We need to tread carefully as we consider the expansion of legal sanctions for harassment in the workplace. Proposed SB176, Protecting Opportunities and Workers’ Rights Act, is sponsored by Colorado Senators Faith Winter and Brittany Pettersen, and Reps Susan Lontine and Matt Gray. The bill makes multiple fundamental changes to employment law – including topics that should be treated in depth individually.
By expanding the reach of anti-discrimination law, it moves into dangerous territory and would likely not gain traction in a legislative environment with more balanced views. With strong Democrat majorities in both chambers (41/24 in the House, 20/15 in the Senate) and a Democratic Governor, the opportunities for more thoughtful solutions are elusive.
- The bill, a response to recent popular movements around discrimination, goes too far and is unnecessary. There are already strong protections for workers who are subject to acts of harassment in the workplace. Unfortunately, this may overwhelm a process that should be a path to justice for more serious grievances and legitimate claims.
- SB176 will raise the cost of doing business in Colorado by increasing the likelihood and costs of litigation, regardless of the merit of a complaint.
- These costs are an outsized burden to small independent businesses. They are beleaguered by the proliferation of regulations from all layers of government that they lack the resources to sustain.
It is worth recognizing that there is no bright line between what should be socially sanctioned behavior and what should be legally sanctioned in the complex world of social, interpersonal engagement. Yet the popular and rapidly growing policy trend is to capture a broader number of interpersonal exchanges into the scope of legal sanctions. This introduces a lot of uncertainty. What is legal or illegal conduct or communication between two people? And what impact will the threat of litigation have on the free association of individuals who depend on each other for opportunity?
Background:
Recent public social campaigns have posed major challenges to existing norms. They have led to introspection, conversation, conflict and adaptation. We are expecting individuals to drill down into multiple social and situational cues – those both easily recognized as well as those that are much more nuanced and contextual. #MeToo, Black Lives Matter, and COVID have forced us to explore and revise norms that guide us in every interaction and at all levels of intimacy. These are changes that must be allowed time to be considered, challenged, and adopted as norms. That cannot happen all at once, everywhere.
Change is a messy, collaborative, inspiring, difficult, and ongoing process –
Beth Comstock, a former vice of General Electric who operated GE Business Innovation.
like everything meaningful that leads to human progress.
There are hazards of setting one standard that requires a high level of personal and contextual discernment. Added to this complex mix is the reality that as individuals, we have unique temperaments that influence the way another person might perceive our intentions.
Working with someone on the autism spectrum, for example, demonstrates what so many of us take for granted. Even those with mild autism may struggle to understand infinite and abstract social cues. They may be shunned for not observing social norms. But it may be because they lack the ability to read a situation. It is quite painful to grow up with that constant friction.
Recent social unrest has made it critical for those engaging in the economy to be more sensitive and aware. This law further threatens the ability of those with autism to engage in our economy. It pushes against efforts by a growing number of employers who earnestly work to accommodate their needs and discover their unique gifts.
Their plight helps us to acknowledge that this friction exists for all of us at some level. Situational awareness is surprisingly complex. It is an ongoing learning process every time we enter a new or different environment.
What this bill would do.
Challenging the underlying assumptions:
- It would allow an aggrieved employee to circumvent the CO Civil Rights Process and file a civil action directly in a state or county court. (*update, Apr 1, below)
- Assumption: We should relieve the lack of capacity in the CCRD process and allow for a direct route to a civil court. The Colorado Civil Rights Division is a Division of the Colorado Department of Regulatory Affairs.
Provisions in SB176 allow a claimant to skip a process that the Colorado Legislature recently reviewed in 2018. Bi-partisan support for HB 18-1256 validated the role of CCRD as a reasonable approach to conflict resolution.
HB1256 appropriated funding for a performance audit of the Division and its governing Commission. The State Auditor issued a report (summary) in September 2019 listing a number of recommendations to improve operations that any business practitioner would recognize as essential. We should not accommodate poor management, but instead, do the hard work of making it the effective conflict resolution tool the agency was meant to be. The full State Auditor’s report can be found here.
This is especially important given the trend to add a heavier adjudication load with laws like pay equity and the recently passed paid leave. Paid leave is relevant because we expect Colorado’s department of labor to build from scratch an adjudication system for those related grievances. There is even a potential for the stacking of harassment and paid leave-related retaliation. Are we expecting different results?
In sum, the carving out of the troubled but essential administrative process should not stand.
- SB176 would lower previous thresholds for the definition of harassment, “severe or pervasive,” and opens it up to any one action that an employee believes is discriminatory. The bill language states: “A single incident of harassing conduct can be sufficient to create a hostile work environment, regardless of whether the harassing conduct is severe or pervasive.”
- Assumption: “severe and pervasive” are not a low enough threshold. We need to capture even one word or interaction and shift it from social sanction into the scope of legal sanctions.
This is a mistake. While there seem to be incidences that deserve recognition and escape current protection, this solution is too sweeping. The trade-offs and costs will be high. Such a broad definition will inhibit interpersonal engagement and invite expensive lawsuits that may be without merit. “Severe and pervasive” should stand.
- It would expand the definition of a hostile work environment.
- Assumption: a hostile work environment should be redefined to include anything that “undermines a person’s sense of well-being.”
This goes too far, is vague, and subject to personal interpretation.
- It would prevent parties from agreeing to joint confidentiality. This bill protects that right to confidentiality only for the employee or plaintiff.
- Assumption: An employer should not have the right to an agreement of confidentiality. That right to confidentiality should be available only to the employee/plaintiff.
This is not only a violation of fairness, but will also reduce the opportunity for effective reconciliation.
- Independent Contractors: It may make employers liable for the conduct of an independent contractor (IC).
- Assumption: We should capture third-party transactions and relationships through the legal definitions of IC. Existing definitions of employment classification should close the gap that may allow for an escape from liability for discriminatory behaviors. Independent contractors deserve protection from harassment.
SB176 would add confusion to already controversial and confusing definitions that hinge on the idea that the employer cannot exercise direct control or supervision over an IC. This would make the navigation of these working relationships more difficult and risky. It will reduce the ease of doing business among diverse business entities.
It is not well understood how far the liability extends for these complex relationships. This is part of a much larger debate as our economy has evolved. Innovative working arrangements are rapidly challenging a regulatory regime built on outdated employment models. These definitions continue to grow more confusing and complex, making them hard for businesses to manage without significant (and expensive) legal support. This bill is not the place for such far-reaching policy debates.
Provisions that further erode the clarity of employee and independent contractor and their lines of responsibility is a reason to oppose this bill.
Pricing the risks gives us clues that we are approaching harmful or excessive labor protections.
Insurance providers take the temperature of our litigation climate. The cost of protecting fragile assets and business viability as these risks grow is rising rapidly. If Colorado’s litigation risks rise to the level of those in California, for example, we will see an exit from our state of insurers offering these risk management products. As it stands, likely due to the combined impacts of #MeToo, Black Lives Matter, and COVID, the rapid rise in filing complaints is leading to rising employment practices liability insurance (EPLI) rates (10 – 50%). Deductions are climbing, as well as exclusions (including certain industries losing access).
Only 23% of businesses with fewer than 100 employees are covered by EPLI, making them particularly vulnerable. Colorado’s passage of the “Job Protection and Civil Rights Enforcement Act of 2013” extended liability to employers with fewer than 15 employees in 2013 with the passage of HB13-1136.
According to the 2017 Hiscox Guide to Employee Lawsuits, the average cost to defend and settle a claim is $160,000. The likelihood of a firm being sued varies widely by state. In 2017, Hiscox found a 10.5% chance nationwide, but for CA, NV, and NM, for example, those percentages range between 46% and 55%.
A representative study of 1,214 closed claims reported by small- to medium-sized enterprises (SMEs) with fewer than 500 employees showed that 24% of employment charges resulted in defense and settlement costs averaging a total of $160,000.
The average employer’s self-insured retention deductible for these charges was $50,000.
2017 Hiscox Guide to Employee Lawsuits
For small independent firms, the disruption to existing laws that govern relationships with independent contractors is a deep concern.
Threatening the freedom to operate as an independent contractor presents a direct challenge to small firms’ ability to compete in our economy. With rising labor costs, the ability to transact with ICs is a lifeline.
Excessive labor laws threaten to make hiring an obstacle to avoid rather than a resource for growth and success.
We risk having an economy that encourages businesses to start small and stay small. There is a growing concern for a decline in business formation with the intention to hire and establish a payroll. The US Census Bureau’s Business Formation Statistics follows the trends of job creators. Most net job creation comes from young growing firms. This tells a story if we are willing to listen.
We risk a bifurcated economy with very small firms at one end and large, mature firms at the other. The threats to both small and young or startup businesses from excessive regulations limit their agility and viability. They present a barrier to growth that will prevent small firms from challenging larger firms from below and creating jobs.
It follows that the diversity of job opportunities will skew heavily toward only large firms. Many who value the non-pecuniary rewards of working for a small firm will suffer from that loss.
In sum, small businesses suffer the most from over-reaching labor laws and must have the freedom to engage with independent contractors.
It is clear that there are still incidents of conduct that are harmful and not acceptable. But like any tough problem, that “last mile” is often the most expensive. At some point, we must trust individuals to resolve their own conflicts. This is not the time to be expanding existing legal protections with a broad, far-reaching bill like SB176. Instead, it is time to show a modicum of patience and allow employees, employers, our present adjudication system, and the economy to adapt and absorb the already present changes and challenges.
*Update as of April 1, 2021. In a Senate Judiciary hearing, the first committee to hear testimony and consider the bill, sponsors proposed several amendments. Among them was the elimination of the terms that allowed an employee with a grievance to circumvent the administrative process of CCRD, L.006. As of this posting, however, the bill has been laid over and has not been passed out of that first committee. Further, it faces a number of hurdles before those amendments can be considered secure.
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