At-will employment and creative destruction
David Brancaccio’s economic lessons from “The League.”
It’s baseball season, so this month we’re watching “The League,” which is available to stream on Hulu with a subscription. You can also rent or buy the film on several platforms. In this week’s newsletter, “Marketplace Morning Report” host David Brancaccio reflects on the economic and labor principles on display in the film.
Among tensions at the heart of Sam Pollard’s documentary “The League” is that Black fans who adored baseball’s Negro Leagues also acknowledged that the leagues would come to an end, amid the fight for civil rights in America.
The economist Joseph Schumpeter popularized the idea of “creative destruction” where firms doing it the old way collapse to make way from new and better ways. Better ways, in this case, being major league baseball that finally allowed players of all races to play on the same team. This started with Jackie Robinson coming to the Brooklyn Dodgers organization in 1945, first with its farm team the Montreal Royals.
I draw this week’s lesson from the documentary from the terms of Robinson’s hiring by the Dodgers organization, a profoundly controversial move in the deeply segregated America of 1945. It is about how much the Dodger’s visionary but hard-nosed boss, Branch Rickey, paid Robinson’s Negro League team to release the star. The answer is zero. The Dodgers took a prime asset from another team for nothing.
Among the teachable moments here is something that affects most employees in America: it’s called “at-will’ employment. You are at-will when you work without a contract. The benefit to companies is that the boss can terminate people without having to prove the employee is underperforming. Companies can fire at-will employees almost willy-nilly. This puts employees in a precarious position, since every day can be “pink slip” day. This arrangement also gives at-will employees power, the power many exercised during what became known as the “Great Resignation”: Fed up? Get an offer of greener pasture? The magic words are then available to at-will employees: “Take this job and …” The cost to employers of not having contracts is the risk that your best assets, your people, are free agents every time they walk out the door.
The Library of Congress has a letter Jackie Robinson wrote to his new boss, his answer to a published report suggesting he had violated his contract with his Negro league team, the Kansas City Monarchs. I located a transcript. Robinson explains that he had asked the business manager of the Kansas City Monarchs for a contract “but none was ever tendered to me,” Robinson wrote. “I knew that I had no job at any minute they cared to dismiss me. Furthermore, at no time did I have a conversation with anyone connected with the Kansas City Monarchs or with any other club for that matter in regard to my future services.”
If there was no contract, and therefore no contract violation, in the hiring of Jackie Robinson, the Dodger boss’s unwillingness to offer any compensation to the Kansas City team was seen as obnoxious if not predatory by some observers. Contrast Rickey’s behavior with that of Cleveland Indians’ boss Bill Veeck who paid $10,000 ($140,000 in today’s money) to the owners of the Newark, New Jersey Negro League club for Larry Doby, the second African American brought to the majors. The Dodgers’ boss remained unrepentant about paying zilch for Robinson, indicating that in the fight to desegregate America it was his hope and expectation the Negro leagues would cease to exist, like Black-only hotels and restaurants.
Here in 2024, it is important to note that at-will employees in most states still have the right to not be fired at random. Some states insist the layoff must be reasonable. Some states acknowledge implied contracts even if there was no formal contract. In these states, if you can prove your boss promised something contract-like or if a company’s employee handbook has the feel of a contract, it is possible you cannot be summarily canned. Some states prevent firing whistleblowers or terminating employees who refuse orders to break the law. You need to look these up for your own state. What I can list are the states that give companies the most leeway and at-will employees the fewest rights: Florida, Georgia, Louisiana and Rhode Island are at the bottom or top of that list, depending on your management vs. employee perspective.