Wrongful Discharge Laws and Innovation: Appendix

The Employment Consequences of Wrongful-Discharge Laws: Large, Small, or None at All?

Uniquely in the industrialized world, the United States has long had the presumption that employers may legally fire workers “at will,” that is, “for good cause, bad cause, or no cause at all.” During the 1970’s and 1980’s, this presumption eroded rapidly: most U.S. state courts created three classes of common-law restrictions that limited employers’ ability to fire. These exceptions garnered m...

Labor Adjustment Costs and Capital Structure Decisions

This paper investigates how the costs associated with dismissing employees impact a firm’s capital structure decisions. I hypothesize that increases in these labor adjustment costs reduce a firm’s optimal amount of debt financing by lowering expected profitability and raising financial distress costs and operating leverage. To test this hypothesis, I adopt a difference-in-differences research d...

Those "Wrongful Discharge" Lawsuits

ou’re fired!” “Y These words can mark the beginning of lengthy legal problems for contractors deciding to terminate even unsatisfactory employees. Why? First, many of today’s employees have no qualms about initiating a lawsuit if they believe their employer is in the wrong. Second, employers may not realize the consequences their actions can have under federal, state or local employment laws. T...

Disclaimers of Wrongful Discharge Liability: Time for a Crackdown?

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We estimate the effects on employment and wages of wrongful-discharge protections in the United States. Over the last three decades, most U.S. state courts have adopted one or more common law wrongfuldischarge doctrines that limit employers' discretion to terminate workers at-will. Using this cross-state variation with a difference-in-difference framework, we find robust evidence of a modest ne...