Common law exceptions to employment at will and U.S. labor markets

Employment relationships in the United States were historicallygoverned by the common law doctrine of employment at will. Underthis rule, parties to an employment relationship could, in theabsence of an explicit contract, unilaterally terminate thematch at any time, for any reason, and without penalty. In recentdecades, numerous state courts have recognized 'exceptions'to employment at will that limit the circumstances of workerdismissal. Using a panel of state labor market aggregates from1965 to 1994, this article examines the effect of these exceptionson U.S. labor markets. These exceptions are seen to have noeffect on aggregate employment nor unemployment. However, temporaryemployment is observed to increase by a statistically significant15% following the adoption of an exception. The implied contractexception, in particular, appears to be responsible for thisincrease.