Topic: Regulatory Studies

Rand Paul and the ADA

Along with the rest, the Kentucky Senate candidate has come under fire for expressing some guarded criticism of the Americans with Disabilities Act in broadcast interviews. In particular, opponents have blasted Paul for getting some details about the law wrong in his off-the-cuff hypothetical example:

Let’s say you have a local office and you have a two story office and one of your workers is handicapped. Should you not be allowed maybe to offer them an office on the first floor, or should you be forced to put in a hundred thousand dollar elevator?

In fact ADA regulations specify that elevators will not be mandated for private buildings of “less than three stories” unless used for shopping, health care, or some other purposes. This leads Jed Lewison of Daily Kos, with the generosity of spirit toward opponents for which that site is known, to rant: “What an idiot… He has no idea what [the federal government] does. He’s like a toddler freaking out about monsters under the bed.” Right. Doesn’t everyone who gets asked about their position on the ADA on national TV know that the elevator cutoff begins at three stories, not two?

Associated Press reporter John Cook has followed up with a “Newsroom” blog entry pursuing the gotcha theme, and quotes me in the course of doing so. Since I might not have made myself sufficiently clear on the phone with Cook, let me try to have another go at it here.

Does the ADA ever mandate that a business install elevators in its three-story building? Yes, often it does, but typically not through its employment provisions, which, as federal guidance has made clear, seldom if ever require installation of an elevator as the requested “reasonable accommodation” for an individual worker. The other main branch of the ADA relevant here is the law’s architectural rules, which do not hinge on any calculation of reasonable accommodation to individual workers/users. Under these rules, so long as the owner of an older building leaves it alone without restoration, only “readily achievable” changes will be required, which will ordinarily not include elevator installation. Cook quotes spokespeople for the EEOC and DOJ who correctly deny – note the narrow wording, which may escape many readers – that elevators are required under the “reasonable accommodation” standard. And he quotes a court decision – again note the narrow ground – that elevator installation is not required under the “readily achievable” standard.

But where the rules on major improvements like elevators get their teeth – as some of Cook’s sources must surely be aware – is not from either of those standards, but from the rules that apply to new construction and, crucially, renovations of older spaces. Renovation, when not minor, triggers a requirement to bring the space up to broad ADA standards. This can easily result in elevators and other budget-busting outlays for the immediate benefit of perhaps a single employee or perhaps of no employees at all, since the requirements apply whether or not any disabled person has ever sought access to the space.

Next time federal agency spokespeople are asked about elevator mandates, I hope they address the renovation trigger rather than other, less relevant sections of the law. They might even want to check their own website (South Dakota restaurant owner “agreed to install an elevator” following complaint to the feds) or, amusingly, the Daily Kos site itself (contributor: “I was laid off from my job last November because the company I was working for was forced to install an elevator in their new building.”)

As I told Cook, I think it’s pretty common for Senators (let alone non-incumbent candidates) to display confusion about which provision does what in a complicated law. Last year Arkansas Senator Mark Pryor, defending the Consumer Product Safety Improvement Act of 2008 – a law he was himself instrumental in passing – claimed that “the law allows the CPSC to make ‘commonsense exceptions’ to anti-lead requirements.” It doesn’t, but the remark passed almost unnoticed since no gotcha narrative was running at the time.

If candidate Paul is looking for non-hypothetical examples of curious and untoward ADA applications, he might start here and here (restaurants), here (rugged hiking lodge), here (PDF, see p. 7 – resort accessible only on skis), or, on employment topics, here, here, or here. And thanks to Ira Stoll at Future of Capitalism, who cites my writing in responding to another critic of Paul, former Bush speechwriter Michael Gerson, who disputably appears to regard the ADA as among “the largest moral achievements of recent American history.”

Federal Aid: 45 Years of Failure

Yesterday, the Washington Post reviewed the life of Phyllis McClure, who was an advocate for federal education spending in low-income neighborhoods.

Once an aspiring journalist, Ms. McClure joined the NAACP Legal Defense and Education Fund in 1969. She immediately used her penchant for muckraking to illuminate the widespread misuse of federal funds meant to boost educational opportunities for the country’s neediest students.

The money was part of the new Title I program, created under the Elementary and Secondary Education Act of 1965. The slim volume that Ms. McClure wrote in 1969 with Ruby Martin – ‘Title I of ESEA: Is It Helping Poor Children?’ – showed how millions of dollars across the country were being used by school districts to make purchases – such as a Baptist church building in Detroit and 18 portable swimming pools in Memphis – that had little to do with helping impoverished students.

The authors charged that money meant for poor children was being used illegally by school districts as a welcome infusion of extra cash to meet overhead expenses, raise teacher pay and other such general aid. In addition, they wrote, districts were using Title I funds to continue racial segregation by offering black children free food, medical care, shoes and clothes as long as they remained in predominantly black schools.

That all sounds rather familiar–state and local governments misusing federal aid dollars. As I’ve written about at length, there was an explosion in federal aid for the states in the 1960s, with hundreds of new programs established. But huge problems developed almost immediately–excessive bureaucracy and paperwork, one-size-fits-all federal regulations stifling local innovation, and the inability of federal aid to actually solve any local problems. 

I live in Fairfax County, Virginia. The county receives about $15 million a year in federal “Title I” aid for disadvantaged schools–the program Ms. McClure was worried about. But Fairfax is the highest-income county in the nation! Why are hard-working middle-income taxpayers in, say, Ohio, paying for local schools in ultra-wealthy Fairfax?

Aside from the misallocation problem, academic evidence suggests that state and local governments mainly offset federal spending for poor schools by reducing their own spending on poor schools. Poor schools end up being no further ahead.

The federal aid system is crazy. Even if federal aid is a good idea in theory–and it isn’t–the central planners haven’t been able to make it work as they envisioned in more than four decades. The federal aid system has simply been a giant make-work project for the millions of well-paid federal/state/local administrators who handle all the paperwork and regulations.  

Even if federal aid was constitutional or it made any economic sense, it will never work efficiently. Aid will always be a more wasteful way of funding local activities than if local governments funded activities by themselves. Aid will always be politically misallocated by Congress. Aid will always involve top-down regulations from Washington that reduce local flexibility and innnovation. And aid will always undermine federalism and the American system of limited government.

It’s time to blow up the whole system.  Title 1 and all 800 other state aid programs should be repealed.

Federal Redesign of Hot Dogs?

From a Richmond Times-Dispatch editorial, the sort of passage you think at first must be satire:

At the instigation of the American Academy of Pediatrics, federal bureaucrats at the FDA, the Department of Agriculture, and the Consumer Product Safety Commission are studying whether to require the nation’s hot-dog makers to redesign hot dogs to reduce the likelihood of choking.

But it’s not satire, as other news clips confirm.

Now, as every parent knows who makes sure to cut up a hot dog for the smallest eaters, the risk of choking on one of these food objects is not zero (though it is very, very low; 13 children’s deaths in 2006 were linked to hot-dog asphyxiation, but children eat nearly 2 billion hot dogs a year). In that sense, the proposal is less obviously batty than some other federal regulatory initiatives that have upended whole sectors of commerce over risks that have never been shown to have harmed anyone at all.

But notice that the only truly effective way to keep the familiar cylindrical hot dog off the plates of small children would be to ban it for everyone — the logical end point, perhaps, of a policy that infantilizes parents by assuming they cannot be trusted to watch out for their children’s safety. If on some future Memorial Day you find only squared-off frankfurters or triangular-prism bratwursts in the supermarket cooler, don’t say you weren’t warned.

Guess Who’s Behind the New Fire-Sprinkler Mandates

California just adopted effective next year a requirement that all new one- and two-family dwellings include indoor sprinkler systems. Other states are debating similar mandates, spurred by changes to national building code standards. Earlier legal mandates have required the inclusion of smoke alarms and carbon monoxide alarms, but the cost of those devices is relatively minor, whereas full-blown sprinkler systems add measurably to the cost of a new home, as well as posing challenges in such areas as maintenance, aesthetics, and risk of property damage through accidental activation.

It will surprise not a single reader of these columns, I suspect, to learn that the fire sprinkler industry has been a major force in pushing the new mandate. As for the opposition, home builders have managed to mount a bit of resistance – New Jersey, for example, saw the current depressed state of the residential construction business as reason to postpone its mandate for a year. But the builders are pretty much on their own in the fight, since future buyers of new homes are a group with no organized political presence whatsoever.

Real estate blogger Christopher Fountain writes that he’s “never heard of a home buyer voluntarily ordering this equipment when building a house, so it sounds to me like one more instance of people who know better dictating to those who don’t.” Exactly. A South Carolina paper quotes a state official as saying if buyers feel priced out of the new home market by the cost of the mandate, they have other ways to save money “such as choosing less expensive flooring or countertops, or not installing yard sprinklers”. Easy to make someone else’s budget decisions for them, isn’t it? And shouldn’t the “affordable housing” community be taking more of an interest?

Zoning vs. Families

Back in 1996 George Liebmann wrote in Regulation about how “Zoning makes it more difficult to keep aged parents close by and care for them.” He recommended that “Duplex homes and accessory apartments should be permitted in all new residential construction. Housing options such as these allow elderly persons to live near their adult children without intruding on their children’s privacy.” (“Modernization of Zoning,” pp. 71, 75)

Now the Washington Post reports

The Rev. Kenneth Dupin, who leads a small Methodist church [in Salem, Virginia], has a vision: As America grows older, its aging adults could avoid a jarring move to the nursing home by living in small, specially equipped, temporary shelters close to relatives.So he invented the MEDcottage, a portable high-tech dwelling that could be trucked to a family’s back yard and used to shelter a loved one in need of special care.

Skeptics, however, have a different name for Dupin’s product: the granny pod.

Protective of zoning laws, some local officials warn that Dupin’s dwellings – which have been authorized by Virginia’s state government – will spring up in subdivisions all over the state, creating not-in-my-back-yard tensions with neighbors and perhaps being misused….

the nation’s elderly population is set to double in just 10 years as more and more baby boomers hit retirement age. Surveys by AARP and others also show that large majorities prefer to live in their own homes or with loved ones rather than in retirement communities.

But local officials think their zoning rules are more important than keeping families together.  They fume that allowing such small structures for grandma would “turn our zoning ordinance upside down.” And what’s more important, saving money and keeping grandma near her family or strict adherence to zoning regulations? Local officials think the choice is clear.

In this case, though, state officials disagreed. Virginia just passed a law “that supersedes local zoning laws in the state and allows families to install such a dwelling on their property” – but only “with a doctor’s order.” They couldn’t just allow families to choose a living arrangement that suits them. No, a doctor has to authorize it.

It’s sort of like medical marijuana – a slight increase in freedom, but also an increase in the medicalization of normal individual decisions.

The FTC and Those GM Ads

I’m usually in enthusiastic accord with our friends over at the Competitive Enterprise Institute, but it seems to me they’ve made a mistake by petitioning the Federal Trade Commission (FTC) to crack down on GM’s ridiculous “we repaid our federal loan” ad. Some zealous enforcers would love for the FTC to do more to regulate speech by American business on matters of public concern, and it seems to me the last thing we should do is encourage such a trend.

For those who came in late, General Motors and its CEO Ed Whitmire were widely and rightly assailed here and elsewhere for asserting (in a column whose message was repeated in much-played TV ads) that the company had repaid its bailout loan “in full, with interest, years ahead of schedule.” Actually, as the inspector general of the government’s TARP program readily acknowledged, the firm had merely used one pot of federal money to repay another. Iowa Sen. Charles Grassley helped expose the dodge, and publications ranging from FoxNews.com to the New York Times joined in with scathing coverage.

Yesterday CEI announced that it had filed a formal complaint [PDF] with the FTC urging the commission to investigate the automaker’s ad campaign as misleading. It alleges that the ad campaign “could unfairly dupe consumers into a false, renewed confidence in the company” and that “consumer purchasing decisions can easily be affected by such considerations.” Nick Gillespie at Reason, CEI general counsel Hans Bader, and Todd Zywicki at Volokh have more.

There’s a long history of businesses’ responding to public criticism of their operations or products – and getting in further legal or regulatory trouble because of that very response. In one early case, the FTC went after egg producers for asserting, in the midst of a cholesterol scare that in hindsight appears overblown, that their ovoid wares were not in fact a menace to cardiac health. Sen. Charles Schumer (D-N.Y.) and the Center to Prevent Handgun Violence have asked the FTC to prohibit ads that imply that keeping a loaded weapon on hand will make a family safer. In Nike v. Kasky, a famous case that reached the Supreme Court [Thomas Goldstein, Cato Supreme Court Review 2003, PDF], shoemaker Nike was sued under a California law over the public defense it had put forward of its labor practices in overseas factories. Environmentalists have sought to suppress ads claiming that nuclear power is nonpolluting, and so forth.

Free-market advocates have generally argued that whatever the merits of laws or regulations banning misleading advertising in garden-variety commercial contexts, there are special dangers to the First Amendment and to robust debate generally in letting agencies and courts second-guess the content of “issue ads” and speech on topics of public controversy. To begin with, it encourages advocates to turn to the law to silence disagreeable speech rather than muster their best arguments to rebut it. In one grotesque example, MoveOn.org and Common Cause actually petitioned the FTC to institute a complaint against Fox News over its use of the slogan “Fair and Balanced”, since (they said) the network was neither.

Despite its current dependence on government, GM is in every relevant legal sense a private company, so any precedents forged against it will wind up applying to every other private enterprise that might wish to advertise on matters of public controversy. Which makes it a concern that CEI’s complaint cites with seeming enthusiasm broad FTC interpretations of authority – for example, its authority to suppress speech that might not be in itself false but could leave a potentially misleading impression.

If there is a continuum extending from more or less purely commercial speech (“Our tires last 40,000 miles”) to more or less purely political speech (“Our business is badly overtaxed”), GM’s ad campaign surely falls way over toward the “political” side. CEI’s response to this is to argue that the campaign might influence consumers’ purely economic calculations (as opposed to the political reasons they have to feel angry at GM) by making them more likely to see the company as solvent and thus as capable of making good its warranty promises. The words “strained” and “makeweight” come to mind to describe this argument. Does CEI really want to establish the future principle that a company’s over-sunny talk about its financial prospects will henceforth get it in trouble with two federal agencies, the FTC and SEC, rather than the SEC alone?

It all seems a rather high price to pay in principle for keeping the GM-TARP story in the papers for another day or two.

The Ninth Circuit’s Controversial New Class Action Decision

The Ninth Circuit has issued its long-awaited en banc decision in Dukes v. Wal-Mart, a pathbreaking class action seeking relief from Wal-Mart for alleged gender discrimination on behalf of somewhere between 500,000 and 1.5 million women. The upshot: a 6-5 partial affirmance of one of the most questionable class certification approvals in recent memory.

The case is sparking considerable commentary: see here, here, and here, for starters. Cataloguing all the myriad questionable parts of the 135+ page decision, which range from the standard for admitting expert testimony in support of certification, to the permissibility of so-called “issue classes,” to due process restraints on award of class-wide punitive damages, would take a blog post rivaling the length of the Ninth Circuit’s own monster-of-an-opinion.

Here, though, are a few problems that pop out on first reading.

First, the Ninth Circuit’s certification decision depends on an exceedingly questionable understanding of federal civil rights law. As Richard Nagareda has written, the case is premised on “a bold, new conception of prohibited discrimination under Title VII - a notion that the scholarly literature encapsulates in the term ‘structural discrimination.’” The idea is that a corporation can violate federal antidiscrimination laws by structuring the workplace in a way that enables unconscious discrimination by frontline managers.

Wal-Mart is said to have engaged in this sort of scheme because it permits its managers to engage in highly subjective decision-making about pay and promotion, rather than imposing uniform objective criteria. In effect, the idea is that Wal-Mart’s laissez faire approach to personnel management masks a conscious effort to use its managers, and their unconscious biases, as a conduit for the company’s own unstated policy of gender discrimination.

As Nagareda points out, the theory of structural discrimination “has enjoyed a run in academic discourse out of line with its meager acceptance as a matter of actual doctrine.” Indeed, as he notes, “one broadly shared starting point in the literature” is that structural discrimination is not consistent with current law. Yet, the viability of this suit turns on this theory. And the trial court and the original Ninth Circuit panel in turn authorized a class without ever squarely deciding whether Title VII does, in fact, embrace this theory.

The en banc panel appears to make some (meager) effort to rectify this problem. But its elliptical treatment of the structural discrimination theory, spanning a couple of paragraphs buried deep in the belly of the mammoth opinion, is ephemeral—a far cry from Nagareda’s suggestion that the panel first “resolve the meaning of the statute squarely and forthrightly” before undertaking class certification analysis. One senses the often-reversed Ninth Circuit, fearful of the Roberts Court peering over its shoulder, is trying to bury the lede.

Second, a more technical problem: the en banc decision exacerbates an already troublesome circuit split over the conditions for approving a class under Rule 23(b)(2). This is a popular vehicle for class actions among plaintiffs’ lawyers for two reasons: first, assuming a class qualifies for treatment under it, class members are not entitled to an automatic right to exit the class (or “opt out”) and, second, Rule 23(b)(2), in addition, imposes less stringent requirements for class certification. In their advisory notes, the drafters of the federal class action rule suggest a class qualifies for treatment under Rule 23(b)(2) if injunctive relief “predominates” over monetary relief. And one might think that in a suit, such as this, seeking massive punitive damages on behalf of an veritable army of women, certification under Rule 23(b)(2) is therefore obviously inappropriate. But rather than squarely so hold, the Ninth Circuit now stakes out an entirely new, multi-factored balancing test for determining when injunctive or monetary relief predominates—creating a three-way circuit split about the meaning of Rule 23(b)(2)’s predominance test.

Another more fundamental problem: The text and structure of the Civil Rights Act also strongly suggest that in suits seeking backpay and punitive damages, defendants must have a chance to present affirmative, individualized evidence, on a case by case basis, rebutting claims they have discriminated. In addition, the Supreme Court’s due process cases also strongly suggest punitive damages should be awarded based on an individualized determination of fault. Yet, although the ultimate trial plan remains in flux, the en banc panel greenlights jettisoning the defendant’s right to present this kind of affirmative, individualized, case-by-case rebuttal evidence. It has done so, of course, in the service of facilitating the class action: if a case-by-case opportunity to affirmatively rebut discrimination is mandated by Congress, or the Fifth Amendment, in hundreds of thousands of suits seeking back pay and punitive damages, its hard to avoid concluding that those claims predominate over the request for injunctive relief, disqualifying them from Rule 23(b)(2) treatment even under the Ninth Circuit’s new “third way” test … . and raising serious concerns about whether the claims for monetary relief are certifiable at all.

Class action practice is, alas, one area where the Supreme Court has been, largely, AWOL. The result—an ever-lengthening array of circuit splits on key questions that affect when a class action can be green-lighted. Dukes—a decision chock full of questionable, boundary-pushing decisions—is the inevitable result. Some suggest Supreme Court review of this decision is close to a sure thing. Let’s hope that’s right.