econscius

Obama Jobs Solution: Suing Employers For A Job?

In Economy, Job Creation, Lawsuits, Obama Administration, President Obama, Unemployment on September 27, 2011 at 8:07 pm

The “Jobs” Bill that President Obama sent to Congress “includes a provision that would allow unsuccessful job applicants to sue if they think a company of 15 more employees denied them a job because they were unemployed.” [1]

While I understand the frustration of the unemployed, the President’s idea is likely to be counterproductive and lead to even less hiring of the unemployed.

Lawrence Lorber, a labor law specialist who represents employers, said Mr. Obama’s  proposal “opens another avenue of employment litigation and nuisance lawsuits.” [1]  Most employers are small and do not have lawyers on staff to defend against these lawsuits.  Even larger companies with a slew of in-house legal counsel have no desire to be sued over matters that are difficult to disprove.

Why would an employer discriminate against the unemployed?

(1) It is an open secret in the business world many employers formally downsize under-performing employees in order to avoid law suits.  A downsizing of just one person in a large company may actually be a polite way of firing an underperformer.  Most workers are the member of some protected class (female, racial minority, veteran, over age 45, etc.).  If the underperforming employee has not made themselves easy to fire (e.g. by repeatedly skipping work), it can be difficult to prove in Court the subjective judgments that a particular employee’s work is mediocre or worse.  Defending a wrongful termination case is something many companies try to avoid.  Even when the company wins, it racks up legal expenses.  Many companies feel it is better to pay a small severance package and let the employee be downsized “not for cause” rather than terminated “for cause” at the risk of a lawsuit.

This open secret is one reason employers have long preferred to hire someone employed at another company rather than someone who is unemployed.  

(2) Employers think other companies let go of underperformers first and hold on to top performers.  The thinking is that, when XYZ Company lets 10% of its workforce go, it probably is mostly letting go of its 10% least desirable employees.  

(3) Lastly, companies feel that people who are out of the workforce for extended periods of time, such as two or three years, may lose some of their work-related skills.

Are these beliefs always correct?  No, though they surely are at least partly accurate some of the time.  In a normal job market, these biases against the unemployed are not a big deal.  Does every employer feel this way?  Undoubtedly no. 

Unemployment surely is always a disadvantage, but America has traditionally had enough jobs to go round so that most any able-bodied unemployed person would, sooner or later, find something.    In today’s bad job market, the already existent bias against the unemployed is a bigger issue for the unemployed because there are so few jobs available. 

There are other small biases that exist in hiring: in favor of the tall, in favor of the attractive and in favor of people with degrees from prestigious universities.  Studies have shown taller people earn more [2] and more attractive people earn more [3].  These facts add insult to injury to men because studies also show women prefer taller and wealthier men; attractiveness is universally desired in a mate.  But, I would not recommend a federal statute banning discrimination on account of height; how does one even begin to measure such discrimination in a real world situation?  Would it not open to the door to frivolous lawsuits?

 

What would happen if the President’s bill passes and the unemployed are allowed to sue employers for discrimination?  Would the long-term unemployed now quickly find jobs?   I think the answer is no

Let’s think ahead and assume President Obama’s bill becomes law.  It is not clear that employers who are predisposed against the unemployed would be any more likely to actually hire the unemployed.  There are myriad reasons an employer can give (“doesn’t fit our culture”) for passing over an applicant.

But, the new law would make it far more risky to interview the unemployed.  Any unemployed person who applies for a job but is not hired would have legal standing to try to file a lawsuit against the employer.  The safest bet for an employer hoping to avoid these lawsuits would be to try not to interview the unemployed in the first place.  How might they do that?  Obvious options would be to employ recruiters who cold call people already employed elsewhere, look to internal (already employed) candidates, outsource to another country, or automate rather than hire anyone at all.

I know this is cold comfort to the long-term unemployed, but the idea of forcing employers to hire the long-term unemployed through lawsuits will backfire and make it even tougher for the unemployed to get interviewed and may result in fewer new jobs.  A much better idea to actually accomplish that goal would   be a carrot, rather than the stick:  a tax credit for hiring the long-term unemployed.

Unfortunately, this is another example of President Obama- who has no experience whatsoever in private business – proposing something that would actually be counterproductive.   The continuous flow of proposed high taxes, new regulations and laws such as this one creating a new protected discrimination class of unemployed people are exactly what is making American business skittish to hire at all.  The private sector creates jobs, not the government through new laws allowing for more lawsuits.

As always, comments are welcome.

[1] http://news.yahoo.com/blogs/lookout/obama-proposes-letting-jobless-sue-discrimination-191042168.html

[2] http://www.sciencedaily.com/releases/2009/07/090710092226.htm

[3] http://money.cnn.com/2005/04/08/news/funny/beautiful_money/

Pictures from Wikipedia Commons.

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  1. If we examine the total package of anti-business proposals put forth by this president, we begin to get an understanding of his overall strategy based upon the patterns produced. The patterns show an ongoing assault on multiple fronts. What we don’t know is his intent. Is it intentional destruction of the private sector … or simple incompetence wrapped in arrogance?

  2. Kevin, thanks for your comment.

    I wish I could give a conclusive answer if the anti-business proposals from the Administration. Are they simply being incompetent from some combination of inexperience with business and/or belief in wrongheaded theories – or – are they going out of their way to attack American business because they want to punish businesspeople? I did a new post today on the Administration forcing Ford Motor Company to drop an ad featuring a Ford customer who criticized the auto bailouts. Just about every day comes more bad news.

    Back in January 2009, I really (and wrongfully) thought the Obama Administration might be closer to the Clinton Administration on business policy. Unfortunately, I have to admit I have been proven wrong by events.

    Thanks again,
    John

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