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By Walter Olson
Adapted and updated from The Excuse Factory, Free Press, 1997

Over the past 45 years, legislators, regulators, and courts have invented and imposed on the American workplace a vast and ambitious new body of law ranging from harassment and handicap-accommodation law to age discrimination law to family leave to new common-law doctrines making employers liable for "wrongful termination," "workplace defamation," and much more. Practicing lawyers refer to this new field as employment law, and distinguish it from the earlier labor law associated with the New Deal. It is mostly advanced not by unions—nor in fact by collective worker sentiment or action of any sort—but by lawyers' threats to sue for large damages on behalf of some (often just one) worker. It aspires to regulate not just hiring, firing, and wage-setting, but the whole range of working conditions, very much including psychological intangibles of the sort summed up in a famous phrase from harassment law, "hostile work environment."

The law turns a great many commonplace work situations into potential lawsuits. Not only is every firing a potential source of legal trouble; so is every failure to hire or promote, as well as an endless array of problematic working conditions, pay disparities, and criticisms or other remarks that might have given pain. Pretty much all employee selection and evaluation methods, very much including the subjective and word-of-mouth methods most in use, are legally suspect for one or another reason, often because they show "disparate impact" against some protected group. Asking ambitious employees to work overtime, or guessing wrong about what an adverse lawyer or court will consider to be "on-the-job" time, has cost many employers huge sums following retroactive wage-and-hour class action suits.

Employers cannot knowingly and fully comply with the new employment law the way a wage earner can be sure he has filed his income taxes by April 15. The new law is voluminous; much of it is vague, so that employers cannot tell exactly what is asked of them but must find out after the fact when courts or regulators rule; it changes constantly and often retroactively; and its dictates are often what lawyers diplomatically call "in tension" with each other. No degree of good faith can keep employers from being taken to court and sometimes losing. Nor can they be sure of victory by sinking any fortune into compliance efforts—which does not keep them from trying.

Some employers react by documenting personnel decisions obsessively, while others put as little on paper as they can get away with. Many hire squadrons of personnel and compliance specialists and in-house lawyers, often yanking authority from front-line managers and professionals in the process. Some adopt clever subterfuge, others resolve to live dangerously and hope they don't get sued, and yet others cultivate ultra-progressive reputations for overcompliance which they hope will count in their favor if they are ever put in the dock. One consistent feature of the new law is its propensity to usher in personnel practices no one would have thought of adopting for any other reason, such as the stylized "window buyout" in which a large group of employees are offered a short period, such as 30 or 60 days, to decide whether to accept a bribe in exchange for leaving without suing.

In the past decade, having taken a look into the abyss of universal and unending workplace litigation, a number of influential courts have stepped back and signaled a retrenchment. The U.S. Supreme Court in a series of high-profile rulings narrowed the previously ultra-broad application to the workplace of the Americans with Disabilities Act. Courts in California, Michigan and elsewhere have pulled back from wide-open theories of common-law wrongful termination.

And yet the plaintiff's bar, ever resourceful and inventive, has at the same time been opening up extremely lucrative new fields of employment litigation. Employment class actions, which fell largely into disuse after a heyday in the 1970s, were revived to great effect and resulted in high-profile settlements on behalf of minority and female employees at many large corporations. Wage-and-hour suits, a previously obscure holdover from 1930s labor law, have been rolled out as big legal business (with help from the class action format) and may succeed in redistributing billions of dollars in the years ahead, not infrequently in situations where employers had been lulled by a lack of employee complaints into thinking there was no legal problem with their pay policies. And lawyers are finding ways to rework and work around ERISA, the federal pension statute, so as to turn discontents over pension fund management into potentially huge claims.




Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.