Accommodation mandates.

• Author: Jolls, Christine

INTRODUCTION

Legal requirements that employers provide specified benefits to their workers, such as workers' compensation and family leave, are virtually omnipresent in modern employment law. Some mandates are directed to workers as a whole, and many of these date back to the early part of the twentieth century (workers' compensation, for instance(1)). But other, newer mandates are directed to discrete, identifiable groups of workers, such as the disabled. These mandates are intended to accommodate the unique needs of those workers. These "accommodation mandates," and their consequences for the accommodated workers, are the central topics explored below.

Since accommodation mandates regulate a market relationship--that of employer and employee--an important set of questions about them involves how they affect the wages and employment levels of the accommodated group. There is an accepted economic framework for analyzing the effects of mandates directed to workers as a whole (such as workers' compensation),(2) but accommodation mandates raise many distinct issues that have not been adequately addressed in the existing literature. Central among these issues is the way in which antidiscrimination law interacts with accommodation mandates; this interaction is simply not relevant when analyzing mandates directed to workers as a whole. Antidiscrimination law attempts to restrict differences in wages and employment levels between accommodated and nonaccommodated groups, and these restrictions will fundamentally alter how an accommodation mandate affects the wages and employment levels of accommodated workers.

Part I below develops a general framework for analyzing the effects of accommodation mandates. These mandates, perhaps most familiar from the Americans with Disabilities Act of 1990 (ADA),(3) dot the landscape of modern employment law. Examples include:

1. The requirement under the ADA that employers provide "reasonable accommodation" to disabled workers.(4) This requirement accommodates the special needs of disabled employees.

2. The requirement under some state laws that insurance companies--and, as a result, employers who offer health insurance provided by these companies--cover maternity-related hospital and medical expenses in their insurance plans that provide general hospital and medical coverage.(5) This requirement accommodates the special needs of female employees of childbearing age, although it may also accommodate the needs of certain other employees, as discussed more fully in Part II.B.1.a below.

3. The requirement under the Family and Medical Leave Act of 1993 (FMLA) that employers permit their employees to take unpaid leave in the event that they have a "serious health condition."(6) This requirement accommodates the special needs of disabled employees--who are more likely than other employees to need to take time off because of such a condition--although certain employees who are not disabled will also be accommodated by the requirement.

4. The FMLA's requirement that employers permit their employees to take unpaid leave in the event that they have a newborn or newly adopted child or an immediate family member who is seriously ill.(7) This requirement accommodates the special needs of female employees of childbearing age, although again it may also accommodate other needs and circumstances, as discussed more fully in Part II.C.1.a below.

   All of these accommodation mandates are targeted to groups that are protected under general antidiscrimination law. As a result, the mandates cannot be analyzed in isolation from antidiscrimination law. Therefore, Part I's framework, in contrast to much of the existing literature, emphasizes the importance of antidiscrimination law's restrictions on relative wages and relative employment levels of accommodated and nonaccommodated workers to the analysis of accommodation mandates. This focus helps to clear up some of the confusion that presently exists regarding the effects of accommodation mandates.

   More specifically, Part I reaches the following conclusions:

   (I) At the most basic level, the existing literature tends to assume that desirable distributive effects of accommodation mandates for accommodated workers are either extremely unlikely or (the polar opposite) virtually assured. In the first camp are many economically oriented commentators (both lawyers and nonlawyers), who uncritically apply the economic model of mandates directed to workers as a whole (the Summers model)(8) to the distinct context of accommodation mandates.(9) On this basis they conclude that the costs of an accommodation mandate will typically be shifted to the accommodated group in the form of reduced wages or reduced employment levels--the natural implication of the Summers model, as described more fully in Part I.A.2.a below. The second camp consists of the many commentators who hail the passage of laws with accommodation mandates, such as the ADA and the FMLA, without any discussion whatsoever of the potentially adverse effects of these laws on the wages and employment levels of the accommodated group.(10) The truth about accommodation mandates, I suggest, lies somewhere in between and, not surprisingly, is more complex, as elaborated in points (II) and (III) below.

   (II) Of central importance to the distributive effects of accommodation mandates for accommodated workers is the degree to which the restrictions on relative wages and relative employment levels imposed by antidiscrimination law are "binding," in the sense of constraining employers' behavior in an effective manner. If such restrictions are binding, then an accommodation mandate will make the accommodated group better off (in a sense that will be made more precise below) unless the cost of the mandated accommodation exceeds its value to the accommodated group and the group bears most or all of that cost. This scenario is described more fully in Part I.B.1.b below. This conclusion marks a striking contrast with the case of mandates directed to workers as a whole, for in that case, as described in Part I.A.2.a, the conditions under which a mandate can make workers better off are much narrower, and the extent of the potential gain is far smaller. The conclusion about distributive gains to accommodated workers is similar in spirit to Richard Craswell's conclusions about the effects of consumer (as distinguished from employment) mandates on markets populated by heterogeneous consumers; however, as detailed below, there are a number of basic differences between his analysis and the analysis offered here.(11)

   (III) The analysis of mandates directed to workers as a whole also yields incorrect conclusions if only restrictions on wage differentials across groups, and not restrictions on their differential employment levels, are binding. Because enforcing rules against discrimination in the hiring of workers is relatively difficult, it is often reasonable to assume that only restrictions on wage differentials are binding, as numerous commentators have emphasized.(12) If the analysis of mandates directed to workers as a whole is applied in this setting, the conclusion is that whether the value of the mandated benefit exceeds or falls short of its cost is precisely revealed by whether the employment level of workers rises or falls with the mandate.(13) But, as Part I.B.2.a emphasizes, with binding restrictions on wage but not employment differentials, the employment level of the accommodated group will fall with an accommodation mandate no matter what the value-cost relationship for the mandated accommodation is. Thus, and critically for policy evaluation purposes, negative employment effects can no longer serve as a proxy for failure to meet the value-cost condition.

   (IV) Since the effects of an accommodation mandate vary significantly with the degree to which restrictions on wage and employment differentials are binding in the sense described above, it is important to be able to predict, at least roughly, when such restrictions are likely to be binding. At its best, the existing literature on accommodation mandates simply acknowledges the various possibilities with regard to whether restrictions on wage and employment differentials may bind.(14) (As already mentioned, most of the existing literature does not even go this far.) The framework developed in Part I identifies the factors that bear on which of the possible scenarios with regard to wage and employment restrictions is likely to obtain. The framework thus allows one to generate predictions about the effects of specific accommodation mandates--predictions that can be (and are, in Part II below) tested against the existing empirical evidence on the effects of these mandates. The factors I identify also allow one to generate predictions about new laws and their likely policy consequences.

   A final contribution of Part I is to resolve a recurring puzzle about accommodation mandates: to the extent that these mandates produce negative consequences for the wages or employment levels of accommodated workers, will the negative effects be felt in wages, employment levels, or both? Negative effects on wages and employment levels are often treated in an undifferentiated fashion; for instance, Samuel Issacharoff and Elyse Rosenblum describe the concern of some commentators that "requiring pregnancy leave will make female employees more expensive than male employees; therefore employers will respond by either hiring fewer women or paying females less than their male counterparts."(15) The question, however, is which of these things will happen. I identify the factors that bear on this question.

   Part II below uses the economic framework developed in Part I to generate predictions about the effects of the particular accommodation mandates listed above.(16) In broad terms, my framework predicts that accommodation mandates targeted to disabled workers will increase or leave...