Teleplus, a small long distance firm in San Antonio, Texas, is exactly the type of conscientious employer President Clinton described in his State of the Union address and planned to discuss at the Philadelphia summit. The president has challenged business owners and nonprofit organizations to hire as many long-term welfare recipients as possible, and Teleplus already hires many low-skilled workers from diverse racial and ethnic backgrounds. According to Mary Gonzalez, the company's secretary and treasurer, Teleplus would happily hire welfare recipients who manifest a desire to work hard and abide by company policies.
Hard experience, though, may cause Teleplus and other businesses to think twice before accepting the president's challenge. Frivolous lawsuits and a maze of state and federal labor regulations will almost certainly discourage well-meaning employers from hiring those who need jobs the most.
Here is an example of one lawsuit that an employer believes to be groundless. Early last year, two black females filed employment discrimination claims against Teleplus with the Equal Employment Opportunity Commission. According to letters filed with the EEOC from a supervisor and a floor manager, one of the complaining workers arrived at work intoxicated, with her speech noticeably slurred. She allegedly addressed telephone customers as "honey" and "baby," slapped her supervisor on the buttocks, and called him "a dirty man." According to another letter also filed with the EEOC, the other employee screamed profanities at her supervisor and co-workers during a dispute over a customer's telephone number.
Last month, the company participated in a discrimination hearing before a federal examiner. The intoxicated employee contended, among other things, that Teleplus had never penalized a white employee for drinking on the job. Although the commission has not informed Teleplus whether it will pursue the case further or allow the disgruntled employees to file suit individually, Mary Gonzalez estimates the company has already spent over $10,000 in legal fees and other expenses. Her primary concern at this point is whether Teleplus will have to waste considerably more money to defend itself in federal court.
The Clinton campaign to encourage private-sector employers to hire long-term welfare recipients fails to address the need to eliminate onerous labor regulations and groundless discrimination suits. The president has merely proposed allowing employers to claim up to $10,000 in tax credits for hiring long-term welfare recipients. He has also proposed a $3 billion welfare-to-work jobs initiative designed to assist states and local communities to move one million of the hardest-to-employ welfare recipients into jobs by the year 2000. Nevertheless, Mr. Clinton has assured AFL-CIO President John Sweeney that welfare workers will be covered by the Fair Labor Standards Act, the minimum wage, and other labor statutes.
Many legal professionals believe a legitimate fear of discrimination suits and adverse publicity may cause many businesses to refrain from hiring untested and inexperienced workers. "An employer would be foolish to participate in Clinton's program given the prevalence of frivolous discrimination suits," argues Bill Worthy, a veteran trial attorney whose firm represents Teleplus. This is because a plaintiff in a typical civil-rights suit does not necessarily have to prove that an employer intended to discriminate. Using a method called "disparate impact analysis," the employee need only show that the employer's hiring and firing practices have adversely affected members of a protected group. This is true even when the employer uses objective performance criteria to evaluate its workers.
Consider, for instance, the hypothetical case of a drilling company in Louisiana, where 83 percent of welfare recipients are black. The company voluntarily accepts the president's challenge and randomly hires 200 long-term recipients to man offshore rigs. If the company later determines that it must discharge half of the new hires because they lack certain skills or fail to perform according to expectations, the company may find itself defending a civil-rights lawsuit. Even if the plaintiffs unearth no evidence of deliberate discrimination, the law permits them to file suit simply because the layoff disproportionately affects black employees. The plaintiffs may not ultimately prevail, but the firm will still pay thousands, if not hundreds of thousands of dollars, to defend itself in court.
Similar concerns plague employers who hire persons with severe illnesses or addictions. The Rehabilitation Act and Americans with Disabilities Act both prohibit discrimination in employment against persons suffering from AIDS. The statutes also offer fairly broad protection to recovering alcoholics and drug users. Federal law also prohibits discrimination against unwed mothers, pregnant women, and women who obtain abortions.
Of even greater concern to most employers is the confusing array of state and local laws governing employment discrimination. Certain jurisdictions prohibit discrimination on grounds of obesity, educational background, marital status, homosexuality, emotional or mental illness, learning disabilities, and illiteracy. Many states even prohibit discrimination against persons with arrest or conviction records.
Washington, D.C., which prohibits discrimination on most of these grounds, further protects employees from discrimination on the basis of "personal appearance." Although an employer can avoid liability under this rule by demonstrating a "reasonable business purpose" for certain grooming standards, the D.C. courts have not been particularly sympathetic. The District Court of Appeals recently ruled that a city requirement that all male firefighters have short hair and be clean-shaven was discriminatory.
In 1986, the same court penalized Atlantic Richfield Company (ARCO)-a model employer that values social responsibility and actively promotes equal opportunity and affirmative-action programs-for discriminating against a female employee on the basis of "personal appearance." The company's transgression: It regularly criticized the worker for allegedly wearing tight-fitting and revealing clothing, sitting with her legs open, and behaving in a "boisterous" and "flirtatious" manner.
As if the possibility of protracted civil rights litigation is not enough to frighten most employers, business owners must also be careful to avoid civil lawsuits arising from their failure to screen workers adequately.
Most states allow persons injured or harmed by an employee to sue an employer for negligently hiring an incompetent or dangerous worker. If, for example, a truck driver with a poor driving record or history of substance abuse injures a motorist, the victim has the right in most states to sue the employer for negligent hiring. A recent decision of the New Jersey Supreme Court asserts, "Anyone dealing with the public is bound to use reasonable care to select employees competent and fit for the work assigned to them and to refrain from retaining the services of an unfit employee."
Many jurisdictions even permit plaintiffs to recover hefty punitive damages against businesses that knowingly hire such individuals, particularly when an employer is aware of a worker's substance abuse or criminal history.
Federal studies indicate that the threat of negligent hiring suits is particularly high among long-term welfare recipients. A study prepared last May for the Department of Health and Human Services found that approximately half of all welfare recipients suffer from one or more of the following: serious alcoholism, regular use of crack or cocaine, depression lasting from five to seven days a week, major health problems, or extremely low basic skills. An additional 40 percent of all recipients experience less severe forms of such problems. Other federal studies have found that welfare recipients "have below average education and cognitive skills" and are more likely than the average American to have been involved in a criminal incident.
Several courts have held business owners vicariously liable for an employee's criminal or malicious act. In 1990, the Texas Supreme Court found the Frito-Lay Company liable for compensatory and punitive damages when Jose Padilla, a traveling salesman, intentionally assaulted a convenience store owner.
Another Texas court assessed $700,000 in damages against a security company when one of its night watchmen ambushed a customer in a convenience store parking lot. The guard jumped the customer from behind, beat him with a night stick, and shot him in the abdomen. The trial jury determined that the company had negligently failed to investigate the guard's criminal record, even though his most recent conviction had occurred more than 10 years earlier, and none of his convictions revealed any violent proclivities.
In a sense, the risk associated with hiring a long-term welfare recipient resembles the dilemma a doctor faces when he encounters an injured person by the side of the road. While state laws do not generally require physicians to render assistance to those in need of medical attention, an injured person and his family usually have the right to sue for negligence if the doctor errs despite his best efforts. Many states have attempted to mitigate the harsh effects of this rule by passing "Good Samaritan" laws. Such laws typically prohibit or limit recovery against a doctor who stops and renders aid.
Reducing or eliminating the legal risks an employer faces may do more to encourage the hiring of long-term welfare recipients than tax credits or block grants. Congress, for instance, could adopt a "Good Samaritan" law permitting employers who voluntarily hire former welfare recipients to terminate their employment for any reason within six months.
Such a law would prohibit an employee from filing a discrimination suit for any discharge occurring during the probationary period. At a minimum, Congress could require a worker to meet a higher evidentiary burden or cap the availability of monetary damages. The government could also mitigate the risks associated with negligent hiring suits by specifically exempting welfare employers from such suits or limiting the damages recoverable by a third-party plaintiff.
The president's desire to encourage companies and nonprofits to hire welfare recipients is certainly admirable. Sadly, altruistic employers must carefully consider the legal ramifications before accepting the Clinton challenge. Christian business owners should endeavor to treat all persons with dignity and give those who have below-average skills or troubled backgrounds the opportunity to prove their worth and gain valuable experience. The government, however, should refrain from punishing those who lend a helping hand.
Mr. McCutcheon practices law in San Antonio, Texas.