The Impact of Employment Law and Practices on Business and Society: The Significance of Worker Voice

SCHIPANI_FINAL_EIC ADJ (DO NOT DELETE) 11/30/2017 2:53 PM THE IMPACT OF EMPLOYMENT LAW AND PRACTICES ON BUSINESS AND SOCIETY: THE SIGNIFICANCE OF WORKER VOICE* Cindy A. Schipani** Frances J. Milliken*** Terry Morehead Dworkin**** INTRODUCTION ............................................................................ 980 I. SIGNIFICANCE OF VOICE ........................................................ 982 A. Theoretical Overview ..................................................... 982 B. The Impact of Voice ....................................................... 986 C. Voice and Silence ........................................................... 991 II. THE LEGAL ENVIRONMENT: EMPLOYMENT-AT-WILL........... 998 A. Historical Underpinnings of the Employment-at-Will Doctrine .......................................................................... 998 B. Application of Employment-at-Will Today.................. 1000 III. WHISTLEBLOWING ............................................................... 1007 A. Efforts to Promote Whistleblowing .............................. 1007 B. Efforts to Silence Whistleblowing and Voice .............. 1012 IV. PROPOSALS FOR WORKPLACE PRACTICES ........................... 1021 CONCLUSION ................................................................................... 1023 *Copyright 2017. Cindy A. Schipani, Frances J. Milliken, Terry Morehead Dworkin. All rights reserved. The authors wish to thank the participants of the Big 10 Colloquium, Professors Leigh Anenson, Dan Cahoy, Wayne Eastman, Kevin Kolben, Gideon Mark, Abbey Stemler, and Matthew Turk for their helpful comments. We also wish to thank Alina Charniauskaya, J.D., Julia Xin, J.D., Zachary James, J.D., and Kathleen Knight, J.D. Candidate, University of Michigan Law School; and Mateusz Borowiecki, B.A. Candidate, University of Michigan, for excellent research assistance. **Merwin H. Waterman Collegiate Professor and Professor of Business Law, University of Michigan. ***Arthur E. Imperatore Professor of Entrepreneurial Studies and Professor of Management, Stern School of Business, New York University. ****Wentworth Professor of Business Law, emerita, Indiana University and Scholar in Residence, Seattle University School of Law. 979 SCHIPANI_FINAL_EIC ADJ (DO NOT DELETE) 980 11/30/2017 2:53 PM U. OF PENNSYLVANIA JOURNAL OF BUSINESS LAW [Vol. 19.4 INTRODUCTION Time and time again, it has been shown to be important, for both business and society, for individuals to speak up when they encounter problems or wrongdoing in the workplace. The scandal at WorldCom broke only after employees spoke up and publicly “blew the whistle” on executives.1 An Enron employee reported problems to the IRS in 1999, long before the firm’s failure in 2001 and, some speculate, early enough to avoid a total failure of the firm.2 In the wake of scandal, Volkswagen offered internal immunity to employees who blew the whistle regarding cheating on emissions tests and requirements.3 In an effort to weed out the wrongdoers and put the company on a path toward recovery, Siemens offered immunity for whistleblowing employees when a scandal broke in connection with massive international bribery.4 Research also demonstrates the importance of employee voice, which sometimes takes the form of whistleblowing, for individual employee wellbeing. When employees feel unable to exercise their voice at work, there can be serious negative impacts for psychological and physical well-being.5 Despite the negative impact of employee silence for both organizations and 1. See Susan Pulliam & Deborah Solomon, How Three Unlikely Sleuths Discovered Fraud at WorldCom, WALL ST. J., Oct. 30, 2002, http://www.wsj.com/articles/SB1035929943494003751 [https://perma.cc/QEM5-SKYG] (offering detailed background on the whistleblowing at WorldCom). 2. See David S. Hilzenrath, IRS Pays Enron Whistleblower $1.1 Million, WASH. POST, Mar. 15, 2011, https://www.washingtonpost.com/business/economy/irs-pays-enronwhistleblower-11-million/2011/03/15/ABFLAEb_story.html [https://perma.cc/X5Y5UVQY] (quoting the whistleblower’s lawyer). 3. Jack Ewing & Julie Creswell, Volkswagen, Offering Amnesty, Asks Workers to Come Forward on Emissions Cheating, N.Y. TIMES, Nov. 12, 2015, http://www.nytimes.com/2015/11/13/business/volkswagen-offering-amnesty-asks-workersto-come-forward-on-emissions-cheating.html [https://perma.cc/42V3-D5ZQ]. 4. Mike Esterl, Siemens Amnesty Plan Assists Bribery Probe, WALL ST. J., Mar. 5, 2008, http://www.wsj.com/articles/SB120465805725710921 [https://perma.cc/F882-HTSL]. 5. See Michael Knoll & Rolf van Dick, Do I Hear the Whistle . . . ? A First Attempt to Measure Four Forms of Employee Silence and Their Correlates, 113 J. OF BUS. ETHICS 349, 353 (2013) (examining the correlation between different forms of employee silence and wellbeing); Leslie A. Perlow & Stephanie Williams, Is Silence Killing Your Company?, 81 HARV. BUS. REV. 52, 52 (2003) (“[S]ilence can exact a high psychological price on individuals, generating feelings of humiliation, pernicious anger, resentment, and the like.”). See also, Michael Knoll & Rolf van Dick, Authenticity, Employee Silence, Prohibitive Voice, and the Moderating Effect of Organizational Identification, 8 J. POSITIVE PSYCHOL. 346, 346 (2013) (discussing the psychological effects of authenticity and linking authenticity to employee voice); Fons Naus et al., Organizational Cynicism: Extending the Exit, Voice, Loyalty and Neglect Model of Employees’ Responses to Adverse Conditions in the Workplace, 60 HUM. REL. 683, 683-685 (2007) (suggesting that a company culture that encourages employees to be engaged will have a positive impact on employees’ well-being). SCHIPANI_FINAL_EIC ADJ (DO NOT DELETE) 2017] IMPACT OF EMPLOYMENT LAW AND PRACTICES 11/30/2017 2:53 PM 981 employees, the reality is that there are often a number of serious barriers to speaking up in the workplace, including risking potential negative employment repercussions, such as termination.6 The risk of termination is especially realistic in jurisdictions where employment-at-will is the legal norm. Employment-at-will gives employers and employees the right to terminate employment at any time, with or without reason, provided the reason is not illegal, without legal consequence.7 In the United States, employment-at-will is the applicable legal standard when there is not an employment contract, such as a collective bargaining agreement, executive contract, or other specific contract terms granting employment for a specific period of time.8 There are exceptions to the doctrine,9 but the reality is that most employment in the United States is at-will.10 In addition, employee protections provided by collective bargaining agreements may be on the decline. The U.S. Supreme Court recently heard the case of Friedrichs v. California Teachers Association, in which a mandatory payment of union dues was at issue.11 The Court ultimately dead (...truncated)