A Modest Defense of Allowing Firms to Execute Junior Associates

Getting a job is difficult, particularly in a down economy. One way in which one sees this is in the use of unpaid or poorly paid intern labor. Many people at the bottom of the employment ladder are willing to work for minimal compensation as a way of learning the ropes and getting their foot in the door. Internships do two things for employers. First, they provide a pool of cheap – if unskilled – labor. Second, they shift the costs of training from the employer to the employee. In effect, the employer holds off on hiring the employee until he or she has expended her own resources in the form of time and labor acquiring skills that the employer desires. Internships are thus much like professional education — a training cost that is bourn mainly by employees rather than employers.

Here’s a question: Why is the military different?

Recruits into the military get pay and benefits from day one, despite the fact that Uncle Sam must spend months and sometimes years training recruits before he can get any useful labor out of them. Given the high costs of training, why doesn’t the military shift some of those costs to recruits in the form of unpaid internships or employee-financed training programs? It seems to me that there are two explanations, one economic and one legal. The economic story is simple supply and demand. There are relatively few people interested in being soldiers in relationship to the military’s demand for personnel. Accordingly, prospective grunts must be offered a relatively good deal to induce them to join up. Fair enough. There may be another, legal explanation, however.

We generally don’t think of it in these terms, but joining the military is a kind of employment contract. The recruit promises to provide the government with his labor and the government promises to pay him for it. In this sense it is not all that different than any other employment contract. The big difference comes in terms of the remedies that the employer acquires against the employee. In your standard at-will employment contract, the employee can walk away at any time should he or she wish without breaching the contract. Even in cases where the employment contract is for a term, the actual remedies of the employer in the event of breach are pretty slim: a suit for money damages (subject to the duty to mitigate, etc.) and perhaps some enhancements like bonus clawback clauses.

Now compared that with the military. Breach of the military employment contract by the employee has a couple of special names: mutiny and desertion. The remedies that Uncle Sam gets as employer are impressive: fines, imprisonment, and – in theory – execution. Strikingly, however, this harsher remedial regime, in many ways, works for the benefit of the recruit.

An ordinary employer who makes a huge investment in the education of its employees has relatively few means of guaranteeing that it will recoup its investment. Hence, we see unpaid internships. Another example would be the fact that law firms never hire untrained college graduates and send them to law school on the firm’s dime. The military, on the other hand, has much better chance of recouping its investment in training.

This is why prospective soldiers with no military background don’t take out student loans to finance their stint in basic training. Perhaps my students would be better off if we allowed them to enter a contract in which a law firm could hang them in the event of desertion.

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7 Responses

  1. TJ says:

    “Repeal the Thirteenth Amendment” is not likely to be a popular platform any time soon, no matter how much it might benefit law students.

  2. Nate Oman says:

    Specific performance of personal service contracts does not violate the Thirteenth Amendment.

  3. TJ says:

    Kind of depends on whether the specific performance is to perform the work (backed, at most, with the threat of contempt), or to perform the hanging, doesn’t it? Of course, the question is difficult to test since personal service contracts are not subject to specific performance regardless, and hanging would obviously be a penalty and violate public policy.

  4. A.J. Sutter says:

    Your linked SSRN article concludes with the statement “The question of whether [affirmative contracts to perform services] ought to be enforced is left open by this examination, but the analysis does show that common law development in this area ought to proceed without conversation-stopping constitutional claims.” I.e., after 80 pages of effort pointing out that the 13th Amendment allows specific enforceability of personal services contracta, you abstain from stating your opinion about whether such contracts ought to be so enforceable. Elsewhere in your conclusion you also use a fair and balanced media jargon word when characterizing such contracts as usually concluded with “elites,” though you declare them “outside the Constitution’s domain” even when they “involve more ordinary workers.”

    Rather than “covering” your views with the false modesty of your article and the coyness and ironic tone you attempt in this post, why don’t you declare your actual position on this issue? E.g., should such contracts, even when they involve “more ordinary workers,” be specifically enforceable? Or should Congress and or state legislatures act to make that remedy off limits, thereby filling a hole in the 13th Amendment? And if you advocate either of those positions (or some other) subject to some exceptions, let’s hear them on the record.

  5. Nate Oman says:

    A.J.: I am not secretive or coy. Just busy. I figured that after 60 odd pages of constitutional analysis it was probably best to call it a day on specific performance for that article. For what it is worth, I think that specific performance should be available for the enforcement of (some) personal service contracts. I have even presented a working paper to that effect at a couple of law schools.

  6. ohwilleke says:

    Colorado, while not going quite so far, captures some of the same sentiment in Section 8-2-113(2)(c), Colorado Revised Statutes. Generally speaking, non-competition agreements are prohibited in Colorado, except in a few selected exception cases, even if they are reasonable in area and duration. Indeed, it is actually a crime for an employer to put an invalid non-competition clause in an employment contract. Section 8-2-115, Colorado Revised Statutes.

    But, there is an exception to the general rule for any “contractual provisions providing for recovery of the expense of educating and training an employee ho has served an employer for a period of less than two years.”

    In the real world, I’ve seen this mainly used in the skill trades where, for example, plumbers have trouble holding onto apprentices once they learn the business. So, for example, a master plumber might require his apprentice to refrain from seeking employment as a plumber anywhere in the metropolitan area for two years from the date of hire.

    Often the Colorado law isn’t a terrible hardship, because plumbers are often handy in other ways and have economic value outside their chosen profession. But, most associate attorneys are comparatively worthless in the economic marketplace without their ticket to practice law.

    The agreements are not put in place, of course. But, the reasons that have nothing to do with either state law or the 13th Amendment. These kinds of arrangements are expressly forbidden by Model Rule of Professional Conduct 5.6 which has counterparts in every state. But, it isn’t hard to imagine a world without MRPC 5.6, and isn’t impossible to imagine that this kind of world would have benefits as well as the detriments that cause it to be ethically prohibited.

    Indeed, in the pre-law school era when indentured servitude was the norm, this was precisely the kind of arrangement that was used for apprentice lawyers who were “reading law” in someone’s office.

    In Japan, the living law, if not necessarily the law on the books, recognizes the right of an employer to recoup anticipated lost profits when an employee quits a job prematurely, which can be a very powerful incentive, and employers also use perks like company owned housing to confine employees to their jobs.

  7. A.J. Sutter says:

    Ohwilleke, I live in Japan, and I’m not aware of the “recognized right” in the “living law” that you mention. My wife, who’s spent more than 20 years of her career in Japan, hasn’t heard of it either. The closest seems to be that during the bubble period some companies threatened employees who were sent overseas for MBAs or other training that they’d have to repay the cost of the education, not anticipated lost profits, if they quit too soon thereafter; she herself was threatened about that. (Apparently lots of company-paid MBAs were quitting in that era.) But actually companies didn’t have any legal basis for holding employees to this requirement (according to a then-chief prosecutor and current bengoshi whom she consulted), and apparently the practice was later prohibited judicially. Can you please provide more information, if you’re thinking of something different? In any case, these days Japanese employers tend to be looking for more flexibility to fire people expeditiously, or to shift them to temporary status, rather than for power to retain them.

    You’re right that some employers use company-owned housing, and it’s something that many people recognize here as a source of injustice and inequality. Some famous-brand companies also require such employees to buy staple living items at inflated prices from company canteens, rather than allow them to go to convenience stores. But again, the context in which this most often comes up nowadays is when an employer intentionally sheds workers: when such a worker loses his job, he loses his address, and without an address he can’t apply for unemployment benefits.

    Another incident I recently heard of concerns a 57-year-old executive who’d spent 35 years at a major bank, with 5 years to go until he could retire (and with 2 kids in high school): he was told that he could either accept an 85% pay cut to only $20K per year, or else lose his job and his pension. FYI, getting another job past age 50, especially in finance, is pretty impossible here.

    In context, these issues in Japan really seem more apposite to the question of slavery than than to specific enforcement of employment contracts into which the employee has entered freely.