Historically, relations between workers and employers in the United States have often been characterized by the employment-at-wi
ll doctrine, according to which the duration of employment is determined by the employer and the grounds for termination are limited only by the provisions of contracts and specific statutes. Many state courts and legislatures have reevaluated this doctrine and have modified it by expanding the concept of wrongful termination, thereby increasing employer liability. Some economic theorists suggest that such changes tend to reduce employment in states that enact them, because protecting workers against wrongful termination raises the cost of labor to employers: firms will tend to spend more time and money screening potential employees, be reluctant to terminate less-productive workers, and incur greater legal expenses. In a study that took into account differences among states, researchers Dertouzos and Karoly concluded that states with wrongful-termination laws experienced a two percent to five percent drop in their employment rate as a result of adopting these laws. They also found that the impact on employment appears to be smallest in manufacturing, where unions have already institutionalized similar protection, and in small firms, perhaps because those firms' lesser ability to pay damages makes it less profitable for employees to file wrongful-termination lawsuits against them. The passage suggests which of the following regarding wrongful-termination lawsuits?
A) States that do not implement wrongful-termination laws will probably see an increase in wrongful-termination lawsuits.
B) It is less profitable to file wrongful-termination lawsuits against unionized companies than against companies without unions.
C) A wrongful-termination lawsuit is less costly to a company than continuing the employment of an unproductive worker.
D) Obtaining financial compensation is an important motivation for filing wrongful-termination lawsuits.
E) Those who file wrongful-termination lawsuits are likely to be awarded larger settlements under the employment-at-will doctrine than under wrongful-termination laws.
D) Obtaining financial compensation is an important motivation for filing wrongful-termination lawsuits.
Explanation:
A wrongful-termination lawsuit is an incentive for employees to suit their employers because of the prospect of financial gain. This makes hiring riskier for firms, because there is always the possiblity, however remote, that a new hire might sue the firm in the future if she or she is dimissed.
Under these panorama, economists have gone about reaserching if there is any correlation between wrongful-termination laws, and the results have been consistent in showing that such correlation exists. Therefore, many economists recommend not only the termination of such laws, but also the removal of other laws that reduce labor flexibility.
One of the reasons why the unemployment rate dramatically decreased during these years was because millions of Americans joined the U.S. military. This is because during these years, World War II was taking place. Although the United States had remained neutral during the first few years of the war, it decided to get involved after the Japanese attack on Pearl Harbor.
