Recently, I had the opportunity to watch one free night of cable during a brief hotel stay, and decided to tune in to Fox News. When I heard a commentator railing against a provision in President Obama’s jobs bill that “would make it illegal for employers to run advertisements saying that they will  not consider unemployed workers, or to refuse to consider or hire people because  they are unemployed,” I was skeptical. So I decided to check the proposed legislation’s actual text.

It turns out that some well-intentioned but sadly misguided individual did, in fact, add such a nonsensical provision.

The draft legislation states very clearly that it will be unlawful for an employer to:

“(1) publish in print, on the Internet, or in any other medium, an advertisement or announcement for an employee for any job that includes-(A) any provision stating or indicating that an individual’s status as unemployed disqualifies the individual for any employment opportunity; or (B) any provision stating or indicating that an employer will not consider or hire an individual for any employment opportunity based on that individual’s status as unemployed; or

(2) fail or refuse to consider for employment, or fail or refuse to hire, an individual as an employee because of the individual’s status as unemployed;

(3) direct or request that an employment agency take an individual’s status as unemployed into account to disqualify an applicant for consideration, screening, or referral for employment as an employee.”

I don’t think items (1) and (3) are necessarily bad. After all, it is illegal for employers to specify in advertisements that they will accept applications from only members of a particular race, ethnicity, religion, and so on. I think these two provisions are similar in spirit to existing anti-discrimination laws.

However, I think item number (2) fails to address reality. That is, small firms will react to this legislation by changing their hiring behavior to minimize legal risk. The most logical reaction will be not to interview the unemployed at all.

Damned If They Do; Damned If They Don’t

Of course, this strategy will ultimately fail, because the statute is cleverly worded. Any trial lawyer worth his salt will focus on this key phrase: “fail or refuse to consider for employment.” In other words, it won’t be long before the government requires firms to maintain extensive databases and records of resume submissions.

In essence, the very refusal to interview unemployed candidates to limit one’s legal liability will likely maximize that liability. After all, interviewing only employed candidates is a clear violation of this statute; a comparison between resumes that led to interviews and those that did not will likely be all that is needed to win a case.

So what is an employer to do?

Well, the most logical implication of this bill will be for an employer to increase her legal and compliance expenses. After all, if an employer interviews the unemployed, she faces legal liability. If that same employer refuses to interview the unemployed to avoid potential lawsuits, that employer risks a clearer violation of the law once opposing counsel subpoenas the firm’s resume database.

My guess is that smaller businesses will be much more cautious before they even consider hiring someone new. After all, the very act of receiving a resume could expose them to litigation risk.

Of Unicorns and Pixie Dust

Some liberal politicians appear to have an unshakable belief that government can legislate hopes into reality. As a consequence, they pass ill-considered provisions like this one, that have some fairly obvious negative first and second order effects.

In the end, legal and compliance costs will rise, and employers will exhibit much more caution before they decide to create jobs.