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Abstract:
This essay discusses nonunion employment contracts. It describes several important contract doctrines that have significantly eroded the once virtually irrefutable employment-at-will presumption. Two factors appear to determine whether employees receive protection against discharge: (1) jurisdictional variation among liberal, conservative and centrist states, and (2) the definiteness and specificity of any alleged assurances of job security. Recently, scholars have also debated the normative question of whether the at-will rule is a desirable default, offering various economic arguments in support of a just cause regime. The essay questions whether the existence of implicit agreements for career employment justifies making such informal agreements legally enforceable. Workers cognitive limitations and strategic problems such as signaling and adverse selection produce ambiguous behavioral predictions, and thus they too provide an uncertain basis for reform. A nascent empirical literature has begun to provide valuable information about actual contract practices. Thus, for example, arguments based on adverse selection must confront the inconvenient fact that a significant number of employers (government agencies, unionized firms, and about 15% of nonunion employers) contract for legally enforceable just cause protection. Other important empirical work has raised doubts about the extent of workers legal knowledge. The essay concludes that more and better evidence on these questions is needed to justify displacing the current at-will default.

Abstract:
Advocates for laws prohibiting employment discrimination on the basis of disability most often aspire to protect the dignity and opportunity for personal fulfillment available to individuals with disabilities. However, concern for human dignity provides no stopping point, no indication of when it might be permissible to deny an employment opportunity to someone with a disability, perhaps even because of that person's disability. And yet, at an intuitive level, everyone seems to understand that the law must contain limits, qualifications, and exceptions. In short, disability discrimination is sometimes morally and politically legitimate. Existing economic arguments either offer no defense of the ADA's distinctive duty of reasonable accommodation or provide too little guidance about how far that duty should extend. Adapting an informal economic model of employee turnover that I have used in prior work, I show how incomplete and asymmetric information about disabling conditions can produce the labor market inefficiencies of mismatching, churning, and scarring. The model illuminates both the reasons for imposing a duty of accommodation and the circumstances in which that duty should be diminished or eliminated entirely. My analysis also provides new support for the conventional intuition that discrimination protection is most appropriate for characteristics beyond an individual's control. Finally, I show how current patterns of EEOC charges and ADA litigation provide some empirical confirmation that the framework is relevant.

Abstract:
People are often ignorant about the legal rules that govern the most common transactions in their lives. This article analyzes one common regulatory response to our widespread legal ignorance. A surprisingly broad range of legal rules have the ostensible purpose of inducing sophisticated parties to draft express contract language that will inform their contractual partners about the legal rules governing a particular transaction. However, this legal-information-forcing objective often remains unrealized because people routinely sign contracts without reading and understanding their terms. In theory, courts could design information-forcing rules that would be truly informative. But recognizing the potential futility of attempts to inform many contracting parties about complex legal rules, the article also explores several alternative justifications for doctrines that encourage sophisticated parties to draft express contract terms. Such terms could facilitate the activities of avid comparison shoppers. Comprehensive written terms also may promote ex post legal clarity and thereby reduce the costs of resolving disputes. Finally, a litany of exculpatory clauses effectively allows parties to contract out of the comparatively expensive legal system of dispute resolution in favor of a regime governed by informal social norms. The normative desirability of these rules is somewhat less clear, but my exploration of alternative justifications shows the conceptual poverty of current judicial and legislative reliance on the informative content of express contract terms.

Abstract:
The Americans with Disabilities Act (ADA) is a significant legal intervention designed to improve outcomes for people with disabilities. In this article, I use an informal model of worker-firm matching as an organizing framework to explore the economic effects of disability discrimination law in the workplace. The framework shows how the presence of individuals with disabilities in the labor market creates precisely the conditions - incomplete and asymmetric information - that can lead to inefficient mismatching, "employee churning," and "scarring." In contrast to the conclusions of more conventional economic analyses, I argue that the statutory duty of reasonable accommodation promotes labor market efficiency by combating churning and scarring. The duty to accommodate constrains employers whose private gains from discharging disabled employees often produce social losses which are borne by other employers and by public disability insurance schemes. The framework thus sheds new light on how disability discrimination law influences labor market efficiency.

Arguments based on distributive justice and the dignitary interests of people with disabilities have always been - and will no doubt remain - a critical part of the policy debate. Nevertheless, an efficiency defense of accommodation mandates bolsters these non-economic arguments offered in support of the ADA. It also challenges the conventional conclusion that a statutory duty of accommodation most closely resembles an implicit tax and transfer scheme with purely redistributive effects. Moreover, my analysis of comparative accommodation costs identifies some areas of tension between dignitary and efficiency approaches to accommodation. Thus, for example, we can pursue complete freedom of choice for individuals with disabilities only if we are willing to compromise significantly the economic objective of matching. By identifying more clearly the diverse ways in which accommodation promotes both economic and non-economic goals, we can hope that legal doctrine will tend to express a more orderly balancing of these values.

Abstract:
The Americans with Disabilities Act (ADA) is a significant legal intervention designed to improve outcomes for people with disabilities. In this article, I use an informal model of worker-firm matching as an organizing framework to explore the economic effects of disability discrimination law in the workplace. The framework shows how the presence of individuals with disabilities in the labor market creates precisely the conditions - incomplete and asymmetric information - that can lead to inefficient mismatching, "employee churning," and "scarring." In contrast to the conclusions of more conventional economic analyses, I argue that the statutory duty of reasonable accommodation promotes labor market efficiency by combating churning and scarring. The duty to accommodate constrains employers whose private gains from discharging disabled employees often produce social losses which are borne by other employers and by public disability insurance schemes. The framework thus sheds new light on how disability discrimination law influences labor market efficiency.

It is important to remember that arguments based on distributive justice and the dignitary interests of people with disabilities have always been - and will no doubt remain - a critical part of the policy debate. Nevertheless, an efficiency defense of accommodation mandates bolsters these non-economic arguments offered in support of the ADA. It also challenges the conventional conclusion that a statutory duty of accommodation most closely resembles an implicit tax and transfer scheme with purely redistributive effects. My analysis of comparative accommodation costs also illustrates some areas of tension between dignitary and efficiency approaches to accommodation. We can pursue complete freedom of choice for individuals with disabilities only if we are willing to compromise significantly the economic objective of matching. By identifying more clearly the diverse ways in which accommodation promotes both economic and non-economic goals, we can hope that legal doctrine will tend to express a more orderly balancing of these values.

Abstract:
This chapter focuses on economic analysis of the legal rules governing involuntary termination of the employment relationship. It describes the legal framework governing discharge in the US and compares those rules to job security provisions in other countries. I also offer a critical review of the theoretical and empirical literature on employment protection. Aside from the observation that increased firing costs will reduce turnover, economic theory produces mostly ambiguous predictions that depend on the structure of the model and assumptions about crucial parameters. Contrary to an oft-cited assertion in Lazear (1990), there is no feasible employment contract that ensures Coasean invariance to legally mandated firing costs. An extensive empirical literature broadly supports the notion that employment protection reduces aggregate employment, but other results have been decidedly mixed. Nevertheless, the available empirical evidence casts doubt on many of the market failure stories that advocates of legally mandated just cause protection offer to explain the prevalence of at-will contracts at private sector employers. The chapter concludes by proposing a new approach to measuring legal variables for the purposes of estimating their effect on the US labor market. First, we should focus on the marked differences among jurisdictions in the stringency of their employment law doctrines. Second, we should model explicitly the process by which both multi-state employers and cross-jurisdictional influences create powerful spillover effects.

Employment Practice, Labor Law, Law and Economics, Employment law, empirical studies, measuring legal rules, international comparisons, employment-at-will, employment contracts

Abstract:
A lively debate has raged in recent years about how to regulate employment reference practices. According to the conventional account, employers refuse to provide candid references because they fear defamation liability and perceive only the most speculative benefits from exposing themselves to the risk of suit. As a result, almost everyone appears to agree that employers are getting too little information about prospective employees. An intuitively appealing response to this problem would be to impose on the former employer a duty to disclose. Another obvious possibility is to reform defamation law so as to reduce the threat of liability that employers face when they provide candid references. Although these are plausible policy options, prior commentators have seriously underestimated the difficulty of designing appropriate legal reforms. The framework that I develop in this Article highlights the unique problems associated with regulating information flows and reveals complex interactions among the various legal and economic forces that influence employment reference practices. In particular, I examine three potential inefficiencies arising from employee turnover -- mismatching, churning, and scarring. Contrary to the conventional wisdom, I conclude that defamation law functions reasonably well in its present form, that disclosure obligations might well produce more harm than good, and finally that the most promising legal reforms are those that focus on the problems associated with hiring for high-risk occupations. I also explore how the law might facilitate both preexisting and innovative market mechanisms for information sharing.

Abstract:
A lively debate has raged in recent years about how to regulate employment reference practices. According to the conventional account, employers refuse to provide candid references because they fear defamation liability and perceive only the most speculative benefits from exposing themselves to the risk of suit. As a result, almost everyone appears to agree that employers are getting too little information about prospective employees. An intuitively appealing response to this problem would be to impose on the former employer a duty to disclose. Another obvious possibility is to reform defamation law so as to reduce the threat of liability that employers face when they provide candid references. Although these are plausible policy options, prior commentators have seriously underestimated the difficulty of designing appropriate legal reforms. The framework that I develop in this Article highlights the unique problems associated with regulating information flows and reveals complex interactions among the various legal and economic forces that influence employment reference practices. In particular, I examine three potential inefficiencies arising from employee turnover -- mismatching, churning, and scarring. Contrary to the conventional wisdom, I conclude that defamation law functions reasonably well in its present form, that disclosure obligations might well produce more harm than good, and finally that the most promising legal reforms are those that focus on the problems associated with hiring for high-risk occupations. I also explore how the law might facilitate both preexisting and innovative market mechanisms for information sharing.