The Evolution of Unjust-Dismissal Legislation in the United States

In the past decade, many state courts have ruled in favor of employees alleging they were improperly dismissed. The author of this paper advances an evolutionary theory of unjust-dismissal legislation in which employer groups, responding to the threat of large and variable damage awards imposed by the judicial system, eventually support unjust-dismissal legislation in order to clearly define property rights, reduce uncertainty, and limit employer liability. Based on evidence from a case study of legislation enacted in Montana and an empirical analysis of the determinants of proposed unjust-dismissal legislation in a panel of states, the author concludes that proposals of unjust-dismissal legislation are a response to court rulings that weaken and obfuscate the employer's right to dismiss employees at will.