A Consumer Warning For The Restatement Of Employment Law: Read Carefully Before Applying

• Author: Matthew W. Finkin
• Position: Albert J. Harno and Edward W. Cleary Chair in Law, University of Illinois College of Law.
• Pages: 193-204

Page 193

On May 19, 2009, the membership of the American Law Institute (ALI) voted to approve the Restatement of the Law (Third) of Employment Law,¹ Chapters one, two, and four, subject to the approval of remaining Chapters not yet drafted, rejecting a motion to defer for further study. About two weeks before the vote, the ALI administration distributed an informational circular to its members that included the following terse announcement: "A group of academics called the Labor Law Group has generated an extensive set of comments on the Employment Law draft and has requested we inform members that those comments are available at http://www.law.tulane.edu/LaborLawGroupALIDocs.aspx."

This dry notice barely hints at the depth of the underlying controversy or of what is at stake in it.

The "group of academics" referred to, about thirty in number, are all specialists in labor and employment law. They form the membership of an organization founded more than fifty years ago, at the urging of then professor (later Secretary of Labor) Willard Wirtz, to modernize the teaching of labor law and, today, of employment law as well. The Group's members engage in collaborative efforts to produce casebooks and other teaching materials attuned to the latest economic, social, and legal developments. The Group thus mirrors the ALI as a self-selected, self-perpetuating educational body differing in one key regard: whereas the ALI from its founding eschewed any role in labor law-until, that is, it launched its Restatement project in 2003- labor and employment law is the sole focus of the Labor Law Group.

The Group's critique of the Restatement, prepared by working committees assigned to each subsection of the then current draft of September 2008, was presented at a conference at the Hastings College of Law in January 2009. Each Restatement subsection and the respective working committee's critique of it was taken up, analyzed and debated, and the critique redrafted as needed in light Page 194 of that discussion. Although the ALI's Reporters were invited to attend, none did. Instead, the Group's report was submitted to the ALI, and in its wake a few small changes were made by the Reporters in the final draft: some superseded or misstated cases were omitted, some neglected cases were mentioned, few stylistic changes were made; but, in all essentials the Group's critique was ignored, its request to broaden the ideological complexion in the cohort of Reporters was brushed aside, and the draft was adopted.

Whence this warning to the judiciary, the ultimate consumers of the ALI's product: Read Carefully Before Applying. This injunction is not directed to the Restatement. It needs no attention called to it as it surely will be cited by counsel, especially by counsel for employers, and attention having been drawn to it, it will surely be read by the courts. No, this consumer alert calls attention to the Group's critique, which the ALI chose in substance to ignore.² That document should be read, and read carefully before the courts choose to apply what the Restatement advises. It supplies a strong corrective-academically rigorous, painstakingly researched, and powerfully argued-that should give pause before the courts uncritically assume that the ALI's good housekeeping seal of approval means that the Restatement will be good for the health of society.

All the many points of specific criticism made by each of the working parties need not be rehearsed here. Professor Kenneth Dau-Schmidt's introductory to the Group's report does a splendid job of that. But out of the welter of detail (and the devil is in the details) a single, dominant theme will emerge in stark relief: at almost every critical juncture, where the courts are divided or where there is room for the law to grow, the Reporters opt for the approach more solicitous of employer interests or less open to legal development; they do this with a high degree of indifference to either doctrinal faithfulness or consistency with existing Restatements; and, critically, they decline at every point to engage with the published criticism, perhaps on the esoteric assumption that if they do not acknowledge the Restatement's tendentiousness no one will notice it.

I will single out just three subsections to illustrate the point. I have chosen these out of so many others not due to any special salience but simply because I had worked through two of them in contemplating yet an earlier draft³ and worked on the third as a Page 195 member of the Group's working party; that is, simply because I am more familiar with that terrain to craft this warning notice in the immediate wake of the ALI's vote.

I Tendentious And Unresponsive: Three Illustrations

A Revocation of Policies Assuring Job Security

The prior draft of the Restatement held that the promulgation of an employer policy that expressly assured employees of job security provided a legitimate basis to require an employer to observe those terms. As this is in keeping with the result in most jurisdictions the Reporters could scarcely do less. But the legal basis they gave for that result was unusual. The Reporters' comments to the September 2008 draft observed first that "some courts"⁴ have applied implied contract theory while others have applied promissory estoppel to bind employers by their policies. The Reporters found neither persuasive and opted instead for "administrative estoppel," a doctrine borrowed from federal administrative law. The Reporters' Comment explained:

Such [policy] statements are analogous to rules of practice promulgated by administrative agencies to govern their operational decisions; as a matter of administrative law, such rules are held binding on the agency until properly modified or revoked on a theory of "administrative agency estoppel" even though no statute or regulation may have required their promulgation in the first place. By the same token, unilateral employer statements that, reasonably read in context are intended to govern operational personnel decisions should be binding on the employer until properly modified or revoked.⁵

On behalf of the Labor Law Group, Professor Steven Befort, noting that a clear majority of courts (not "some courts") had applied implied contract to reach that result, commented on the draft's alternative theory thusly:

The analogy to administrative agency estoppel may be subject to at least two criticisms in the context of employer policy statements. First, no jurisdiction has adopted administrative agency estoppel as the underlying rationale Page 196 for enforcing employer policy statements. As such, the draft Restatement here again proposes to change rather than to restate or clarify existing law.

Second, it is not clear that the rules governing administrative agency procedure are comparable in nature to the rules governing the substance of the employment relationship. While a procedural rule in an agency context serves to provide guidance on the process of how an agency intends to determine substantive rights going into the future, a promissory statement made in the context of an ongoing employment relationship itself directly establishes the substantive rules governing that relationship. In some employment contexts, such as in the realm of procedural due process rights afforded by the Constitution to public employees, an employer's unilaterally promulgated rules and even practices have been found to be binding and not subject to unilateral alteration.⁶

In other words, the analogy will not hold up. A public agency that promulgates a rule assuring its employees that they will not be dismissed except for just cause cannot unilaterally revoke that rule and then treat those employees who had been governed by it as at- will employees: the rule creates a property interest in the job that may not be...