The costs of wrongful-discharge laws

We estimate the effects on employment and wages of wrongful-discharge protections in the United States. Over the last three decades, most U.S. state courts have adopted one or more common law wrongful-discharge doctrines that limit employers' discretion to terminate workers at-will. Using this cross-state variation with a difference-in-difference framework, we find robust evidence of a modest negative impact (-0.8 to -1.6 percentage points) of one wrongful-discharge doctrine, the implied-contract exception, on employment to population rates in state labor markets. The short-term impact is most pronounced for female, younger, and less-skilled workers, while the longer term costs appear to be borne by older and more-educated workers - those most likely to litigate under this doctrine. We find no robust employment or wage effects of two other widely recognized wrongful-discharge laws: the public-policy and good-faith exceptions. Published findings in the literature range from no effect to very large negative effects. We re-analyze the two leading studies and find the discrepancies can be explained by methodological shortcomings in the one case and limitations in the coding of key cour