Olson believes that the new employment law will in time produce European-style rigidities in the labor market, with permanent high unemployment and a large measure of inefficiency and waste. The net effect is the creation of a zero-sum lottery in which a lucky few (and their even luckier lawyers) sometimes receive fabulous windfalls while the cost of employing everyone else rises.

But the real surprise of Olson's book concerns the ways being found to avoid many of the new law's rigidities. Small employers attempt to keep the number of their workers below the threshold at which the rules apply. Some companies also make across-the-board reductions in their labor force to avoid having to justify the discharge of particular troublesome employees. More employers engage temporary workers. Perhaps most significantly, employers are factoring the higher costs of the new law into wages, thereby shifting the burdens to other employees. Thus does bad law not only fail to achieve its primary purpose, but creates ever widening distortions in our economic and social life. -- Commentary Magazine, Franklin Hunt

Chapter 1

HIRING HELL

When Martin K. joined the Boston police force, the application from included a question about whether he'd ever been admitted to a hospital. He declared under oath that he had not, which was quite a whopper: actually, he'd been admitted five times to Veterans Administration facilities for psychiatric inpatient care. When it learned of the untruth, the city fired him. Aside from whether someone with his medical history should be toting a gun in the name of the citizenry, it figured Martin's lie in a sworn statement was disqualification enough for a job where he would frequently be asked to give credible testimony under oath.

The state high court ruled against the city and ordered him reinstated with back pay and damages for emotional distress. It said Mass-achusetts handicap-rights law prohibited employers from taking into account job applicants' medical history; including mental health treatment; would-be cops were no exception. Since the city had no business taking past hospitalization into account, it had no business asking about it. And since it had no business asking about it, it also had no right to act on the basis of responses to its question -- a sort of employment-law analogue to the exclusionary rule in criminal law.

The case was no fluke. In many other cases, lawyers were succeeding in advancing the notion that if a question is improper, a job applicant needn't answer it truthfully; it's known as the "right to lie."

The hiring and interview process is the place everyday managers are most likely to encounter the new employment law. And the new law -- especially as applied by the federal Equal Employment Opportunity Commission -- has made the regulation of hiring one of its special missions. The result has been to give not only managers, but also applicants, a lot of new things to be nervous about.

The legal hazards begin with the classified ad. Statements such as "recent grads," "young office," "beginner," and "ideal for retiree" have all set companies up for age-bias suits. On the other hand, "career prospects," "possible long-term situation," and the like have been seized on as grounds for claims that the employer was implicitly promising tenure and thus forfeiting its right to fire later without "good cause." Employers have also been targeted by complaints for buying ads in the big local newspaper without advertising in smaller publications catering to black or foreign-language readers. (Many such publications, aware of the captive ad base, charge rates quite a few times higher than their circulation would otherwise seem to justify.) The EEOC has said some employers may even violate the law if they run a classified ad that gives only a voice telephone number, without an address or teletype number for the convenience of deaf applicants.

The interviewing of job applicants comes under remarkably intense legal pressure, with any number of everyday questions considered off-limits. One consultant describes it as hazardous to ask whether an applicant has friends at the company, since white males might have more. If a question is forbidden by itself, of course, it's also generally forbidden as a follow-up to an applicant's puzzling or unsatisfactory statement or résumé entry. Many managers try to guess age from dates in personal history; another common ploy is to toss the ball into the applicant's court by asking open-ended questions in the hope he'll volunteer information that couldn't be probed for directly.

Inappropriate interview questions can serve as a basis for cash damages all by themselves, even if an applicant would not have been offered a job. Managers at the Community Coffee Ct). of Baton Rouge, Louisiana, allegedly asked insensitive questions of a sales applicant whose handicaps included facial disfigurement as well as visual and hearing problems; a jury agreed he wouldn't have landed the job but voted him $15,000 anyway for his emotional distress, plus $30,000 in punitive damages to teach the company a lesson.

Other careless comments pose a danger of giving a later complainant something to seize on as a binding promise of tenure. Attorney Alan Koral notes that "it is probably safe to say that 'this is a nice place to work' or 'we want our employees to be happy with their jobs.'"

What about reference-checking? That runs into its own problems. Until the 1980s or so American courts largely shielded employers from defamation suits arising from bad references or other comments on employee performance. Quite suddenly, though, a series of decisions knocked down the old "qualified privilege." A New York court ruled that describing a former employee as having been fired "for cause" was reason enough to send a defamation case to a jury. "Malice" could be shown, courts decided, if a company showed "conscious indifference" to the impact of its words on the former employee. Invasion of privacy and infliction of emotional distress are among other newly popular theories; the Ninth Circuit in 1989 upheld a $1.4 million award against a railroad for "intentional interference" with an ex-worker's prospects. Mentions of a former employee's proclivity toward alcohol or drug abuse -- or bad behavior linked to such abuse -- are especially dangerous, running afoul of privacy and disabled-rights concerns as well as the rest.

Where managers have tried to dispense largely positive evaluations interspersed with a caveat here and there, lawyers have interpreted it as an attack on their clients that is all the more damaging for being coded. Giving references only where one can be enthusiastic, and keeping mum otherwise, has run into claims that silence about one former worker under such circumstances is tantamount to a negative comment. And even giving positive references to everyone is dangerous. "An employer who fires you but gives you a positive reference...is just begging to be hit with a wrongful discrimination suit," writes attorney Lewin Joel. "After all, if you were such a good employee, what was the real reason you were fired?"

Some commentators have pointed out that relatively few reference suits make it to trial or win big awards. But the reason is hardly a mystery; the point of this kind of legal weaponry is to serve as a threat rather than to have to be carried through -- and the threat works very well. The giving of references is for the most part a volunteer activity carried on from a sense of public spirit, and it is easy to pull back once a liability risk appears. Most big employers soon retreated, therefore, to an almost wholly uninformative name-rank-and-serial-number recitation of dates worked and titles. In other cases, the wording of a reference is set in exit negotiations with a worker's lawyer. Some courts even order employers to provide favorable references to workers who have sued them, in what might seem a remarkable example of compulsory insincere speech for the purpose of fooling blameless third parties.

Though some state legislatures have heeded a business outcry by passing laws intended to restore limited immunity for giving references, it has not proved easy to restore confidence overnight, especially as ingenious lawyers start looking for ways around the limits. The atmosphere remains unrecognizably different from that of a generation ago. "Regarding character, we are wandering in a wasteland," Cleveland recruiter Alan Schonberg told the New York Times.

Reference-giving was also the subject of one of the EEOC's most exotic crusades over the years. The commission has insisted that the entire process of checking references has "adverse impact" on blacks, who allegedly will receive poorer references than others. Hence, it has held, employers should not be permitted to check references unless they have carried out elaborate studies to validate the use of the practice in their particular circumstances. The commission spent years in court suing the National Academy of Sciences on behalf of one black applicant whom the NAS had decided not to hire after her reference came in negative. (The bad reference was itself conceded as not unfair or racially motivated.) The prospective employer finally won after hiring two academics who conducted elaborate analyses of its personnel records and showed that aside from the single case at issue, its policy of checking references had not worked to reduce the number of blacks hired; in fact, few applicants of either race had received bad references. Though it lost that case, the commission has apparently never given up on its wider view that reference-checking is to be held legally suspect.

The EEOC's view that reference-checking is inherently unfair to minorities is just one of the countless applications of its famous doctrine of "disparate impact," approved by the Supreme Court in the celebrated case of Griggs v. Duke Power, laid out in the Uniform Guidelines on Employee Selection Procedures more than two decades ago, and minutely analyzed in flume-jamming flows of legal commentary ever since. The doctrine essentially provides that any employee selection procedure with adverse impact against any protected group will be unlawful unless an employer is willing on demand to validate its business necessity. Almost every phrase in the preceding sentence might better be enclosed in quotation marks, since each is an ambitiously broad term of art:

* Employee selection procedure means virtually any screening method an employer might use to choose among applicants: education or experience requirements, consideration of standardized test results, typing speeds, height, possession of a driver's license, and so on.
* Adverse impact occurs when members of some protected group fail to make it through the process in numbers proportional to their share of (1) the general population, (2) the workforce, (3) the pool of workers who are in some sense qualified for the particular job, or (4) those who in fact applied. Complainants have used all these theories, depending on which comes out most favorably for them; they also gerrymander the geographic bounds from which the group is drawn, so that a suburban employer accused of hiring too few blacks may find its numbers compared with those of the whole metropolitan area, while one in the inner city may find the comparison pool drawn only from within city limits. Nothing deliberate or invidious need be shown, and proof of nondiscriminatory intent is irrelevant. Virtually all neutral hiring practices show disparate impact: educational requirements show it against blacks, height requirements against women, and so forth. As a result, all are suspect. * Validate means that the employer must be willing to offer affirmative, more or less scientific studies to back up its decision to use such a selection method. Such studies, if done from scratch, can cost hundreds of thousands or even millions of dollars. The EEOC maintains fabulously stringent guidelines for validation, which the courts only sometimes accept (being at other times more lenient toward employers). Even when courts approve a method as adequately validated in one case, they seldom set out a green light for other employers: plaintiffs can go back to challenge the same method again when it is used by the next employer, and not infrequently they get it struck down.
* Business necessity, more than the other terms, has varied in stringency with changes in the mood of the Supreme Court and lower courts. Fans of adverse-impact law, in line with the usual meaning of necessity, think courts should make it virtually impossible for employers to validate procedures unless they are necessary for them to stay in business. Only a minority of courts have taken that view; the Supreme Court wavered for years, then in Wards Cove v. Atonio (1989) moved toward a markedly more permissive view in which employers would have to show only the general rationality of their selection methods. In 1991 Congress reversed Wards Cove and restored the earlier (but far from coherent) state of the law.

EEOC and court interpretations have turned the disparate-impact theory into a thing of magnificence, a regulatory Eighth Wonder of the World, endowed with a seemingly endless array of oubliettes, hidden vaults, and sunless dungeons. Virtually every set procedure an employer might choose to make part of its hiring process is suspect. Does it recruit only by advertising, or never by advertising? Either practice might have disparate impact on one group or another. The chill on minimum education or experience requirements has helped scare many employers out of asking for diplomas and transcripts, even though many courts have in the event upheld such standards. New York City has found that the best predictor of police recruits' performance -- of the questions it is still permitted to ask -- is their record in previous jobs, but groups suing the city charge that "favor[ing] candidates who have been able to hold a single job for several years" perpetuates "white, middle-class values."

Having grown out of discrimination law, disparate-impact doctrine is still mostly discussed on the basis of its implications for minority interests. But it has far wider effects, which are felt in countless situations where minority status as such could not be the issue -- that is, where neither of the candidates vying for a position is white or male, or where both are. Thus minimum height requirements for security guard or firefighter positions are subject to disparate-impact challenge because of their adverse impact on Asians and females; the law, however, equally forbids the use of the criterion to decide between two Scottish-American males of markedly different height. In fact, it is quite erroneous to imagine that the disparate-impact theory somehow applies only when employers are suspected of somehow wanting to exclude a group by proxy. Flight attendants with surplus poundage won millions by arguing that airline weight requirements had disparate impact on women, who find it harder to keep their weight down. But whatever can be said for or against weight rules, we may be sure that airlines did not devise such rules as a way of reserving flight attendant jobs for men; women held the great majority of attendant jobs, and indeed male applicants were winning in other courts after alleging the airlines had consciously favored women.

In so-called pattern-and-practice cases, the EEOC can identify a practice with disparate impact and then demand "back pay" for the entire class that went underrepresented in the employer's workforce, even though this may constitute a group ten or fifty times more numerous than the actual number of positions for which the employer was hiring. In the 1980s, Chicago utility Commonwealth Edison hired females for 11 percent of its meter-reading jobs. The commission said this was not enough, but the company would have had to turn away large numbers of women in any event, because it got an estimated 100 applications for each position. So the EEOC simply negotiated a settlement dividing $3 million equally among all 3,000 women who applied ($1,000 for each), on the apparent theory that when all have won, all must have prizes. (This case refutes clearly enough the widely held notion that the function of "back pay" is somehow not to punish the employer but to make everyone whole.) In another well-known case, the commission demanded that the Daniel Lamp Company place $10,000 worth of ads to find black applicants against whom it might have discriminated, and pay a further $123,000 as supposed back pay to those who might step forward as a result -- a sum apparently arrived at before any look at the situations of the not-yet-unidentified claimants. The actual complainant received back wages of $340.

Cataloguing the EEOC's novel applications of disparate-impact law would take a book in itself. Among the most remarkable is its crusade against word-of-mouth hiring, which it considers legally suspect since it tends to perpetuate the (invariably out of balance) demographic makeup of a company's current workforce.

For most managers, avoiding grapevine influences on hiring would be somewhat like avoiding breathing. Especially in immigrant communities, nothing is more common than for particular businesses to draw heavily from one ethnic group -- Pakistani, Dominican, Irish, or whatever. Taxi fleets in Washington, D.C., have thus been organized along a wide variety of ethnic lines, with dispatchers for at least one fleet announcing destinations in Amharic. Yet the EEOC regularly files complaints against employers that fill positions by word of mouth, using the doctrine to extract surprisingly large settlements from surprisingly small companies (as with the $2 million it got from an obscure candy maker named World's Finest Chocolate). It also routinely goes after companies whose use of grapevines attracts lots of minority employees, but not the right mix of them. Thus its very active Chicago regional office filed cases against a small machine shop with too many Hispanics and too few blacks, and another against a janitorial service whose work force was predominantly Korean.

The Korean-janitor case brought the agency a certain amount of adverse publicity, not that anyone seemed to care much in Washington. Prominent Seventh Circuit judge Richard Posner stingingly rebuked the commission for its "sorry parade of witnesses," including one who claimed to have responded to a Chicago Sun-Times ad even though the company had never advertised there. Though completely vindicated, the company closed down after running up $200,000 in legal costs during the eight-year fight. "After 32 years in the United States, my dream is shattered," former president Andrew Hwang told Crain's Chicago Business. "My business is totally gone." Hwang was now looking for work as an employee of others. "We won the battle and lost the war," said his attorney, Cary Kabumoto. "If you're a small company, you may as well roll over."

Another noteworthy EEOC crusade has been against employers' right to consider applicants' police records, which is yet another practice with adverse impact on minorities.

Several early court cases gave the agency the opening it was seeking. In one, a federal court ruled that a defense contractor had unlawfully taken into account the fact that a job applicant had been arrested fourteen times -- those arrests being presumably just an innocent guy's streak of really bad luck. That was followed by an Eighth Circuit case striking down across-the-board employer policies against hiring applicants with criminal convictions (as opposed to arrests). The court's apparent rationale was that some convictions are "little" and not really worth considering; of course, it wasn't prepared to trust employers to decide for themselves which those were.

EEOC doctrine leans heavily on the notion that employers must ignore all past convictions that are not "job-related," a circular term of art. Thus in its view employers should often have to ignore even quite serious crimes unless they are both recent and closely related to a job's subject matter. It ruled against a company that did not want to rehire a crane operator who was released after serving six years for first-degree murder; a portrait photographic studio that wanted to turn away a convicted forger (because even though his offense was job-related, it was six years old); and against a company reluctant to hire a convicted shoplifter as a dock worker (because even though the crime was job-related, the items taken weren't very valuable). "Generalized concerns about customer or co-worker loss of confidence, absenteeism in the event of future arrests, or minor losses from pilfering are not sufficient to rise to the level of necessity," approvingly remarks the author of a leading treatise.

The agency has also declared unlawful any general employer policy of firing workers caught lying on their applications, even when the questions to which the applicants were responding were otherwise legitimate -- a position that goes beyond even that of the Massachusetts court in Martin K.'s "right to lie" case. It explains that firing liars has an adverse impact on ex-cons because they, more than others, feel a need to falsify their work record (in order to conceal stretches of imprisonment).

The EEOC does not always win these cases. It lost one in 1989 where it had demanded that a trucking company hire felons to handle "high risk" freight such as computers and pharmaceuticals; federal judge Jose Gonzalez tartly observed that if applicants "do not wish to be discriminated against because they have been convicted of theft then they should stop stealing."

In the law schools, though, the main worry appears to be that current doctrines against criminal-record bias don't go far enough. The Fordham Law Review's commentator thinks worried employers are just being foolish: "There is little evidence that employees with records are poor workers or safety risks." No "tendency is apparent" for ex-offenders to abuse drink or drugs at any greater rate than the general public, agrees the most widely cited academic account, in the Catholic University Law Review. Despite years of EEOC efforts, the author laments, "persons without criminal records have an advantage" on the job market. To curb this problem, employers approached by an applicant with even a very recent and job-related conviction "should have to demonstrate...that the applicant [still] has the propensity to engage in that criminal conduct." How they or anyone could succeed in doing so is left unclear. Naturally, the author also advocates construing "job-related" narrowly: thus a company whose inventory includes valuable industrial materials should not be permitted to turn away a convicted embezzler, since "stealing such items is very different in form from embezzlement," while a factory should not be allowed to say no to a violence-oriented sociopath concededly unsuitable for customer service, "since working with things rather than people is the major part of the job."

In general, as such passages suggest, the law review commentary on employment law tends to be almost comically remote from employer concerns. A widely noted Harvard Law Review comment proposes that employers be made to "reevaluate their commitment" to "the standard face-to-face interview" because this "prejudicial" process permits "illegitimate appearance evaluations" of the disabled, elderly, or just plain homely (looks-ism being pervasive in the business world). Solutions might include "restructuring the hiring process to eliminate or reduce information about applicants' appearance" by using so-called Chinese walls to keep interviewers from passing data on physical appearance to final decision-makers, "expanded use of telephone interviews," and -- the Harvard author is not offering this as a parody -- interviews held behind screens.

Hiring law exemplifies the new employment law's aim of controlling the psychological intangibles of work. The interview process, even more than most of life in the business world, is rife with verbal fencing, byplay of personality and undisclosed agendas, even as everyone stays on best behavior. "Small talk" and general chat can cut the tension and also give "a picture of the person," as Irene Larsen (the manager of an agency that referred domestic workers to homeowners) told Robert Hamburger in his oral history of domestic work, A Stranger in the House. "I can tell very well," Larsen said, "if I ask, 'How old were the children?', and she says, 'Oh, I don't remember how old they were' -- she doesn't like children. If you like children, you're going to remember how old those children were."

Studies have confirmed the commonsense idea that first encounters, even when they prove the prelude to productive relationships, often pose a rough spot for those who differ from the majority in some way. Thus when able-bodied persons in one study met disabled newcomers, they showed more rigidly controlled behavior than when meeting others, gestured less, and "expressed opinions that were less representative of their actual beliefs." Another study found black visitors treated with "verbal overfriendliness, coupled with vocal and behavioral cues of affective retreat."

It is far from clear that the introduction of legal compulsion has helped to reduce the awkwardness of first encounters. When it comes to the visible human differences associated with major disabilities, many interviewers have been tempted to try breaking through the unease by openly acknowledging differences in either a joshing or serious way. Now they know better. "It has put a damper on the dialogue," said quadriplegic attorney Kathi Pugh. "They know they can't ask about your disability, so the subject is never brought up and they assume the worst."

We're said to live in the Information Age, but when it comes to hiring, our law much prefers ignorance: the less employers know about those they propose to employ, the better. The accident- or embezzlement-prone have to work somewhere, after all. Sure, more people may get hired for jobs they won't do well, but as one enthusiastic commentator sums it up, workers deserve the right "to fail on the job" (emphasis added).

Do workers as a group benefit? Getting hired is a competitive sport, and if the law gives one contestant a leg up it must artificially hobble someone else; if no disfavor may be shown to felons, then no favor may be shown to those who have faced similar temptations but always stayed clean. The legal chill on references chokes off more helpful, positive references from past employers than backbiting, negative ones. The game of waiting for applicants to volunteer information that can't be asked for directly gives an edge to those with outgoing personalities and those who know what is expected; the shy lose out, as do those who unknowingly ramble on about the wrong topics. Some win the right to lie, but others who refuse to gild their résumés miss their chance to shine. And the honestly hired but mismatched new worker is hardly better off if, after failing on the job, he must be eased out to face the whole strained process again from a weaker position.

Many rules bar employers from probing for information that would count in a candidate's favor. It's considered too risky to inquire into unpaid community and family responsibilities, for example, though these are often important strengths for homemakers trying to re-enter the workforce. New York, trying to assist adherents of controversial political causes, forbids inquiry into applicants' participation in any community groups not narrowly focused on career or business matters -- even though most employers probably count such involvement as a plus most of the time. With "diversity" in business vogue, unusual personal backgrounds might be expected to be in demand, but employers aren't supposed to ask about them.

As liability-chary employers look for ways to reduce the pesky human element, one natural development has been a steady growth of interest in interview software. A 3M division markets LPA SelectPro, which offers more than 225 questions to help make a "structured, consistent interview." Another maker of employee-selection software, reports Suzanne Oliver in Forbes, "is always searching for new indicators that aren't yet forbidden by the courts" and puts in questions about cigarette smoking, favorite games, and television habits.

Common sense, for years now hermetically excluded from the law of hiring, would start by recognizing that people thrown together in a room will talk, with no clear line to separate chat that is job-related from that which is not; that grapevines are inevitable and largely a good thing; that the filling of jobs is a rushed, highly imperfect process torn between fear of making a bad pick and the need to act before good candidates go elsewhere or unperformed work piles up to the crisis stage. It would demolish and give a decent burial to the disparate-impact doctrine, and aim to recreate the law of job references circa 1957 if not earlier. Instead we have devised a hiring law as punitive, contradictory, and hard to comply with as wit could readily manage -- all the better, it would seem, to teach employers that they should conduct as little of this antisocial activity as possible.

Copyright © 1997 by Walter Olson