Obama appointees to the Equal Employment Opportunity Commission (EEOC) are killing jobs by making hiring decisions riskier and more costly. As I explain below, employers’ ability to hire based on merit has increasingly come under assault by the EEOC, as it has ordered employers to discard useful employment tests and put up with incompetent employees. It is not worthwhile setting up a business if all your sensible hiring decisions are second-guessed or vetoed by the EEOC.
When reporters write stories about the cost of regulations, they only focus on regulations found in formal codes. But most regulations aren’t formal rules, but rather agency interpretations of statutes. Typically, such agency interpretations expand the reach of a statute the agency administers, such as a statute that authorizes lawsuits by job-applicants, employees, tenants, or customers against businesses that allegedly violate the statute’s provisions. For example, the EEOC’s interpretations of anti-discrimination laws and disabilities-rights laws are not formal rules, as the Supreme Court has noted, but the courts often defer to the EEOC’s interpretations anyway. So the EEOC can dramatically increase the ability of employees, or the EEOC itself, to sue businesses under those laws, just by coming up with expansive interpretations of those laws (thus expanding its own power). The result is an increase in costly lawsuits that imposes economic burdens on employers, and discourages people from setting up small businesses or hiring new employees to work in existing businesses.
The EEOC has sued, and threatened to sue, employers who hire and fire based on merit. For example, a hotel chain was recently compelled to pay $132,500 for dismissing an autistic desk clerk who did not do his job properly, in order for it avoid a lawsuit by the EEOC that would have cost it much more than that to defend. “The EEOC says Comfort Suites dismissed the clerk when it should instead have accepted the services of a state-paid ‘job coach’ who might have ‘helped the clerk learn to master his job by using autism-specific training techniques.’” Based on a 1979 Supreme Court decision, it used to be thought that employers did not have to alter essential job requirements to accommodate the disabled, or incur more than modest expense, to comply with disabilities-rights laws; but the EEOC has progressively expanded the reach of the disabilities-rights laws since then, through ever-broader and more onerous agency interpretations of those statutes.
The EEOC has sued employers who sensibly refuse to hire as truckers people with a history of heavy drinking and alcoholism. It has done so even though if employers do hire alcoholics for such safety-sensitive positions, they will be sued under state tort laws when the alcoholic driver has an accident. The EEOC’s demand that such employers disregard histories of alcoholism is based on an extremely expansive, and dubious, interpretation of the Americans with Disabilities Act.
The EEOC is suing employers over the use of criminal histories in hiring, and harassing employers who conduct criminal background checks, even though employers who hire criminals end up getting sued when those employees commit crimes while on the employer’s payroll. The EEOC’s demands thus place employers in an impossible dilemma where they can be sued no matter what they do.
The EEOC is also suing employers who don’t bend sensible workplace rules to accommodate the obese, claiming that obesity is a disability. And it is suing employers who take into account bad credit and financial histories in hiring, even though failure to take that into account can lead to lawsuits against banks and property managers by customers.
All of these burdensome mandates, and the threat of lawsuits, discourage people from setting up a business, just as regulations making it almost impossible to fire people in places like Portugal and Italy have contributed to those countries’ slow economic growth by discouraging the formation of new businesses and the hiring of additional employees. (Researchers like the RAND Institute have found that more employment-related regulation and litigation are associated with increased unemployment rates.)
The EEOC’s aggressive new stance reflects its new left-wing majority under the Obama administration, which has appointed anti-business extremists to the EEOC.
The Obama administration’s demand that businesses make risky hiring decisions reflects its general antipathy to business, which is discouraging job creation. A liberal Yale professor recounts being told by a businessman that he would not hire more employees despite having a “successful business” due to the current political and regulatory climate. “How can I hire new workers today, when I don’t know how much they will cost me tomorrow?,” asked the businessman, “referring not to wages, but to regulation: He has no way of telling what new rules will go into effect when. His business . . . operates on low margins. He can’t afford to take the chance of losing what little profit there is to the next round of regulatory changes. And so he’s hiring nobody until he has some certainty about cost.”
Boston business owner Terry Catchpole noted in The New York Times that economic uncertainty due to Obama administration policies has wiped out jobs at companies like his:
Two years ago our executive communications company had 17 employees. Today it has seven . . . like many small businesses, we are dependent on big businesses as customers. And the big businesses that we would ordinarily depend on to become clients are sitting on their cash, because they are deathly afraid of an Obama administration that has been hostile to business . . . They have no idea where the administration’s next attack is coming from, and how much it is going to cost them to defend. So businesses do not spend money; they do not hire my company; and we cannot hire back those 10 good people we had to let go.
Democratic businessman Steve Wynn called Obama “the greatest wet blanket to business and progress and job creation in my lifetime,” saying that “the business community in this country is frightened to death of the weird political philosophy of the President of the United States. And until he’s gone, everybody’s going to be sitting on their thumbs.”
Obamacare’s burdens on employers may eventually wipe out as many as 800,000 jobs.