Achieving Antidiscrimination Objectives Through “Safe Harbor” Rules for Cases of Chronic Hiring Aversion

Published July 12th, 2017 -  - 07.12.178


The article-length version of this post can be found at 2 Journal of Law and Public Affairs 1 (2017).

As a general matter, and looking only at hiring barriers, our employment discrimination laws have done a good job encouraging employers to take advantage of available talent from populations they might previously not have previously have drawn from. This encouragement comes both from the “stick” – fear of liability and adverse publicity from administrative investigations and lawsuits — but also from the “carrot”  of benefiting from a broader pool of talent and having any negative preconceptions dissolved by favorable experience.  In these situations, the laws have served to accelerate desirable market outcomes and, at the same time, enhance the participation in our economy of previously marginalized groups.

There are some areas where chronic hiring aversion by employer persists.  I have three examples in mind:  (1) individuals aged 50 and over who have worked for many years for a prior employer and are seeking new employment; (2) individuals with obvious disabilities requiring costly accommodations, such as hiring readers or purchasing special equipment; and (3) individuals with prior records of conviction for serious crimes.

In each of these (and perhaps other) cases, the employer will generally avoid hiring individuals from these categories even though such a hiring aversion is unlawful and there doubtless are individuals within those categories who will defy the predictions underlying the categories and perform as well as other employees. Most employers will avoid hiring individuals with these characteristics because the risks of being caught are  low and the costs of hiring employees from these categories who turn out to be problematic are higher and more enduring than in the usual case. Ironically, regulation of termination decisions in this context may worsen the employability prospects of these individuals.

For example, in the case of the unemployed older worker, we can assume that the individual performed adequately in the prior position but that the worker’s likely fit in a new organization involving  different tasks or technologies and reporting to younger supervisors is difficult to predict. If the employer makes a mistake and hires an older worker who turns out to be a problematic fit, it would be very difficult, as a practical matter, to terminate that worker’s employment. Error costs are especially likely to be high in the case of a terminated older worker because the trier of fact (i.e., the jury) is likely to indulge in a presumption in that worker’s favor. Employers appreciate this risk, even if they are not unduly risk-averse, and will avoid hiring older workers.

A second group involves individuals with obvious, difficult-to-accommodate disabilities. In the U.S., the law provides that the costs of accommodations cannot generally be considered in deciding whether to hire the disabled employees. The statutory duty is to treat alike disabled and non-disabled workers provided that the worker is qualified to perform the essential functions of position with or without reasonable accommodations. Costs of providing accommodations are not generally treated as cognizable under the concept of “reasonable accommodation”; cost considerations can come into play, if at all, only if the employer can establish the very difficult affirmative defense of proving “undue hardship. A good number of employers skirt the problem by avoiding hiring such disabled workers altogether.

A third example of chronic employability problems is individuals with a history of prior conviction for a serious crime. Here, too, the costs of an employer mistake are especially large because employee theft or violence on the job will be especially costly. Most employers will avoid hiring such workers altogether.

There are several possible responses to these hard cases. One response is to stiffen the penalty for employer noncompliance by increasing the level of damages that can be recovered, including noneconomic and punitive damages. The level of enforcement also can be increased by being up enforcement resources for these categories of discrimination.

A second response to is to use “carrots” rather than “sticks” say, by giving employers subsidies for hiring individuals from these categories or giving employees vouchers they can use to mitigate for the hiring employer some of the costs of hiring ex-convicts.

These two modes of response are useful and should be encouraged but may be of limited reach. Presumably, existing resources, both financial and enforcement, represent what the government is willing or able to provide; more is not likely to be forthcoming any time soon.

A third response is for the responsible agency to promulgate “safe harbors” for employers willing to hire individuals from these categories of perceived high employment risk.  The safe harbor would be an administrative rule reducing some of the risks of hiring individuals who face chronic hiring aversion by employers. The approach proposed here would be in the form of a regulation, promulgated after notice and opportunity for public comment, that individuals from these categories may be hired as probationary employees for a defined, say a two- or three-year period, during which they may be discharged without cause or consequence for the employer under the law administered by the agency.

All other provisions of the antidiscrimination and other employment laws would remain in effect. If such employees are retained beyond the probationary period, they will be treated the same as other employees in all respects.

The benefit of the safe-harbor approach is that it directly addresses the concerns that materially influence the employer’s non-hiring decision. The employer is given a relatively cost-free opportunity to evaluate whether engaging the employee from the perceived high-risk category will in fact entail the predicted risks or whether an employee’s actual performance will belie the prediction.

Safe-harbor rules are increasingly being used in the employment areas, typically as a means of handling technical aspects of the legal regime, such as nondiscrimination testing to determine whether the coverage of an employee benefits plan disproportionately favors highly-compensated employees or navigating the “affordability” requirement for mandatory employee healthcare coverage. Some states are exploring safe harbor rules for dealing with whistleblower protections.[1] Also, the United States Supreme Court has introduced a form of safe-harbor approach in affording employers an affirmative defense to liability for sexual harassment by supervisors if they put in place internal processes for enabling employees to make complaints and promptly investigate and provide redress for meritorious complaints.

There are three principal objections to the safe-harbor approach. The first is the general concern we have already encountered that the standard may be set too low – that employers will be given a safe harbor when reliance on conventional antidiscrimination enforcement would yield the same antidiscrimination results.  Stating the point in a somewhat different way, the concern is that the safe harbor will increase the incentive for noncompliance.

This objection has less force in the present context because the safe harbor, under this proposal, would be available only for chronically unemployed or underemployed individuals in high-risk groups. Promulgation would occur only after considerable experience with conventional antidiscrimination enforcement.

The second objection is a moral objection – that a safe-harbor approach recognizes and legitimates discrimination against individuals in the perceived high-risk group who are qualified for the positions they seek. There is, of course, some force to this point but it must be kept in mind that the underlying objective of the law is to promote the employment or the “mainstreaming” of individuals from discriminated-against groups who are not participating fully in the workplace. If that employment is not occurring and conventional enforcement is not changing outcomes, we ought to be seeking approaches that will promote employability without undermining antidiscrimination values. To minimize any stigmatization, the program would be available only for individuals who affirmatively enroll.

The third objection is based on the claimed inutility of the safe-harbor approach. Here, the argument is that employers will hire strategically to take advantage of the probationary period with no intention to retain these employees as potential regular employees at the end of that period. This is largely an empirical objection to be evaluated in the course of actual experience with safe-harbor induced probationary employment. In addition, it is difficult to understand what benefits would accrue to the employer in engaging in such a stratagem. Hiring a new employee always entails training and workforce-integration costs, which most employers will not want to incur unless they hope to recoup that investment over the course of sustained employment. Moreover, the proposal envisions an above-board, transparent program; participating employers would be operating under some measure of public scrutiny.  And the government agency providing the safe harbor would take account of the employer’s record in deciding whether to allow that employer’s continued participation in the program.

In sum, creation of carefully cabined regulatory safe harbors for hiring employees from high-risk categories has the potential to spur improved utilization of such employees with limited harm to the moral force of the antidiscrimination command.

 

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