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"Fair Employment Opportunity Act of 2011"

One of the great barriers to economic recovery is the spectre of employment litigation. Congress has repeatedly expanded the ability of employees to sue employers over employment decisions. This is not good for employees as a group. Why? Imagine if Congress legislated that employers have to give employees a $500 Starbucks gift certificate every year. Would that make employees better off? Of course not: the employers would simply reduce wages by the expense of giving out the gift certificate. The same is true when Congress creates additional rights to sue employers. If every employee is a potential lawsuit, employers will reduce wages (and reduce hiring) to account for those additional costs. And, of course, those costs aren't just the damages awarded to employees: it's the cost of attorneys' fees for both plaintiffs and defendants, and it's the costs of gigantic human resources bureaucracies to ensure compliance with increasingly burdensome employment laws. While a tiny fraction of employees win jackpot awards, the net result is a wealth transfer from productive employees to lawyers and human resources departments, and increased unemployment.

So, of course, in the face of this, two Democratic legislators have the brilliant idea of making it even easier to sue employers by creating a new cause of action: HR 2501, making it illegal to discriminate against the currently unemployed. A National Law Journal op-ed praising the legislation doesn't even consider the unworkability of it. Is it a litigable prima facie case of discrimination when an employer hires a lateral? Are there grounds for disparate impact litigation when an employer asks for a certain number of years of experience? If this passes, an unemployed person can make more money applying for jobs and repeatedly suing and agreeing to nuisance settlements than actually finding work. The natural consequence will be fewer advertisements for new employees, and more unemployment. Except for lawyers.

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Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.