The Changing Legal Environment for Employers: Implications for Small Businesses

By Robinson, Robert K.; Jackson, William T. et al. | Journal of Business and Entrepreneurship, March 2010 | Go to article overview
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The Changing Legal Environment for Employers: Implications for Small Businesses

Robinson, Robert K., Jackson, William T., Franklin, Geralyn McClure, Clayton, Russell W., Journal of Business and Entrepreneurship


This article introduces the major provisions of one signed and two proposed employment and labor legislation statutes (the Employment Nondiscrimination Act, the Employee Free Choice Act, and the Lilly Ledbetter Fair Pay Act) which are being openly discussed for possible enactment in the near future under the Obama administration. As this legislation is likely to result in increased administrative costs, compliance costs, and litigation costs for small business owners, each statute is examined in terms of its potential impact on small businesses' current employment policies and practices. We conclude by offering possible options for the small business community in dealing with the complexity of these issues.


Recessions are particularly hard on small business (Beaver & Ross, 2000). When credit tightens, small businesses, many of whom are undercapitalized, are particularly vulnerable. To exacerbate matters, the 1 1 1th Congress of the United States is poised to inadvertently hobble small businesses by enacting new employment and labor legislation: The Employment Nondiscrimination Act (ENDA), the Employee Free Choice Act (EFCA), and the Lilly Ledbetter Fair Pay Act (FPA). At a time when America needs the job creating power of the small business sector, pending government intervention may be adding additional costs of regulatory compliance to the sector's current cost burden.

The purpose of this article is to introduce the major provisions of these proposed statutes, which are expected to be enacted under the current administration. In fact, on January 29, 2009, one of them, the Ledbetter Fair Pay Act, was signed into law by President Barack Obama. Each statute will be examined in terms of its potential impact on a firm's current employment policies and practices, and options for small businesses will be provided.


The first question that arises is: Why must small businesses be concerned about the government regulation of employment? After all, are not small businesses sufficiently small enough, in terms of employee numbers, to be exempted from most federal employment legislation? The answer to this question may surprise many, including those that are most impacted - small businesses. In fact, over the past two decades, considerable attention has been given to the impact of government policy on small business operations. Much of this research has focused on only the following general concerns:

* Government policy (Cook & Barry, 1993; Kirk, Franklin, & Robinson, 1996; Rogoff & Lee, 1996; Taylor & Banks, 1992)

* The impact of government policy (Cook, 1996a; Cook, 1996b; Dye, Carland, & Carland, 1990)

* Clean air regulations (Ramsey & Williams, 1996); resolving OSHA complaints (Scherer, Kaufman, & Ainina, 1993)

* Defamation liability (Fenton & Lawrimore, 1992)

* The Americans with Disabilities Act (Brannen & Begley, 1995; Moore, Moore, & Moore, 2007)

* AIDS (Franklin, Gresham, & Fontenot, 1992; Rutsohn & Law, 1991)

* Drug testing (Ward, 1991)

* Negligent hiring (Usry & Mosier, 1991)

* Wrongful discharge (Aalberts & Seidman, 1993; Fulmer & Casey, 1990; Gomes & Morgan, 1992)

* Civil rights (Kurtz, Wells, & Davis, 1993)

* Maternity leave (Freese, 1994; Worthington & Moss, 1989)

* Sexual harassment (Robinson, Jackson, Franklin, & Hensley, 1998)

A common thread throughout the overwhelming majority of the research is the concept that government policy does indeed affect small businesses, and the impact can be significant.

However, a related issue of concern (and one with the potential for impact equal to if not greater than the concerns mentioned above) has received only limited exposure. The issue in question is evaluating the total impact of Title VII of the Civil Rights Act of 1964 on small business.

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The Changing Legal Environment for Employers: Implications for Small Businesses


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