Our legal system is a minefield - effects of government regulation

When Pres. Clinton went on nationwide television in September, 1993, to outline his plan for a new health care system, he invoked one of his favorite campaign themes - the idea that the government ought to help individuals and businesses that "work hard and play by the rules." Since that concept well may become the unifying theme of the Clinton Administration's domestic policy agenda, it deserves scrutiny.

No one would deny that Clinton understands the meaning of hard work. He grew up poor, but worked his way into elite colleges and rose very quickly in political office. The President, however, never has faced the challenge of running a business. Although he has experienced life on the campaign trail and logrolling in the Capitol, Clinton never has had to cope with volumes of business regulations or serious, potentially crippling lawsuits. The simplistic notion that business people can "play by the rules" betrays an ignorance about managing a company in modern America. The disturbing reality is that there are so many rules today that compliance often is impossible.

In August, 1993, the National Law Journal and Arthur Andersen Environmental Services surveyed more than 200 corporate attorneys on environmental law issues. Most anonymously confided that their firms had violated a Federal or state environmental law in 1992. An even more startling finding was that nearly 70% of the respondents believed that total compliance with all the state and Federal regulations simply was unachievable. As one general counsel said, "The cost of compliance (100%) would drive [the company out of business." Another explained that there were "too many regulations. Some are in conflict. Some are unclear."

The legal climate in the environmental area is so treacherous that the lawyers themselves are encountering difficulties. San Francisco attorney William Scherer was indicted for a felony because of the advice he gave to a client company. When his client was evicted from one of its warehouses, it apparently left behind some 55-gallon drums of radioactive waste. After the landlord executed a writ of possession against the warehouse and demanded the removal of the drums, Scherer replied that his client recently had filed for bankruptcy and could not pay for the removal because such an action would constitute a violation of bankruptcy law. The frustrated landlord turned to the state environmental agency, and an investigation was launched. Despite the absence of environmental damage, the Solano County District Attorney's Office charged Scherer with a felony - for the illegal disposal of hazardous waste.

Crime in the inner city has created a legal nightmare for rental property owners and managers. Victims of violent crime successfully are suing commercial businesses and landlords for inadequate security. A study by Liability Consultants Inc. found the average jury verdict for a rape on a business premises to be $1,800,000. For a death, jurors awarded 2,200,000. To avoid liability, many businesses have hired security guards and invested in expensive security systems. If those guards mistakenly should harass an innocent person instead of a gang member or drug dealer, the firm could be sued for civil rights violations.

Some rental managers are winding up in court because they invested in the wrong technology. A New York City landlord installed state-of-the-art electronic doors and locks for his apartment building. The system proved to be very effective, but the landlord subsequently was sued for religious housing discrimination. Some of his tenants are Orthodox Jews and they can't use the lobby key on the Sabbath or certain religious holidays because Judaic law condemns the destruction of an electric current on those days. The landlord could incur the expense of removing the electronic system to accommodate those tenants, but he is aware that, if any of his other tenants are injured thereafter by an intruder, the legal system will blame him for installing an inferior security system.

Crime also is a serious problem in the workplace. According to the National Institute for Occupational Safety and Health, homicide was among the leading causes of death in the American workplace during the 1980s. Because every business is required to maintain a safe working environment, employers have to take any odd or threatening behavior by an employee very seriously. Years ago, employers used psychological tests on employees who exhibited threatening behavior, but those tests now are illegal in many states because of laws that protect the privacy of workers. A company could dismiss an employee immediately if it believes that other individuals are in danger, but because the evidence usually is circumstantial, there always is the risk of a wrongful dismissal lawsuit. Many states have laws that protect workers from employers who dismiss them for improper reasons.

Organizations that have multilingual workforces must guard against language bias lawsuits. These are being brought by individuals who assert the right to speak their native tongue at the office. The law appears to allow companies to enact English - only policies in circumstances where the company can prove such a policy is a "business necessity." Hospitals probably can justify an English-only policy for their surgical staffs, but many other businesses will have difficulty meeting that legal standard. Meanwhile, a firm that tolerates too much foreign language in the workplace may be vulnerable to a legal action from one of its English-speaking employees. New York's Bellevue Hospital was sued by a clerk claiming to have been isolated by her Filipino-American co-workers.

Manufacturers often find themselves caught between Federal mandates and the liability rules of the various states. Automakers, for instance, have to meet the strict fuel economy standards of the National Highway Traffic Safety Administration. Those have given automakers an artificial incentive to build a higher number of smaller cars since weight reduction is one of the most effective ways of increasing fuel economy. If a car becomes too light, though, the auto company can be held liable for design defects in a products liability lawsuit. (Numerous studies confirm the relationship between vehicle size and occupant safety.) The Federal rules are designed to promote fuel economy, while the state liability rules are meant to promote safety. There may be a safe harbor where automobile manufacturers can go to comply with both the state and Federal rules, but it is an extremely difficult place to find.

When Johnson Controls discovered that part of its battery manufacturing process posed a health risk for fetuses, it prohibited fertile females from working in that area. Johnson could not insulate itself from expensive lawsuits simply by warning the workers of the risk because any child born alive can recover damages from a third party for prenatal injuries. The company quickly was sued for sex discrimination, and the case went all the way to the Supreme Court. The Court found the exclusion policy to be unjustified sex discrimination and ruled that Johnson's fear of tort liability was exaggerated. Four justices, however, appeared to sympathize with Johnson's plight. They observed that the Court's speculative analysis with respect to tort liability would be of "small comfort" to the companies actually exposed to possible lawsuits. The sweeping regulations of the Americans with Disabilities Act (ADA) undoubtedly will make the lives of handicapped persons a little easier, but the primary beneficiary of that law will be the attorneys who litigate alleged violations. For the business community, the ADA means more vaguely defined rules. Employers, for example, no longer can inquire into a job applicant's medical history - including mental illness and drug abuse. Supporters of the ADA claim that such information is not germane to the applicant's ability to meet job requirements, but that premise ignores the fact that productive employees also can be troublemakers.

After a torrent of criticism for the Alaska oil spill, Exxon adjusted its personnel policies so that individuals with a history of alcohol or drug abuse would be excluded from certain tanker positions. In 1992, however, the oil company was sued for "handicap discrimination." An engineer claimed it unlawfully dismissed him because of his alcoholism. Exxon offered the man another job within the company, but he believes that he legally is entitled to be reinstated to his original position as a tanker engineer.

McDonalds Corp. lost $210,000 in a negligent-hiring lawsuit when a customer's three-year-old was assaulted by an employee. McDonalds hired the disabled worker through its McJobs program on the recommendation of a state counselor. The latter knew the employee had a previous conviction for child molestation, but never provided McDonalds with that information. The plaintiffs attorney told the jury that McDonalds should have performed a more thorough investigation into the employee's past.

Health issues

There has been a great deal of publicity with respect to asbestos in recent years. Some magazines and newspapers report that building owners and taxpayers will lay out more than $100,000,000,000 over the next 25 years in an effort to remove the material from structures. One aspect of the asbestos issue that rarely is reported, however, is the fact that many building codes in the 1940s and 1950s required construction companies to use the material because of its fire-resistant qualities. The building codes obviously were passed with the best of intentions, but it hardly seems fair to hold commercial property owners liable for the resulting asbestos-related injuries of tenants and workers today. The legal system may hold the government liable for asbestos exposure in its own buildings, but it is interesting to note that no local unit of government has accepted any responsibility for the asbestos problems in privately owned structures.

Another litigation minefield concerns company policies relating to smoking. During the 1970s, nonsmokers began to prevail in lawsuits against employers who allowed smoking in the workplace. Most companies reacted to those rulings by designating certain areas for smoking; others banned it entirely. During the 1980s, many business firms discovered that they could reduce their health insurance costs and avoid personal injury liability altogether by refusing to hire smokers. Yet, that policy now is prohibited in many states because of smokers' rights legislation.

In May, 1993, Vermont enacted a blanket prohibition on smoking that applies to all public and private commercial property (including restaurants and taverns). The reported health risks associated with secondhand smoke has led many cities and localities to enact similar laws around the country. Even in states that have declined to issue such bans, businesses are being sued under the ADA. Fast food chains, for instance, have been sued by customers with respiratory ailments who demand smokefree dining rooms. The restaurants could inconvenience their smoking customers by prohibiting smoking in the dining room, but that policy also could run afoul of the ADA, according to labor law specialists. Commercial businesses also must accommodate individuals who are addicted to smoking!

It is difficult to calculate how much time, money, and energy are expended every year in an effort to comply with Federal rules and regulations. Some economists believe that the cost of Federal regulations alone is in the neighborhood of 500,000,000,000 per year. Beyond such a burden on the economy is the perversion of the American idea of limited, constitutional government. The Founding Fathers fought against a tyrannical king so they could establish a government that would respect the inalienable rights of individuals. Two hundred years later, it seems as though a business person hardly can make a move without exposing his or her firm to a fine or a lawsuit.

The Clinton Administration appears to be completely oblivious to the oppressive legal climate. The President's domestic policy agenda mostly is about additional rules for the business community (family leave, comprehensive health care reform, etc.). Meanwhile, the number of individuals businesses that actually can afford to "play by the rules" gets smaller every year.

COPYRIGHT 1994 Society for the Advancement of Education
COPYRIGHT 2004 Gale Group