By Eric Singer on 2.3.09 @ 6:06AM
In their first act, President Obama and the Democratic Congress
bring discrimination claims back from the dead.
In the first new law passed by Congress and signed by
President Barack Obama, the Lilly Ledbetter Fair Pay Act
overturns a U. S. Supreme Court ruling against its
namesake.
Lilly Ledbetter, who worked for Goodyear from 1979 through
1998, filed a discrimination claim in May 1998 alleging that she
had to rebuff sexual advances of her foreman boss in the early
1980s, and that his unflattering write-ups of her work led
to her being underpaid for nearly 20 years. Having stayed on the
job, collected money for working and retired receiving additional
benefits, she subsequently sought compensatory and punitive
damages for actions dating back more than 20 years prior
to the time of the trial.
A jury awarded her $228,438 in back pay (including $4,662
for mental anguish), and $3,285,979 in punitive damages. The
allegedly harassing supervisor was dead by the time of
the trial, so it was Ms. Ledbetter's word against
his coffin. She then conflated her sexual harassment claims
along with a claim of equal pay for equal work, inviting a
mind-numbing review of her roles over the years. The case ended
at the Supreme Court in 2007, which overturned this psychodrama
by affirming the Equal Employment Opportunity Commission's rule
that claims of discrimination be made within 180 days of the
actual discrimination.
A key risk factor for investors in the current
economic crisis has been the rapid loss of the rule of law. The
rules keep changing. As the banking contagion spread, some firms
-- like AIG, Fannie Mae and Freddie Mac-- were rescued, while
others -- like Lehman -- were killed. Investors panicked because
they no longer knew the rules and the credit markets completely
seized up.
As its very first order of business, Congress has
created an opportunity for the same kind of panic in the
market for employing women. With the passage of this new
law, there will be no statute of limitations for any
transgression, ever, and every conceivable slight will be valid
litigation grounds -- forever. Even the death of the
discriminator won't stop the case. (In fact, as we can see from
Lilly Ledbetter, it only helps.) It will be a rock festival of
nuisance lawsuits and awards. At the margin, Human Resource
departments will expand; productive employees will pound
salt.
When Congress passed the higher minimum wage law in May
2007, teenage unemployment was about 15%. One year later, it was
over 20% -- the unintended consequence of making teens more
expensive to hire. By this summer it could be even higher.
Lilly's law may have a similar impact on women. From
December 2007 through December 2008, men's unemployment rate went
from 4.4% to 7.2%, while women's unemployment rate went from 4.3%
to 5.9%. Women are employed at higher rates so there must be
widespread discrimination, right? One unintended consequence of
this act may in fact be greater discrimination against women.
Given two equal candidates for a NEW job, the female may now
be viewed as carrying greater financial risk from
the increased long-term potential for litigation because of
Lilly Ledbetter's Act. And perhaps fewer women will be hired
compared to men.
If the unemployment rate for women had been heading towards
8% in the next year or so, I would guess this new law will add at
least one or two percent to their top unemployment rate and it
will add to the number of hall monitors hired to mitigate
liability. The market will have the job of discounting this
additional millstone, and I doubt it will like it much.
With this opening act, Congress shows itself to be truly
unserious about making it easy for business to take risks
and hire people. This law represents a giant step towards
copying the mediocrity of European socialism, with its persistent
10% to 12% unemployment rate in good times.
Once upon a time, only murder had no statute of
limitations. Now murder one charges and EEOC claims have the same
lease on life. Lilly Ledbetter's law puts the future behind us,
and promises an endless rehash of the past. Only ghosts live in
the past all the time. Congress is taking us to the dark
side.
topics:
Frivolous Lawsuits, Gender Discrimination, Rule of Law
