Forbidden Grounds: The Case against Employment Discrimination Laws

by Richard A. Epstein

This timely and controversial book presents powerful theoretical and empirical arguments for the repeal of the anti-discrimination laws within the workplace. Richard Epstein demonstrates that these laws set one group against another, impose limits on freedom of choice, unleash bureaucratic excesses, mandate inefficient employment practices, and cause far more invidious discrimination than they prevent. Epstein urges a return to the now-rejected common law principles of individual autonomy that permit all persons to improve their position through trade, contract, and bargain, free of government constraint.

Genres: Politics, Economics, Philosophy, History, Law

548 pages, Paperback

First published January 1, 1992

About the author

Richard A. Epstein is the James Parker Hall Distinguished Service Professor Emeritus of Law and Senior Lecturer at The University of Chicago Law School.

Epstein started his legal career at the University of Southern California, where he taught from 1968 to 1972. He served as Interim Dean from February to June, 2001.

He received an LLD, hc, from the University of Ghent, 2003. He has been a member of the American Academy of Arts and Sciences since 1985 and a Senior Fellow of the Center for Clinical Medical Ethics at the University of Chicago Medical School, also since 1983. He served as editor of the Journal of Legal Studies from 1981 to 1991, and of the Journal of Law and Economics from 1991 to 2001.

His books include The Case Against the Employee Free Choice Act (Hoover 2009); Supreme Neglect Antitrust Decrees in Theory and Practice: Why Less Is More (AEI 2007); Overdose: How Excessive Government Regulation Stifles Pharmaceutical Innovation (Yale University Press 2006); How Progressives Rewrote the Constitution (Cato 2006). Cases and Materials on Torts (Aspen Law & Business; 8th ed. 2004); Skepticism and Freedom: A Modern Case for Classical Liberalism (University of Chicago 2003): Cases and Materials on Torts (Aspen Law & Business; 7th ed. 2000); Torts (Aspen Law & Business 1999); Principles for a Free Society: Reconciling Individual Liberty with the Common Good (Perseus Books 1998): Mortal Peril: Our Inalienable Rights to Health Care (Addison-Wesley 1997); Simple Rules for a Complex World (Harvard 1995); Bargaining with the State (Princeton, 1993); Forbidden Grounds: The Case against Employment Discrimination Laws (Harvard 1992); Takings: Private Property and the Power of Eminent Domain (Harvard 1985); and Modern Products Liability Law (Greenwood Press 1980). He has written numerous articles on a wide range of legal and interdisciplinary subjects.

He has taught courses in civil procedure, communications, constitutional law, contracts, corporations, criminal law, health law and policy, legal history, labor law, property, real estate development and finance, jurisprudence, labor law; land use planning, patents, individual, estate and corporate taxation, Roman Law; torts, and workers' compensation.

Reviews

[Toe · Rating 3 out of 5]

Objective Summary
Introduction
Epstein advocates for repealing Title VII of the Civil Rights Act of 1964. Antidiscrimination violates freedom of contract. Labor markets do not require intervention of the sort antidiscrimination laws represent because there are no problems of hold out, coordination, public goods, externalities, or fraud when firms select whom to hire. Title VII is an inefficient means of wealth redistribution.

Chapter 1
People own themselves and their labor. They should be able to offer their services as they wish. Discrimination in employment is not the same as force because no one has a right to the job another is offering (or not offering).

Chapter 2
In competitive markets with free entry, everyone will have more choice even if some employers discriminate. Competitors and laborers can combat discrimination with lower prices.

Chapter 3
Some discrimination is rational in competitive markets. It lowers the cost of searches and governance. Informal and reputational considerations make some discrimination efficient, though the efficiencies gained are more prevalent in long-term contracts than single sales. Title VII imposes hidden costs by disallowing the efficiency gains. Epstein would let employers decide how to hire their workforce.

Chapter 4
Selling goods is not the same as entering into employment contracts. Nondiscrimination required of common carriers prevents them from charging monopoly prices. But virtually no employers are monopolies.

Chapter 5
Jim Crow laws were an overreach of local government. Laws required segregation that economics would not justify. Doctrine of “separate but equal” was justified and upheld by courts under the police powers of the state. The Supreme Court was too passive and deferential in accepting arguments about health and welfare benefits of segregation under the police powers.

Chapter 6
From 1937 to 1964, the Supreme Court’s unwillingness to protect property rights, and its deference to state and federal legislatures in economic matters, allowed unions to discriminate to the detriment of blacks, who could not bargain for lower wages or more work. Labor laws and minimum wage laws helped enable the practice of racial discrimination.

Chapter 7
In the text of the Constitution, it is unclear whether Congress should have the power to regulate public accommodations or employment discrimination. The Civil War Amendments (13 and 14) and Commerce Clause are the best possible sources of textual authority. The Commerce Clause, as interpreted in Wickard v. Filburn, gives Congress the power to impose antidiscrimination laws.

Chapter 8
Epstein advocates for an unregulated (or minimally regulated) competitive market with at-will contracts. Those who enter such contracts are better positioned to know their preferences than academics or politicians.

Chapter 9
Epstein would repeal Title VII’s application to private entities when there is free entry into the marketplace because private contracts are superior to government regulations. Enforcing the antidiscrimination regulations requires covering all aspects of employment, and courts must engage in difficult and costly motivation analysis. The McDonnell Douglas burden shifting analysis is undertaken in disparate treatment cases without direct evidence of discrimination. Mixed motive cases raise questions of which motive is decisive and by what proportion each motivation led to the ultimate decision. Antidiscrimination laws raise the costs of searches and adjudication of disputes that at-will employment contracts avoid.

Chapter 10
Title VII was not drafted to include disparate impact of neutral standards, policies, or practices. Defenders of Title VII stated in legislative history that the statute would not cover disparate impacts. But Griggs v. Duke Power was a Supreme Court case that (incorrectly, per Epstein) interpreted Title VII to prohibit disparate impact of testing without “business necessity.” Demonstrating “business necessity” has become practically impossible for employers, so they forgo useful, albeit imperfect, tests and other screening mechanisms in hiring.

Chapter 11
Supreme Court cases have held firms liable for neutral policies that have a disparate impact on different races of employees and applicants. Title VII prioritizes eliminating Type II errors (finding a practice legal when it is illegal, or false negative) over Type I errors (finding a practice illegal when it is legal, or false positive). Both types of errors should be considered and the aim of legislation should be to reduce both types of errors in the aggregate. Firms should be able to use tests in hiring if they wish for economic efficiency.

Chapter 12
Economic data on the impact of Title VII is hard to parse. It reduced the total scope of federal and state government, which increased opportunities for blacks. But gains then stalled about 10 years afterward and unemployment for low-skilled blacks then increased.

Chapter 13
Sex is not the same as race. There are many differences between men and women, including their abilities and preferences. These include pregnancy, pensions, interests, and skills. The doctrine of separate but equal makes less sense for race than for sex.

Chapter 14
Employers can hire on the basis of religion, sex, or national origin in those certain instances when they are a bona fide occupational qualification reasonably necessary to the normal operations of that particular business or enterprise. But courts have interpreted this exception to Title VII too narrowly and treated it more like a business necessity at a cost to employers. Such inefficiency negatively impacts all of society.

Chapter 15
Title VII caused dislocations and inefficiencies in employer-provided pensions and life insurance. Women live longer than men on average, so they benefit more from defined benefit life pensions and less from life insurance. Title VII required unisex actuarial tables that were simply wealth transfers between sexes. The result is that many employers eliminated lifetime pensions, leaving many employees worse off.

Chapter 16
EEOC and the Pregnancy Discrimination Act require companies offering fringe benefits to include pregnancy as a covered condition. This type of subsidy through employers is economically inefficient.

Chapter 17
Title VII has been interpreted to include sexual harassment. Sexual harassment should be handled as a common law tort rather than through nondiscrimination. There are already processes in place to establish proof, consent, and employer liability in common law precedents. Sexual harassment is unlike other forms of discrimination in that it generally cannot be addressed by freedom of contract.

Chapter 18
Different employee preferences can explain differences in disparate impact or concentrations of workers based on sex. For example, due to differences in preferences between the sexes, male construction workers outnumber female construction works while female nurses outnumber male nurses. Disparate impact analysis has many technical and statistical challenges, so disparate treatment should be the standard in discrimination cases.

Chapter 19
The statutory language of Title VII prohibits discrimination against “any individual” and does not support affirmative action, regardless of the faulty interpretation of the Supreme Court or academics. Wrongly decided precedents have permitted discrimination in favor of protected groups to occur when the drafters of Title VII would not have supported it.

Chapter 20
Epstein would allow private employers to implement affirmative action however and for whomever they want. In public employment, preferences should be very limited, and contracts should go to the lowest bidders regardless of the makeup of their workforce.

Chapter 21
The Age Discrimination in Employment Act asserts that discrimination on the basis of age is wrong, but it doesn’t say why it is wrong. It does not address the argument for freedom of contract, which may include mandatory retirements. The ADEA leads to market inefficiencies by requiring costs not be taken into consideration by employers, even though returns on investment and training have different expected horizons depending on applicants’ ages. Employers’ costs include training, turnover, returns on investment, and others. Employers should be allowed to keep mandatory retirement ages.

Chapter 22
Epstein would repeal the Rehabilitation Act of 1973 and the Americans With Disabilities Act. Working with people with disabilities imposes costs, and the ADA ignores those costs. Employers must make “reasonable accommodations” to employees unless doing so would be an “undue hardship.” Profit-maximizing firms already take into consideration such costs and benefits and are better positioned to do so than politicians. To the extent the law requires expenditures that the firms would not voluntarily make, that is a social loss, which leads to increased prices for everyone and fewer job opportunities for the disabled.


Subjective Thoughts
This is a work of remarkable erudition. It includes moral philosophy, legal history, economics, and statistical analysis. Grappling with all the information packed into this book is difficult and time-consuming. Summarizing such an expansive work is a daunting task. So, here, I’ve decided to take the easy way out and included lots of quotes from Epstein himself, while also taking a stab at the highlights in the following few paragraphs.

Epstein’s main point is easy enough to state, though the support he provides for it is overwhelming and fills the bulk of the book. Epstein is a libertarian who believes Title VII of the Civil Rights Act of 1964 and all similar antidiscrimination legislation (such as the Americans with Disabilities Act, the Age Discrimination in Employment Act, and the Pregnancy Discrimination Act of 1978) should be repealed. His reasons are both theoretical and practical. In theory, the harm imposed by discrimination is insufficient to override the harm imposed by ignoring the freedom of association generally, and the freedom of contract specifically. Free people should be allowed to associate with, work with, hire, or fire whomever they want for whatever reason they want. No one is entitled to a job from another. If a racist (or sexist, or ableist, or ageist, etc.) businessman does not want to hire some because of their race, sex, gender, disability, age, religion, national origin, then that is the businessman’s choice. The applicant for the position will just have to find employment elsewhere. Discrimination does not involve the use of force, fraud, or externalities, so there is insufficient justification for government interference. There is no sound reason to override the preferences of some employers to satisfy the preferences of some applicants or third-parties.

In practice, the costs of antidiscrimination legislation outweigh the benefits. All legislation starts in the hole because of administrative and compliance costs. To the extent firms make decisions different from what they would make absent the legislation, that is a social loss to everyone that results in fewer jobs, fewer goods, more expensive goods, and a misallocation of limited resources. In a world of free association and freedom of contract, no one wastes time applying for a job they cannot practically get. Inexpensive and helpful search mechanisms, such as tests, will improve the sorting mechanisms in place for talent to command its just compensation. Does this mean that vulnerable minorities will be doomed to unemployment and poverty, and there will be a return to Jim Crow if such federal antidiscrimination laws are passed? No, actually. Labor markets are highly competitive, and they would become more so with fewer regulations. An irrational racist would lose market share to a competitor without such prejudices. If the racism is rational or economically efficient, then overcoming it through the force of legislation simply prioritizes some people’s preferences over others at the cost of economic efficiency for all. Comparative advantages are most likely to trade in an open market with easy entry, which is precisely what regulations diminish. The problem with Jim Crow segregation is that it required discrimination by state and local government, which is not the same as permitting it through voluntary association or disassociation by private individuals. The legislation changes the decisionmaker from (a) the managers and owners of the firm who are on the ground, have the most relevant information regarding the decisions, and have the strongest incentives to succeed to (b) bureaucrats who have less information and less ability to weigh all the competing factors in making the best decision for the firm. This is not a positive change morally or economically.

I must also note that my book has a copyright date of 1992. Concerns about any return to Jim Crow, discrimination against minorities, or an abolition of affirmative action look silly in 2021. To the extent overt discrimination occurs, it is in favor of some racial and sexual minorities (though notably not Asians). All of the energy and popular discussion seems to support so-called “Social Justice,” which includes lowering or elimination of standards like the Scholastic Aptitude Tests and exterminating the slightest whiff of anything short of full embrace of diversity and inclusion efforts. Don’t believe me? Look at the handling of incidents involving Bubba Wallace, Roseanne Barr, Paula Dean, Donald Sterling, James Damore, and Jack Phillips of Masterpiece Cakeshop. Whether you think the consequences faced by any of these people were right or wrong, these incidents cannot reasonably support the argument that minorities are oppressed by the media, legislatures, academia, corporations, or tech companies. Set asides and affirmative action are invariably in favor protected minorities as born out by all the evidence on college admissions.

Overall, Epstein is as impressive a legal scholar as any I’ve read. I agree with his libertarian worldview, which is why I like the message—though not the length—of this book. I agree with him that embracing libertarian principles would be a net improvement to the world. Unfortunately, that position does not seem to be carrying the day. Antidiscrimination laws have already expanded to include sexual orientation, gender identity, and gender expression as forms of sex-based discrimination. It's not at all clear to me why certain characteristics (religion, sexual orientation) are protected against discrimination but others (political affiliation, socioeconomic status) are not. As the public sphere expands, the private shrinks. The expenses of disagreements grow over time, and we’re all worse for it. This path leads to a point where everything not forbidden is required. The last line in Epstein’s book is, “The modern civil rights laws are a new form of imperialism that threatens the political liberty and intellectual freedom of us all.” If that sounds extreme to you today, I doubt it sounds extreme to Donald Sterling, James Damore, or Jack Phillips. By the time it sounds extreme to you tomorrow, it will be too late.

[Steven H · Rating 5 out of 5]

A DETAILED ANALYSIS AND CRITIQUE OF ANTIDISCRIMINATION LAWS/POLICIES

Richard A. Epstein is a Fellow at the Hoover Institution, is Professor of Law at the New York University Law School, and is a senior lecturer at the University of Chicago.

He wrote in the Preface to this 1992 book, “various questions of constitutional law, and resulted in my book, ‘Takings: Private Power and the Power of Eminent Domain’ … As I was thinking through the radical implications of that book, my intellectual uneasiness about the New Deal and the welfare state came by degrees to be carried over to the second wave of reform legislation of Lyndon Johnson’s Great Society, including the civil rights acts, at least as far as they applied to employment discrimination…. The employment discrimination laws represent the antithesis of freedom of contact. Yet these laws do not fit into the categories of necessity or mistake that challenge that principle… It also became clear to me that there was no modern … sustained treatment that either defended or attacked the employment discrimination rules. So I decided to write that study.” (Pg. xi-xii)

He wrote in the Introduction, “In this book I advance a position that is well outside the mainstream of American political thought. I develop a defense of the traditional common law approach to the regulation of labor markets. My target is the social consensus that supports one or another version of the modern antidiscrimination principle. My method is a frontal intellectual assault on that consensus.” (Pg. 6)

He says, “The dominant evil in the pre-1964 period was not self-interest or markets, inflexible human nature, or even bigotry. It was excessive state power and the pattern of private violence, intimidation, and lynching, of which there is a painful record but against which there was no effective federal remedy. The explicit discrimination in the South and elsewhere was preserved by the use of coercion, both by state law and by private individuals (such as the Ku Klux Klan) whose activities were left unchecked by state agents.” (Pg. 93-94)

He suggests, “Why… did outside entrepreneurs not move into the South before the 1964 act? The best explanation… is that the elaborate set of indirect legal sanctions could have made entry by an outsider exceedingly treacherous… The same political forces that put the separate but equal statutes on the books were doubtless capable of using their power in the underworld of administrative discretion of ensure that no separate but equal firm would emerge.” (Pg. 250-251)

He asserts, “The effort to redistribute wealth along racial lines runs into the obvious objection to having poorer whites subsidize richer blacks…. References to the victims of discrimination and the wrongful conduct of discrimination are meant to invoke notions of corrective justice, which are so dominant in the ordinary perception of common law torts and crimes against persons and property.” (Pg. 260)

He states, “I incline to the view that the biology of sex differences is profound, and influences not only the activities immediately related to courtship, reproduction, and child rearing, but also virtually every other aspect of human conduct. Whether one thinks that hormones (say, differences in testosterone levels) and innate drives or socialization dominates, however, is quite beside the point for this discussion. Any analysis of the employment market has to take as a given the stock of workers who are available for different positions. No market can operate on the assumption that it should be organized AS IF the tastes and preferences of the work force were wholly uncorrelated with sex, when the correlations are there. If biological forces are dominant, then these can be changed only with enormous difficulty, if at all, and only over the resistance of both men and women.” (Pg. 271-272) Later, he adds, “Women should be able to compete for positions by accepting lower wages than men.” (Pg. 299)

He notes, “Notwithstanding all the specific explanations for sex discrimination in labor markets, it is common today to attribute the sharp skews in the market to the effects of prior discrimination. But the explanation rings hollow, for the shift in relative percentages has remained small in the years since the passage of Title VII, in a world in which employers often clamor to hire, as it were, against the grain. The more powerful explanation for the persistence of these differences in employment patterns is that they are desired by employees and employers alike. The problem of selection bias by employees dominates this area as it does in no other.” (Pg. 374-375)

He argues, “there is this irony: vast amounts of discrimination are evident on the face of the record, but most of it takes place in the form of affirmative action programs that are tied to race and sex. Here proof of discrimination is as easily found as it was in the cases of formal discrimination against blacks in the years just after the passage of the Civil Rights Act. The hard issues go only to the question of justification, both under Title VII and as a matter of first principle.” (Pg. 391)

He points out, “Many cases of race-conscious hiring make sense… even if we are suspicious of affirmative action promoted as mere favoritism. If I were running a program designed to help ghetto youth escape the terrors of drugs in the housing projects, I would be sure to hire some black staff; identification and role model arguments do count for something, although it is difficult to say how much. If I were running a Head Start program in a Hispanic neighborhood, I would insist that some Spanish-speaking staff be part of the program.” (Pg. 424)

He explains, “My opposition to the Americans with Disabilities Act… should not be construed to imply that disabled persons have not been subject to unfair treatment in the marketplace. They have been and are; but often the source of the unfairness does not lie in the inability of the handicapped to receive subsidies for work but in government interference with the control of their labor. Like everyone else, the disabled should be allowed to sell their labor at whatever price, and on whatever terms, they see fit. At this point disabled persons have just criticisms of the whole array of supposedly protective legislation that in fact limits their ability to negotiate on their own behalf; the minimum wage laws and various kinds of ostensible safety and health regulations can impose a greater burden on them than on others.” (Pg. 484)

He argues, “In the end, this pattern of antidiscrimination law may prove ruinous not only to the firms subject to the surcharges but also to the persons with AIDS who need assistance. If they were free to offer their services while waiving the right to health and life insurance, they would improve their prospects of getting a job without having to call into play the coercive power of the state. To be sure, a job without the insurance is far less desirable than a job with the insurance. But in many cases the use of the antidiscrimination law meant that AIDS carriers will have no job, with NO pay and NO insurance. As with minimum wage and other discrimination laws, the antidiscrimination rules are highly beneficial to some members of the protected class, but not to all.” (Pg. 493)

This book will be of great interest to those seeking critiques of employment discrimination laws.

[John Nelson · Rating 5 out of 5]

Professor Richard Epstein argues in this book that employment discrimination laws do more harm than good and that employment discrimination can be addressed better by the free market than by laws or judicial decisions. As one expects from Professor Epstein, he presents a powerful argument on a controversial topic which not even his most ardent opponents can disregard, which is an achievement in itself.

Epstein begins with a libertarian-leaning analysis of the free market and how employment discrimination and those who want to discriminate will fare within it. He moves on to discuss current employment discrimination laws and show how those laws, which originally prohibited discrimination, have been perverted to allow and sometimes even require employers to discriminate, either through explicit "affirmative action" programs, or implicit quotas and preferences used to keep the numbers of various racial/ethnic/gender groups within a politically acceptable range and avoid costly litigation. He concludes with a discussion of several forms of alleged discrimination which were relatively new to the law when the book was published in 1992, including age and disability discrimination.

It is not a difficult task to show that America's employment discrimination laws are a disorganized mess that has morphed into an engine that promotes and sometimes even requires discrimination even as self-proclaimed "civil rights" groups assert with a straight face that nondiscrimination remains the goal. It also is not difficult to show that unleashing the free market would be a much better way to end discrimination than the current legal regime.

One of the core insights of the economics of discrimination, as developed by Nobel prize-winner Gary Becker and others and as touched upon in this book, is that discrimination comes with a price. Even if discrimination is allowed, an employer who wants to discriminate will pay a price by hiring workers based on irrelevant characteristics such as race or ethnicity, rather than simply hiring the best workers at the best price. As a result, the free market is inherently hostile to such discrimination.

If one's objective is to stamp out discrimination, the primary task for the legal system is to make it safe for businesses not to discriminate. In the Jim Crow South, businesses adhered to racial segregation even though it was not in their best interest to do so because it would not have been safe to depart from local mores. Indeed, even when businesses resisted discrimination, political power was used to bring them back into line. In the famous case of Plessy v. Ferguson, which upheld "separate but equal" railroad passenger service, the railroad wanted to allow any passenger to board any railroad car because that was the most economical way to run its business. The State of Louisiana responded by passing a law requiring segregation, which the Supreme Court upheld in Plessy v. Ferguson. When the Civil Rights Act of 1964 was passed, it provided the legal cover businesses needed to end the discriminatory practices required by local demands, and with businesses free to do what was in their best interest anyway, the entire discriminatory edifice came crashing down within a few short years.

The problem, of course, is that as the nation moved into the 1970s, the left-wing "civil rights" agenda shifted from ending discrimination against blacks and other minorities to requiring discrimination in their favor and against other people. Further, the range of officially recognized "victims" entitled benefit from such discrimination gradually expanded, bringing ever more people under this regime. Businesses responded as one would expect; since it no longer was safe not to discriminate against whites, many companies, especially larger ones, adopted quotas, preferences, and other forms of "affirmative action" to avoid being sued. They had to pay a price by being unable simply to hire the best worker for each job, but the protection they gained from lawsuits or worse was worth it.

One of the most unfortunate aspects of this history is that while "affirmative action" has inflicted unfairness on individuals and high costs on companies and society at large, it has not raised the economic standing of its putative beneficiaries in any demonstrable way. As Epstein points out, in the years immediately following the passage of the 1964 Civil Rights Act, the income of blacks relative to whites rose in the South. That was to be expected; as discriminatory barriers fell, blacks were able to get better jobs, and their economic standing improved.

Since roughly 1970, however, when the legal/political agenda shifted from ending discrimination to reversing course and promoting discrimination in favor of persons who would have been discriminated against in previous years, black progress vis-a-vis whites has ended. Once again, this result is not surprising. Since there were no more widespread discriminatory barriers to knock down, there was no more progress to be made on this front. Continued allegations of discrimination were at best a pointless distraction from real problems, and at worst the source of new discrimination against new victims.

Seen in this light, the civil rights history of the past 50 years has been especially pernicious. Not only has the law been used to create new classes of victims, but it hasn't even aided its intended beneficiaries. Indeed, it has obscured the real educational and cultural problems which have held many blacks back, and continue to blight their lives.

It would not be realistic to end employment discrimination laws, as Epstein advocates. The best we can hope for is to require that those laws be color-blind, as their advocates and critics both say they want. Indeed, not being as strong a libertarian as Professor Epstein, I do not favor repealing those laws. In light of the inherently self-correcting nature of the free market, however, a much lighter regulatory touch is in order on this subject.

[Pedro Degiovanni · Rating 2 out of 5]

Interesting concept, but hopelessly outdated. It would also benefit from learning some search & matching theory.