Oregon State Bar Bulletin — DECEMBER 2011


Involvement with and news about employment discrimination cases would seem to bear this out. Unlike ordinary corporate contract disputes, employment discrimination disputes are deeply personal to the parties involved. A supervisor who is accused of discrimination suffers an attack on his or her reputation within a company and within a community. An employee who believes that he or she has suffered discrimination feels violated for being specifically selected for less than equal treatment. Even when claims are brought in good faith, the parties and the public feel as if employment laws are being abused for personal gain.

Employment discrimination is real. The legal process for spotting and fixing employment discrimination is messy, to say the least. But too often laws prohibiting employment discrimination are mistaken for the foundation, or even the whole, of employment law. Quite the opposite is true. Discrimination lawsuits actually mark one kind of failure of U.S. employment law. By the time a discrimination lawsuit is filed, the cooperative venture of employment typically is at an end: an employer has made the decision to sacrifice investments made in a valuable human resource and an employee has lost a livelihood.

Thinking of employment law as just about employee rights or employer freedom is shortsighted. Employment law is not only for employers or employees. Employment law is also for the rest of us, who need as many members of our community as possible gainfully employed and capable of managing their affairs without state assistance. From this perspective, the larger question to ask about any employment law is whether that law increases the prospects for fair, stable employment relationships. That question is a very different one than questions about who, between a specific employer and employee, should prevail in court of after things have gone south.

Labor and Employment in Relation to Community
Labor is something that every community needs, and which every community will somehow obtain, from a large subset of its members. Employment is the legal organization of that labor supply to meet communal demands. The most common way of legally organizing labor for employment has been force. In waterfronts of port cities in the Pacific Northwest, for example, states sanctioned the brutal practice of “shanghaiing” or “impressment.” This violent collection of sailors to man merchant ships for burgeoning international trade was a direct response to labor shortages.

Indentured servitude and slavery are other ways to turn labor supply into organized employment. But while many states succumbed to slavery, 75 percent of Oregon’s founding fathers voted against using the institution of slavery for purposes of employment in Oregon. What readers may not know is that 89 percent of Oregon’s founders also voted to prohibit the immigration of free blacks to the state — their decided purpose, according to the Oregon History Project, was “an ideal of an Oregon with only free, white labor.”

Enter employment discrimination, which only makes sense after a community has chosen free markets as the primary legal way to turn labor into employment. Describing slaves or impressed sailors as victims of employment discrimination is out of place, however. A better description is that those people were victims of human rights violations, not to mention a bevy of crimes and torts. The road from shanghaiing and slavery to modern “at-will” employment is a familiar one. That process involves removing population-specific barriers to employment so that everyone competes for work on fair terms.

While few Oregonians today disagree with exhortations to workplace equality, the legal rules that promote it are intrusive and cause rifts in different sectors of society. Contrary to popular belief, most employers understand the need for prohibitions on employment discrimination. Such acceptance is cold comfort, however, when unresolved immigration policies lead to labor shortages or when merely disgruntled employees threaten to use employment discrimination laws as a sword rather than a shield. Similar tensions can exist between employees of different backgrounds given their relative positions to antidiscrimination laws. White male employees do not have to be biased or bigoted to feel as though employment discrimination laws are written with everyone except them in mind (historically, that’s kind of true). And employees who enjoy “protected class” status do not invite the high workplace profiles that come with the national project of stamping out workplace discrimination.

In the last 20 years or so, the number of employee workplace protections has started to weigh upon employers. The supermajority of those employers is small. According to the Small Business Association, small businesses — those with fewer than 500 employees — represent 99.7 percent of all employer firms, employ over half of all private sector employees, and have generated 64 percent of net new jobs over the past 15 years. Due to size, many small employers (large enough to be covered by antidiscrimination laws) are quite sensitive to the costs of employment law compliance and can be put out of business by the right (or wrong) lawsuit. Because jobs are a precondition of any discussion of workplace fairness, it is not enough for Oregon simply to push for greater and greater employee protections. The employment equation also requires that communities support employers. Balancing employee workplace protections with active support of employers is really what employment law is all about.

Balancing At-will Employment and Workplace Protection
Laws regulating employment almost didn’t happen in the United States. The most important employment law case in U.S. history is Lochner v. New York, decided by the Supreme Court in 1905. The case involved the constitutionality of a New York law that prohibited bakers from working more than 10 hours per day and 60 hours per week. New York claimed the law was necessary to protect the health of bakers. The Supreme Court struck down the law as a violation of employers’ and employees’ “liberty of contract.” The Lochner decision signaled that states generally were prohibited from interfering with employment contracts. Had Lochner held up, many of the workplace protections that employees enjoy today — minimum wages, maximum work hours and overtime pay, mandatory meal and rest periods, workers’ compensation and unemployment insurance — would be unconstitutional

Oregon played an important role in the freedom of contract debate started by Lochner. Just three years after Lochner the U.S. Supreme Court decided Muller v. Oregon, 208 U.S. 412 (1908). Muller concerned a 1903 Oregon statute that provided,

…no female shall be employed in any mechanical establishment, or factory, or laundry in this state more than 10 hours during any one day. The hours of work may be so arranged as to permit the employment of females at any time so that they shall not work more than 10 hours during the 24 hours of any one day.

Violation of the statute was a criminal misdemeanor punishable by a $10 to $25 fine. Muller operated the Grand Laundry, located at 320 N. 17th St. in Portland. Muller violated the female work-hour limit by requiring some of his female employees to work more than 10 hours per day. An Oregon trial court convicted Muller and fined him $10. The Oregon Supreme Court affirmed the conviction. Relying on the Lochner decision, however, Muller argued that the Oregon law was an unconstitutional violation of his own and his female employees’ freedom of contract rights.

The Lochner decision should have controlled the outcome of Muller. But in a remarkable showing of sexism worth quoting at length, the U.S. Supreme Court upheld the Oregon law:

That woman’s physical structure and the performance of maternal functions place her at a disadvantage in the struggle for subsistence is obvious. This is especially true when the burdens of motherhood are upon her. Even when they are not, by abundant testimony of the medical fraternity continuance for a long time on her feet at work, repeating this from day to day, tends to injurious effects upon the body, and, as healthy mothers are essential to vigorous offspring, the physical well-being of woman becomes an object of public interest and care in order to preserve the strength and vigor of the race. …[H]istory discloses the fact that woman has always been dependent upon man. He established his control at the outset by superior physical strength, and this control in various forms, with diminishing intensity, has continued to the present. As minors, though not to the same extent, she has been looked upon in the courts as needing especial care that her rights may be preserved. …Differentiated by these matters from the other sex, she is properly placed in a class by herself, and legislation designed for her protection may be sustained, even when like legislation is not necessary for men, and could not be sustained. It is impossible to close one’s eyes to the fact that she still looks to her brother and depends upon him. Even though all restrictions on political, personal, and contractual rights were taken away, and she stood, so far as statutes are concerned, upon an absolutely equal plane with him, it would still be true that she is so constituted that she will rest upon and look to him for protection; that her physical structure and a proper discharge of her maternal functions — having in view not merely her own health, but the well-being of the race — justify legislation to protect her from the greed as well as the passion of man. The limitations which this statute places upon her contractual powers, upon her right to agree with her employer as to the time she shall labor, are not imposed solely for her benefit, but also largely for the benefit of all. This difference justifies a difference in legislation, and upholds that which is designed to compensate for some of the burdens which rest upon her.”

Lochner (and the sexism that drove Muller) ultimately were overruled, allowing states to pass laws protecting employees in the workplace. But the Lochner philosophy remains a fundamental part of the American psyche on employment rights. The crux of the Lochner decision is that employers and employees are free to set the terms of employment. In common legal parlance, employment is “at the will” of the contracting parties. This common law default rule explains why most employees in the United States will never have a written employment contract despite working for most of their lives.

The at-will employment rule also helps to explain why workplace protection laws are so contentious politically. Given Americans’ preference for freedom of contract in employment, few Oregonians would support a law that forced an employer to hire an employee against the employer’s will, or vice-versa. But some employee rights, such as reinstatement and re-employment rights under Oregon’s family leave and workers’ compensation laws can sometimes look a lot like that. At the same time, Americans also believe that virtues such as workplace loyalty and personal honesty and diligence in the workplace should also be rewarded, perhaps with enhanced job security. Such disagreements over employee rights and employer freedoms trace directly back to Lochner, and they will always be with us.

In balancing at-will employment with workplace protection of employees, however, the costs to employers are usually overlooked. In the current economic climate, Oregon cannot afford to take employers for granted because, more so than most states, we sorely need jobs. The unemployment rate in Oregon currently is 9.4 percent. Last year’s unemployment data showed unemployment for African-Americans at 12.8 percent (African-American males at 15.7 percent). Under-employment data for Oregon youth, especially for African-American youth, is catastrophic (19 percent for African-American females, 27 percent for African-American males). To that end, there are some employee workplace protections worth highlighting in virtue of their direct impact on employment opportunities. Oregonians may want to continue these policies because they accord with our values. But facing them squarely may spark us to creative solutions that will ease the unemployment woes of our state.

First, is Oregon’s minimum wage. Oregon’s minimum wage currently is $8.50 per hour. From the perspective of good community, $8.50 per hour is not enough and certainly isn’t livable. But the pursuit of livable wages occurs alongside the pursuit of employers to headquarter in the state. The federal minimum wage is $7.25 per hour. About half of states follow the federal minimum wage. If an employer plans to start or expand a business, it’s relevant that a savings of $1.25 per hour per employee is available in states other than Oregon. We cannot simply raise employee minimum wages because it is the right thing to do, but not anticipate it to have an effect on employment. But there are creative solutions. For example, to spark youth employment Oregon might consider defining a youth labor market with the minimum wage below $8.50 per hour. (Under federal law, workers under 20 can be paid as little as $4.25 for the first 90 days of employment.) Or individuals receiving unemployment benefits might be authorized to use those benefits as work vouchers to subsidize an employer’s hiring costs. In the current state of Oregon employment, such sub-optimal work might be preferable to no work at all.

Second, are the federal Family Medical Leave Act (“FMLA”) and the Oregon Family Leave Act (“OFLA”). These laws protect employees who have to be away from work to care for sick family members. Employees should be protected from losing their jobs when work duties conflict with duties under another American institution — the family. But these laws also impact on employment. Employers with 50 or more employees are required to comply with FMLA. Oregon employers with 25 or more employees are required to comply with OFLA. The difference in coverage limits is important. Nationwide, employers with fewer than 50 employees think long and hard before hiring the 50th employee. The benefits of one or two more employees may be outweighed by the burdens of FMLA for all 51 or 52 employees. This problem is magnified under OFLA because OFLA obligations trigger with 25 fewer employees. This is a choice that Oregon has made and perhaps it is the right one. But, unlike Oregon employers, employers in states that follow the federal limit do not worry about hiring that 25th or 26th employees — or employees 27-49, for that matter — out of concern over the costs of family leave obligations.

Third, and finally, is the Fair Labor Standards Act (“FLSA”). With youth unemployment so high in Oregon, unpaid internship programs that put young people into workplaces would bring great relief. But the Department of Labor’s interpretation of “internship” under FLSA all but prohibits for-profit employers from instituting such programs. Under FLSA an employer can hire an unpaid intern and not run afoul of the law only if the work does not displace regular employees and the employer “derives no immediate advantage from the activities of the intern.” (The law actually suggests that an employer who hires an intern should have its operations impeded by the presence of an intern.) One mark of a true internship is that the intern provides no “essential services to the employer.” In practice, this means an employer can only hire interns provided that such people are genuinely useless to the employer’s business. Meanwhile, the growing labor pool of high school students, college graduates and law school graduates in Oregon who would willingly work for free in exchange for training and experience are legally barred from doing so.

The Future of Employment Laws: The Role of Collective Bargaining
Fairness in employment is not static. It also is something separate from employer and employee perceptions of their circumstances. On the correct view, employment law exists to foster fair, stable employment relationships. Sometimes this project requires loosening restrictions on employers in order to increase jobs, a precondition of any discussion of workplace fairness. At other times the project requires crafting rules and restrictions needed to protect and integrate a new labor population, such as transgendered people or the growing number of immigrants who perform essential work in the United States. At all times, it is about managing the course of a dynamic institution without which communities, families and individuals fail.

The primary workplace issue facing the United States today is the growing inability of employees to earn livable wages and benefits or, to put the matter slightly differently, to achieve and maintain middle-class. This concerns what happens in and to a free market society when people can no longer achieve economic self-sufficiency through work. The harms to society of this development extend far beyond employers and employees, to families, education, investment, retirement and leisure. The ability to achieve middle class through work is a grave matter of public concern. At the same time, conflicting philosophies of government and personal responsibility among Americans, along with legislative capture by certain influential segments of our community, have stifled progressive solutions to this problem.

The United States has taken two main approaches to the issue of workplace fairness: employment law and labor law. Employment law is largely a command structure that tells employers what actions they must and mustn’t do. The structure of our employment laws is ill-suited to the issue of livable wages and benefits for several reasons. First, employment law’s vision of workplace fairness is one of formal rather than substantive equality. Employer workplace obligations do not include assurances of material well-being for employees, only fulfillment of contractual promises plus prohibitions on conduct that violates public policies. Second, notions of individual contract and private property that underlie the employment relationship appear to prohibit government from requiring employers to pay wages and benefits that accord with some substantive vision of workplace equality. Third, there is growing belief that the primary explanation for worker disadvantage in the United States is not employer misconduct but rather is structural disadvantage across many public institutions such as poor housing and substandard education. Americans have not reached consensus that employers should share in attempts to alleviate structural discrimination simply because they may be well-positioned to pay for it.

By contrast, labor law does contain a substantive vision of workplace equality. That vision is to be achieved by a power-sharing model of industrial governance that affords unions the political leverage needed to negotiate for decent wages and benefits. Additional attractions of the collective bargaining model are greater job security, greater participation in business decision-making, and greater room for creative problem-solving where employer and employee interests conflict. Labor law does then represent a body of law that casts the issue of livable wages and benefits as a legitimate, substantive workplace fairness issue. The obvious obstacle to labor law’s vision is the dramatic decrease in union membership in the United States. First, according to the Bureau of Labor Statistics, the number of unionized workers in the U. S. fell to a 70-year low of 11.9 percent (6.9 percent for private employees) in 2011. Second, the decrease in labor suffrage seems likely to continue given the current political climate and the inability to pass pro-union legislation such as President Obama’s Employee Free Choice Act. Third, even at the height of union participation, only 35 percent of the American workforce was unionized. The current concern over livable wages and benefits likely affects large numbers of nonunionized workplaces.

If the concern over livable wages and benefits is about changing the way Americans think about workplace equality, then labor law has distinct doctrinal and administrative advantages over employment law but also distinct political disadvantages. But key to the substantive reform of both employment and labor law is the development of a vision of employment as a public institution that concerns employers, employees and the community at-large, instead of as a private institution that concerns only employers and employees. What is needed is a perspective on the public interest in the employment relation that to some degree is entitled to bend contract and property law toward a larger communal employment ideal. Until employment is understood as a communal project with its own distinct ends, the suggestion that private employers should share public responsibility for the social or economic disadvantages of employees will remain unintelligible.

With these more broad observations about the purposes of employment law in mind, we can all get back to representing our respective employers and employees — whom we all know to be right.

 

ABOUT THE AUTHOR
Jeffrey Jones is an associate professor of law at Lewis & Clark Law School and of counsel to Barran Liebman. The research for this article was done by Nancy Alexander and Jane Chausova, second-year law students at Lewis & Clark Law School.

© 2011 Jeffrey Jones


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