The Legal Assualt on Competence and Honesty; D. Henderson

THEFREEMAN IDEAS ON LIBERTY The LegalAssaulton Competenceand Honesty by David R. Henderson I n October 1993, when Northwest Airlines announced that it had agreed to rehire pilot Norman Prouse as a ground trainer, a com pany spokesman acknowledged that "some Northwest employees might be bitter." The reason: three years earlier, Mr. Prouse, after an all-night drinking bingewith the two mem bers of his flyingcrew, had flown a plane from Fargo to Minneapolis early the next morning. Whereas FAA rules prohibited flight crew members from operating planes if they had a blood-alcohol level higher than .04 percent and Minnesota law defined drunk driving at .10 percent, Prouse's level, measured three hours after the plane had taken off, measured a whopping .13 percent. The three drinking buddies were thrown in prison, and, after emerging, Prouse entered a rehabilitation program. But the Americans with Disabilities Act (ADA), which President Bush had signed in 1990, protected alcoholics who entered rehab, and Northwest, which could have tried to cover itself under an exception, instead claimed virtue for rehiring an employee who had broken its rules and lied about it. By July 1995, Northwest confirmed that Mr. Prouse was again flying.

In the early 1990s, a UCLA heart surgeon spread hepatitis B to 18 patients: apparently the virus passed through the holes in his gloves. "The hospital's decision to allow the David R. Henderson is a research fellow with the Hoover Institution and an economics professor at the Naval Postgraduate School in Monterey, California. surgeon to keep on operating even· after he was found to be infected," said a hospital spokesperson, was "in compliance with fed eral regulations." The particular federal law the spokesperson was referring to was, once again, the ADA. Laurence Gostin, a promi nent advocate of the ADA, wrote, "Seen through the lens of the ADA, public health regulation may be regarded as discrimination against people with disabilities." The ADA also protected a manic-depressive against an employer who did not want to hire him as a crane operator. Under Michigan's "discrimi nation law," a jury, citing narcolepsy as a protected category, awarded $610,000 to-a surgeon!

These are a few of the many stories that Walter Olson tells in his newbook, The Excuse Factory: How Employment Law Is Paralyzing the American Workplace (Free Press, 378 pages, $25.00). If it were just a .series of well-documented horror stories about how employment law makes it hard for employers to fire incompetent and dangerous employ ees, Olson's book would be well worth the price. In that respect alone, The Excuse Fac tory is better than Philip Howard's excellent book, The Death of Common Sense. Indeed, with his exquisite mixture of anger and hu mor, Olson, a fellow at the Manhattan Insti tute, writes like a modern Voltaire. But The Excuse Factory is more than just a collection of stories. Olson explains why they happened. He writes of the key articles in 629 630 THE FREEMAN • OCTOBER 1997 various law reviews, the key court decisions, the important legislation, and the important players. He then connects the dots, showing how all those factors came together to create a nightmare of contradictory regulations that would humble Kafka. And he does so with the style and· drama of a detective novel.

Ever since slavery ended in the United States, the law governing employment in America had been the so-called "at will" doctrine, which treated employers and em ployees equally. Just as employees were free to quit without cause, employers were free to fire without cause. But in 1967 Lawrence Blades, a professor at the University of Kan sas, argued in a law review article that being fired had harsh consequences for employees. The "ever-increasing concentration of eco nomic power in the hands of fewer employ ers," wrote Blades, meant that employees would "become even more easily oppressed." Blades's prediction of fewer employers, Olson notes, was "a singularly bad bit of market forecasting." To right the alleged wrongs, Blades advocated letting employees sue em ployers who fired without "good cause." Doz ens of other law review authors piled on, and, by the 1980s, few law professors could be found who would defend employment at will.

Later, Harvard law professor Alan Dershow itz asserted, "Suing is good for America." By Dershowitz's criterion, America pros pered. In 1980, the Michigan Supreme Court concluded that a statement in a Michigan Blue Cross employee handbook that employ ees would be released "for just cause only," was a binding contract. Previous courts had never read such statements that way. "Wield ing novel legal arguments like a miracle Ginsu knife," writes Olson, "the court in short order reduced the half-dozen old contract doctrines to cole slaw." The court went further. Jurors didn't have to worry, the judges said, about whether an employer had acted in good faith, but instead could substitute their own judg ment. In another ruling handed down the same day, the Michigan court said that verbal statements of praise, even those made by a long-departed supervisor, could be treated as an oral contract. By 1990,writes Olson, courts in at least 38 states and federal appeals courts in at least 19 cases cited the Michigan Blue Cross decision approvingly. Employment at will was gone.

Also gone was the legal recognition of employers' right to refuse to hire, even if their grounds for refusal were reasonable. Courts ruled against a company that refused to hire a crane operator who had been convicted of first-degree murder, because the offense had not been recent and was not closelyrelated to the job. Admitting that a convicted forger's offensewas relevant to a job at a photographic studio, a court said the sixyears-old offense was not recent enough. Another court found against a company that was reluctant to hire a convicted shoplifter as a dock worker. Its reason: the items he stole weren't very valu able! Courts even have decided that if an employer asks an "improper" question at a job interview-about, for example, such irrel evant details as whether the applicant has a criminal record, a history of mental illness, or a problem with alcohol-the employee has a "right to lie."

But one law the courts couldn't control was the law of unintended consequences. There are many. One is the virtual elimination of job references. Standard policy at most compa nies today is to admit that, yes, the former employee who asked for a reference did work here, in this position, between these dates, period. The reason: an employer who says that the employee was fired or was incompe tent or assaulted his fellow workers could be sued for defamation, malice, or "conscious indifference." Some courts even order em ployers to provide favorable references to workers who have sued them. This is far more intrusive than simple censorship: it is an outright invasion of the employers' minds. Another consequence of the laws is that employers end up with less competent em ployees. Because tests of physical strength have "adverse impact" on women, for exam ple, virtually every large U.S. city government has been sued over the physical tests they use to hire police and firefighters. The San Fran cisco fire department, which had formerly asked recruits to lift a ISO-pound sack up a flight of stairs, now lets them drag a 40-pound sack-across a smooth floor. Although easing THE LEGAL ASSAULT ON COMPETENCE AND HONESTY 631 standards has not substantially increased the number of women hired-Olson estimates that only about one percent of firefighters nationwide are women-an unintended con sequence is increased hiring of weak men.

Ever wonder why companies often an nounce generally available severance pack ages to large numbers of employees rather than pruning out the ones they want to get rid of? Olson shows how this now-common prac tice is a way around the age-discrimination law and other employment laws. Employers cannot be legallysafe by firingjust employees beyond a certain age, nor can they be legally safe by firing just the incompetent or less competent employees. A further unintended consequence of the lawsis to make career and retirement planning difficult for employees. Now, if employees quit without being offered a severance package, they might miss out on one offered the next month. One of the most ominous consequences of the changes in employment law is the stifling of free speech. In 1992a federal court ordered that workers in a government office be pre vented from making remarks contrary to the religious beliefs of their fellow employees.

But making remarks contrary to other peo ple's religious beliefs is precisely one of the kinds of speech that the founding fathers meant to protect with the First Amendment. The First Amendment says there shall be "no law . .. abridging the freedom of speech"? What part of "no law" don't those judges get? When you read Olson's book, you see how superficial is the current conservative push for ending quotas in hiring. "If official encour agement for preferences were withdrawn to morrow," he writes, "the great bulk of litiga tion would continue, and so would most of the managerial headaches." You also see how callous,hypocritical, and possiblyoutright evil some of the advocates of the new employment law are. Take, for example, the many con gressmen who voted to eliminate mandatory retirement for almost all employers, but to keep automatic retirement at age 55 for firefighters and police who guard federal in stallations. The congressmen presumably un derstood that alertness and strength decline with age, but cared only when it affected the places they worked. Or take Warren Rud man's claim,when he was a U.S. Senator from New Hampshire, that the Senate's rights in dealing with their employees should be "ab solute" because otherwise the Senate would be subject "to the whims of a U.S. district court judge" who "would have the power to overrule the considered judgment of 100 members of this body." Why didn't Rudman use the same arguments to defend the rights of other employers? Finally, take Ira Glasser, then executive director of the American Civil Liberties Union, which has been in the fore front of the battle to prevent employers from firing employees. When he had a disagree ment with an employee, he ordered, "Please leave the building and take only personal possessions with you."

Olson notes that when association is com pelled, as the lawnow does, what suffersmost, ironically, is diversity. "A nation that truly cared about diversity would allow the flour ishing of both bawdycalendars at some work places and Bible readings at others," he writes. Fortunately, Olson offers a solution: freedom of association. With employers and employees free to deal with each other-or not-employees can choose employerswhose desires and characteristics fit their own, and so can employers. Olson writes: "[L]iberty the simple policyof refusing to force others to deal with us against their will and without their consent-turns out to be the best method to elicit the greatest willingness and enthusiasm to cooperate from those who might do us good." D THEFREEMAN IDEAS ON LIBERTY BenjaminConstant Libertyand PrivateLife by Jim Powell T he French thinker Benjamin Constant was, according to respected Oxford Uni versity scholar Isaiah Berlin, "the most elo quent of all defenders of freedom and priva cy." Constant's most important contribution: he recognized that "the main problem ... [is] how much authority should be placed in any set of hands. For unlimited authority in any body's grasp was bound, he believed, sooner or later, to destroy somebody."