Bad Data, Bad Economics, and Bad Policy: Time to Fire Wrongful Discharge Law

OF THE UNITED STATES 395 (114th ed. 1994) (Table 614: Employment Status of the Population: 1950 to 1993) [hereinafter 1994 STATISTICAL ABSrRACT] (calculating that the 1993 agricultural workforce consisted of 116,232,000 workers). (2) Covered by union contract: Peck, supra note 13, at 8 (stating that only 21 million persons were members of unions in 1976); Stieber & Murray, supra note 14, at 322 (stating that there were fewer than 16 million workers represented by labor organizations in 1981); 1994 STATISTICAL ABSTRACT, supra, at 439 (Table 683: Union Members, by Selected Characteristics: 1983 and 1993) (estiniating that 12.3% of nonagricultural workers were represented by unions in 1993). (3) Excluded government employees: Peck, supra note 13, at 8-9 (explaining that more thanhalf of state employees and over 90% of federal employees enjoy procedural safeguards); Stieber & Murray, supra note 14, at 322 (excluding all government employees from calculations because they are protected from unjust discharge by collective bargaining or civil service procedures); BUREAU OF THE CENSUS, U.S. DEP'T OF COMMERCE, STATISTICAL ABSTRACT OF THE UNTED STATES 424 (103d ed. 1982-83) (Table 661: Nonagricultural Industries-Number of Employees, 1970 to 1981, and Number and Earnings of Production Workers, 1975 to 1981) (calculating that there were 16,024,000 government employees in 1981); 1994 STATISTICAL ABSTRACT, supra, at 424 (Table 656: Nonfarm Industries-Employees and Earnings: 1980 to 1993) (calculating that there were 18,842,000 government employees in 1993). (4) At-will employees, calculated by subtracting (2) and (3) from (1): Stieber & Murray, supra note 14, at 323 (assuming that 20% of all nonunionized workers in the private sector would be excluded from protection for unjust discharge due to falling within the six-month probationary period). (5) Estimated discharges of at-will employees: Peck, supra note 13, at 10 (suggesting that "if negotiation of discharge and discipline grievances produces settlements at a rate comparable to that experienced in other dispute settlement negotiations, the number of discharge and discipline cases in the nonunionized sector that would have been subjected to that process in a collective bargaining relationship could be as high as 300,000 a year"); Stieber & Murray, supra note 14, at 324 (calculating that the discharge rate for employees who have completed their six-month probationary period would be about 3.0%, and multiplying that percentage by the number of nonprobationary, at-will employees for both 1981 and 1993 to produce discharge estimates of 1,770,000 and 1,994,000 respectively). (6) Estimated unjust discharges of at-will employees: Peck, supra note 13, at 10 (suggesting that at least half of the discharges that would have led to arbitration had the workers been under a collective bargaining agreement would have been found unjustified). 1908 1996] Time to Fire Wrongful Discharge Law Table 1: Comparison and Update of At-Will Estimates 1909 Peck (in thousands) Stieber & Murray (in thousands) 1976 1993 1981 1993 data data data data Nonagricultural 80,000 116,232 91,024 116,232 workforce Covered by union 21,000 14,296 16,000 14,296 contract Excluded government 8,676 10,586 16,024 18,842 employees At-will employees with < 6 mos. tenure 12,000 16,619 excluded At-will employees who 50,324 91,350 47,000 66,475 would receive protection 50,324 91,350 47,000 66,475 Percent of nonagricultural workforce 63% 79% 65% 72% with at-will contracts Estimated discharges of at-will employees 300 548 1,400 1,994 Estimated unjust discharges of at-will 150 274 700 997 employees I Sources: Stieber & Murray, supm note 15, and Peck, supra note 14 (for textual explanation of this table, see note 21). Despite these inventive methods employed in estimating something on which no reliable direct data exists, both sets of calculations are problematic. The calculations can provide at most an upper bound on the number of discharges because both calculate the number of at-will employees as a residual by subtracting other groups from the total labor force. ' Because fixed-term contracts do exist, even if in unknown quantity, this result provides an upper bound rather than an estimate of the 22. This is unavoidable because there are no data on the terms of employment agreements. Texas Law Review [Vol. 74:1901 number of at-will employees. So long as the result is treated as an upper bound, this problem is not fatal. The most serious problem is the use of union arbitration discharge rates for calculations concerning the nonunion sector.' Both Peck and Stieber and Murray assume a fifty-percent win rate for at-will employees based upon union-sector arbitration experience.24 This assumption is not supportable. Under most collective bargaining agreements, the union, not the employee, has the right to take a discharge to arbitration.' The union win rate is likely to be influenced by the union's screening of the claims it brings to arbitration. Similarly, union and nonunion employers might 23. Peck uses union arbitration data and an unsupported assumption concerning settlement rates to conclude that there are 12,000 to 15,000 employees "discharged or disciplined each year under circumstances that would have led to arbitration if they had been working under a collective bargaining agreement and represented by a union." Peck, supra note 13, at 10. He then derives the figure of 300,000 discharge and discipline cases by assuming that "negotiation of discharge and discipline grievances produces settlements at a rate comparable to that experienced in other dispute settlement negotiations .... " Id. This implies that 95% of disputes settle. Although Peck does not describe his calculation of discharge rates, it appears his figures come from doubling the number of reported arbitration cases concerning discharge and discipline and assuming a proportionate number of discharges for employees in the nonunion sector, an implied discharge rate of 0.6%, far lower than the 3% to 4% rate that Stieber and Murray's research indicates. See supra note 20. Stieber and Murray base their discharge rates on a separate empirical study, but also adopt employee win rates from the union sector experience with arbitration. In addition, Peck combines discharge and discipline grievance cases. Peck, supra note 13, at 8-10. Discipline and discharge are quite different things, and Peck provides no numbers on how the cases break down. The decision whether to take a grievance over discipline to arbitration differs from the decision to take a discharge to arbitration in at least one important respect: discharge imposes a sufficiently high cost on the discharged employee so that the benefit to the employee (although not necessarily to the union) of arbitration is almost certain to outweigh the costs, yet the cost to the employee of discipline varies widely with the specific sanction. Peck also assumes that the same proportion of cases submitted to AAA, FMCS, and unaffiliated arbitration panels are settled and involve discharge and discipline. Id. at 9. Given the many differences between arbitrations conducted by these different types of arbitrators, the FCMS's and AAA's rules governing arbitrators' conduct differ in some respects. The lists of arbitrators used by the two services are not identical. The AAA charges a docketing fee, while the FMCS does not, reducing the cost of filing an FMCS arbitration. The FMCS has a higher prehearing settlement rate, which is at least partially attributable to this difference. Interview with Elvis Stephens, Arbitrator, University of North Texas, in Denton, Tex. (Nov. 6, 1991). Even greater differences exist with respect to unaffiliated arbitrators. The parties will choose between the sources of arbitrators based on the characteristics of the underlying agreement, introducing selection bias. The rates of particular types of disputes will not, therefore, necessarily be the same. 24. Peck, supra note 13, at 9; Stieber & Murray, supra note 14, at 324. 25. It is axiomatic that the union exercises that right in pursuit of the maximum benefit to the union, rather than to the individual. This casts no aspersion on the motive of the union. A favorable view of a union's motives might mean that the union is seeking to maximize the benefit to all its members by conserving scarce resources in frivolous cases, while a less favorable view of union motives might see the decision as one used by the union leadership to keep loyal members in theirjobs and letting disloyal ones lose theirs. Unions bring discharge grievances not because the union officers believe the discharge is "unjustifiable" but because it serves the unions' purposes to do so. Further, unions' decisions are complicated by the duty of fair representation imposed upon them by federal law. Finally, arbitration costs in the union sector are borne by the union, not the discharged employee, as they would be in the nonunion sector. 191