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The paper is a multidisciplinary collaboration between contract law, employment law and management scholars and draws from the fields of law, management, and psychology. After reviewing and noting the gaps in the employment and justice literatures, this paper presents the findings of a survey of 763 participants to measure whether certain variables—procedural and substantive fairness, as well as educating employees on the principle of employment at will—impact the propensities of employees to retaliate and litigate at the time of discharge.

The survey results are significant and striking. We find statistically significant reductions in retaliation and litigation rates when survey respondents are shown scenarios where they are treated with substantive and procedural fairness. We also find that when employees are given significant information about the law ahead of time, their propensity to retaliate and litigate decreases. We learn from this study that when employee expectations are managed using fairness norms and education the outcomes of discharge are profoundly affected. Such knowledge can have significant effects on the litigation and dispute resolution costs of employers who are faced with making difficult decisions regarding layoffs and retention.

The paper then concludes by showing how our study in light of psychological contract theory can be used as a guide to reforming employment law. The findings suggest the use of an expanded contextual analysis that serves to benefit employers and employees by matching their expectations and, at the same time, preventing the creation of perceptions of injustice at the time of employment termination.