Threat of Lawsuits Will Make Unemployment Worse

Sam Graves
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Posted: Oct 07, 2011 12:01 AM

Our nation is facing an unemployment crisis unlike anything we have seen for quite some time. Today’s announcement for September’s unemployment numbers is another reminder of how serious our problem is.

Since President Obama took office in January 2009, the number of people unemployed for more than 27 weeks has increased by 124 percent. Equally disturbing is the fact that the average number of weeks it takes for job seekers to find a job is about 40 weeks, the second longest average time that Americans have been unemployed since the statistic was first recorded in 1948.

I am fully committed to helping fix our unemployment problem and helping the long-term unemployed find work, but the provision in the President’s “jobs bill” that would prohibit employers from discriminating against job applicants because they are unemployed is the wrong approach, and may actually do more harm than good.

Title III of the President’s bill takes the unprecedented step of allowing unemployed people to sue on the basis of discrimination if they are not hired for a job, regardless of whether or not the claim is valid.

Under the proposal, it would be “an unlawful employment practice” if a business with 15 or more employees refused to hire a person “because of the individual’s status as unemployed.” Although it would be almost impossible to prove this, unsuccessful job applicants could sue and recover damages for violations, just as when an employer discriminates on the basis of a person’s race, color, religion, sex or national origin.

There are some policies in the “American Jobs Act” that House Republicans agree with, but this is not one of them. This provision creates more business for trial lawyers, not small businesses, by opening the floodgates to increased litigation.

Small businesses already face the harsh reality of burdensome and complex regulations during a down economy. The fear of a discrimination lawsuit under Title III would particularly disincentivize them from hiring new employees, contrary to the very purpose of the plan. A 2007 study, commissioned by the Institute for Legal Reform, concluded that small businesses alone pay $98 billion a year due to frivolous law suits – money that could have been used to hire more workers, expand businesses, or improve employee benefits.

As Chairman of the House Small Business Committee, I hear about government policies that burden entrepreneurs and prevent small business job creation every week. This lawsuit threat may be one of the most onerous.

In our Committee’s new interactive website called “Small Biz Open Mic” an owner who runs a small dentist office in Irving, TX expressed her frustration with this additional burden.

“If the President’s Jobs Bill is passed, my business will be opened up to lawsuits if I hire someone other than a long-term unemployed person,” said this small business owner. “I would hire the best person for my business, regardless of their unemployment status. I have decided not to hire under these conditions. How does that help the unemployed?”

Richard Singer, a small business owner in Bay City, Michigan, knows all too well about frivolous lawsuits. His small family-owned foundry was subject to a 3-year lawsuit that was finally dismissed in 2009. Unfortunately, due to his legal bills, coupled with the dire economic conditions in Michigan, Mr. Singer was forced to lay off some of his employees and continues to struggle to keep his business profitable.

“Any time an entrepreneur decides to go into business for himself, he’s incurring a lot of risk, and the rewards are not guaranteed by any means,” said Mr. Singer. “When you throw in the additional risk of lawsuits and their potential cost, it has a serious effect on the economic engine of this country.”

I fully sympathize with the pain and struggle that millions of Americans are facing today when trying to find work. My goal is to remove government barriers for job creation in the private sector, so that businesses start hiring again. Helping the long-term unemployed is necessary, but it’s important that Washington doesn’t enact legislation that does more harm than good.