three considerations:

1) Property rights are not absolute, and they must be restricted when they conflict
with other rights and important societal interests.
2) Critics argue that employment at will has actually worked to weaken a
substantial portion of society and to suppress them to the will of others.

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 3) eventhough property gives people power against the sovereignty of the state, he
failed to recognize that it also gives individuals power against each other.

B. Contractual Freedom argument and Employment at will:

- Employment can also be viewed as a contractual arrangement between employers

and employees, which arise from either an explicit contract or an implicit contract
in which conditions of employment are tacitly understood and accepted by both
parties. Court decisions in such cases have held that the right of a person to sell his
or her labor is the same as the right of the employer to impose conditions of
employment.

- Opponents to t h e employment at-will doctrine state that The contractual

freedom in employment contract is not granted equally to both parties because of
the great difference in bargaining power between employer and employee, and the
courts have held that freedom of contract cannot be justified when it prevents
employees from protecting their most vital interests.
- In the absence of many job alternatives; the employer would find himself obliged
to accept entering an employment contract that impose on him stiff and hard
conditions; and in such cases his freedom and consent would be considered
biased; and his acceptance to the contract is not voluntary.
- To assure freedom in employment contracts, therefore, employees must have more
alternative choices and equal bargaining power as much as possible.

C. Efficiency argument and Employment at Will: (utility argument)

- A utilitarian justification of employment at will is that the doctrine serves to
increase economic efficiency. Efficiency is maximized if employers are accorded
considerable margin in determining the number of workers needed, selecting the
best workers available, assigning them to the job for which they are best suited,
and disciplining and dismissing workers who perform inadequately.
- Legal restrictions on the ability of employers to make such decisions would put
legislatures and courts in the position of making business decisions. The main

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 drawback of the argument is that the benefits accumulate primarily to employers,
and these benefits must be weighed against any harm to employees individually
and to society as a whole.

IV. EXCEPTIONS TO THE EMPLOYMENT AT-WILL

- Accordingly, the courts have made three kinds of exceptions to employment at
will:

1. Public policy exceptions. The courts have ruled that employers

should not be permitted to dismiss employees when doing so in contrary to
some important matter of public policy, such as protecting public health or
upholding the law. Thus, employees should not be fired for refusing to
commit illegal acts or for seeking benefits to which they are legally
entitled.
2. An implied contract to continued employment. Sometimes
prospective employees are given assurances in job interviews or employee
manuals regarding specific grounds and procedures for dismissal. In some
cases courts have ruled that these create a commitment on the part of the
employer and thus constitute an implied contract.
3. Bad faith a n d m a l i c e . Even w i t h o u t a n i m p l i e d
c o n t r a c t , a commonly accepted principle in business is that of acting in
good faith. Accordingly, the courts have sometimes acted when employers
have shown
bad faith or actual malice in dismissing employees. Examples include
cases in which employees have been fired in order to prevent them from
receiving a commission from a sale or to deprive them of a pension for
which they would soon be eligible.

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 V. JUST COMPENSATION

Compensation is a primary motivator for employees. People look for jobs that not
only suit their creativity and talents, but compensate them—both in terms of salary
and other benefits—accordingly. Compensation is also one of the fastest changing
fields in Human Resources, as companies continue to investigate various ways of
rewarding employees for performance.

The level of compensation (wage) influences workers in their job selection and
productivity as well. Most employees are concerned about their wages and whether
their pay is just or fair.

To know if they are paid in fairness; most employees compare their wages with other
employees who hold similar jobs. However; if this is the only method used for
comparison, then all workers holding the same job in an organization shall be paid the
same and their wage will be either overpaid or underpaid because this method
neglects other important factors in determining workers’ pay such as the effort; skills,
experience, ability…. of each employee.
- What factors help in determining whether a pay is Just or Not?

A. WORKERS WAGES
- It is important first to understand the difference between wages, salaries and
Compensation.

- A wage is based on hours worked while a salary is an amount paid for a particular
job, regardless of hours worked. Salaries and wages are usually paid in monetary value.
Compensation, by contrast, can refer to any form of pay, whether in the form of cash
or benefit that a person receives in exchange for performing work. These benefits may
include Transportation fees; health insurance coverage, stock ownership, bonus….

- Employee‘s compensation is mainly determined by MARKET FORCES (the

market price of labor which is affected by supply and demand). However; there are
other important factors that are taken into consideration in setting the level of pay.

 The most important factors are:

- First wages must be set in a way to motivate, attract and maintain

good employees. They must also be equitable—that is, the wage must accurately
reflect the value of the labor performed. In order to determine salaries or wages
that are both equitable for employees and sustainable for companies, businesses
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 must first make certain that they understand the responsibilities and requirements
of the position under review.
- The next step is to review prevailing market rates and classifications for similar
jobs (COMPARABLE WAGES). This process requires research of the
competitive rate for a particular job within a given geographical area. Wage
surveys can be helpful in defining wage and salary structures, but these should be
undertaken by a professional (when possible) to achieve the most accurate results.
In addition, professional wage surveys can sometimes be found through local
employment bureaus or in the pages of trade publications. Job analysis usually
helps to set wages and salaries,
- Other factors to consider when settling on a salary for a position include: Job
requirements, Productivity of the employee , experience, education, ….Cost of
living in the area, Company’s strategy and willingness to pay, Availability of
people capable of fulfilling the obligations and responsibilities of the job, Level
of demand elsewhere in the community and/or industry for prospective employees,
Productivity of the employee

 Employees’ compensation is also viewed as a MORAL ISSUE:

 Employees attitudes are affected by their perception of fairness in the pay setting
process (even highly paid employees may have a decrease in their productivity if
they feel that they are unfairly paid)
 Fair and Just pay will lead to a fair and Just society. If wages are just, then the
basic needs of people will be met; income and wealth shall be distributed fairly.

B. MARKET MECHANISM
- Economists view that the level of wages reflects the market price of Labor which is also
affected and determined by supply and demand.
 How does supply and demand determine the price of labor?
- Any shortage in the number of workers in a certain field, will lead employers to raise
the wages offered to attract more workers, the raise will remain until enough number of
workers fill the job and any surplus of workers will lead to a drop in the wages until only
the desired number of workers remain. (Market clearing price).

 Are Wages set by Market Mechanism FAIR?

- Economists state that wages set by the market mechanism are fair because they are
influenced by Supply and demand. They state the following to support their view:

1) Market transactions are free and result from voluntary contracts and that
employees are totally free to work according to the wage set by the employers or
to refuse.
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 2) In a Free Market system, employees are paid in proportion to their skills, effort,
knowledge and experience…And workers who invest more in their “Human
Capitals” (education, experience, skills, effort) shall receive proportionally greater
wages.

 What are the Objections to this view?

- However; many philosophers and legislators believe that wages set according to the
market mechanism are unjust and unfair and they justify this by the following:

1) In many cases; workers are being exploited by employers (such as in cases

where there is a large number of potential workers in jobs that require few skills).
 The remedy to this problem according to economists is to raise the
productivity of workers in a way that enable them to ask for higher wages.

2) Most market Transactions are not totally free: the contracts concluded
between the employer and employees are not autonomous because autonomy
in contracts presumes that both parties have equal bargaining power. (in
employment contracts; employers are in a better position than employees and
have greater bargaining power)
 The remedy to this problem according to economists: the presence and
efforts of labor unions support workers and give them equal bargaining
power.

C. MINIMUM WAGE

 Meaning and purposes of “minimum Wage”

- It is the mi ni mu m amount of compensation an employee must receive

for performing labor.

- In some countries (such as the USA, Lebanon,) the minimum wage is set by a
statute or by a law. In others (such as the UK) it is set by the wage council of each
industry. The rate of minimum wage varies among countries, states and provinces.
- The aim of these laws is to protect employees and workers from being exploited, at
the same time providing them with the means to afford their basic needs. While the
benefits of establishing a standard minimum wage are quite obvious, it has also
attracted strong criticism from many economists. However, many economic

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 researches show that minimum wages usually end up harming workers and the
broader economy.

- SUPPORTS AND OBJECTIONS TO THE MINIMUM WAGE

 Supporters of a minimum wage law state the following:
1) A minimum wage law protects workers who have few employment options
(women, minorities, youth workers, the disabled, and so on), who simply don't
have the bargaining power to fight for a minimum living wage without
government intervention.

2) It reduces the gap between the rich and the poor, redistributes wealth
and reduces the poverty rate: One main advantage of the minimum wage is
that it helps to close the income gap between the rich and poor. These laws
serve to redistribute wealth and income in a way that secures the basic needs
for everyone in the society: Minimum wage law decreases the poverty rate in
a community. This, along with other measures of government in the fields of
education, healthcare, social help, etc., are essential in poverty reduction.

Although there is still a significant difference, the minimum wage at least puts
a floor in the gap so it does not grow wider. Narrowing this gap is important to
maintaining a population with equal freedoms.

3) It prevents the abuse of workers by the employers: Businesses have more

power to abuse the labor market: and it is unfair to allow employers to exploit
employees who badly need work by offering them low wages. A Minimum
wage law shall correct this kind of injustice.

4) An increase in the minimum wage shall result in reduced absenteeism, less

turnover, and higher productivity.

 Proponents of a minimum wage law state the following :

1) Minimum wage laws lead to an increase in the rate of unemployment: If labor

markets are competitive, a minimum wage law could cause unemployment
because firms, in order to maintain their profits, will reduce the number of
employees, or decrease their work hours ….

2) Minimum wage will NOT reduce the rate of poverty: Evidence from a large
number of academic studies suggests that minimum wage does not reduce poverty.
Although such law will lift some families out of poverty, however, other low-

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 skilled workers may lose their jobs, which reduces their income and drops their
families into poverty.
 If a minimum wage is partly or fully passed through to consumers in the form
of higher prices, it will hurt the poor because they disproportionately suffer
from price inflation.
 Minimum wage is an inefficient to raise the income of the poor because other
means are much more effective (health and social insurance….)

3) A minimum wage law will NOT benefit all workers: Such law will attract more
teenagers and less skilled persons into low paying jobs leading to a decrease in the
number of jobs available to low- skilled adults. Therefore; a minimum wage has
its greatest impact on the market only for teenage and minorities labor.
4) If the Minimum wage is enough to secure the basic needs of a person, however, on
the other way, it shall decrease the incentives of workers to improve their work skills
and to seek for higher paying job. It may also decrease the number of
workers working as a part-time.

5) It lets employers decrease the employment incentive benefits (bonus,

commission…)

6) Black Market. A minimum wage may increase the number of people working on
the black market (illegal workers) so firms can avoid paying the legal minimum.

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VI. CASE SUMMARY AND QUESTIONS

Case 8.1 The Firing of Robert Greeley

Robert Greeley was dismissed from his job at Miami Valley Maintenance Contractors
because his company decided that it was too much trouble to withhold child support
payments from his paycheck as ordered by a local judge. The company preferred instead
to pay a $500 fine for refusing to comply with the court order. The Ohio law that enables
a judge to order an employer to withhold child support payments was enacted in order to
comply with a federal law that sought to address the problem of divorced fathers who fail
to support their children. Although Ohio had been an employment at will state—the
courts had refused to intervene when an employee was fired for reporting illegal dumping
of toxic wastes, for example—the Ohio Supreme court ruled in this case that the actions
of Greeley’s employer undermined the ability of government to devise an effective
solution for an important social problem.
Discussion Questions

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 1. The court’s ruling applies only to Greeley’s unusual circumstances. How far should
the court extend this public policy exception? Are there good reasons for not extending it
very far? (Hint: note the opinion in Pierce v. Ortho Pharmaceutical Corporation.)2.
Was the court consistent in refusing to intervene in the case of the employee who was
fired for reporting the illegal dumping of toxic wastes? Are there any relevant
differences between the two cases?3. Should the state place a responsibility on
businesses to help solve social problems, such as ensuring that divorced fathers make
child support payments? If so, are there any limits on the social problems that businesses
can be forced by government to address?

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