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The Great Resignation: A new idea for keeping employees on the job

Ned Bassen
Ned H. Bassen is a shareholder in Becker’s Business Litigation Practice. He has had an expansive labor and employment practice for over 45 years.

By now, it appears well-established that employers generally may require COVID-19 vaccines for employees returning to work and may ask employees physically entering the workplace if they have been diagnosed with or tested for COVID-19. Employers also may require employees to come to work post-pandemic for legitimate nondiscriminatory reasons.

With the return to work looming, while many employers are discussing a “hybrid” remote/in-office work combination future, some employers either want employees back to the office full-time or for larger periods of time than employees would like.

But, what are employers’ rights when employees, especially millennials, don’t want to come back to the office and want to instead continue working remotely for their organization?

Not everyone wants to return to the pre-pandemic, 9-5 office lifestyle.

How (and sometimes when) to bring employees back into the office is a vexing decision that employers are currently or soon to be facing, along with how to give employees flexibility.

One recent study found that a “whopping 58% of workers say they would “absolutely” look for a new job if they weren’t allowed to continue working remotely in their current position.

The U.S. Department of Labor has reported that workplace resignations set a 20-year record in April 2021, with 4 million employees quitting their jobs. The global employment website Monster has said that 95% of employees are considering changing their jobs. (Read more on that here.)

Resigning employment has now reached such a new high level that quitting work post-pandemic has been labeled “The Great Resignation of 2021.”

What should employers do to ease the burden from employee departures when there will be difficulty finding qualified replacements? Hiring quality talent is becoming increasingly tough as well as competitive.

It would be best for recruitment professionals to consider all their options in today’s labor market.

One option that has not been widely discussed is increasing the use of employment agreements. Many, if not most, employees are at-will so employees and employers alike are free to part ways. But this does not have to be so, and an employment agreement may supplant employment at will.

Related: 2 keys to stopping the ‘Great Resignation’

Requiring employees to sign employment agreements, however, could present legal issues that may thwart an employer’s desired result. This is because as a practical matter, an employment agreement requiring the continuation of employment with narrow exceptions unrelated to working at the job rather than remotely may have a preventive effect, i.e., employees may not quit because of concern over the terms of the employment agreement.

If an employee quits and challenges enforcement of the employment agreement, there are ways that employers could increase the likelihood that it would be enforced by a court.

One way would be to include a liquidated damages provision in the employment agreement. This provision would require an employee to pay a fixed amount should the employee quit for a reason other than as specified in the agreement (usually other than for “good cause” as defined by the agreement).

State law determines the enforceability of liquidated damage clauses in employment agreements. These clauses are not enforceable in California. In most other states, liquidated damage provisions are enforceable if: 1) they are not considered to be penalties, and 2) the fixed amount is generally proportionate to the damage to the employer from the breach.

The employer’s damages would be the cost in time and money to replace and train a new employee as well as any loss in revenue until a trained replacement is productively working again. Enforceability of the employment agreement would be from the perspective of reasonable damages rather than as a hammer to force the employee to continue to work.

To make this workable for an employer, liquidated damages employment provisions should not be the same in employment agreements for all employees. At a minimum, the amounts of damages should range based on several factors, including the reasonable cost of replacement/training and the loss of revenue, which are realistic post-pandemic costs.

Another legal issue that comes up even with liquidated damage employment agreement provisions that are well-drafted is the need for “consideration,” or something of value promised in exchange for the specified liquidated damages provision, to support this provision.

This is not an issue for new employees, because the new employment itself would provide consideration for an employment agreement containing a liquidated damages provision. But for existing employees, the continuation of employment in exchange for signing such an agreement would be problematic.

However, consideration can be provided by a raise, a promotion or another change in the terms of employment that would benefit the employee. In other words, the employer would be saying if you want this good change, you need to sign this new agreement with liquidated damages.

This is an option to consider to ameliorate what is likely to be a big problem for employers.

The first step would be to have a carefully and well-drafted employment agreement with the liquidated damages provision discussed above.