Discrimination may be bad for business, but that doesn’t mean laws banning discrimination are good for business. Often, these laws are like the proverbial Trojan Horse, applied by the courts in unexpected ways that are harmful to businesses, including employers who harbor no prejudice of any kind. For example, the Supreme Court interpreted a federal race and sex discrimination law (Title VII of the Civil Rights Act) as banning unintentional “disparate impact” (which is when a neutrally applied selection criterion weeds out more black than white applicants) even though that statute explicitly limited relief to cases where there was a showing that the employer had “intentionally engaged in or is intentionally engaging in an unlawful employment practice.” [See Griggs v. Duke Power Co. (1971); 42 U.S.C. 2000e-5(g).] The result of that case was to outlaw a wide array of useful, colorblind standardized tests.
The Supreme Court also interpreted a statutory attorneys fees provision that was neutral on its face as instead mandating one-way fee-shifting, effectively entitling only prevailing plaintiffs to such fees (except in really extreme cases), not prevailing defendants, and entitling such plaintiffs to fees even if the employer had a reasonable, good-faith belief for taking the position it did. [See Christiansburg Garment Co. v. EEOC (1978).]
Civil rights agencies and courts also impose emotional distress damages in discrimination cases that seem to be either grossly exaggerated, or insufficiently corroborated by objective evidence. For an example of the former, see the recent ruling by an administrative law judge in the Oregon Bureau of Labor and Industries, recommending “$135,000 in damages against Melissa and Aaron Klein, owners of Sweet Cakes by Melissa in Gresham, Ore., who had declined to cater a gay wedding on grounds of religious scruples [Oregonian, earlier].” As is typical in administrative discrimination cases, the same agency is effectively serving as prosecutor, judge, and jury, which the Founding Fathers would have viewed as a violation of the constitutional separation of powers, as law professor Philip Hamburger has explained.
$135,000 (or even a tenth that amount) is a grossly excessive emotional-distress damage award for a simple refusal to contract with a customer. Being rebuffed by a merchant is much less painful than losing your job, or even losing out on a promotion, and people wrongly fired from their jobs typically get less than $135,000 in emotional distress damages. The award is so ridiculously large that it seems to designed not to compensate, but to punish people for harboring archaic beliefs, with the lion’s share of the award being to punish the small business owners for their thought-crime, rather than make anyone whole.
Damage awards in discrimination cases are often excessive when compared with cases involving similar or greater economic injuries decided under other branches of the law, such as lawsuits by government employees alleging they were fired in violation of the First Amendment or due process, or lawsuits by people fired in breach of a written employment contract. Thus, a person denied a promotion for discriminatory reasons can end up getting more than people fired for exercising their free speech rights, even though it’s logically more painful to lose your livelihood than to lose a promotion. [Compare Passantino v. Johnson & Johnson, 212 F.3d 493 (9th Cir. 2000) (where court upheld $1 million in emotional distress damages for retaliatory refusals to promote woman who alleged sex discrimination, where she alleged that “she experienced substantial anxiety as a result of her sense that she could no longer advance within the company,” as well as “rashes, stomach problems, and other symptoms”) with Nekolny v. Painter, 653 F.2d 1164, 1172-73 (7th Cir.1981) (the court reversed awards of damages for emotional harm for firings in violation of the First Amendment, based on statements that employees were “depressed,” “a little despondent,” or even “completely humiliated” ), Spence v. Board of Educ. of Christina Sch. Dist., 806 F.2d 1198, 1201 (3d Cir.1986) (overturning award of $22,060 as excessive in First Amendment case, where “The evidence of emotional distress consisted chiefly of plaintiff's own testimony that she was depressed and humiliated by the transfer and that she had lost her motive to be creative”).]
Administrative agencies also use anti-discrimination laws as an excuse to censor politically incorrect speech, asserting (sometimes mendaciously, and sometimes accurately) that it fosters a “hostile work environment,” and that employers should be liable for such speech by their employees, even when it does not reflect the employer’s own viewpoint, and in some cases, even when the employer didn’t even know about the speech.
For an example of such censorship by the federal Equal Employment Opportunity Commission, see here and here. For additional examples (and possible future examples, such as speech about same-sex marriage), see this link and this link.
Excessive damage awards by agencies illustrate the wisdom of California Governor Pete Wilson’s veto many years ago of a bill to give California’s civil-rights agency the ability to award up to $150,000 in damages (alas, subsequent legislation has given the agency the power to levy up to $150,000 in fines and emotional distress damages, and California state courts have long had the ability to award unlimited punitive and emotional distress damages in workplace discrimination cases, rising into the millions).