BE HEARD Act would harm small business and Virginia’s business climate

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Small businesses in Virginia could face a very different business climate next year, due to Joe Biden’s support for laws like the BE HEARD Act.

Under the BE HEARD Act, even the tiniest employers with only one or two employees will face unlimited liability in lawsuits, for things like discrimination, or harassment committed by an employee. It would also make confusing changes to the legal definition of sexual harassment that could lead to small businesses being liable for trivial acts by an employee. These small employers would also be liable for attorneys fees that could dwarf what they end up paying workers who sue them.

Right now, small businesses in Virginia aren’t covered by most federal discrimination laws like Title VII, unless they have at least 15 employees. This doesn’t mean they can get away with being racist. If they intentionally discriminate based on race, they can be sued under a federal race discrimination law that covers even the smallest employers, 42 U.S.C. 1981. And if they fire someone for a non-race-based reason — such as because of their sex, age, or religion — they can be sued under Virginia state law, if they have more than five employees. Under the 2020 Virginia Values Act, they can be ordered to pay such employees lost wages; emotional-distress damages; and up to $350,000 in punitive damages. (As originally introduced, the Virginia Values Act removed limits on punitive damages, but the final version of the law leaves in place the general $350,000 limit contained in Virginia state law).

But businesses with fewer than 15 employees aren’t covered by federal laws against unintentional discrimination, or non-racial discrimination.

But the “BE HEARD” Act, which Biden has repeatedly touted, would change this. It treats small business just like big businesses, by subjecting them to unlimited damages in lawsuits. It does that by first subjecting even the tiniest employers to federal law (Title VII) — and then by abolishing the limits on compensatory and punitive damages. Right now, federal law doesn’t limit the amount of lost wages workers can collect in a lawsuit. But it does limit the amount of punitive and compensatory damages that the business has to pay for things like emotional distress. Such punitive and compensatory damages are typically capped at levels that vary based on the size of the employer ($300,000 for the largest employers. See 42 U.S.C. 1981a(b)(3)).

The BE HEARD Act would abolish those caps for every employer, including the tiniest. So they would be subject to liability without limit.

But the biggest problem small business would have as a result would not be those damages, but lawyers’ bills. Every time an employer loses a federal discrimination lawsuit, it has to pay the attorneys’ fees of the workers’ lawyer. But if the employer wins, it typically doesn’t recover any of its attorneys’ fees from the worker. This means the employer always ends up paying a bundle when it is sued for discrimination.

Big businesses can afford to pay hundreds of thousands or millions in attorneys fees. Small businesses can’t, and can go broke due to a single protracted discrimination lawsuit.

Those attorneys’ fees are often much bigger than the amount of money the worker gets from suing the employer — meaning that it is lawyers, not workers, who are the primary beneficiaries of federal antidiscrimination laws. That can encourage lawyers to sue businesses over minor violations. For example, a court awarded a worker over $40,000 in attorney fees against her employer, even though she suffered only $1 in damages in Brandau v. State of Kansas (1999).

And that doesn’t cover a business’s own legal costs. Remember, it has to pay its own lawyer, too. Years ago, it was estimated to cost $25,000 for an employer to get a very weak discrimination lawsuit against it dismissed at the earliest phase of litigation (“motion to dismiss”), $75,000 to get it dismissed at a later phrase (“summary judgment”) and $250,000 to defeat a discrimination lawsuit that makes it all the way to a trial.

The BE HEARD Act would also allow businesses to be sued long after memories have faded, making it hard to defend themselves. It extends the statute of limitations from 180 days to 4 years. It classifies commonplace hiring criteria as “discrimination,” by expanding the legal definition of unintentional discrimination to put the “burdens of production and persuasion” on employers in disparate-impact lawsuits. It also holds employers liable for certain unintended pay disparities by incorporating the Paycheck Fairness Act, which is discussed at this link.

It holds employers strictly liable for harassment committed by supervisors in violation of company policy. It defines people as supervisors, even when they really aren’t, because they lack the authority to hire, fire, or promote anyone. It allows not just employees, but also interns and independent contractors, to sue employers.

It also redefines sexual harassment and discriminatory harassment in ways that will be confusing to jurors and may lead them to find an innocent employer guilty.

For example, it says conduct can be “workplace harassment” even if “the conduct occurred outside the workplace.” It gives a long long list of things that typically are not true of workplace harassment, and then says that conduct may be harassment “regardless” of them. It states:

conduct may be workplace harassment regardless of whether, for example—

“(A) the complaining party is not the individual being harassed;

“(B) the complaining party acquiesced or otherwise submitted to, or participated in, the conduct;

“(C) the conduct is also experienced by others outside the protected class involved;…

“(F) the conduct occurred outside of the workplace.”

But according to court rulings, all these things logically weigh against a finding of workplace harassment. If conduct occurs outside the workplace, it is less likely to be workplace harassment. (See Alvey v. Rayovac Corp. (1996)).

If conduct is not even aimed at you, it is less likely to harass or intimidate you. (Gleason v. Mesirow Financial).

If you participated in the conduct without being pressured to do so, it wasn’t sexual harassment. (Scusa v. Nestle USA (1998)).

If conduct is experienced by both men and women, it is less likely to be sexual harassment. (See Holman v. Indiana (2000)).

So it is foolish and misleading to suggest that conduct is “harassment regardless” of these factors.

Telling juries they don’t matter could lead to confused juries finding a small business liable for harassment based on trivial things that aren’t harassing, such as speech about racial, sexual, or religious issues.

The BE HEARD Act also fosters confusion and ambiguity in other ways. Under current Supreme Court precedent, conduct has to be more than trivial — “severe or pervasive” — to constitute sexual or discriminatory harassment. (See Clark County School District v. Breeden (2001)).

So employers don’t need to ban harmless joking. The bill complains that “some lower court decisions have treated ‘severe or pervasive’ as a threshold for liability.” But that’s exactly what the Supreme Court did in its Breeden decision.

By eroding the “severe or pervasive” limit, the bill will pressure institutions to restrict speech about sexual, religious, or racial issues that is not severe or pervasive, leading to First Amendment violations: Courts have overturned campus sexual harassment policies that prohibited speech that was not severe or pervasive. (See Saxe v. State College Area School District (2001); DeJohn v. Temple University (2008)). A college lost a First Amendment lawsuit after it punished a professor for a sexual metaphor that mildly offended listeners. (See Silva v. University of New Hampshire (1994)).

Similarly, judges have also questioned the constitutionality of religious harassment rules that penalize workplace speech about religion that does not really harm the complainant. (See Meltebeke v. Bureau of Labor & Industries, 903 P.2d 351 (Or. 1995) (Unis, J., concurring)).

The BE HEARD Act ignores those court rulings.

It declares that several well-known court rulings contain an “erroneous analysis” about what constitutes sexual harassment — such as “Black v. Zaring Homes.”

But there was nothing wrong or odd about that 1997 federal appeals court decision, which was written by a female judge, and issued by a mostly-female panel of judges appointed by both Democratic and Republican presidents. It dismissed a sexual harassment lawsuit because the plaintiff had sued over relatively trivial things, like a worker joking about liking “sticky buns,” while reaching for a pastry.

By rejecting sensible court rulings clarifying what does — and doesn’t — constitute “harassment,” the BE HEARD Act could lead to sexual harassment law being unconstitutionally vague and overbroad.

The definition of sexual harassment is already rather vague. A court ruled that a standard college sexual harassment policy was unconstitutionally vague as applied to a professor’s longstanding sexually-oriented lectures, because it lacked detailed guidance clarifying and fleshing out its meaning. (See Cohen v. San Bernardino Valley College (1996)).

By classifying more speech as harassment, the BE HEARD Act will lead to censorship. Its many provisions hostile to employers will harm the business climate and make it harder for businesses to thrive and create jobs.

A version of this commentary was originally published on August 4, 2020 in the online Liberty Unyielding.

Hans Bader

About Hans Bader

Hans Bader, a former Competitive Enterprise Institute scholar, is an attorney living in Northern Virginia.
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