Private lawmaking and discrimination

Ian Ayres and Jennifer Gerarda Brown have posted an interesting paper on the potential for private lawmaking, Mark(et)ing Nondiscrimination: Privatizing ENDA with a  Certification Mark. Here’s the abstract, with some of my comments following:

A little-known piece of intellectual property, the certification mark, provides a viable mechanism for employers to commit to the exact substantive duties of the proposed "Employment Non-discrimination Act," which if passed would prohibit disparate treatment on the basis of sexual orientation. By signing the licensing agreement, an employer gains the right (but not the obligation) to use the mark and in return promises to abide by the word-for-word strictures of ENDA. Other certification marks (such as the Good Housekeeping Seal, the UL (Underwriters Laboratory), and the Orthodox Union (Kosher) marks) require the owner of the mark police licensees, but our proposed "Fair Employment" mark allows employees and applicants to enforce the ENDA duties directly as express third-party beneficiaries of the license. The "Fair Employment" mark thus replicates the core enforcement mechanism of ENDA by creating private causes of action in the same class of individuals.

The mark provides a mechanism for producing precedent about a statute before the statute is ever enacted. The cases enforcing the mark's requirements would provide legislators with information about how the statute might be interpreted, as well as a lower bound on the litigation rates it might engender. The mark represents a new form of federalism. Instead of jurisdictional federalism, the mark facilitates corporate federalism - whereby individual corporations can experiment with taking on the duties of a proposed bill. Employers might sign the license (and thereby take on the risk of discrimination liability) to: 1) induce more sales - including state and local EEO officers who are charged to contract only with non-discriminating employers; 2) recruit employees - including gay-friendly as well as gay applicants; and 3) appease input suppliers - including accreditation organizations and unions that already press for non-binding nondiscrimination provisions. Some employers might sign the license because their employees already have private rights of actions under state law or local ordinances. This article includes original empiricism suggesting that the litigation cost to employers in states that have prohibited sexual orientation discrimination has been quite modest. Still others may sign simply because it is the right thing to do. Many, many employers have already included sexual orientation in their non-binding nondiscrimination policies. For such employers, signing the license may mean only that the employer will never defend a claim by denying that it promised not to discriminate.

The proposed strategy apparently deals with the cost of private lawmaking by piggybacking on proposed legislation – thus letting legislators and interest groups do the legislative drafting, and using the legislative drafting process to give the proposal initial credibility. 

Although the authors appear to rely on contract remedies for enforcement, an additional mechanism is through reputational penalties incurred by discriminators, triggered by the bringing of contract enforcement actions.  See Bradford, Discrimination, Legal Costs and Reputational Costs. This would require some public consensus about the consequences of violating the act, but perhaps such a consensus would result from sufficiently widespread employer buy-in through ENDA certification.

This approach has some interesting implications. In general, given the potential for private lawmaking, when is public lawmaking, either in legislatures or through court decisions, necessary? In other words, while the authors envision ENDA certification as a pre-enactment strategy, why is enactment ever required? Indeed, success of the certification arguably could reduce demand for the law.  On the other hand, the authors argue that a public choice dynamic might set in where complying companies, which presumably are those that have the lowest compliance costs, lobby for a law requiring their higher-cost competitors to comply. This raises the question whether, given the potential for competition and variation among firms regarding discrimination, a law requiring uniform compliance is a good thing.

The next question is in what other areas, particularly those involving contentious social issues, would this mechanism be feasible?

Update: There's a website for the fair employment certification mark the authors suggest.  All of which makes me wonder more about the respective roles of private and public lawmaking.