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Instead of Going to Court, Corporations Pay Lobbyists for Favorable Results

Corporations that have higher numbers of employment cases brought against them spend more money on lobbyists, who help influence courts and change labor laws.

When an employee has a grievance with an employer, there's a hierarchy in place for resolution. The first step is a chat with the boss. The second is some kind of outside mediation. The final option is taking the argument to court.

Getting to this final step is quite common in the United States, where almost 25 percent of cases in the federal court system involve employee-employer allegations. In 2016 alone, the Equal Employment Opportunity Commission resolved 97,443 charges for claims related to discrimination based on race, sex, national origin, or religion, resulting in $482 million in damages to the victims. That's a lot of money, and corporations hate spending money.

One way they've been trying to avoid that cost is by spending in another area: lobbyists.

An October study examined the relationship between corporations' lobbyist payments and their employee litigation records. The first finding was obvious: Companies that experience employee litigation spend way more on lobbyists ($970,000 a year) than companies that don't ($180,000). And, the study explains, those companies are getting great value for the extra $790,000 they're spending.

By reviewing the 27,794 employee lawsuits filed between 2000 and 2014, the study's authors found that court case outcomes were more favorable for companies that lobby versus those that don't. Or, as the abstract put it, the case results show "the benefit of building political capital to obtain biased outcomes in favor of politically connected firms." (These findings were replicated in a 2011 study of the Chinese system that concluded "politically connected defendants ... have higher stock returns and are more likely to appeal against adverse outcomes and to obtain a favorable appeal result.")

"Lobbying firms do not suffer from reduced value, while non-lobbying firms suffer from litigation and major problems," says Omer Unsal, assistant professor of finance at Merrimack College and lead author on the study.

It's nice advertising for corporate lobbyists: Purchase our services, and your employee-related litigation will disappear. This may happen because corporate-friendly judges—whose appointments are influenced by lobbyists—dismiss the cases, or because employees withdraw their claims before making it to court, knowing the chances of winning are low. Workers win only 1 percent of the cases filed for discrimination, harassment, or retaliation.

But if electing or appointing favorable judges doesn't work, there's also another way for corporations to stifle employee litigation.

"Companies hire lobbyists, but they also hire people who used to work at the Department of Labor, or the Department of Justice," Unsal says. "And why would firms or lobbying firms hire people who used to work in the Department of Justice?"

The answer is simple: to influence lawmaking. Corporations with a greater number of employment cases filed against them tend to lobby for bills that are labor- or employment-related. (While the study didn't specify which side of the labor/business divide the bills sat on, it's safe to assume that businesses are sponsoring bills that help businesses.) If companies don't like the labor rules, they pay lobbyists to change them.

In election year 2016, $205 million was spent on lobbying by either labor unions or those affiliated with labor interests. Compare that number to the $3.4 billion spent by business interests. The reason for such a disparity is simple—businesses have more to spend than labor unions. You can see the effect of this in the resulting legislation.

"Some [pro-labor] bills are, of course, being passed," Unsal says. "But I don't remember the last time [the federal government] passed a bill that only helped employees."

Between 1993 and 2009, there was an average of 2,096 labor-related bills introduced in Congress per legislative session. But between 2009 and 2017, that number dropped to an average of only 215 bills per session. The number of labor bills proposed during the Obama presidency is roughly one-tenth of what it was during both the Clinton and Bush administrations.

It's hard not to associate this drop with an event that occurred on January 21st, 2010.

On that day, the U.S. Supreme Court, in its controversial Citizens United case, decided that corporations shouldn't be limited in their ability to contribute to politics. The result was record-shattering campaign financing. What corporations are getting for that money is lawmaker influence. And as the dip in labor bills being introduced suggests, that influence is being felt.