Jotwell: Worklaw http://worklaw.jotwell.com The Journal of Things We Like (Lots) Tue, 08 Jul 2014 10:45:09 +0000 en-US hourly 1 (Re)Booting the Dismal Science http://worklaw.jotwell.com/rebooting-the-dismal-science/ http://worklaw.jotwell.com/rebooting-the-dismal-science/#comments Tue, 08 Jul 2014 10:45:09 +0000 http://worklaw.jotwell.com/?p=703 Michael J. Zimmer

French economist Thomas Piketty has published a lengthy tome on economics that, unusual for economics books, has become a best seller. That attention is for good cause. While not exactly a beach read, Capitalism in the Twenty-First Century is a potential game changer for what the study of economics entails and its consequence for future policies. The timing of the book is perfect because the fact of increasing economic inequality [...]]]> Thomas Piketty, Capital in the Twenty-First Century (2014).

French economist Thomas Piketty has published a lengthy tome on economics that, unusual for economics books, has become a best seller. That attention is for good cause. While not exactly a beach read, Capitalism in the Twenty-First Century is a potential game changer for what the study of economics entails and its consequence for future policies. The timing of the book is perfect because the fact of increasing economic inequality has become a topic of increasing focus among academics but also in public policy discussions more broadly. What has been lacking is a deep understanding of how this has come to happen and what might be done to reduce inequality. Picketty’s book moves the discussion forward by pointing to where inequality comes from, where it is going, what might be done to shift its momentum and direction and what might happen if nothing is done to alleviate ever increasing inequality.

In his Introduction, Piketty quotes Marx’s “Communist Manifest” for its prediction of the inevitability of revolution resulting from the internal contradiction of capitalism: “The development of Modern Industry, therefore, cuts from under its feet the very foundation on which the bourgeoisie produces and appropriates products. What the bourgeoisie therefore produces, above all, are its own gravediggers. Its fall and the victory of the proletariat are equally inevitable.” In less dramatic language, Piketty concludes that “the private rate of return on capital, r, can be significantly higher for long periods of time than the rate of growth of income and output, g. The inequality r>g implies that wealth accumulated in the past grows more rapidly than output and wages. . . . Once constituted, capital reproduces itself faster than output increases. The past devours the future.” His evidence supporting his conclusion that makes capitalism inherently unstable, at least in its present form, is his of study of a wide array of data from a number of countries from the 19th century up until the beginning of World War I and, beginning again after the end of World War II until today. During those prolonged periods, the net rate of economic growth in terms of output and wages was about 1% while the return on capital was always between 4 and 5%. Thus, wealth in terms of capital versus from labor increasingly is concentrated in the top 1% and, even more so, in the top .01%. Ever-expanding capital simply cannot be sustained in the long run because that would mean that labor loses all value. If the past is the prologue to the future, capitalism will at some point inevitably collapse if actions are not taken to reduce the growing value of capital. The period from the beginning of World War I through the end of the immediate post-World War II period demonstrated that the momentum toward ever increasing concentration of wealth can be stopped. During that disastrous period of the 20th century, there was a substantial shift as capital shrank due to the destruction of the two great wars, the Great Depression, the end of European colonization and a policy shift toward the creation of a middle class. As a result economic inequality decreased significantly until after World War II. Much economic theory assumed that this period was the new normal, but, for Piketty, the experience since 1970 onward shows that the old normal has reasserted itself so that economic inequality will continue to grow unless substantial efforts are undertaken to change the policies that underpin the growing power of capital over labor.

Where Piketty differs from Marx is that he does not agree that the end of capitalism is inevitable or that capitalism is inherently contradictory. Instead of Marx’s economic determinism, Piketty believes in capitalism and a globalized economy but he concludes that the present situation is the result of policy choices that have been made. For him, disaster can be averted if those policies are altered to change the course of the present trend toward ever increasing economic inequality.

There has been and will continue to be, I am sure, extensive debate about his thesis and the data he has assembled to support it. But, I want to explain why this book has much broader potential impact, even if his analysis and conclusion might not ultimately be accepted in whole or even in substantial part. There are three reasons why this book is likely to have long term significance, even beyond the conclusions that Piketty draws from his studies. The first concerns the proper scope of economics as a discipline. In 1962, Milton Friedman published “Capitalism and Freedom” that was the opening shot in the war to replace Keynesian macroeconomics with free market microeconomics—the Chicago School. With tremendous support from those economic interests that would benefit from neoliberal economic theory and governmental policies based on that theory, free market microeconomics won the war in the United States and it has had a tremendous impact globally as well. Piketty challenges that narrow view of what is properly called economics by reasserting the significance of macroeconomic theory as a proper basis not only for the study of economics as an academic discipline but also to make economic policy decisions.

Second, Piketty is convinced that the true study of economics is a social science. To be a social science and to be potentially meaningful, economics must be based on the best and broadest available data, and not just theory. To support a return to that broader view of what economics is all about, Piketty looks to history and, more importantly, to all kinds of sources of economic data developed both internationally and—so far, more significantly—within different national economies. In short, he wants to transform economics from pure theory to join other social sciences, such as sociology, that are based on data and its analysis. Chicago School economics has recently been at least dinged, if not seriously undermined, by the emergence of microeconomic behavioral economics that studies data showing how people make economic decisions rather than the hypothetical “rational economic actors” that drive pure Chicago School economic theory. Piketty shows that analyzing vast amounts of macroeconomic data is key to making the study of economics realistic and therefore useful. He, of course, calls for amassing much more data of different types especially from much more of the world including the developing and undeveloped nations of the world.

Third, Piketty rejects the parochialism of economics that focus on individual national economies. He takes a global perspective on how economic theory and policy should be discussed. Given the expanding significance of global economic activity, this seems obvious. Most of his analysis is based on major developed national economies because the U.S., the U.K., France, Germany, Japan, and Sweden have the data that have been collected that can be used for his comparative analyses. But he uses any data he can find to project the way globalized economics works. Would more data come available from the developing world, Piketty would incorporate that in his approach to economics.

The book is well written, surprisingly so considering it is a translation from the French, but it is long. Piketty presents a vast array of historical and current data of widely different forms and includes data from 20 countries. His descriptions along with accompanying graphs and tables are extremely clear. Based on the data presented, Piketty presents a wide variety of different interpretations and he does a good job supporting the conclusions that he draws from these mountains of information.

Publication of Capital in the Twenty-First Century has resulted in a significant amount of response, much of it favorable but also a lot of criticism. The criticism takes two basic forms—challenges to his data and to the inferences that he draws based on that data. So far, the most significant attack on Piketty’s methodology for presenting and interpreting data has been by the Financial Times economics editor, Chris Giles. Some of the criticisms involve what Giles considers to be “transcription errors from the original sources and incorrect formulas.” Piketty has explained these not as errors but as necessary judgment calls based on limitations inherent in the way the different sources of data have been made available and how best to interpret them overall. More seriously, Giles claims that Piketty misinterprets data from the U.K. so that Piketty’s conclusion that inequality is increasing is unsupported and in fact economic inequality is not increasing in the U.K. Piketty responds that Giles fails to understand the difference between tax data and survey data about wealth. According to Piketty, Giles is comparing the apples of hard tax data with the oranges of much softer survey data. Survey data understates wealth because people have a strong tendency to underreport what they own. Given the tremendous amount and range of data that Piketty has assembled, the immediate future of Piketty’s approach will depend on how reviews of his methodology turn out. In his response to Giles, Piketty appears to have so far won the debate, but it is still very early. If nothing else, Capital in the Twenty-First Century is likely to set the agenda for economic researchers for the foreseeable future.

A number of critics have challenged the inferences that Piketty has drawn based on the data he has presented. For example, Larry Summers is not so sure that Piketty’s conclusion that the recent extraordinary increases in CEO compensation in the United States is the result of our low income tax rates that create incentives for CEOs to seek ever higher compensation. Piketty bases his conclusion on the fact that productivity of U.S. corporations has not increased to justify higher executive compensation and that CEO compensation of multi-national corporations located in other developed countries with higher income tax rates has not ballooned as they are doing in the U.S., even though the productivity of their corporations is in line with U.S.-based corporations. As with challenges to the data Piketty has presented, his inferences will also form the agenda for economic researchers in the near and perhaps far term.

Capital in the Twenty-First Century is important to read because it has already altered the focus of economic debate. Its longer term significance depends on how it holds up to the many critics who have a new research agenda based on what Piketty has done.

Piketty’s policy conclusions will make people like Grover Norquist gasp in horror. For example, Piketty concludes that “the optimal top tax rate in the developed countries is probably above 80 percent.” He concludes that income tax rates that high would not interfere with the growth of economic productivity and would, in the U.S., go a long way toward reducing the present growth in economic inequality that is primarily based on unjustified rent seeking by the high executive class. Even more shocking to the present conventional wisdom is Piketty’s proposal for a worldwide tax on net wealth that is accompanied by international laws and policies to minimize the ability of taxpayers to hide their assets in tax havens.

Given the present state of political discussion, Piketty’s proposals sound shocking. But, there is a great jazz song, “Compared to What,” recorded in 1969 by pianist Les McCann and saxophonist Eddie Harris for their album, Swiss Movement. Doing something to reduce economic inequality has to be compared with what will happen if nothing is done. Piketty explains that the last time economic inequality was as extreme as it is today was in the Gilded Age, as it is described in the U.S., and the Belle Époque as the period was called in Europe. What reversed that inequality was the horror of the two world wars and the Great Depression. If the alternative to dealing with ever increasing economic inequality is such catastrophes, perhaps we can begin to discuss policy approaches that are not nearly so destructive. If Piketty’s analysis is right and nothing is done, what will be dismal is the failure of humankind to protect its future.


Editor’s note: For other Jotwell reviews of Thomas Piketty’s Capital in the Twenty-First Century see: ]]> http://worklaw.jotwell.com/rebooting-the-dismal-science/feed/ 1 2
On Managerial Justice and the Anti-Discrimination Project http://worklaw.jotwell.com/on-managerial-justice-and-the-anti-discrimination-project/ http://worklaw.jotwell.com/on-managerial-justice-and-the-anti-discrimination-project/#comments Mon, 16 Jun 2014 10:25:21 +0000 http://worklaw.jotwell.com/?p=680 Marcia L. McCormick

The extensive research showing that employment discrimination plaintiffs fare significantly worse than plaintiffs in other kinds of cases in federal court at every possible stage of litigation is well known at this point. Scholars like Ted Eisenberg, Kevin Clermont, and Stewart Schwab have thoroughly documented the disparity. Building from this work, other scholars have focused on why employment discrimination cases are different. [...]]]> Nancy Gertner, The Judicial Repeal of the Johnson/Kennedy Administration's ‘Signature’ Achievement (forthcoming, 2014), available at SSRN.

The extensive research showing that employment discrimination plaintiffs fare significantly worse than plaintiffs in other kinds of cases in federal court at every possible stage of litigation is well known at this point. Scholars like Ted Eisenberg, Kevin Clermont, and Stewart Schwab have thoroughly documented the disparity. Building from this work, other scholars have focused on why employment discrimination cases are different. Some have chalked the change up to changes in employer behavior, labeling current forms of discrimination “subtle” rather than “overt.” Others have mapped doctrinal drift between the goals of the statutes when they were initially enacted and their current applications. Still others have linked the drift and plaintiffs’ disproportional losses to the liberal use of summary judgment and the change in rules to pleading standards under Twombly and Iqbal. Most scholars are able only to theorize on the causes as they document these changes, but Nancy Gertner, a Professor of Practice at Harvard and former United States District Court Judge, has offered important new insights on why it is that employment discrimination cases fare worse than other kinds of cases.

Judge Gertner’s most recent article on the subject is The Judicial Repeal of the Johnson/Kennedy Administration’s Signature Achievement. In it, she identifies five potential causes of this phenomenon: 1) judges may believe that discrimination doesn’t exist anymore; 2) more discrimination cases are frivolous; 3) good cases are taken to state courts because state law is less employer friendly; 4) the Supreme Court has narrowed the law in a way that protects employers; and 5) the pressures on judges create and perpetuate biases against these cases. Based on her own experiences and others’ studies of judicial decisions, Gertner concludes that ideology, particularly as communicated by the Supreme Court in its decisions, plays some role, but that the greatest cause of the disparity is the pressure on judges to manage their caseloads and the ways that the effects of those pressures magnify the ideological factors.

Judge Gertner’s article builds on two of her prior articles, Losers’ Rules, and with Elizabeth M. Schneider, “Only Procedural”: Thoughts on the Substantive Law Dimensions of Preliminary Procedural Decisions in Employment Discrimination Cases. The core contention in these three works revolves around how case management practices are driving a wholesale abandonment of the antidiscrimination project.

First, judges are encouraged to resolve cases without trials and to write decisions only when absolutely necessary. Because a grant of dismissal or judgment disposes of at least part of a case, those decisions must be written and must explain the decision’s rationale. So decisions are written only when plaintiffs lose. That means, the only decisions available to be read are decisions explaining what is wrong with plaintiffs’ cases, which creates and reinforces judges’ implicit biases about the merit of employment discrimination cases. As Judge Gertner notes, “[i]f case after case recites the facts that do not amount to discrimination, decisionmakers have a hard time imagining the facts that comprise discrimination.”

In addition, courts have developed decision-making heuristics for employment discrimination cases, which are employed in only one direction to avoid false positives—wrongful accusations of discrimination. Those heuristics become precedent and then supplant the law themselves. One particularly vivid illustration of such a heuristic is the “stray remarks” doctrine, which trivializes sexist and racist speech. This doctrine arose as a way to distinguish direct evidence of discriminatory motive from circumstantial evidence, with a particularly narrow view of direct evidence. Only if no inference at all was required to link the plaintiff’s protected class with the decision—I am not hiring you because you are black or female—would the evidence be direct. Anything else would be a “stray” remark. This heuristic has been employed in such a way that now, explicitly gendered or race-linked speech is not considered evidence of discrimination or constitutive of harassment at all by judges in the summary judgment stage. Conversely, when juries hear that this kind of language was used, they have ruled for plaintiffs and awarded large damages.

To counter these structural pressures on the substance of the law and consequent self-perpetuating spiral away from the goals of the employment discrimination statutes, Judge Gertner makes several suggestions. Congress could amend Title VII of the Civil Rights Act and the Age Discrimination in Employment Act (ADEA) as it has the Americans with Disabilities Act (ADA),  using language more broad and cabining judicial discretion. Scholars could monitor judicial decisions, like one study of decisions from the Northern District of Georgia, showing that summary judgment was granted for defendants on at least one issue in 95% of cases, in an effort to reveal to judges their own patterns. Judge Gertner herself is currently undertaking a larger study like that one. Finally, an enforcement scheme that doesn’t rely on the federal courts might be worth exploring.

Judge Gertner is not the only person with federal judicial experience writing about how the system is broken for employment discrimination cases. She is joined by Judge Mark W. Bennett, whose article Essay: From the “No Spittin’, No Cussin’ and No Summary Judgment” Days of Employment Discrimination Litigation to the “Defendant’s Summary Judgment Affirmed Without Comment” Days: One Judge’s Four-Decade Perspective agrees that these structural pressures are having an effect, and by Judge David F. Hamilton, whose Address to the Association of American Law Schools, Section on Employment Discrimination Law at the 2013 Annual Meeting, On McDonnell Douglas and Convincing Mosaics: Toward More Flexible Methods of Proof in Employment Discrimination Cases, 17 Emp. Rts. & Emp. Pol’y J. 195 (2013) agrees and offers the Seventh Circuit’s standard as an antidote. The work of all three should confirm for the rest of us that we are right to continue to be concerned about the way employment discrimination cases are treated by the judiciary and inspire us to work more effectively toward solutions.

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Internalizing The Costs Of Employment Law Violations http://worklaw.jotwell.com/internalizing-the-costs-of-employment-law-violations/ http://worklaw.jotwell.com/internalizing-the-costs-of-employment-law-violations/#comments Wed, 14 May 2014 10:30:59 +0000 http://worklaw.jotwell.com/?p=683 Michael C. Harper

David Weil’s new book on the fragmenting of internal labor markets in many American industries, The Fissured Workplace, should be read by all who wish to understand how the challenges to enforcing laws designed to protect American workers have become greater as the institutional structures and processes through which American businesses produce and deliver goods and services have continued to evolve. This book should be read not primarily because [...]]]> David Weil, The Fissured Workplace (Harvard University Press, 2014).

David Weil’s new book on the fragmenting of internal labor markets in many American industries, The Fissured Workplace, should be read by all who wish to understand how the challenges to enforcing laws designed to protect American workers have become greater as the institutional structures and processes through which American businesses produce and deliver goods and services have continued to evolve. This book should be read not primarily because President Obama last year nominated Weil, a Boston University School of Management Professor, to head the Wage and Hour Division of the Department of Labor or because the book includes several chapters stressing the importance of strategic public enforcement and the role of unions and other non-governmental worker advocacy groups in changing workplace culture. Rather, the primary value of the book is its rich description of the variant ways by which successful American businesses that sell branded goods and services have externalized the costs of employment law violations by delegating to other businesses the responsibility for providing and supervising the labor input for their branded products. This description supports the book’s most important recommendation, a recommendation that would require—beyond stronger enforcement of current laws—a re-internalization of the costs of employment law violations to those businesses that monitor and control the production of goods and services sold under their brands.

Weil describes three kinds of externalization: subcontracted workplaces, outsourced supply chains, and franchised retail operations. For each, he provides examples of lead businesses that use externalization to concentrate on their core competencies of branded product design, development, and marketing, as well as to escape certain costs, including labor costs, that would have to be incurred without externalization. Weil explains how externalization has been facilitated by technological developments that enable lead businesses to protect differentiated brands, and associated high profit margins, through close monitoring and coordination of the quality and timely production of branded goods and services. Modern computer-based technology provides this brand protection without some of the higher labor costs of non-union, as well as unionized, large internal labor markets. Furthermore, as long as the lead company delegates actual control over a subcontractor’s or franchisee’s workforce to the subcontractor or franchisee, it can escape at least some of the costs of compliance with employment laws like FLSA and OSHA, in addition to potential workers’ compensation liability. There is good reason to think that subcontractors and franchisors often cannot pass on employment law compliance costs to the dominant branding companies with which they are in business. While subcontractors’ and franchisors’ reduced concern with reputational costs and their tight profit margins encourage their non-compliance, their relatively small size and less permanent work forces make enforcement less likely. Further, lead companies with differentiated brands generally can transfer their business to competing contractors or other potential franchisees.

Franchising in the fast food industry provides a particularly revealing example for Weil’s central branding thesis. Franchising in the fast food industry—unlike some of the franchising in janitorial services that Weil also describes—cannot be dismissed easily as a misclassification under current law of employees as independent contractors or businesses. Furthermore, at least ostensibly, most fast food franchisors delegate to each of their franchisees control over the compensation, work time, working conditions, and supervision of the workers at the franchisee’s retail outlets. Yet, at the same time, in order to protect their brands, the fast food franchisors maintain strict control over the food and services delivered by the franchisees. Weil reports the consequences of franchising for employment law compliance with federal minimum wage and overtime laws in the fast food industry: “The probability of noncompliance is about 24% higher among franchise-owned outlets than among similar company-owned outlets.” (P.131). Weil tells a similar, albeit somewhat more complicated story, about franchising in the hotel industry, finding that hotels managed by a branding company generally having higher non-compliance rates.

Under current law, in order to hold a franchisor responsible for employment law violations as a joint employer of a worker at a franchisee’s outlet, there probably would have to be some demonstration of the franchisor having at least effective partial control of the worker’s compensation, hours, working conditions, or supervision. But Weil’s analysis begs the question of whether the law should require such control to be demonstrated. Why should a franchisor that uses technology to ensure the quality of the products marketed under its brand, not also be required to ensure the quality of the workplaces that sell its product? Why is it not more efficient, as well as equitable, to treat the costs of compliance with employment laws as part of the costs of marketing branded products? Franchise agreements, and other contracts delegating control of employees, of course may include indemnification clauses as part of the allocation of returns, but if only the branding company can pay, should the costs of violations not be internalized to provide proper incentives for compliance?

Weil is not a lawyer; he is sometimes not precise in his explanation of current law and does not explore possible legal problems with some of his analysis. Beyond approval of some liberal judicial rulings and an explanation of how involvement of a branding company with reputational concerns can ensure much more effective implementation of employment laws like the FLSA, the book does not explore what might be workable limits on joint employer liability. The reality of fissured employment Weil describes and the consequent legal problems he highlights, however, are ones that should be of concern to any policy maker interested in the effective enforcement of employment law in the modern economy.

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Employer Retaliation Policies and the Retaliation Catch-22 http://worklaw.jotwell.com/employer-retaliation-policies-and-the-retaliation-catch-22/ http://worklaw.jotwell.com/employer-retaliation-policies-and-the-retaliation-catch-22/#comments Tue, 15 Apr 2014 10:30:39 +0000 http://worklaw.jotwell.com/?p=675 Deborah L. Brake, Retaliation in an EEO World, 89 Ind. L.J. 115 (2014).

Alex B. Long

Whistleblowers and workplace retaliation victims continue to make headlines in the national media. From Edward Snowden to NFL players Chris Kluwe and Jonathan Martin, employees who speak out against what they perceive as employer or coworker wrongdoing often generate significant disagreement among the public. Professor Deborah L. Brake has done as much as anyone in legal scholarship to highlight some of the limitations of workplace retaliation [...]]]>

Deborah L. Brake, Retaliation in an EEO World, 89 Ind. L.J. 115 (2014).

Whistleblowers and workplace retaliation victims continue to make headlines in the national media. From Edward Snowden to NFL players Chris Kluwe and Jonathan Martin, employees who speak out against what they perceive as employer or coworker wrongdoing often generate significant disagreement among the public. Professor Deborah L. Brake has done as much as anyone in legal scholarship to highlight some of the limitations of workplace retaliation law. Her most recent article on the subject sheds light on a relatively unnoticed limitation.

One of the more frequent criticisms of the courts’ handling of retaliation claims is the standard to which retaliation plaintiffs are held. An individual who is retaliated against for opposing unlawful discrimination need not establish that the conduct opposed was actually illegal under federal law. Instead, the individual must simply establish that she reasonably believed that the conduct complained of was unlawful. If a reasonable employee would not have believed that the employer’s conduct was illegal, the employee’s conduct is unprotected under the law and the employer is free to retaliate against the employee for the employee’s opposition. As Brake notes, much of the criticism to date has focused on the fact that courts tend to hold retaliation plaintiffs not to the standard of a reasonable employee, but to that of a reasonable employee who has taken a law school course on employment discrimination, thus leaving many employees unprotected when they oppose what they believe to be discriminatory conduct.

But to Brake, this represents only half of the equation. Her new article focuses “on the interplay between retaliation doctrine and employers’ internal discrimination policies.” Brake examines how employers’ internal policies strongly encourage employees to file internal complaints of sexual harassment early on—before the harassment becomes more severe. Unfortunately, the policies often define sexual harassment more broadly than the term is defined under federal law. Brake notes that employer’s sexual harassment policies often incorporate the definition of sexual harassment used in a set of EEOC guidelines from 1980. Brake points out that this definition “encompasses a much broader category of conduct than what a court would necessarily find to be actionable.” The effect of these policies, then, is to encourage employees to complain about conduct that is not actually unlawful under federal antidiscrimination law. By complaining, the employees increase the odds of being retaliated against. Yet, because courts often hold retaliation plaintiffs to something stricter than a reasonable person standard, these employees are left unprotected from retaliation.

Intrigued, I decided to look at my own institution’s sexual harassment policy that is provided to student-employees. This is a document whose target audience is (as a general matter) young people with limited experience in the adult workplace. These student-employees likely know little about employment law and have little context in which to place their interactions with coworkers and supervisors. Therefore, the university’s internal EEO policy seems particularly likely to influence the decision of this particular kind of employee, who may be seeking to understand her rights and to plan her course of action when confronted with objectionable conduct. Therefore, I was interested to see what sort of guidance my institution provides its employees. And, lo and behold, the harassment policy contains the same overly broad 1980 standard Brake mentions. Thus, student-employees are given a somewhat skewed and employee-friendly view of what qualifies as sexual harassment. The policy then goes on to provide the following advice to student-employees who believe they may be victims of harassment: “[d]on’t delay” in reporting harassment because “if you delay action, the harassment is likely to continue.” But the policy is, in effect, encouraging unsophisticated employees to report behavior that a court may very well find no reasonable employee could have believed was actually unlawful while at the same time increasing the likelihood that the employer might retaliate against the employee for reporting in the first place. (For the record, I have no reason to think that my employer would do this. I’m talking about employers in the generic sense.)

Brake also discusses a related problem with the failure of employer EEO policies to track legal standards. EEO policies sometimes employ fairness- or civility-focused language, thus encouraging employees to report unfair or uncivil workplace behavior. But generalized complaints about unfairness or incivility in the workplace are insufficient to put employers on notice about potential violations of antidiscrimination law. The effect, as Brake notes, may be to “ensnare employees who use the terminology of human resources and EEO policies to express their complaints instead of the rights-claiming language of the underlying statutes” and who end up being retaliated against.

Too often, legal scholars focus on the flaws of prevailing judicial or agency approaches to discrimination and retaliation law without considering how employers communicate these approaches to their employees. Brake’s article looks at the side of the coin that most authors have ignored to the point. The result is an illustration of the Catch-22 that employees may find themselves in as a result of the interplay between judicial interpretations of statutory antiretaliation provisions and employer policies.

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Fundamentally at Odds: Is the Sex Industry Compatible with the Mandates of Title VII? http://worklaw.jotwell.com/fundamentally-at-odds-is-the-sex-industry-compatible-with-the-mandates-of-title-vii/ http://worklaw.jotwell.com/fundamentally-at-odds-is-the-sex-industry-compatible-with-the-mandates-of-title-vii/#comments Fri, 14 Mar 2014 10:30:56 +0000 http://worklaw.jotwell.com/?p=670 Lua Kamál Yuille, Sex in the Sexy Workplace, 9 Nw. J.L. & Soc. Pol'y 88 (2013).

Kerri Stone

With the continual evolution of anti-discrimination law and an endless array of new, unexplored wrinkles and nuances of the law seemingly unfurled with each new holding, it is more important than ever that scholars persist in identifying open issues and problems in the jurisprudence. One of the primary practical benefits of scholarship in the field of employment discrimination has been to expose the [...]]]>

Lua Kamál Yuille, Sex in the Sexy Workplace, 9 Nw. J.L. & Soc. Pol'y 88 (2013).

With the continual evolution of anti-discrimination law and an endless array of new, unexplored wrinkles and nuances of the law seemingly unfurled with each new holding, it is more important than ever that scholars persist in identifying open issues and problems in the jurisprudence. One of the primary practical benefits of scholarship in the field of employment discrimination has been to expose the gaps and cracks in the law’s coverage and regulation of the workplace, and the best scholars have made their contributions by surveying the landscape, contouring the fault lines, and proposing solutions. Sex in the Sexy Workplace by Professor Lua Kamál Yuille does just this.

Addressing itself to the issue of how to properly adjudicate the hostile work environment sexual harassment claim of a non-sexualized worker (like assistants, etc.) in a so-called “sexy workplace,” the article deftly raises the issue of how neither the law of sexual harassment, nor any of the critiques levied at that law, adequately responds to this unique situation in a way that vindicates the victim or recognizes the injustice of what has been allowed to occur. It then posits what Professor Kamál Yuille terms a “doctrinal fix that draws inspiration from the ‘bona fide occupational qualification’ and ‘business necessity defense’ exceptions to Title VII’s prohibition on workplace discrimination.” Finally, the article seizes upon the opportunity to point to this particular deficit in the law as being illustrative of a more rudimentary tension worthy of note in the law of sexual harassment: the so-called “sex industry,” Professor Kamál Yuille claims boldly, “is fundamentally incompatible with the principles of Title VII’s prohibition of gender discrimination.”

Noting that sexual harassment is an ”intractable and evasive problem,” the article uses as its premise the facts alleged in recent cases that highlight the plight of the non-sexualized worker in the sex industry. It goes on to ask whether, presuming that the law allows a “sexy workplace” to exist, and even to provide certain defenses to sex-based discrimination due to the inherently “sexy “ nature of the workplace, such a workplace can demand that all of its employees put up with sexualized treatment and behavior that would otherwise not be allowed at work. Analyzing this type of a workplace and the non-sexualized workers within it, against the backdrop of current Title VII law, the article concludes that non-sexualized employees of businesses whose “essence” is sexual titillation are subjected to the same lower standards of Title VII protection as those who opted to accept sexualized employment in the first place.

The article is tremendously useful, in that it then goes beyond that astute observation to posit a change in courts’ approach to hostile work environment claims in the form of a new model that draws upon extant defenses like the bona fide occupational qualification (BFOQ) exception and the business necessity defense (BND) to heighten the protection afforded. Further, it reflects upon the larger significance of the project of examining the sexy workplace, observing that there is a basic incompatibility between the very existence of sexy workplaces and the mandates of Title VII, and laying the foundation to truly question the existence of such workplaces. This is a very powerful observation.

The article’s discussion of unwelcomeness, in particular, is useful and enlightening. Noting that in its establishment of the cause of action of sexual harassment in 1986, the Supreme Court stressed that the claim’s “gravamen” or hallmark was unwelcomeness, the article highlights how hard it will be for a non-sexualized employee, to prove that sexualized or otherwise offensive banter or treatment is, in fact, unwelcome “even under a liberal approach to unwelcomeness.” This is because receptiveness to what would otherwise be harassment is imputed to these employees; they are readily seen as willingly participating in these exchanges because they opted for employment in a workplace with an “environment inherently pervaded by sexuality.” The article’s critique of both courts’ handling of the unwelcomeness prong of the analysis of cases, even those beyond the “sexy workplace,” and courts’ “inordinate focus on the type of language used by the claimant” is also tremendously valuable and insightful.

After raising and dismissing many responses to the problem she has identified, the author posits that “the BFOQ would become an exception for bona fide occupational requirements—the BFOR,” and that “the business necessity defense (BND) supplies another” model for examination, making up the so-called “BFOR/BND exception.” So not only does this article shed light on the plight of a uniquely-situated group of employees, but it moves beyond critiques to both ponder new approaches and to make a larger statement about both the state of Title VII jurisprudence and its gaping holes and about the existence of sexy workplaces and what they will invariably do to the perceptions of and protections afforded to all of the employees who work in them. There is much in this article that provokes and enriches thought and debate on the state of Title VII, sexual harassment, and certain accepted workplace terms and conditions.

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Who, What, Why, When and Where: How Well Does the National Media Report on Sexual Harassment? http://worklaw.jotwell.com/who-what-why-when-and-where-how-well-does-the-national-media-report-on-sexual-harassment/ http://worklaw.jotwell.com/who-what-why-when-and-where-how-well-does-the-national-media-report-on-sexual-harassment/#comments Wed, 12 Feb 2014 11:30:54 +0000 http://worklaw.jotwell.com/?p=666 Joni Hersch & Beverly I. Moran, He Said, She Said, Let’s Hear What the Data Say: Sexual Harassment in the Media, Courts, EEOC, and Social Science, 101 Ky. L.J. 753 (2013), available at SSRN.

Henry Chambers

In He Said, She Said, Let’s Hear What the Data Say: Sexual Harassment in the Media, Courts, EEOC, and Social Science, Joni Hersch & Beverly Moran explore whether coverage of sexual harassment in the New York Times and Wall Street Journal is consistent with sexual harassment [...]]]>

Joni Hersch & Beverly I. Moran, He Said, She Said, Let’s Hear What the Data Say: Sexual Harassment in the Media, Courts, EEOC, and Social Science, 101 Ky. L.J. 753 (2013), available at SSRN.

In He Said, She Said, Let’s Hear What the Data Say: Sexual Harassment in the Media, Courts, EEOC, and Social Science, Joni Hersch & Beverly Moran explore whether coverage of sexual harassment in the New York Times and Wall Street Journal is consistent with sexual harassment as it is reported in three other sources: a 1994 United States Merit Systems Protection Board (USMSPB) survey, charges filed with the Equal Employment Opportunity Commission (EEOC) from 2006-2010, and complaints filed in the Eastern District of Pennsylvania (EDPa) from 2010-2011. As the authors note, the article stemmed from curiosity regarding what national media outlets are reporting about sexual harassment and if that matches the reality of sexual harassment: “This article was inspired by a desire to learn if our national portrait of sexual harassment comports with what we know about harassment through social science.” (P. 775.) I like the article because it explores a practical issue that can help illuminate how one particularly important area of law is perceived and lived. How sexual harassment is perceived can help shape how sexual harassment law is enforced and how sexual harassment is lived in the workplace. Consequently, the article may be of interest to almost anyone who works with or cares about employment discrimination law.

The article can be summarized fairly quickly. The authors identify the key issue: whether major media outlets cover sexual harassment reasonably, fairly and accurately. After a brief discussion of the literature regarding sexual harassment in the workplace and the doctrine and history of sexual harassment, the authors compare sexual harassment coverage in the New York Times and Wall Street Journal with three data sets noted above: the USMSPB survey on sexual harassment, EEOC charge data, and sexual harassment complaints filed in the EDPa. The authors quickly analyze each data set noting the demographics of the sexual harassment claimants and what behavior tends to trigger harassment charges. The review of the media coverage suggests that sexual harassment is covered in an intensely local and episodic manner, with little recognition that sexual harassment is a national phenomenon that could be connected to “a larger, social, economic or political trend.” (P. 778.) In comparing the media coverage and the data sets, the authors found that while the reporting of the New York Times and Wall Street Journal generally does not mislead regarding the demographics of sexual harassment claimants, particular stories may downplay the seriousness of the factual allegations made in complaints. The article suggests that differences between the media portrayal of sexual harassment and what can be found in the data may result from the media’s focus on litigation. The authors note that a focus on pre-litigation harassment claims may provide a fuller picture of sexual harassment. The authors end the article observing that the focus on litigation leads to reporting that tends to miss “a sense of what happens before litigation and what sexual harassment means to victims in terms of their economic, professional, and emotional lives.” (P. 781.)

The article is not a comprehensive study of how major media portrays sexual harassment and whether that portrayal is consistent with how workplace sexual harassment is lived. It takes a narrow slice of the media and a narrow slice of sexual harassment claims and complaints and compares them. To be clear, this is not a criticism. Scholarship need not always be earth-shattering or make an all-encompassing point. Good and interesting scholarship can be fairly narrow and limited. A narrow exploration of a narrow slice of evidence that yields a few insights based on the limited exploration can be enough to move the enterprise forward. This article does that. As important, this article likely will encourage additional areas of study regarding the broad question of how the public is informed about sexual harassment, its prevalence and its resolution. Several more articles like this one could help us better understand whether the public’s vision of sexual harassment matches sexual harassment’s reality.

Those of us who have taught and written about sexual harassment realize that many laypeople and some lawyers have a tenuous grasp of what sexual harassment is and how prevalent it is. The information the public receives about sexual harassment is of critical importance because it can color the public’s vision of what the law is and can affect what the law becomes. Judges and juries will nearly always attempt to follow the law. However, judges and juries may analyze a sexual harassment case based on what they believe they know about sexual harassment. Factfinders must find facts based on the evidence presented, but how they do so may depend on their background impressions of sexual harassment. To the extent that more people will get their ideas about the law from the media than from studies of workplace sexual harassment, seeing what information the public is provided and how it appears to track what we know about sexual harassment is a fruitful task. The article is worthwhile.

The article is worth a read for those who have an interest in sexual harassment law. It is worth a read for those who are curious about how sexual harassment is portrayed in the New York Times and the Wall Street Journal. It is worth a read for those who might consider comparing the coverage that sexual harassment gets in other media outlets. Lastly, it is worth a read for those who have ever thought about how non-lawyers develop their ideas on sexual harassment. The article qualifies as a Thing I Like Lots.

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Inequality in the Workplace and Beyond http://worklaw.jotwell.com/inequality-in-the-workplace-and-beyond/ http://worklaw.jotwell.com/inequality-in-the-workplace-and-beyond/#comments Tue, 14 Jan 2014 11:30:56 +0000 http://worklaw.jotwell.com/?p=662 Michael J. Zimmer, Inequality, Individualized Risk, and Insecurity, 2013 Wis. L. Rev. 1 (2013).

Joseph Seiner

In his paper, which was presented as the Thomas E. Fairchild Lecture at the University of Wisconsin Law School, Professor Michael Zimmer does a superb job of explaining how employment has factored into the economic inequality that is so prevalent in our society. Professor Zimmer explains how the middle class is quickly disappearing from the workplace, and how economic mobility is quickly on the decline. [...]]]>

Michael J. Zimmer, Inequality, Individualized Risk, and Insecurity, 2013 Wis. L. Rev. 1 (2013).

In his paper, which was presented as the Thomas E. Fairchild Lecture at the University of Wisconsin Law School, Professor Michael Zimmer does a superb job of explaining how employment has factored into the economic inequality that is so prevalent in our society. Professor Zimmer explains how the middle class is quickly disappearing from the workplace, and how economic mobility is quickly on the decline. Most importantly, he charts a course toward rectifying the existing problems.

In the first part of this paper, Professor Zimmer examines how the current economic volatility has created numerous difficulties for everyday workers. In particular, he explores how the permanent-type relationships between employers and employees are going by the wayside, as businesses have moved toward an independent contractor model that allows them greater flexibility in managing their workforce. As the majority of U.S. workers are employees-at-will, most employees today have little security in their paychecks or in their health and retirement benefits. Professor Zimmer also does an excellent job of exploring how unionization has waned across the country. Thus, while workers still have the ability to organize and overcome employment-at-will, it is becoming far less common for them to do so.

Professor Zimmer explains how risks of all kinds in the workplace have been transferred from employers to employees. He notes that the courts have made it more difficult for individuals to avail themselves of statutory exceptions to employment-at-will. He explains that benefits have been slashed across the board by employers at the same time that health care costs are rising. And, he describes how it is becoming increasingly difficult for workers to have the guarantee of a secure retirement as a result of these shifts.

Professor Zimmer also does an outstanding job of explaining the cause of the current inequality and he examines ways that it can be addressed in the future. In perhaps the most illuminating part of the paper, Professor Zimmer clearly describes a path forward that can resolve the overwhelming problems that he identifies. He explains how and why there has been a notable decline in our sense of a “collective identity.” In its place, there has been an emphasis on individualism that is not realistic or practical. This is largely because the decision makers in our society—who will often be employers controlling the destiny of their workers—are making “choices that allow them to strive to maximize their own economic gain.” This maximization of wealth for the few comes at the expense of the common worker and the poor in our society. This shift has only been supported by the government, which has been concerned with “maximizing the interests of the richest segment of our society, the top tenth of one percent.”

In the final section of the paper, Professor Zimmer explains how we must revisit the role of money in politics if we are to resolve the current inequalities that exist. In particular, campaign finance is an issue that must be closely examined. The focus in our country must be moved away from maximizing the wealth of the few and toward policies that will benefit all workers. Thus, “[r]educing the role of money in politics is a necessary prerequisite to addressing the real problems most of the people in this country face.” Professor Zimmer is realistic about the difficulties involved in making this shift. As he notes, “the task ahead is daunting” given the “flow of virtually unlimited amounts of money into politics.” Nonetheless, creating less risk for employees, greater security, and less inequality is a goal worth fighting for. Professor Zimmer’s novel examination of this problem is well considered, well researched, and well argued. His thesis is a sense of inspiration, and should serve as a wake-up call for workers everywhere that a new path must be pursued. As he properly concludes, “[t]here should always be hope.”

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I’m Shocked, Shocked To Find that Politics Is Going on in Here http://worklaw.jotwell.com/im-shocked-shocked-to-find-that-politics-is-going-on-in-here/ http://worklaw.jotwell.com/im-shocked-shocked-to-find-that-politics-is-going-on-in-here/#comments Mon, 02 Dec 2013 11:30:45 +0000 http://worklaw.jotwell.com/?p=651 Charles J. Morris, How the National Labor Relations Act Was Stolen and How it Can Be Recovered: Taft-Hartey Revisionism and the National Labor Relations Board's Appointment Process, 33 Berkeley J. Emp. & Lab. L. 1 (2012), available at SSRN.

Anne Marie Lofaso

Charles J. Morris, Professor Emeritus at Southern Methodist University Dedman School of Law, is a giant in the field of labor law. After graduating from Columbia Law School in 1948, he practiced in Dallas, Texas, for just shy of [...]]]>

Charles J. Morris, How the National Labor Relations Act Was Stolen and How it Can Be Recovered: Taft-Hartey Revisionism and the National Labor Relations Board's Appointment Process, 33 Berkeley J. Emp. & Lab. L. 1 (2012), available at SSRN.

Charles J. Morris, Professor Emeritus at Southern Methodist University Dedman School of Law, is a giant in the field of labor law. After graduating from Columbia Law School in 1948, he practiced in Dallas, Texas, for just shy of 20 years before receiving an academic appointment at SMU, where he taught for about a quarter-century, from 1967 until his retirement in 1991. During his first year in teaching, Professor Morris began service as a labor arbitrator. In 1978 President Carter appointed Morris to serve on the Federal Services Impasse Panel (FSIP), a post he held until 1983. Despite his retirement, Morris has remained an active scholar. Indeed, Cornell University Press published his magnum opus, The Blue Eagle at Work: Reclaiming Democratic Rights in the American Workplace in 2005, a book that earned him a place on the Right-to-Work’s Ten Most Wanted list.

In other words, Professor Morris is an active 90-year-old with a plethora of institutional knowledge about the Act. He started law school when the National Labor Relations Act (NLRA) was the Wagner Act. He graduated from law school after the passage of Taft-Hartley. He practiced law for two decades before teaching labor law for another quarter-century. He has been involved in labor-dispute resolution as an arbitrator and as a member of the FSIP. His labor law scholarship spans five decades. He has lived through almost the entire history of modern labor law. So when he writes about the subject that puzzles all labor scholars—why is union density so low—those in his field should at least consider his thoughts.

Professor Morris’s main argument is two-fold. The question—what’s wrong with the NLRA—is the wrong question. The real question is what’s wrong with the National Labor Relations Board (NLRB). Morris contends that organized management and its political allies have been able to steal the NLRA by appointing political leaders to the Board who do not share Congress’s purpose in enacting the NLRA, but instead have engaged in a misleading and perhaps disingenuous campaign to revise those purposes.

The article is beautifully written in the style of mid-twentieth-century prose that sports the liberal-arts education of halcyon days. Professor Morris’s article uses the tale of the six blind men and an elephant to make the following point. Congress passed the NLRA to encourage collective bargaining as a means for sustaining industrial peace. Shortly after Taft-Hartley was passed, union-density began its gradual decline from over 30 percent to just over 6 percent of the private-sector workforce today. This phenomenon has baffled academics and labor advocates who have identified several problems with the NLRA to explain this phenomenon. But like the blind men describing only that part of the elephant that they are touching, these thinkers describe only part of the story. If they were able to see the big picture they would understand the main problem. Presidential appointees since President Eisenhower have been increasingly politicized. Those who have been coopted by business interests have successfully messaged to the public that the NLRA serves the purpose of protecting the individual’s right to refrain from union activity, as opposed to protecting the collective right to engage in concerted activity.

Although long—it comes in at 72 law review pages—Professor Morris does an excellent job of succinctly explaining the main problems with the NLRA, as identified by labor scholars. Among them are the usual suspects: lengthy delays in representative and unfair labor practice (ULP) proceedings, ineffective remedies, lack of card check, unclear rules, absence of rules that encourage compliance, and “the absence of limitations on employers’ unqualified right to permanently replace economic strikers.” To these six reasons, Morris adds “widespread [lawful and unlawful] employer opposition to unions . . . ; decreases in rust-belt manufacturing combined with increases in the exportation of jobs to low-wage countries abroad; major changes in the patterns of employment;” and decreasing interest in unionization reveal part of the story of increasingly lower union-density rates. Unsatisfied with this story, Morris turns to what he views as the main reason for the decline in union-density rates—“the Act has not been fully enforced because Board majorities have not been consistently motivated to enforce the Act’s declared policy.”

Much of the meat of Professor Morris’s argument debunks the revisionist message. His argument is as follows. Neither the Taft-Hartley nor the Landrum-Griffin amendments disturbed the Wagner Act’s core provisions. Instead, “these [amendments] were primarily limitations on the exercise of economic power [of] unions [during] the collective-bargaining process.” Morris argues that the Act’s elegant and streamlined language coupled with flexible procedural mechanisms gave the Board “ample authority to enforce the core provisions of the Act and obtain positive results consistent with its policy.” Board appointees with political agendas, however, seized upon the right-to-refrain language added to Section 7 to revise the Act’s purposes from primarily protecting employees’ rights to engage in collective action to protecting the individual’s right to choose whether or not to engage in collective action.

Much of the rest of his article reads as a treasure-filled treatise for the labor scholar interested in the NLRA’s jurisprudential and historical development. For example, Professor Morris uses historical context to support his argument that the Taft-Hartley and Landrum-Griffin amendments were passed to show that those amendments were primarily union-regulatory acts. In particular, “following World War II there was considerable popular criticism of union power and a widely held belief that the NLRB had become one-sided and even influenced by Communists within the agency.” Morris concludes: “while exhibiting a preference for management, Taft-Hartley was not intended to equate individual bargaining with collective bargaining or to lessen the positive right of employees to engage in union and other collective activity or to elevate the negative right to refrain from such activity.”

Professor Morris ends with the following summary:

[The NLRA was] stolen through a synthesis of a long-standing policy of revisionism – which was largely unrecognized – and repetitive appointments of a critical number of Board members and General Counsels who were not committed to the Act’s basic policy of encouraging union organizing and collective bargaining. Consequently, the NLRB degenerated into a broken agency that for the most part failed to accomplish its fundamental purpose of facilitating the creation of democratic workplaces where employees, through their unions, could deal with management as joint partners in a civilized interactive process that seeks to create and maintain mutually satisfactory conditions of employment.

While he devotes only 5 of 72 pages to policy suggestions, the article’s main function is not to preach policy but to prove that politics has distracted from the agency’s mission. In any event, his main solution – members-only bargaining – is laid out in his book, The Blue Eagle at Work. Whether one agrees or disagrees with Professor Morris’s critique of (or solutions for) labor, this is legal scholarship at its best. Clear writing designed to establish a dialogue with practitioners and policy makers to improve the law. SMU should be proud to have such a productive member of its emeritus faculty.

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Losing the Battle, Winning the War? http://worklaw.jotwell.com/losing-the-battle-winning-the-war/ http://worklaw.jotwell.com/losing-the-battle-winning-the-war/#comments Wed, 30 Oct 2013 11:00:10 +0000 http://worklaw.jotwell.com/?p=624 Catherine Fisk & Adam Barry, Contingent Loyalty and Restrictive Exit: Commentary on the Restatement of Employment Law, 16 Empl. Rts. & Employ. Pol'y J. 413 (2012), available at SSRN.

Charles A. Sullivan

As the Restatement of Employment Law (REL) wends its way towards final approval, most likely next May, the debates about it—both within and without the American Law Institute (ALI)—may seem like yesterday’s news. But the promulgation of a new Restatement, unlike the passage of a statute, is not the [...]]]>

Catherine Fisk & Adam Barry, Contingent Loyalty and Restrictive Exit: Commentary on the Restatement of Employment Law, 16 Empl. Rts. & Employ. Pol'y J. 413 (2012), available at SSRN.

As the Restatement of Employment Law (REL) wends its way towards final approval, most likely next May, the debates about it—both within and without the American Law Institute (ALI)—may seem like yesterday’s news. But the promulgation of a new Restatement, unlike the passage of a statute, is not the last word on a legal subject but rather the beginning of a struggle for court imprimatur. In this regard, the scholarship that analyzes REL as it grinds through the laborious ALI mill may prove to have greater influence in judicial venues than it does before the Institute. At least in the case of Contingent Loyalty and Restrictive Exit: Commentary on the Restatement of Employment Law by Catherine Fisk and Adam Barry, that’s a good thing.

At the 30,000 foot level, the authors view the REL as having “two inconsistent visions about the employment relationship and about employee mobility.” Chapter 2, dealing with termination of employment, “envisions employment as a commodity market in which employers and employees contract for the sale of labor and expertise and are free to terminate the relationship when they deem it in their interest to pursue more lucrative opportunities with other contracting partners.” In contrast, Chapter 8, governing employee obligations, “shackles employees with continuing obligations at and after the termination of employment.” Fisk & Barry summarize:

[These obligations] are quite asymmetrical. The employer owes no duty of loyalty to the employee and is free to pursue its self-interest by firing him to hire another for a lower wage or for better skills. Yet the employee’s ability to pursue her own self-interest by seeking better opportunities is limited. The employer can cast him or her onto the labor market whenever it is in the employer’s interest to do so, yet the employee is burdened with an expansive duty of loyalty [while employed] and can be contractually burdened with a non-compete agreement, making it hard for the employee to find alternate employment when he or she is back in the labor market.

While the article’s discussion of noncompetes is well worth reading in its own right, the Restatement is poised to break new ground in imposing a “duty of loyalty” on all employees, and here the article should trigger “not so fast” thoughts when the REL is cited to the courts.

A little background. While the duty of loyalty certainly did not originate with the Restatement, its common law reach and parameters are far from clear. Which employees have such a duty, and what that duty comprises varies radically from jurisdiction to jurisdiction and often from court to court. For example, all agree that employees cannot steal from their employers, but this is more often treated as simple conversion than disloyalty, and it’s not clear that the REL’s folding of “don’t steal” in with other commandments adds anything. Perhaps more critically, higher level employees often have “fiduciary” duties, which might be what is meant by a duty of loyalty1, but, if so, the REL expands this set of obligations to all employees, an expansion that the two authors think makes little sense. A separate question is the scope of the duty not to compete with one’s employer while still employed, which the REL also treats as a loyalty question, albeit one with more nuance than the “duty” framing might suggest.

Contingent Loyalty argues that the REL uses “loyalty” as a one-size-fits-all category that ignores historical origins and may eclipse important distinctions. While the final version of the Restatement might avoid some of the difficulties (for example, Chapter 8 acknowledges, somewhat vaguely, a higher level duty for higher level employees2, and the final Remedies chapter may further clarify the question), the current version is problematic.

For instance, Fisk & Barry write that the confusion in the courts as to competition by current employees might well justify a restatement, but conclude that “even in this core area, the duty of loyalty has no content apart from other laws—trade secrets, the corporate opportunity doctrine, and tort claims for interference with contract—that define the circumstances in which employee competition with a current employer is wrongful.” Further, “unifying” these disparate theories under the loyalty umbrella risks obscuring the requirements of each regime and inappropriately restricting employee endeavors:  “In a capitalist economy committed to free markets, employee competition that is not a misappropriation of trade secrets, a violation of the corporate opportunity doctrine, or interference with contract or with prospective business advantage should not be illegal.”

Focusing on a question where the REL could have made a real contribution—what activity during employment constitutes impermissible competition—Contingent Loyalty notes that neither the blackletter nor the comments shed much light on the dividing line. In fairness to the Reporters, the case law is similarly incoherent, but a Restatement should improve things, and the authors stress the failure of section 8.04(b) to clarify the distinction, with important consequences for potential entrepreneurs:

The comment vaguely says that permissible preparation “may . . . include announcing the employee’s impending departure” and that “employees can jointly agree to seek new employment or business opportunities,” but condemns efforts to “recruit other employees,” at least where the departures leave “the employer . . . crippled or materially damaged.” From this it appears that tort liability may turn on how effusive an employee was in explaining to coworkers the new job she proposes to take and the reasons she proposes to take it, or on whether the employee or the coworker was the first to suggest that the coworker might like to go too, or how it is that employees came to “jointly agree to seek new employment.”

My own critique of the REL in this regard was that it seemed to bar recruiting other employees to leave with you, but created what I call the BFF principle: you can take your best friends—so long as it doesn’t cripple the company.3 While this opens the door somewhat to employee competition, the concept is ultimately incapable of principled application, especially at the front end when an employee is considering going out on his own—with or without colleagues.

Especially where the law is incoherent, the ALI has the opportunity to bring to bear considerations beyond case-counting.  In this vein, the authors argue that focusing on damage to the employer’s business by several employees jumping ship together “is simply wrongheaded” since, in a market-based economy, tort liability should not protect businesses that fail to recruit and retain talent. Indeed, this seems just the other side of the at-will coin: the employer has failed to either sufficiently compensate employees or enter into long term contracts with key workers, and should not be bailed out by the law. The authors make similar arguments about the REL’s blessing of covenants not to compete.

There is much more in Contingent Loyalty worth reading, and, as I suggested, the REL’s final version may take into account some of its concerns. But the more interesting possibility is that, as the Restatement is trotted out, the policy debates that have played out in the law journals and on the floor of the Institute will be revisited in courtrooms across the country, and perhaps even in state legislatures.  In those venues, Fisk & Barry deserve a fair hearing.



  1. §9.09, cmt. A of Tentative Draft No. 6 describes the duty of loyalty as “a prime example of employee’s fiduciary duty owed to an employer.”
  2. §8.08, cmt. A of  Tentative Draft No. 4 says “the obligations of [the duty of loyalty] vary according to the employer’s legitimate interest and the nature of the employee’s position, including whether the employee exercises managerial responsibilities . . . .”  In tension with §9.09, it goes on to say that “[s]ome courts refer to a “fiduciary” duty of loyalty when dealing with managerial employees . . . but not when dealing with nonmanagerial employees.”
  3. §8.04 cmt. D bars “actively recruiting” co-workers, but not informing them of plans to compete. “In addition, a group of employees may agree among themselves to start or join a competing business” as long as so many are urged to depart that the employer’s business is “immediately crippled.” Ill. 5 identifies a group of “social friends since graduating from the same school.”
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What Happened to the “Standard Employment Contract” and What Are Some Countries Doing About It? http://worklaw.jotwell.com/what-happened-to-the-standard-employment-contract-and-what-are-some-countries-doing-about-it/ http://worklaw.jotwell.com/what-happened-to-the-standard-employment-contract-and-what-are-some-countries-doing-about-it/#comments Tue, 01 Oct 2013 11:00:57 +0000 http://worklaw.jotwell.com/?p=615 Rethinking Workplace Regulation: Beyond the Standard Contract of Employment (Katherine V.W. Stone & Harry Arthurs eds., 2013).

Michael J. Zimmer

This book is the result of a project funded by the Russell Sage Foundation that brought all of the contributors together in September 2010 in the outstanding setting of Bellagio, Italy. The contributors were an all-star group of 22 academics and practitioners from around the world. Ten are from law, five from industrial relations, and the rest from various social sciences and [...]]]>

Rethinking Workplace Regulation: Beyond the Standard Contract of Employment (Katherine V.W. Stone & Harry Arthurs eds., 2013).

This book is the result of a project funded by the Russell Sage Foundation that brought all of the contributors together in September 2010 in the outstanding setting of Bellagio, Italy. The contributors were an all-star group of 22 academics and practitioners from around the world. Ten are from law, five from industrial relations, and the rest from various social sciences and business. Despite the idyllic setting for their work, the result of their collaboration is a collection of papers that work very well together to focus on significant development in the world of work, the rise and fall of what they call the “standard employment contract” (SEC). After the end of World War II and until sometime in the 1990s, a large percentage of workers in most of the developed countries had SECs. They had an array of job rights including “decent wages, protections against unfair treatment at work, social insurance provided by the state or the employer and, notably, some degree of job security.” While not all workers had them, SECs “became one of the pillars of the postwar economic system.” The system was the basis of the creation of a substantial middle class made up of workers, mostly male, in large manufacturing enterprises.

What is also made clear is that, while SECs had been the norm, the factors that produced them were substantially different among these different countries. Some SEC systems were driven by legislative mandate, while others, like those in the United States, were the result of labor markets internal to individual enterprises where the mutual expectation of long term employment created an incentive for both the employer and its workers to invest in firm specific skills. While perhaps procrustean, the developed Organisation for Economic Co-operation and Developement (OECD) countries are based on three broad economic traditions— “liberal” market oriented societies like the United States and the United Kingdom; “corporatist” countries in continental Europe like France and Germany, in which the government sits at the bargaining table with labor and management; and “Nordic” social-market economies like Sweden and Denmark that have universal and extensive social benefits with significant wealth redistribution through taxation.

The SEC system, however, has “eroded dramatically over the last two or three decades.” It is being replaced by nonstandard employment “characterized by low pay, modest fringe benefits, little or no job security, limited training, few opportunities for career development and advancement, and little if any protection through unions or labor laws and regulations.” What, if anything, is being done about the resulting increase in insecurity and economic inequality is the focus of the book. “We believe that it is necessary to seek and possibly to find new ways to achieve the array of positive social and economic outcomes previously associated with the standard employment contract.”

The driving force for the erosion of the SEC norm is “[g]lobalization, technology, and new management strategies.” Instead of SECs being the norm, “increasing numbers of workers in advanced economies experience flexible, nonstandard, contingent, or precarious employment relations.” Globalization has resulted in expanded political power of enterprise because the “state has lost regulatory capacity, trade unions have lost influence, [so] private market actors have gained leverage over workers and the rules of the system.”

An extensive Appendix demonstrates beyond peradventure this shift to employment insecurity. An interesting feature of the Appendix, which reviews changes in employment in OECD countries, is that it demonstrates that there is not a single term that captures what this post-SEC employment relation looks like or how to define the employment relationship that has come to predominate. The reason no common term has emerged is that the context in which insecure employment relations develop is specific to the economies, cultures and laws of each country, even neighboring countries. If there ever was the need to convince anyone that labor and employment law is the paradigm of domestic law, the Appendix would be a good place to look. One further conclusion that I draw is that the development of more broadly applicable definitions may be a necessary threshold to addressing a comprehensive and presumably more effective response to the decline of the SEC.

While it is barely mentioned in this era of the dominance of austerity hawks, the best protection of workers in the formal labor market as well as those outside it is to have full employment economies. That is Plan A but it is not developed in the book.

Assuming Plan A is not politically possible in this era where business interests have so much economic and therefore political power, the book describes a number of possible Plan Bs that are already operating in some developed countries. In this era of gridlock politics, this book is a fresh reminder that it is possible for societies to address and hopefully redress serious economic and social problems.

Particularly in Europe, the term “flexicurity” has been thrown around as what Plan B should be. The flexible part of flexicurity is to allow employers to have more or less complete discretion to make employment decisions without regard to the job security of their workers. The security part is to provide workers with permanence in the labor market, even if there is no job security for individual workers with a particular enterprise, as well as providing strong social benefits and useful ongoing vocational training that are available during periods of unemployment. The Dutch and Danish “miracles” are examples of flexicurity at work. The Netherlands has very low unemployment vis-à-vis other OECD countries. It has decentralized collective bargaining down to the local level and has laws that encourage part-time, fixed-term and other non-standard work. About half of all workers hold non-standard jobs, but only 5% to 10% of them describe their situation as involuntary. Most non-standard workers may be satisfied with that status because the law requires equality with SEC workers as to wage rates and benefits.

The Danish version of flexicurity provides no job security by statute or contract. It has the highest percentage of workers in the EU who change jobs. And it has a high labor participation rate and low unemployment. Social benefits, however, are very generous, with workers entitled to unemployment benefits for two years at 90% of their prior income. After unemployment insurance runs out, social welfare benefits that are means-tested kick in with no time limit. The state has very active labor market policies but they impose strict availability criteria. Lifelong continuing vocational training is provided with the highest participation rate in the developed world. All of this is expensive, the highest among OECD countries, with 2.56% of Danish GDP spent on labor market protections. Enterprise gets at-will employment but at the cost of high taxes.

To give a taste of some of the other Plan Bs, Canada has government-funded “sector councils” made up of employers and representatives of workers who work together to expand employment and improve the lives of workers. Italy has some tripartite territorial pacts for some different geographic regions where representatives of the public, employers, and workers are tasked with undertaking numerous development projects with the interwoven goals of economic development and improved employment. Addressing a different problem, several Australian states impose legal liability on Australian enterprises that use supply chains for the labor rights of all workers in the chain, including those at the bottom. The union movements in several countries are trying to cope with the decline of union density and collective bargaining coverage. Japanese enterprise unions have started to recruit non-standard workers of their enterprises. New, community-based unions are being organized in Japan to bring union representation to the workers of smaller employers that have not previously had union representation. German unions are responding to the push by employers for local “derogation” provisions in sector wide collective bargaining by engaging the workers at the local workplaces in local bargaining to try to expand union membership.

The globalized economy of goods, services and investment has resulted in a global labor market. Several authors suggest that labor and employment laws and policies should follow the economy and reach across national borders. For example, it is suggested that the liability of all enterprises that operate supply chains for the workers at the bottom could be expanded transnationally. Only in the final chapter, however, is there a broader claim, not for specific transnational labor and employment law, but as a justification for the kind of cross-national scholarship that the book so ably presents. It is claimed that cross-national learning is valuable “to lay the intellectual foundations of a system of labor market regulation that might one day extend across national borders.” While that is true, it is also true that the increasingly globalized economy has weakened the division of economies on a national basis. The attempts of any one nation to address labor and employment issues, such as the erosion of the SEC, through national laws are very much limited by the impact of a globalized economy and labor market. Nations attempting to protect their workers face “race to the bottom” problems because of the very difficult collective action problem all nations face. Without directly saying so, Rethinking Workplace Regulation demonstrates that it is time to begin to shift the paradigm of labor and employment law as national law to a new transnational approach.

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