March 08, 2005

Quick! Ian Ayres

by PG

I promise to link and edit this properly later, but I wanted to post the first draft and let people react if they liked. Report from Ian Ayres's (of "Reckless Sex" infamy, though for some reason that article was not listed among his current and upcoming publications) talk on "Mark(et)ing non-discrimination: or 'How to create statutory precedent before ENDA passes." Today's lecture is drawn from Ayres's forthcoming book Straightforward: How to Mobilize Heterosexual Support for Gay Rights.

The polls are much worse for nondiscrimination in marriage than in employment. But not much is happening in the employment discrimination arena; the Human Rights Campaign is considering dropping the current proposed federal legislation, Employment Non-Discrimination Act, and incorporating it into an omnibus equality bill.

Professor Ayres proposes a "Fair Employment mark," like a Good Housekeeping seal or orthodox union kosher seal. You cannot produce products with your own mark; rather, you certify that licensees are abiding by certain standards. The standards are a word by word citation to the legal duties of ENDA, and the seal costs nothing to obtain.

Currently ENDA is only a prohibition of disparate treatment; it does not have provisions for affirmative action, domestic partnership or disparate impact. It also has no coverage for gender identity or expression, which may create a split with HRC, which is moving toward including gender identity in its protected categories.

The Good Housekeeping and kosher seals are expensive for the people who give them. A licensor traditionally has to charge money for giving the seal, because of the costs of inspection and substantive certification. This Fair Employment mark is set up only to certify that licensee has signed the license; the licensee has promised not to discriminate.

It creates a third party beneficiary status; every employee during the period of the license is made an express 3rd party beneficiary to enforce the underlying promise, with the same class of private individual causes of action that would be created by ENDA. Also any government agency that could bring a suit under ENDA is empowered by this mark to bring a suit of action, giving the same remedies as ENDA.

Prof. Ayres is quite happy about the altruistic 3rd party beneficiary element of his proposal. He notes that the only for-profit industry that doesnít have to compensate people it negligently injures is the news media, per New York Times v. Sullivan; the minimum standard to win damages for libel is recklessness, and mere negligence is insufficient. We donít use 3rd party beneficiary law enough.

If we could get some employers to sign this, this is a way to start creating precedent for ENDA before the actual bill passes. With 100,000 employees covered, there would be civil contract law opinions interpreting what it means. If ENDA passes with the same words, it may influence what it means. If ENDA is amended, the license also can be amended to remain in accordance. Will ENDA produce a flood of litigation? We can start getting an idea, though obviously with the selection problem that firms voluntarily agreeing are less likely to discriminate than firms forced to comply by law.

It's a new type of federalism: a kind of corporate federalism. Not let a state opt for a different law, but let corporations opt for different laws. Before the passage of a mandatory rule federally, let firms voluntarily opt for it.

Why would an employer sign up for this?

There's a subpart of employers for whom signing up for this would create small cost because they're already required not to discriminate, so they can publicly signal their commitment and get credit for it. These would be employers in the 15 states that already have private rights of action against orientation discrimination, or that are already covered by collective bargaining, or have handbooks that require non discrimination. If you look at litigation rates in states that have the non discrimination statutes, disparate treatment suits are not a very expensive issue.

Municipal or regulated purchasers could demand it. A variety of localities will contract only with non discriminating suppliers, but currently satisfy the requirement only by non-binding agreements not to discriminate. Input suppliers might also demand it; the AFL-CIO has gotten non-discrimination claims in (though they prefer grievance procedure to private rights of action). The Association of American Law Schools requires schools have non-discrimination on basis of sexual orientation, but is not clearly enforceable. [And also doesn't apply to all law schools.]

Some people might sign because it will make them money, not just through regulated purchasers but also by individual consumers. Acoustic separation: Symbol made "FE" to be innocuous, so signifies to people who care about it without offending those who may dislike it, thus creating a boycott. Licensee has the right but not obligation to use the mark, so firms may use it only in gay publications or urban areas.

Take 10 identical firms with homogeneous product, each with 10% of market; assume 5% of customers are gay-friendly, 20% are gay-phobic, 75% donít care. If one of the 10 firms adopts the mark, it gets the 10% of the 75% who donít care (7.5% of total market), 0% of the customers who hate gay people (assuming no acoustic separation) but all 5% of gay friendly dollars. That plus the 7.5%h equals 12.5% of the market, which is greater than 10% and provides an incentive to adopt the mark. At equilibrium, two of ten firms will have the mark.

What if as a preliminary to mandatory regulation, Congress always did an opt-in rule? The Equal Employment Opportunity Commission currently has no statutory authority to enforce nondiscrimination against gays, but how about Congressional legislation letting the EEOC enforce this against employers who volunteered?

HRC has a Corporate Equality index on a scale up to 100, and if you get a 100% rating you get a 100% mark to put on your product. It doesnít subject employers to any litigation risk. The HRC mark goes further than the "FE" Ė it gives extra points for giving money to civil rights organizations or setting up an LGBT group, which can be spun as special rights or shakedown (Rainbow Coalition concern) and doesnít just capture core non-discrimination.

[I didn't fully capture the question-and-answer period, so apologies for making either the questioners or Prof. Ayres sound insane.]

Q: Courts will bear the certification cost, as in private contract. Is it right to force this on the courts without passage by legislation (and attendant modifications of court system to allow it to bear the burden)? Private cause of action: what would it look like?

A: You can get a class certified. Brought in state court like most contract violation.

Q: Creation of statutory precedent. How is this useful? Different states will decide things differently under their own contract rules, and federal courts wonít be bound by any of them. Laboratory effect may be useful, but only in dynamic way; to get Congress to react to it.

A: Hostility against activist judges; even though the statute expressly says you can only bring disparate treatment suit, legislatures may say they donít trust that. SCOTUS nullified Title VIIís provision of only disparate treatment and put disparate impact into it. Finding out how it plays out in the world. You should get a tingle out of being able to create precedent before statute passes.

Q: Would you expect court to look to Title VII law or state & local ordinances? Under this proposal, a Columbia University employee is covered against discrimination on the basis of sexual orientation by New York City, New York State and this mark; would you expect a court to treat the mark-based protection differently? Also, contractor ordinances generally are passed only in cities that already have non-discrimination ordinances.

A: Courts would be drawn to put themselves into imagining what the regime would be if ENDA passed. They would look to federal precedent on non-discrimination law. With regard to contractor ordinances, some localities will prohibit discrimination in city employment, and for firms with which the city does business, but not for all firms within the city.

Q: In the 10 homogenous firms example, benefit goes primarily to first mover.

A: That's an empirical issue.

Q: Why not a sanction regime, where the punishment is not through litigation but the loss of use of mark?

A: Deference to "victim organizations" [Ayres's words, not PG's] that currently use such a regime. Ayres wants to get ENDA to pass. ENDA doesnít currently have punitive damages. Part of this is marketing: get the 150 Fortune 500 companies claiming to support ENDA to use the mark, which doesn't require more than the legislation; if anything, this is ENDA minus.

Q: A company marketing itself as a gay friendly employer should have its pick of gay employees. Do you want to attract a disproportionately litigious group of gay applicants?

A: Some of the people attracted will be hetero allies. Employers can put a disclaimer against litigation in its handbook, claiming that itís not a contractual promise. But Ayres wants to create possibility of a contractual promise.

[The question I didn't get to ask because all the interrogators were professors: people who really care already have this information about which firms are gay-friendly; people who care only a little bit are unlikely to modify their consumer behavior (consider the failure of Made in the USA and no-sweatshop marks). So what will this mark really add that employers are likely to consider a benefit?]

March 8, 2005 06:26 PM | TrackBack
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