California presumes that the employment relationship is “at will” which in effect means that unless you have a contract that states otherwise (e.g. belong to a union with a Collective Bargaining Agreement) your employment may be terminated for any lawful reason, or for no reason, by your employer. See Cal. Labor Code section 2922. The “at will” presumption is not accidental. It reflects a deliberate and quite Victorian view of the world. The theory goes that society a whole prospers when labor markets are flexible. Therefore, employers must be free to shed workers in downturns and hire them in upturns. The increasing gap between the very rich and everyone else seems to make this notion suspect. At the very least, however, one would think that there must be dozens of academic studies that have empirically validated the premise that “at will” employment leads to greater job creation and a more efficient labor force. Surprisingly, there are no academic studies of any kind that show “at will” employment leads to greater economic growth and/or efficiency than employment with job protection.
Many of the EU countries have employment policies in which an employee cannot be fired after a given period of employment without a showing of “good cause” in a full round of trial like hearings. (In the U.S. the closest example may be unionized teachers or other Civil Service employees who enjoy much greater protections than the rest of us.) Britain’s coalition Government recently sought to reduce the job protections that apply in that country. Before acting, Parliament commissioned an exhaustive study, called the “Beechcroft Review” whose goal was to collect and collate academic studies from around the world. The Report would show conclusively the effect that “at will” employment had on economic activity and job creation when compared to the more regulated economies of the Continent.
Everybody expected a definitive, massive report detailing the negative effects of job protections on market economies. Instead, the report, weighing in at 15 pages, meekly concluded that there is no data available that shows any benefit at all to an “at will” employment policy. The BBC put up a great pod on the issue at: http://www.bbc.co.uk/programmes/b01hxtmp. The hosts interviewed leading academics from around the world for their view on the benefits of “at will” employment. The conclusion? There is likely no benefit at all given the corresponding cost of sudden and severe unemployment. Simply put, there is no proven benefit to “at will” employment and every reason to believe that it does more harm than good to a society as a whole.