Saturday, November 25, 2017
The End of Economic Freedom (Part I)
“The pursuit of happiness” in the Declaration of Independence has many meanings including the right for every person to pursue a lawful profession (this is part of economic freedom). I do not think that anyone would argue that our happiness is heavily dependent on how happy we are with our profession. That is why people will change jobs routinely: they are in pursuit of happiness. The United States has been at “At Will Employment” nation since its inception. This means employers and employees are allowed to terminate their work contracts without any reason (except for reasons of discrimination). This concept was outlined in the important Supreme Court decision in Adair v. United States (1908). All this being said, the United States has been moving towards a “job security” nation similar to Canada, Sweden and Norway. Some examples of this can be seen through unionized professions which protect incompetent employees from any type of lawful termination including being lazy and disruptive. It is a huge misconception that job security and the ever-increasing termination laws protecting employees are actually good for employees. Simply put, workers do not benefit from laws and regulation that in the long run make it harder and more expensive for employers to hire. And what’s worse, the inefficiencies and waste from job security programs are passed on to the consumer in the way of higher prices, less innovation, and lower quality products. The rise in the “temp” workforce is a direct response to tougher termination laws and government regulation. Temporary workers provide cheaper options for employers and come with less regulatory employment rules and therefore can be terminated easily without facing lawsuits. Temporary workers do not receive any corporate benefits, but the California Supreme Court changed that in Vizcino v. Microsoft. Hence, courts are onto the corporate “temporary worker” concept and ready to shut down these “at will employment” opportunities. Tort cases seeking punitive damages from companies costs them about 1 trillion dollars annually or about 5% of the economy. For example, “public nuisances” laws have been used to target tobacco, gun, car makers, drug manufactures, and paint manufacturers. In fact, many of the plaintiffs in these cases have faced no harm or damages from any of these companies. Hence, to many, suing corporations is for a personal benefit, not for the benefit of the public. Frivolous lawsuits are common and most companies would rather settle than face enormous fees by going to trial. California’s Unfair Competition Law has triggered thousands of frivolous lawsuits such as planes not having enough leg room or disputing the service fee for hotel room service. Although many lawsuits are dismissed and Supreme Court cases such as BMW v. Gore limit damages to realistic sums of money, the cost on companies is extreme and most of that cost is going directly to the customers in the form of higher prices and less services. The American Disabilities Act (ADA) is part of the Civil Rights Act. It costs business millions each year to upgrade its buildings to meet this law. I do not have anything against making buildings wheel chair accessible but the government should subsidize what it mandates instead of forcing costs onto businesses and consumers. The ADA has made it impossible to fire anyone because things like laziness, lack of concentration, alcohol and drug addiction, and disruptive behavior are all now considered to be disabilities for which the company must seek treatment options to help employees afflicted with such disorders. But these laws go one-way. For instance, an employee who fails to be responsible by taking his medications or has alcohol or drug relapses still cannot be fired. Discrimination lawsuits are up over 5000% over the last 50 years. Person’s in wheelchairs have filed suit against movie theatres because their seating locations are not favorable. And then there are the discrimination lawsuits against bars that offer benefits for women such as ladies night. Every employee has a disability excuse (there is now a medical term for any type of behavior) and therefore employees resort to discrimination lawsuits against their employer when they are let go. While employers are held to incredibly difficult standards, workers are free to be irresponsible and unaccountable for their behavior in the workforce. When one in twenty dollars of economic activity is due to lawsuits, then we have really entered the age of needing tort reform. We need to reestablish equal employer / employee rights and not one-sided laws protecting unproductive employees at the expense of businesses and consumers. People probably enter into a hundred contracts every day: anything we purchase, work, our home, our utilities, cable, phones, marriage, schools, parking, and so forth and so on. There are three reasons a court may void a contract: Public policy reasons, unconscionability, and bargaining power inequity. But the courts have used these reasons to void perfectly good contracts where there has been no coercion or exploitation of any of the parties partaking in the contract. Take, for example, bargaining power inequity: Parties in exact equality have no reason to enter into a contract. Hence, there must be some inequity for party A to enter into a contract to obtain more of what party B has. For this reason, many bargaining power inequity rulings are bogus. Public policy reasons lead judges to input personal bias and opinions into decisions. For example, in a Massachusetts surrogacy case (R.R. v. M.H) the Court sided with the surrogate mother who breached her contract and kept the baby. The judge ruled it is not normal public policy to sell babies. I find that odd since it is now normal public policy to abort a baby. This is a judge’s opinion, he is not following any law. Judges also use unconscionability to input biases and personal opinions. Consider the 1965 Washington DC case Williams v. Walker-Thomas Furniture Company. In this case, the court ruled in favor of a person who breached their contract by defaulting on their furniture payments. The court ruled that the furniture store could not repossess the furniture per the contract. In other words, the furniture store was out the remaining amount due in the contract. In this decision, the court had empathy toward the plaintiff because she was poor. But the court’s decision would affect hundreds of poor people living in the same neighborhood negatively. In response to the decision, the furniture store reduced credit levels and raised prices to cover lawsuits where they could not repossess items for breach of contract. California courts have barred companies like Circuit City from using arbitration as a means to solve employee disputes. Instead, courts want companies to face lengthy and more expensive class action suits instead of settling disputes in arbitration. Once again, these actions force companies to cut employment, reduce wages, or pass any increased legal costs onto the consumer.