Asset Protection

The Coming Lawsuit Tsunami [Part II]

In my last post, I described how economic downturns always lead people to sue each other out of anger and desperation.  Both of these emotions are plentiful now, and will become more so as the depression deepens.

Perhaps to insure that lawyers don't become jobless as the economic gloom deepens, the Obama administration has declared a legal war on America's employers. Given the severity of the current lawsuit crisis, these proposed laws and executive orders are not unlike throwing gasoline on a fire.

If you're an employer, be forewarned.  It won't be enough to figure out how to pare expenses so your business can survive the worst economic downturn since the 1930s. You also need to prepare yourself for lawsuits by employees and ex-employees under Obama's employment initiatives:

  • The Employee Free Choice Act, if enacted, would eliminate secret ballots in union elections. It would also strengthen the hand of unions in contract negotiation, and stiffen penalties against employers that violate employees' rights during union organizing campaigns or first contract negotiations. Just what you as an employer need to deal with as you're trying to survive in this economy!
  • The Lilly Ledbetter Fair Pay Act, signed by President Obama last month, allows employees to challenge any paycheck they receive as discriminatory.  So now, instead of trying to grow your business in these hard times, you'll be in court defending your pay policies.
  • The Arbitration Fairness Act would invalidate all agreements that require the arbitration of any employment, consumer, or franchise dispute. If enacted, this law would virtually eliminate the much less expensive alternative of arbitration in most legal disputes. So if you fire Mrs. Smith for laziness, in most cases you won't be able to force her to submit to binding arbitration.  She'll see you in court, before a "jury of your peers."  Yeah, right!

If you do any business with the federal government, you have to be even more careful, due to a series of pro-union executive orders Obama recently signed. The two most important ones are:

  • Economy in Government Contracting.  In Obama's words, this order "is going to prevent taxpayer dollars from going to reimburse federal contractors who spend money trying to influence the formation of unions."  Basically, it forbids you from using federal money to fight a union organizing campaign.  You need to pay for such activities with your own assets.
  •  Non-displacement of Qualified Workers under Service Contracts.  This executive order forbids you from using your own workforce if you take over a government contract from another company.  Instead, you need to offer the employees of the previous contractor the right of first refusal to these jobs.  If you don't, the government can disbar you from federal contracts for up to three years.

Together with the trends I discussed in Part I of this article, these initiatives are almost certain to lead to a legal tsunami in the next few years.  I hope you're ready for it.  If not, I'll outline six protective strategies to consider in my next post.


Copyright © 2009 by Mark Nestmann

Update: Congress failed to enact the Employee Free Choice Act and the Arbitration Fairness Act in 2009 and 2010, but both proposals are once again before Congress.

(An earlier version of this post was published by The Sovereign Society.)

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