Capitalism and the Rule of Law

By Jeremy D. Pasternak

California’s unemployment rate is currently at 10.1%. No less than Paul Krugman, last year’s Nobel Laureate in Economics, tells us that, nationally, we may be looking at an employment rate “of more than 9%,” that such a figure represents a “real-world” unemployment rate of closer to 15%, and that “The human cost of a slump that severe would be enormous.”

What does this mean for employment cases? And what can we do for those clients and potential clients suffering that “human cost?” There is no question that under the law, a person let go because of a bona fide reduction in force or a mass layoff does not have the right to bring a claim for wrongful termination under California law. On the other hand, if a hundred people get fired, at least one of them is going to get fired for “the wrong reason.” This is due to the simple fact that regardless of the “macro” decisions that are made by large employers, “micro” decisions – that is, who, to let go – are made by human beings. And human beings – here, managers – will continue to act, often inappropriately and even unlawfully, in their own self-interest. As those of us who practice in this area know, the number one “cover” for an animusbased termination is a reduction in force. If the manager is mad at the subordinate who stopped dating him, or who reported the fact that he was cutting corners on safety, or who demanded his leave time off, that manager is going to take advantage of that reduction in force.

But what we are seeing now, I believe, is a trend toward a violation of the law based on “rational” or “economic” factors in addition to personal animus. If a company is having trouble, who is the bigger problem? The employee who is there 24/7 or the employee who needs to be out a half-day a week to attend to a difficult pregnancy? How is management going to control for costs? By cutting staff but making the rest work overtime? Or by not paying overtime at all and just putting everyone “on salary,” despite the fact that legally, only a few very narrow categories of employees can be classified “non-exempt”?

It was Calvin Coolidge who said that “the business of America is business.” Whether or not this is fair to “Silent Cal,” the statement is certainly typical of the over-confidence in the American economy that preceded the Great Depression, and unfortunately, of that which preceded our current economic crisis.

And while the expression is illustrative of America’s strong work ethic and can do attitude, it unfortunately sometimes becomes an ethic in and of itself. When Capitalism (and the “capital C” is deliberate) is not just an economic system, but a belief system, we have problems such as those outlined above, namely, employers who think that an economic decision is necessarily “right.” We are a capitalist society, but we are also a nation of laws, and those laws accept the fact and we should be proud of the fact that in this country we draw certain lines associated with our civil rights and with the society that we wish to be; capitalism sometimes has to get out of the way in a just society.

Of course, on an even deeper philosophical/political level, there is no conflict between these laws and capitalism. In truth, these laws are good for capitalism. Discrimination works to exclude or diminish large sections of our workforce. Although, to use but one of the examples above, getting rid of the pregnant employee may make economic “sense” in an individual circumstance, discriminating against women overall certainly does not. Taking the time to accommodate the long term ill employee by giving him leave may mean a short-term cost, but that investment will pay off over time through the saved cost of training someone new (not to mention the retention of a grateful and hardworking employee).

As I write this, the story of President Obama’s release of previously-secret files is unfolding. The Bush Administration ostensibly in the fight against terrorism, all but ignored our civil rights, at best seeing them as a “luxury” that could not be afforded. We have seen the cost of that error. I suggest that this lesson is instructive with respect to the state of our economy and our continuing respect for the rights of our workforce.


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