The American Law Institute (ALI) is a private organization of establishment lawyers and law professors that seeks to influence the law by publishing “restatements” of the law. In its noblest work, it seeks to make the law of the 50 united states more uniform by “restating” the law in a cogent organized work. While it generally focuses on what the state of the law is now, it occasionally identifies areas where the law is trending to meet a developing or future need. One might make some inferences about the true loyalty of the ALI by examining where it chooses to venture from what is the law to what the law ought to be.
ALI is now engaged in restating employment law. Last year, ALI declined to see the trend away from employment-at-will and “restated” that employers are free to fire workers anytime, for any reason, or no reason, as long as they do not act for an illegal reason. It ignored the increasing number of laws that prohibit more and more of the most common and pernicious reasons for discharging workers. It ignored the emergence of some jurisdictions, such as Montana and New Jersey, that have effectively banned employment-at-will. ALI stuck its flag firmly in the past, choosing to use its influence to reject modern human resources standards that require documentation of grounds for discipline, and the use of progressive discipline.
This year, on the issue of loyalty, ALI has chosen to deviate from the law as it is and give employers new grounds to sue their employees when they reveal company documents. Last month the ALI approved a new chapter of its Restatement of Employment Law with a controversial section on loyalty left intact.
This section would, for the first time, create a duty of loyalty for all employees, not just those in management. While confidentiality agreements today are creatures of contract, ALI proposes to create a duty of loyalty for which employers could sue in tort when documents are disclosed. This change would ease that terrible burden employers have of proving their damages precisely when their documents are disclosed. It would also allow employers to sue even when they had no policy or contract that required the documents to be kept confidential. It broadly defines confidential information to include “all types of information,” “all forms of information,” and “all manner of information.” Prof. Charles Sullivan notes that ALI is exempting undefined “general” knowledge from the duty of confidentiality. He is concerned that what knowledge is “general” will vary under circumstances that will be hard to predict. I am concerned that ALI has not created an exemption for documents that evidence violations of law or dangers to safety, health or the environment.
The ALI’s draft Restatement of Employment Law is bad news for whistleblowers. If states adopt the Restatement’s duty of loyalty, then any whistleblower who uses the company’s documents to show a violation would be subject to a lawsuit by the employer. Every whistleblower who sues for retaliation could face a counterclaim for breach of the duty of loyalty. This outcome turns existing law on its head. Judges of the Department of Labor have long recognized that calling whistleblowers disloyal is itself evidence of animus against protected activity. Haney v. North American Car Corp., 81-SWD-1 (ALJ Aug. 10, 1981). As Judge Campbell noted in Blake v. Hatfield Electric Co., 87-ERA-4 (ALJ Aug. 13, 1987), p. 24, “what may have seemed to constitute disloyalty from a corporate standpoint in this case was protected activity under the law.”
It remains to be seen what remedies ALI will recommend for violations of the new duty of loyalty. Tort remedies can include a broader scope of remedies than breach of contract would normally allow. In some egregious cases, courts have order workers to return their wages or profits. Would ALI recommend this for the garden variety cases of turning over documents to government investigators? These questions will remain unanswered until ALI completes the restatement of employment law in years to come.
The ALI draft restatement deviates from existing law to create this duty of loyalty that employees owe to companies, but it does not create any similar duty that companies owe to their employees. Companies remain free to discharge workers for any reason, or for no reason at all, as long as the employee cannot prove that the real reason was illegal. ALI’s choice of where and how to deviate from existing law reveals something of its own loyalty. I observe that it is closer to the corporate interests that make the endowments to the university towers where professors work, rather than to those who toil in the universities’ grounds.
Just because ALI adopts a rule in its restatement does not mean that states have to follow that rule. Still, this move by ALI underscores the need for a comprehensive federal whistleblower law. If federal law makes clear that companies have no right to conceal their wrongdoing, and that employee disclosures proving misconduct are protected, then companies will not be able to use state tort laws as a sword to punish whistleblowers. In NAACP v. Claiborne Hardware Co., 458 U.S. 886, 918-19 (1982), the Supreme Court reviewed a decision by the Mississippi Supreme Court to make the national NAACP liable in tort for a local branch’s boycott. “The First Amendment … restricts the ability of the State to impose liability on an individual solely because of his association with another.” If federal law can make clear what whistleblower activities are protected, then whistleblowers will be protected from employers who seek to use state tort law as a sword.
