Writing Assignment - respond to the following questions

5 Protection of Consumer, Employee, and the Environment

Ann Johnson

Case Scenario: A polluter’s quagmire 137

Government as Regulator of Business 138

Theories of Regulation 139

The US Regulatory Framework 140

Government as a Protective Regulator 141

Consumer Protection 141

Employee Protection 149

Environmental Protection 157

The Debate about Social Regulation 168

Analytical Case: Employees with disabilities 169

Practical Skill: Complying with government regulation 170

Summary and Conclusion 171

CHAPTER CONTENTS

CASE 5 SCENARIO

A polluter’s quagmire

Tyler’s father, Tomas, is the owner of Trujillo Landscaping, Inc., a sod and landscape company started by Tyler’s grandfather Teodoro, located at the edge of the City of Somewhere. The company is dedicated to the production, sale, and installation of lawn grasses and other landscaping products, so it is important for his business that he keep weeds controlled and make his sod grow lush and green. For that purpose, Tomas uses both pesticides and a chemical fertilizer to ensure he produces the best products.

Recently, a grassroots citizen group—the Friends of Somewhere—expressed concerns about the contents of a nearby water table to the local newspaper. Last week, a representative from the group visited Trujillo’s and talked with Tomas about

the issue. The representative warned him that his products might have a direct impact on neighborhood water quality and urged him to switch to organic pesticides and fertilizer.

Tomas was deeply concerned. He looked into manufacturing his own products with organic substances and found it to be prohibitively expensive. Tomas learned that the pesticides he used would really only penetrate about a foot into the soil, so something else must be contaminating the water table. He also learned that some amount of pollution would be an unavoidable byproduct of the chemical com - positions of most pesticides and fertilizers and each state has its own regulations about the distribution and disposal of toxic substances. Tomas is unsure of where to turn to find information regarding how to more safely apply a product and dispose of residual toxic substances. He is also eager to know how to comply with any regulations concerning groundwater.

At dinner that evening, Tyler suggested to his father that perhaps he could ask the Friends of Somewhere for a little guidance. Or maybe pay Zoey a visit. After all, she had just gone through much of the regulatory setup for her own business and helpful websites and contacts may be fresh in her mind. Tyler’s father thought that was a good idea. Besides, he needed to deliver a couple corkscrew junipers for the entrance of Happy Paws anyway, a grand-opening gift from one business owner to another.

Later, while doing historical research, Tomas discovered that there had once been a well on his land. When the EPA investigated, they indeed discovered the old well, which was allowing runoff to penetrate the water table. It was almost completely obscured at the edge of the Trujillo Landscaping property. But now, with the discovery, Tomas was able to take the appropriate steps to remedy the problem and preserve the good name his family worked so hard to create.

Government as Regulator of Business

Regulation is a type of government intervention in economic activity through commands and controls enforced with coercive power. Government as a regulator of business has evolved over three major periods in the United States (see Chapter 3). The first occurred in the Moderate-Sized Government Era (1887–1933) with the passage of the Interstate Commerce Act in 1887, which established the Interstate Commerce Commission (ICC) to regulate railroad rates. Following the same tradition, legislation was enacted to shore up anti-trust powers as well as consumer rights in the early twentieth century. During the Moderate-Sized Government Era (1933–1970s), regulation was extended to industries as well as to labor markets. The trend was accelerated in the 1960s and 1970s when many social regulations addressing externalities and hazards were introduced. Regulation was expanded to consumer products, the workplace, and the environment. The third period, the Rightsizing Government Era, introduced economic deregulation to several industries such as transportation, telecommunications, electric power, and natural gas trans mission.

138 Business–Government Relations in the Sociopolitical Arena

Regulation at any level of government balances the needs of public and

private interests (Lehne 2006). These needs can be societal as well as economic

(see Chapter 4). This chapter focuses on social regulation and the interplay between

government, the private sector and citizen groups. Three areas of social regulation

will be covered, starting with consumer protection, then moving to employee

protection and, finally, to environmental regulation. The summary of these areas is

intended to provide an overview of the evolution and current status of how

businesses have adapted their practices to comply with government mandates and

will illustrate approaches taken by the public and private sectors to accomplish these

measures.

Theories of Regulation

Philosophically, Emile Durkheim stated that people will be destroyed and societies

will disintegrate without some sort of social regulation, particularly when there is

rapid economic progress. Of all organizations, the state is most equipped to provide

for the welfare of the system and protect labor. Thus, the government has the moral

obligation to fulfill these purposes (Jones 1986). Because people will not naturally

check their own wants, regulations are a check on greed (Jones 1986).

In the modern US system of government regulations, two dominant theoretical

frameworks emerge when social regulation is discussed. Public interest theory contends that regulations benefit the public in areas where market competition does

not necessarily help the public. One example where the market would not benefit

the public is “natural monopolies,” areas where the circumstances make it unlikely

for competition to exist, such as utility companies or, in the non-economic context,

employment discrimination (Lehne 2006). Another area that would not be regulated

without government intervention is the environment.

Competing ideas exist as to why we regulate. Public choice theory of govern - mental regulations promotes the view that interest groups and politics are mainly

driven by monetary interests, and that the ends are more important than the

means. Sometimes it is argued that the private sector is able to act on behalf of

the agency that is supposed to be practicing oversight. Thus, regulations benefit the

private sector and not the public. Public choice theory has been criticized as an

over simplification of human behavior (Lehne 2006). Critics of public choice theory

point out that some behavior is altruistic and is clearly not motivated by individuals

gaining money. For example, people may vote for social programs that benefit others

but not themselves. Thus, values and ideology may matter more than what interest

groups can offer to voters from those elected (Lehne 2006). Self-regulation theory suggests that socially conscious consumers can cause industry to self-regulate

(Volden and Wiesman 2009). Regardless of which theoretical framework seems the

most accurate, social regulations have become increasingly intricate, and it is

crucial that firms are aware of when their business practices involve an area that

is covered by these social regulations.

Consumer, Employee, and Environment 139

The US Regulatory Framework

The US Constitution provides the authority for regulation. Article 1, Section 1

of the Constitution grants Congress the sole power to enact laws. The power to

regulate commerce among states is given to Congress by Section 8 of Article 1 of

the Constitution. Meanwhile, the Constitution also places limits on regulation. The

Fifth Amendment to the Constitution limits government regulatory power by stating

that “No Person shall be deprived of life, liberty, or property, without due process

of law; nor shall private property be taken for public use without just compensation.”

This due process protection is extended to actions taken by states via the Fourteenth

Amendment.

Regulation, as both a political and economic instrument, takes place through

an open public process, which allows interested parties to participate (see

Chapter 7). Most regulations, except anti-trust laws, are implemented by independent

commissions and executive branch agencies. The courts also play a critical role in

interpreting regulatory statutes, assessing their constitutionality, and ensuring

procedural due process. Many legal principles of regulation have come from court

decisions that constitute the common law, which refers to a body of law developed

by judges through court decisions as opposed to statutes passed by the legislative

process or regulations promulgated by the executive agencies.

Although the Constitution does not explicitly authorize Congress to delegate

policy-making to agencies, regulatory agencies assume the responsibility to

promulgate rules, make policies, and resolve disputes. Laws written by Congress

provide the authority for regulatory agencies to write regulations. Regulations

explain the technical, operational, and legal details necessary to implement laws.

Regulatory agencies take two basic forms—independent commissions and executive

branch agencies. Independent commissions, such as the Federal Reserve System,

Federal Trade Commission, International Trade Commission, Securities and

Exchange Commission, National Labor Relations Board, Consumer Products Safety

Commission, and so on, make policies through majority-rule voting and formal rule-

making procedures.

Most executive branch regulatory agencies are housed in a cabinet department,

which has its administrator appointed by the President or a cabinet secretary.

Examples include the OSHA in the Department of Labor (DOL), FDA in the

Department of Health and Human Services (HHS), and National Highway Traffic

Safety Administration (NHTSA) in the Department of Transportation (DOT). The

EPA is an independent executive branch agency and does not belong to a cabinet

department.

To implement statutes passed by Congress, regulatory agencies assume an

important activity of rule-making, which refers to the process that executive and

independent agencies use to create, or promulgate, regulations. Typically, Congress

first sets broad policy mandates by passing statutes, then agencies create more

detailed regulations through rule-making. In addressing the concern about agencies

in exercising their powers, Congress enacted the Administrative Procedure Act

(APA) of 1946, providing that agencies’ rule-making procedures should be

140 Business–Government Relations in the Sociopolitical Arena

consistent with the APA. The APA also grants parties the right to sue for judicial review of an agency action under the framework of procedural due process; that is, if an agency fails to follow APA procedures, or procedures it has established, the courts can overturn the agency’s decision. In addition to procedural due process, the courts review regulatory actions for whether they are arbitrary or capricious, which addresses the issue if an action by the agency exceeds the scope of the mandate and if it has a basis in the record of evidence that agency keeps. The courts also review regulatory actions for substantive due process to ensure they conform to the constitutional requirements.

The implementation and enforcement of laws involves regulatory agencies that assist or force regulated entities to meet legal requirements, as well as hold entities legally accountable for any violations.

Government as a Protective Regulator

Government’s regulation to business generally falls into two categories— economic (or industrial) regulation and social regulation. Economic regulation sets prices or conditions on entry of firms into an industry. It also includes the regulation of financial firms. Social regulation, otherwise, involves the correction of externalities (see Chapter 2) and is largely protective in nature. It is concerned with the qualities of the goods and services produced, the conditions under which production occurs, as well as the impact of production on society. Social regulation is applicable to many or all industries and affects a broad spectrum of social groups. It involves government dictating the details of production, such as the design of products, the conditions of employment, and the nature of the production process. One factor to distinguish economic regulation from social regulation is that the two have followed very different paths in recent decades. Whereas there has been a decline in economic regulation, a rapid expansion of social regulation has been observed, as described earlier. When the deregulation movement started in the 1970s, more social regulatory agencies—including the EPA and OSHA—were created. There appears to have been a great public demand for government to take a more active role in social regulation.

US social protective regulation generally covers three areas, namely consumer protection, employee protection, and environmental protection, which are mainly governed by the federal regulatory framework. Exhibit 5.1 summarizes the federal regulatory framework of the three areas.

Consumer Protection

Consumer protection refers to the regulatory framework designed to ensure the rights of consumers, as well as fair competition and accurate information in the marketplace. The underlying rationale of consumer protection is to correct market failure associated with asymmetric information (see Chapter 2). A market economy espouses consumer sovereignty, which refers to the paramount power of the consumer to affect the operation of a market. In a market economy, “consumption is the role end and purpose of all production” (Smith 1937, p. 38) and consumers have the freedom of choice—they are free to accept or reject any products in the

Consumer, Employee, and Environment 141

US federal social protective regulatory framework

Social Regulation Regulatory Agencies Major Laws

EXHIBIT 5.1

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The Pure Food and Drug Act of 1906 The Meat Inspection Act of 1907 The Food, Drug, and Cosmetics Act of 1938 The Public Health and Service Act of 1944 Drug Amendments of 1951, 1958, and 1962 The Medical Device Amendment of 1976 The Nutrition, Labeling, and Education Act of

1990 The Generic Drug Enforcement Act of 1992 The Best Pharmaceuticals for Children Act of

2002 The Pediatric Research Equity Act of 2003

The Federal Trade Commission Act of 1914 The Wheeler–Lea Amendment to the Clayton

Act of 1938 The Wool Products Labeling Act of 1939 The Fur Products Labeling Act of 1951 The Textile Fiber Products Identification Act of

1958 The Cigarette Labeling and Advertising Act of

1966 The Fair Packaging and Labeling Act of 1966 The Truth-in-Lending Act of 1968 The Poison Prevention Packaging Act of

1970 The Fair Credit Reporting Act of 1970 The Consumer Product Warranty Act of 1975 The Fair Debt and Collection Practices Act of

1977 The Truth in Savings Act of 1991 The Credit Card Accountability Responsibility

and Disclosure Act of 2009

The Flammable Fabrics Labeling Act of 1954 The Refrigerator Safety Act of 1956 The Federal Hazardous Substances Labeling

Act of 1960 The Hazardous Substance Act of 1964 The Child Protection Act of 1966 The National Traffic and Motor Vehicle Safety

Act of 1966 The Poison Prevention Packaging Act of 1970 The Public Health Smoking Act of 1970 The Consumer Product Safety Act of 1972 The Medicare Reform Act of 2003

The Food and Drug Administration (1931) [HHS]

The Federal Trade Commission (1914)

The Consumer Financial Protection Bureau (2011)

The Consumer Product Safety Commission (1972)

The National Highway Traffic Safety Administration (1970) [DOT]

The Drug Safety Oversight Board [FDA]

Consumer Protection

• Fraud and misrepresentation of food, drugs, and cosmetics

• Unfair competition and deception

• Product safety

Social Regulation Regulatory Agencies Major Laws

EXHIBIT 5.1 continued

Consumer, Employee, and Environment 143

The National Labor Relations Act of 1935 The Fair Labor Standards Act of 1938 The Labor Management Relations Act of

1947 The Labor Management Reporting and

Disclosure Act of 1959 The Occupational Safety and Health Act of

1970 The Family and Medical Leave Act of

1993

The Equal Pay Act of 1963 The Civil Rights Act of 1964 and 1991 The Age Discrimination in Employment Act

of 1967 The Vocational Rehabilitation Act of 1973 The Pregnancy Discrimination Act of 1978 The Americans with Disabilities Act of

1990 The Violence Against Women Act of 1994

The Refuse Act of 1899 The Oil Pollution Acts of 1924, 1961, 1973,

and 1990 The Water Pollution Control Acts and

Amendments of 1948, 1956, and 1972 The Clean Air Acts of 1963 and

Amendments of 1970, 1977, and 1990 The Water Quality Acts of 1965 and 1970 The Endangered Species Preservation Acts

of 1966 and 1969 The Air Quality Act of 1967 The National Environmental Policy Act of

1970 The Endangered Species Act of 1973 The Safe Drinking Water Act of 1974 and

Amendments of 1992 and Renewal of 1996

The Resource Conservation and Recovery Act of 1976

The Environmental Response, Compensation, and Liability Act of 1980

The Hazardous and Solid Waste Amendments of 1984

The Department of Labor The National Labor

Relations Board (1935) The Occupational Safety

and Health Administration (1973) [DOL]

The Equal Employment Opportunity Commission (1964)

The Environmental Protection Agency (1970)

Employee Protection

• Employee welfare

• Anti-discrimination

Environmental Protection

marketplace; therefore, producers have to effectively respond to the needs of consumers in order to pursue profit. This assumes that consumers are capable of making rational decisions in a competitive market filled with a large number of buyers and sellers. Yet in reality, consumers are often in a disadvantaged situation where they don’t have enough information to make rational choices.

In the past, the relationship between the buyer and seller was governed by the common-law concept of caveat emptor (“buyer beware”), which assumed that both buyer and seller were equally knowledgeable about the merchandise and, in the case of a dispute between the buyer and seller, the buyer had to undertake the burden to convince the judge or jury that the seller deliberately misrepresented the condition of the merchandise before it was sold. The Industrial Revolution fundamentally changed the landscape when a wide range of manufactured goods was produced, and consequently, the average person could no longer fully understand the intricacies of the many products in the market.

The increased demands for protecting consumer rights have led to the passage of various laws and regulations. Roughly, these laws and regulations comprise three major areas—prevention of fraud and misrepresentation of food, drugs, and cosmetics; protection of consumers from unfair competition and deceptive practices; and consumer product safety (Langran and Schnitzer 2007).

Prevention of Fraud and Misrepresentation of Food, Drugs, and Cosmetics

Regulations to prevent fraud and misrepresentation of products are designed to protect consumers from the adulteration, misbranding, or mislabeling of food, drugs, and cosmetics. Regulations against product adulteration or fraud have a relatively long history. From colonial times to the late nineteenth century, most food and drug regulations were enacted at the state and local level. For example, the state of Massachusetts adopted a food adulteration law in 1641, requiring the official inspection of beef, pork, and other meat. In the mid-1800s, the states of Virginia and Ohio started to enact laws against the adulteration of food and drugs. During the remainder of the century, the scale and scope of state food and drug regulation expanded significantly. Yet with increased interstate competition, regulation at the federal level was deemed necessary.

In the late 1800s, pure-food bills were introduced in Congress, but failed to become law due to opposing business interests. Several events built up public sentiment for protection and eventually led to the passage of the Pure Food and Drug Act of 1906 and the Meat Inspection Act of 1907. One of those notable events was the publication of Upton Sinclair’s bestseller, The Jungle, in 1906, which vividly described the filthy conditions of the meat-packing industry in Chicago. After reading the book, President Theodore Roosevelt ordered an immediate investigation of the industry. Public pressure eventually issued a new lease of life to the shelved bills and pushed them through Congress. The Pure Food and Drug Act of 1906 is the first significant piece of consumer protection legislation at the federal level. It outlawed interstate trade of “adulterated” or “misbranded” foods, and required producers to indicate the presence of mixtures and/or impurities on product labels.

144 Business–Government Relations in the Sociopolitical Arena

The adulteration and misbranding provisions of this law also applied to drugs, which went beyond state legislations’ protection at that time. Enforcement of the Act became the duty of the Bureau of Chemistry, a division under the US Department of Agriculture. The Bureau of Chemistry was renamed the Food and Drug Administration (FDA) in 1931. In 1940, the FDA was transferred from the USDA to the Federal Security Agency, which eventually became the Department of Health and Human Services in 1979.

During the Depression of the 1930s, there was a resurgence of public interest in consumer protection, due to exposure of various consumer abuses, including filthy, decayed, and insect-infested food, as well as the false or misleading advertise- ment of drugs. The FDA and its supporters started to lobby Congress in favor of stronger legislation that would give the agency greater authority to regulate the patent medicine industry. However, their efforts were seriously obstructed by the patent medicine industry itself and its congressional allies. In 1938, a tragedy finally broke the deadlock between the two parties, when over 100 people were killed as a result of consuming a liquid sulfa drug called “Elixir Sulfanilamide,” which had been marketed without being tested for toxicity. Public outcry over the tragedy eventually led to the passage of the Food, Drug, and Cosmetics Act of 1938, which gave the FDA greater oversight over the food and drug industry. The agency’s authority was extended to include cosmetics and therapeutic devices. The new law required that drugs be marketed with adequate directions for safe use and the FDA was granted the power to regulate the therapeutic claims drug manufacturers printed on their product labels. Most importantly, the Act introduced mandatory pre-market approval for new drugs, meaning that drug manufacturers had to demonstrate to the FDA that a new drug was safe before it could be released to the market.

The Food, Drug, and Cosmetics Act went through several amendments, among which were the 1962 Drug Amendments, passed in response to a therapeutic crisis, as the use of a suppressant for morning sickness (thalidomide) by pregnant woman caused the birth of deformed babies in Europe. Under the amendments, drug companies were required to prove that drugs were both safe and effective prior to market release and the FDA was granted the power to oversee clinical trials for new drugs. In addition, the responsibility for regulating prescription drug advertising, which originally was given to the Federal Trade Commission (FTC) under the Food, Drug, and Cosmetics Act of 1938, was transferred from the FTC to the FDA. After these series of amendments, the United States became one of the toughest drug- approval regimes in the world.

Since the 1960s, regulation has continuously strengthened the government’s authority over various aspects of food and drug commerce. For example, the 1976 Medical Device Amendment required premarket safety testing of medical devices. Similarly, the 1990 Nutrition, Labeling, and Education Act required nutritional labeling for all packaged foods, and the 1992 Generic Drug Enforcement Act granted the FDA authority to oversee generic drugs. More recently, the 2002 Best Pharmaceuticals for Children Act allowed the FDA to request pediatric drug testing sponsored by National Institutes of Health (an agency of HHS), and the 2003 Pediatric Research Equity Act mandated manufacturer-sponsored pediatric drug

Consumer, Employee, and Environment 145

trials for certain drugs as a “last resort.” However, some legislation has also weakened government’s regulatory power over the industry. For instance, the 1976 Vitamins and Minerals Amendments and the 1994 Dietary Supplements and Nutritional Labeling Act preclude the FDA from regulating dietary supplements, as a result of the advocacy and lobbying efforts of the consumers and producers of “natural” or “herbal” remedies.

Prevention of Unfair Competition and Deceptive Practices

The prevention of unfair competition and deceptive practices involves government regulations of various forms of disclosure, including advertising, labeling, and product warranties, as well as consumer credit (Langran and Schnitzer 2007). This is a relatively broad area that is generally under the regulatory supervision of the Federal Trade Commission (FTC). The FTC is an independent agency with a bipartisan body of five members appointed by the President. The agency’s principal mission is the promotion of consumer protection and the elimination and prevention of anti-competitive business practices.

The FTC was established in 1914 by the Federal Trade Commission Act signed by President Woodrow Wilson against trusts, which had been a significant political issue during the Progressive Era (see Chapter 3). The Act was passed following two Supreme Court decisions against Standard Oil and American Tobacco, who had used their size and clout to undercut competitors in a number of ways. Under the Act, the commission was authorized to issue “cease and desist” orders to large corporations to curb unfair trade practices.

Section 5 of the Federal Trade Commission Act granted the FTC the right to prevent unfair competition practices. Although Section 5 outlawed unfair methods of competition in commerce, it did not address the issue of fraud and deceptive practices.

Advertising

In the case of advertising, for instance, in 1931, the Supreme Court overturned the ruling of the FTC that Raladam, the manufacturer of Marmola (a tablet containing thyroid substance), misrepresented its product as a remedy for obesity. Although the Court found evidence of misrepresentation common among vendors of such remedies, it concluded that since no conclusive proof of damage could be drawn to Raladam or its competitors, the FTC could not prosecute consumer fraud; therefore, the court vacated the judgment. In response to the court’s decision, the Wheeler–Lea Act of 1938 was passed to amend Section 5 of the Federal Trade Commission Act, specifically proscribing “unfair or deceptive acts or practices” and “unfair methods of competition,” as well as providing civil penalties for violations. It added a clause to Section 5, stating “unfair or deceptive acts or practices in commerce are hereby declared unlawful.” The amendment created criteria in determining an illegal advertisement, as far as it deceives a significant number of consumers and therefore is a representation, omission, or practice that is likely to mislead the consumer in their purchasing decision.

146 Business–Government Relations in the Sociopolitical Arena

Labeling

Another area of disclosure under the FTC oversight is the labeling of products. Labeling is any written, electronic, or graphic communication on the package or on a separate but associated label of a certain product. A series of laws have been passed to protect consumers from product misrepresentation. For instance, the Wool Products Labeling Act of 1939, the Fur Products Labeling Act of 1951, the Flammable Fabrics Act of 1954, and the Textile Fiber Products Identification Act of 1958 required manufacturers to attach labels that specify the nature and content of the materials. The Cigarette Labeling and Advertising Act of 1966 set national standards for cigarette packaging and required all cigarettes sold in interstate commerce to be labeled with a warning that smoking can be harmful to health. The Fair Packaging and Labeling Act of 1966 required labels on many consumer products to state the identity of the product, the name and place of business of the manufacturer, packer, or distributor, as well as the net quantity of contents. The Poison Prevention Packaging Act of 1970 required the use of child-resistant packaging for drugs, chemicals, and other hazardous materials that can be unsafe for children. In recent years, whether or not to require labeling of genetically engineered (GE) or genetically modified (GM) foods has become an ongoing debate. Those in favor of labeling emphasize consumers’ right to know what’s in their food. Opponents point to the fact that no significant differences have been found between GE or GM and conventional foods and emphasize the expense and logistical difficulties of labeling. Although mandatory labeling of GE and GM foods has been proposed, there has been no action by Congress to date.

Product Warranty

A warranty refers to a guarantee or promise that provides an assurance by the manufacturer to the consumer that affirms specific facts or conditions of the goods being sold. Commonly, new goods are sold with an implied warranty that the goods are indeed as advertised. Used products, however, may be sold “as is” with no warranties. In the US, Article 2 of the Uniform Commercial Code (which has been adopted with variations in each state) provides implied warranties. The Consumer Product Warranty Act (also known as the Magnuson–Moss Warranty Act) of 1975 was designed to protect consumers from deceptive warranty practices. Consumer products are not required to have warranties, but if one is given, it must comply with the Act. The Act also required that any written warranty be readily understood by consumers. The FTC was granted the authority to prescribe rules and regulations for deceptive practices.

Consumer Credit

Although credit cards of various types had been used for a long time, it was not until the 1960s that the credit card became popular. Financial institutions also made credit easier to obtain by consumers about this time, yet incomplete consumer credit information often made it difficult to choose between various types of loans. For many years, consumer credit activities were regulated by state laws, which were

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inconsistent in various aspects. The demand for protecting consumers against fraudulent and unfair credit disclosure practices eventually drove the federal legislative process and led to the passage of the Truth in Lending Act (TILA) of 1968. The law was designed to promote the informed use of consumer credit by forcing creditors to notify consumers of the actual cost of that credit. It required uniform or standardized disclosure of costs and fees to encourage competition in financing, from which the consumer can benefit. It also prohibits the issuance of a credit card without the consumer’s oral or written agreement. Later, a handful of consumer credit protection laws were enacted, among which were the Fair Credit Reporting Act of 1970—aimed at protecting the privacy of consumers against the issuance of erroneous credit reports—the Fair Debt Collection Practices Act of 1977—establishing legal protection from abusive debt collection practices—and the Truth in Savings Act of 1991—establishing uniformity in the disclosure of terms and conditions regarding interest and fees and forbidding any misleading or inaccurate advertising for opening bank accounts. During the Great Recession of 2008 (see Chapter 3), which was partially attributed to the fraudulent lending practices of the financial industry, the Credit Card Accountability Responsibility and Disclosure Act of 2009 was signed into law by President Barack Obama. The Act, also known as the Credit Cardholders’ Bill of Rights, mainly aimed to establish fair and transparent practices by limiting how credit card companies can charge consumers.

In 2011, the Consumer Financial Protection Bureau (CFPB) was established as an independent agency of the United States government, responsible for consumer protection in the financial industry. The CFPB was authorized by the Wall Street Reform and Consumer Protection Act of 2010, as a response to the financial crisis of 2007/08 and the subsequent Great Recession. The bureau is located inside and funded by the Federal Reserve and affiliated with the US Treasury Department. In addition to writing and enforcing rules for financial institutions, supervising their operations, and monitoring financial markets, it also collects and tracks consumer complaints.

Consumer Product Safety

Product safety regulations were often established as responses to tragedies or consumer advocacies. One early example was the passage of the Flammable Fabrics Labeling Act of 1954 after serious injuries and deaths caused by the ignition of clothes made from synthetic fibers. The federal automobile safety standards were promulgated in the 1960s, mainly driven by the consumer movement advocated by Ralph Nader. In 1965, Nader published his book Unsafe at Any Speed, accusing car manufacturers (mainly the manufacturer of Corvair, General Motors) of resist - ance to the introduction of safety features. General Motors responded to Nadar’s criticism by hiring an investigator to find evidence against him, which made Nader a national leader of a consumer movement for car safety. In 1972, the Consumer Product Safety Act was passed as a result of alarming findings regarding consumer product safety in a report presented at a congressional hearing. The report indicated that over 20 million people were injured by unsafe consumer products annually,

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among whom about 30,000 were killed and over 100,000 were permanently disabled (US Senate Committee on Commerce 1972).

The authorities that oversee product safety are relatively diffused. Generally speaking, most product safety issues are under the authority of the Consumer Product Safety Commission (CPSC), which is an independent agency of the United States government established in 1972 under the Consumer Product Safety Act. The CPSC regulates the manufacture and sale of over 15,000 consumer products, ranging from clothes to vehicles. Products such as alcohol, tobacco, guns, and explosives, which involve high risks and are often associated with criminal behaviors, are regulated by the Bureau of Alcohol, Tobacco, Firearms, and Explosives in the US Department of Justice. Drug safety is supervised by the Drug Safety Oversight Board of the FDA. Automobiles are regulated by the National Highway Traffic Safety Administration, which is a branch of the US Department of Transportation. The agency was established in 1970 to enforce the Federal Motor Vehicle Safety Standards.

State Regulations of Consumer Protection

In addition to federal regulation, a number of states such as (but not limited to) Colorado, Delaware, Illinois, and Ohio, have adopted the Uniform Deceptive Trade Practices Act (UDTPA). The Act aims at preventing deceptive trade practices such as unfair or fraudulent business practices, as well as untrue or misleading advertising. States that have not adopted the UDTPA often have similar, other laws. States may choose to implement food safety standards, such as the Manufactured Food Regulatory Program Standards (MFRPS), developed by the FDA. Some states, including Florida, Delaware, and Minnesota, have legislated requirements that contracts be written at reasonable readability levels that common consumers can understand.

California has by far the strongest consumer protection laws as a result of rigorous advocacy and lobbying by many social interest groups such as the Consumer Federation of California, California Consumer Protection Foundation, Utility Consumers’ Action Network, and Privacy Rights Clearinghouse. For example, the state’s Unfair Competition Law broadly prohibits unlawful, unfair, and fraudulent business practices and deceptive advertising.

Most states have a Department of Consumer Affairs devoted to protecting consumers and providing legal services. For example, the California Department of Consumer Affairs, with its 41 regulatory entities (25 boards, nine bureaus, four committees, two programs, and one commission), issues licenses in more than 100 business and 200 professional categories, including doctors, dentists, con - tractors, cosmetologists, and automotive repair facilities.

Employee Protection

Employee protection refers to the legal framework that protects the welfare of employees, including wages, working hours, health, safety, and working conditions, as well as the right for equal employment opportunities.

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Employee Welfare

As a result of the industrial revolution, productivity increased exponentially, but the lives of workers worsened in many aspects. The demand for labor in heavy industry caused many employees to be drawn into a new working environment that prior generations had not experienced. Concerns about health, safety, and quality of life for workers began to take center stage as circumstances deteriorated.

There were a few early, scattered, regulatory attempts to address aspects of employee welfare at the workplace. For example, Massachusetts passed the nation’s first law to limit the working hours of women and children employed in factories in 1874 (see Chapter 3). However, there was virtually no consistent labor legislation at the federal level.

Collective Bargaining and Unions

During the industrial revolution, as a result of frustration over wages, hours, and working conditions, workers began to organize into trade associations, called unions, to collectively bargain with employers (Dalton, Hoyle, and Watts 2006). The National Labor Relations Act (NLRA), also known as the Wagner Act, was passed in 1935 as a reaction to many of the employment practices of the industrial revolution (Dalton, Hoyle, and Watts 2006). NLRA is a foundational statute of US labor law, which granted private sector employees the right to organize into unions, engage in collective bargaining for better terms and conditions at work, and take collective action (e.g., strike) if necessary. The NLRA is enforced by the National Labor Relations Board (NLRB), an independent agency of the US government. It is charged with conducting elections for labor union representation, as well as investigating and correcting unfair labor practices.

In a unionized workplace, management will communicate about wages and other conditions of employment with the union representatives rather than with the employees themselves (Bernardin 2007). The union has a representative, who is voted in by union members. The employees are represented by the union during the bargaining process. If an employee believes they are being treated unfairly on the job, they will often file a grievance.

For employers with unions, collective bargaining specifically describes the process where management and unions negotiate terms of employment contracts specifying the wages and benefits for the contracted period of time (Bernardin 2007).

The NLRA largely drove the labor movement in the 1940s. About 25 percent of the workforce was unionized after World War II. During the war, unions agreed not to strike, in order not to destroy the war effort. When the war ended, the issue of falling wages across the board led to large strikes. From 1945 to 1946, there was a series of massive labor strikes affecting many industries and public utilities. Many policy-makers and businesses were threatened by the strikes, as well as labor unions’ ideological affiliations to communism. As a response to the rising union movement, the Labor Management Relations Act (also known as the Taft–Hartley Act) was enacted in 1947 to restrict the activities and power of labor unions. The amendments added a list of prohibited actions (including many forms of strikes), or unfair labor practices, on the part of unions to the NLRA. It also required union

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officers to sign affidavits declaring that they were not supporters of the Communist Party or any organizations that might attempt to overthrow the United States government. The Act still remains effective today.

After revealing the corruption and undemocratic practices of unions, in 1959 the Labor Management Reporting and Disclosure Act was passed to regulate unions’ internal affairs as well as their officials’ relationships with employers. The Act further restricts union activities in the United States.

Fair Labor Standards

In 1938, the Fair Labor Standards Act (FLSA) was signed into law by President Roosevelt as part of his New Deal legislation. The FLSA introduced a maximum 44-hour, seven-day work week and established a national minimum wage. Over 700,000 workers were affected by the Act, and over 130 million US workers are now covered by the FLSA.

The Wage and Hours Division of the US Department of Labor (DOL) governs minimum wage and overtime in accordance with the Fair Labor Standards Act (FLSA). Under the FLSA, when an employee works more than 40 hours a week, the employer is required to pay the employee time and a half normal wages. See Exhibit 5.2 for an example about Walmart, a frequent FLSA violator.

The Fair Labor Standards Act (FLSA) also governs the conditions of child labor. The FLSA requires children be 14 years old for most types of jobs, but must be 16 years old for mining, manufacturing, and transportation jobs (Bernardin 2007). State laws also may have a higher minimum for child labor laws. However, child labor laws are often violated, and it is difficult to monitor them in many workplaces.

The FLSA has been amended many times since its passage; the national minimum wage in 1938 was $0.25 per hour (25 cents), but it was $7.25 in 2014. States can, and many do, set a minimum wage above the national minimum. The State of Washington had a minimum wage of $9.32 in 2014. Some states allow their cities to have minimum wage rates higher than the state minimum; although not common, some city minimum wage rates are much higher than state rates such as the City of Seattle, which will phase in a minimum wage rate of $15 per hour by 2021. The federal contractor minimum wage rate is $10.10.

Occupational Health and Safety

During the industrial revolution in the US, the number of workers in factory jobs increased exponentially as people went from working in agriculture to working in more urban settings. Despite the sophistication of production methods, industry continued to focus on gaining wealth and not on workplace safety, which went largely unregulated. However, since the 1970s, cultural changes have caused less of a tolerance of risk (Bardach 2002). Decreased tolerance for possible injuries, combined with a greater concern for employee well-being, created a political environment where workplace safety could be more greatly regulated.

In 1970, Congress enacted the Occupational Safety and Health Act to ensure that employers provide their employees with a working environment free from

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152 Business–Government Relations in the Sociopolitical Arena

recognized hazards such as toxic chemicals, unsanitary conditions, mechanical dangers, and excessive noise, heat, or cold. Under the Act, the Occupational Safety and Health Administration (OSHA) was established in the US Department of Labor and was charged with the authority to administer the Act.

OSHA is designed to prevent harm to the safety and health of workers. Safety regulations govern standard setting and industrial codes, whereas health issues address whether exposure to a particular chemical is a contributing factor for disease. Risk assessment of conditions that may cause injury or disease is particularly difficult. There is a balance in the burden between employers and employees (Eisner, Worsham, and Ringquist 2006). This balance can be a contested area and special interests and industry may lobby against certain regulations. Passing workplace safety standards is a politically salient practice. The government may announce mandates for a workplace safety practice. However, employers, industry, and other stakeholders may also lobby to advocate for their position.

Although the federal OSHA regulatory workplace safety framework provides a floor for minimum workplace safety standards, many states have agencies that

EXHIBIT 5.2

Walmart FLSA litigations

The Fair Labor Standards Act of 1938 (as amended) provides standards for both minimum wages and overtime entitlement, and specifies administrative procedures by which covered work-time must be compensated. The Act also provides an exemption for individuals who are employed in executive, administrative, professional, and outside sales, as well as certain technical positions. To qualify for an exemption, employees need to meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week; job titles alone cannot determine the exempt status.

Walmart has been a prime target for this type of violation in recent years and has suffered a number of adverse court decisions. For example, on December 23, 2008, the company announced that it settled 63 wage and hour lawsuits in 43 states, which cost the company between $352 and $640 million (Smith 2008).

In 2012, the DOL released another new violation that cost the company $4.83 million in back wages. The violations affected 4,500 Walmart workers. Walmart failed to compensate these employees with overtime pay, considering them to be exempt from the FLSA’s overtime requirements. DOL investigation found that these employees were non-exempt and consequently due overtime pay for any hours worked beyond 40 in a week. In its settlement, Walmart agreed to pay back wages to its affected employees nationwide. Additionally, the company was subjected to $463,815 in penalties due to the repeat nature of the violation.

Sources: Smith 2008; Department of Labor 2012.

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actively monitor workplace safety. As with most federal relationships, federal law is a base, and state laws may provide for an additional level of oversight. The federal and state governments work in conjunction where the states may pass their own initiatives, but states must receive approval from OSHA (Bernardin 2007). Currently, 22 states have their own complete plans (US Department of Labor 2013a). Other states have a partial framework, and OSHA may provide up to half the costs to assist these states (US Department of Labor 2013a).

Although OSHA is an organization that ensures compliance with and enforcement of safety regulations, OSHA consults with and advises employers who need assistance (US Department of Labor 2013b). This information and these resources may be particularly important for small businesses that may not have in house counsel or human resource specialists (US Department of Labor 2013c).

Modern conditions have required increased technical understanding and guidance for employers regarding dangerous levels of exposure to hazardous materials and how to mitigate the effects. Businesses can take steps to ensure the safety of their employees and receive assistance with developing strategies to prevent harm. This is particularly true for small firms. For example, in 2011 and 2012, deaths occurred from methylene chloride used in refinishing bathtubs (US Department of Labor 2013d). However, the health hazard may be reduced by using alternative chemicals or improving ventilation (US Department of Labor 2013d).

The way we worked

EXHIBIT 5.3

Source: www.archives.gov.

Family and Medical Leave

In 1993, the Family and Medical Leave Act was signed into law by President Bill Clinton. The law was intended to “balance the demands of the workplace with the needs of the families” (29 US C. § 2601). The US Department of Labor Wage and Hour Division was empowered to administer the Act.

The FMLA requires employers with 50 or more employees to allow leave for up to 12 weeks during a one-year period for an illness, to care for a child (after birth or adoption), or to care for a sick immediate family member (children, parents, or spouse) (US Department of Labor 2013e). The definition of family members has been extended to include grandparents and other relatives where these relatives served the role of a parent. The FMLA applies to schools, public employers, and private schools with more than 50 students. Firms with fewer than 50 employees at a particular site must comply with the FMLA if the sites are less than 75 miles from each other and the number of employees totals 50 or greater. This provision is for businesses that can move employees around without any great inconvenience.

Employees must provide employers with 30 days’ advance notice if the need for leave is foreseeable. If the need for leave is not foreseeable, then the employee must provide notice as soon as practicable. Although the same position may no longer be available at the end of the employee’s leave, when employees return to work, the employer must allow them to return to a job that is substantially similar in terms of duties and salary (Klienman 2007).

In addition to providing for a more balanced lifestyle for workers, the FMLA has provisions to protect businesses as well. An employer may also have an affirmative defense if the employee was about to be terminated, regardless of the employee taking leave. Thus, if an employee is performing in an unsatisfactory manner, the FMLA does not require a position to be held at the end of the employee’s leave. Employers may exempt employees who are in the highest 10 percent of the income range or if the employee’s absence will cause the firm to have a serious financial loss (Klienman 2007).

The FMLA provides flexibility for employers if their business would incur a serious financial hardship and the company may request that employees pay their own portion of the health insurance premium (Klienman 2007). Employees may be required to pay their own health insurance benefits, but must not be denied the same health insurance benefits as if they were not on leave. Employees may be required to reimburse the employer for insurance if the employee is able to return to work and does not do so.

Anti-Discrimination

Another area of government intervention in employee protection is through a series of anti-discrimination regulations. The rationale for those regulations is to create equal employment opportunity, which is considered a basic right of the US citizen (see Exhibit 5.4 for a brief discussion about Affirmative Action). Yet discrimination on the basis of gender, ethnicity, age, religion, disability, or any non-professional qualification criterion impedes the realization of true equality of employment opportunity.

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Consumer, Employee, and Environment 155

US anti-discrimination regulations were largely driven by the nationwide civil rights movement. The first civil rights law, the Civil Rights Act of 1866, was signed by President Lincoln after the Civil War to protect blacks from employ- ment discrimination. The law had very little impact on improving the employment conditions of black people, especially in the South.

EXHIBIT 5.4

Affirmative Action

Affirmative Action refers to government policies that provide special opportunities for, or that are in favor of, disadvantaged groups who have suffered from discrimination.

In the United States, Affirmative Action was initially taken in the form of Executive Orders, which, having the full force of law, are government regulations issued by the President to help officers and agencies of the executive branch manage the operations within the federal government.

As early as 1961, President Kennedy issued Executive Order 10925, requiring government contractors to “take affirmative actions” to ensure equal em ploy - ment. In 1965, President Lyndon B. Johnson signed Executive Order 11246, which banned employment discrimination based on race, color, religion, and national origin by organizations receiving federal contracts and sub contracts. In 1967, President Johnson issued Executive Order 11375, prohibiting hiring discrimination on the basis of gender in the federal workforce as well as among government contractors.

The Philadelphia Order (or the Philadelphia Plan) was the major Affirmative Action initiative under the Nixon Administration. The Order required government contractors in Philadelphia to hire minority workers under the powers of Executive Order 11246. The Order was extended to other cities. President Nixon also signed the Vocational Rehabilitation Act in 1973 to correct the problem of discrimination against people with disabilities. The Title 5 of the Act required private employers with federal contracts over $2,500 to take affirmative action to hire individuals with a mental or physical disability.

As a result of these efforts, in addition to federal agencies and govern- ment contractors, Affirmative Action was extended to universities and schools with federal contracts. They are all required to develop their own affirmative action plans and set up specific goals to increase the hiring of women and minorities.

In 1995 President Clinton, while reaffirming the need for affirmative action, issued a White House memorandum (Memorandum on Affirmative Action, July 19, 1995) calling for the elimination of any program that “(a) creates a quota; (b) creates preferences for unqualified individuals; (c) creates reverse discrim - ination; or (d) continues even after its equal opportunity purposes have been achieved.”

Civil Rights Laws

In the late 1950s and 1960s, the African-American civil rights movement reached

new heights that were characterized by major campaigns of civil resistance.

Acts of non-violent protest and civil disobedience led to emergent situations between

activists and governmental authorities, demanding policy-makers’ immediate

response to address the inequalities faced by black Americans. One of the most

notable protests was the Birmingham campaign in 1963, in which students and

children, when protesting against racial segregation, were attacked by high-pressure

fire hoses and police dogs. On June 11, 1963, President John F. Kennedy delivered

his civil rights speech, urging legislative action to end racial segregation.

The Civil Rights Act was signed into law in 1964, and outlawed discrimination

based on race, color, religion, sex, or national origin. Title 7 of the Act deals with

discrimination in employment. It prohibits discrimination with respect to privileges

of employment, compensation, contract terms, and conditions of employment. The

Act also created the Equal Employment Opportunity Commission (EEOC), an

independent agency, to enforce laws against workplace discrimination. In 2011 and

2012, the EEOC extended discrimination to include sex-stereotyping (of lesbian,

gay, and bisexual individuals) as well as protection to transgender status and gender

identity, respectively.

The Act was amended in 1991 to strengthen some provisions as well as broaden

the scope of protection. The amendment was in response to a series of ambiguous

Supreme Court rulings that limited the rights of employees who had sued their

employers. In addition to modifying some procedural requirements, the amendment

authorizes jury trials on discrimination claims and allows plaintiffs to recover

emotional distress and punitive damages.

Other Anti-Discrimination Regulations

There are several other anti-discrimination laws that fall under the authority of the

EEOC. The Equal Pay Act of 1963, amending the FLSA, requires equal pay for

men and women doing the same job. The Pregnancy Discrimination Act of 1978

bans employment discrimination against pregnant women. The Americans with

Disabilities Act (ADA) enacted in 1990 prohibited employers (with more than

15 employees) from discriminating against disabled employees in hiring practices,

promotions, and benefits, and must provide reasonable accommodations in the

workplace for employees who are able to perform the essential functions of the job,

where these accommodations do not create an undue burden on the employer, and

where the modification may not create a significant expense. Some accommodations

may include modifying a work schedule, obtaining modified work equipment

and training materials, or increasing accessibility (Dalton, Hoyle, and Watts 2006).

The Job Accommodation Network offers a good resource to clarify information

regarding the complex issues of ADA (see Job Accommodation Network website’s

ADA library).

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Employee Protection in States

State regulations vary greatly regarding employee protection. Some states have higher and some have lower minimum wage requirements than the federal government. If the state and federal laws regarding minimum wage differ, the higher of the two applies. Five states including Louisiana, Mississippi, Alabama, South Carolina, and Tennessee currently have no minimum wage laws (US Department of Labor, WHD 2014).

Many states passed right-to-work laws (Dalton, Hoyle, and Watts 2006), which prohibit union security agreements, or agreements between labor unions and employers that govern the extent to which an established union can require employees’ membership, payment of union dues, or fees as a condition of employ - ment, either before or after hiring. Unions may operate in these states, but employees cannot be compelled to be part of the bargaining unit. Currently, according to National Conference of State Legislatures’ Right-to-Work Resources, there are 24 right-to-work states.

Some states, such as California, have passed their own Family Medical Leave Acts. The California Department of Fair Employment and Housing (DFEH) is responsible for administering these laws.

States generally prohibit discrimination, unless it involves a necessary occupa - tional or professional requirement. For example, California enacted Proposition 209 to bar public institutions from discrimination on the basis of race, sex, color, ethnicity, or national origin in 1997. The state of Michigan enacted a similar law in 2006.

Environmental Protection

Rationale for Environmental Protection

Climate change has recently been a point of major concern and discussion in media outlets (Davenport 2014). Although natural causes may contribute to climate change, industrial and population growth have been cited as major contributors (EPA). Wealthy countries consume and are responsible for more than their share of pollution. Wealthy countries also have more resources for change.

Pollution will be, and has historically been, a byproduct of development (Baron 2013). The goal is not to rid the earth of pollution entirely, but to abate or lessen the problems of pollution where possible (Scheingold 2011). The question is to what degree development need occur in a sustainable manner. Environmental sustain - ability requires looking at the future. The positive effects of a clean environment on human health and the need for sustainability are not usually in dispute. The more contested questions include how to mitigate any negative effects on the environment, how to assess the cost of that mitigation, and how firms can still be economically viable while maintaining environmentally sustainable practices. Thus, creating business practices in the most cost-effective and sustainable manner is the critical challenge for the private sector. Consequently, firms need to be concerned about efficiency. Although the use of certain products may save energy or generally reduce

Consumer, Employee, and Environment 157

the amount of pollutants released into the air or water, firms may need to determine whether selling a certain product or providing a service is cost-effective (Baron 2013).

Cap and Trade versus Command and Control

Government can use different methods to ensure that the private sector follows environmentally friendly practices, depending on the industry and the danger of the pollutant. Some of the ways that the government uses to regulate firms in an effort to reduce pollution include taxes on certain types of emissions, “command and control” of the design of manufacturing equipment to create fewer pollutants, and the “cap and trade system” where the government places an overall limit on a particular pollutant and businesses decide how to reduce emissions in a way that is most cost effective (Baron 2013).

The practice of cap and trade falls under the incentives method of compliance with government mandates for sustainable practices. The cap and trade approach assumes that the amount of pollution created from the process of producing a particular product or service can be known or determined before it occurs. Thus the government sets an overall limit or “cap” on a pollutant (Baron 2013). How to accomplish abatement of these substances is delegated to the individual firms. Cap and trade compels businesses to use the most efficient means possible to reduce pollution. A certain number of “permits” to emit a certain amount of a pollutant are issued in an industry, so the amount of overall pollution is controlled. Cap and trade can also be less burdensome on the government because it does not have to formulate and monitor engineering designs for each firm. These permits to emit a particular pollutant are distributed and can also be bought, sold, or traded among firms. The permits can also be used immediately or at a later time. Thus, the amount of emissions for a particular industry is capped and limited overall under this system. Firms find the most efficient engineering design for what they are producing and determine the best methods for limiting pollutants (Baron 2013). See Exhibit 5.5 for examples of cap and trade practices.

Role of Government and Legal Uncertainties

Technological change and the increased knowledge of health and ecological damage of pollutants requires a larger role in environmental protection. These changes require a more developed system of regulation. Until relatively recently, environ - mental law did not exist in the form we currently know, but was instead guided by advocacy groups and enforced by government regulators. Actions involving pollution were often brought into court as nuisance cases. The legal theory was that because landowners experienced harm to their property due to the actions of another property owner, as private citizens they could bring a civil case to court. Thus, the lawsuits were based on reduction of specific land values (Scheingold 2011).

Environmental law is a relatively new area and has some unique challenges beyond those of other administrative areas. First, the US Constitution is based on the rights of the individual, and not the rights of the collective or the greater good

158 Business–Government Relations in the Sociopolitical Arena

Consumer, Employee, and Environment 159

EXHIBIT 5.5

Examples of cap and trade

Chlorofluorocarbons (CFCs) were invented in 1928 by a scientist working at General Motors. It was a breakthrough for everyday life because CFCs allowed for effective refrigeration. This technology made foods become more transportable and have a longer shelf life. Air-conditioning made housing possible in previously uninhabitable locations. CFCs were widely used through the 1950s (Dray and Cagan 1993). In the 1970s, researchers began to question whether the particular composition of CFCs was connected to depletion of the ozone layer. The “Ozone Depletion Theory” proposed that the use of CFCs created a hole in the ozone layer, causing a loss of protection from the sunlight, damaging food, and increasing the risk of skin cancer (Dray and Cagan 1993).

Sources of Chlorofluorocarbons (CFCs)

Insulation Materials

Refrigeration Air Conditioning

Aerosols

160 Business–Government Relations in the Sociopolitical Arena

of society. Thus, concepts like “standing” (proving that the law will have an effect on the party bringing suit) can be problematic for environmental advocacy groups, whereas the rights to real property (land) and personal property are well defined in the US Constitution (Scheingold 2011). Other areas of ambiguity in the law that have increasingly been settled by litigation include “jurisdiction” (which court legally has control over the case), “standing” (discussed below), and “ripeness” (if the case is ready to be heard) (Scheingold 2011). Thus, in the environmental arena, the judges have interpreted the law to make it more predictable for the parties bringing and defending lawsuits.

For example, the US Constitution requires a “case or controversy” (Article 3,

section 2) exist, to establish that a plaintiff has standing to bring a grievance to

the court system. An actual injury shown to the person or entity bringing forth the

lawsuit must be demonstrated. In the case of Massachusetts v. EPA (2007:533),

Industry questioned the validity of the science. The first debate argued the validity of this theory itself. The second was concerned, assuming the theory was valid, with what should be done about it. The idea of building similar products using other materials that did not hurt the ozone layer was thought to be inefficient for manufacturing and prompted concerns about the market (Dray and Cagan 1993). Eventually, the government used cap and trade to restrict the level of CFCs, with a goal of eventually eliminating the cap and trade system (Dray and Cagan 1993). Another example of how cap and trade has been used as a tool to reduce toxic emissions involves the acid rain issue. Acid rain occurs when emissions such as sulfur dioxide (SO2) and nitrogen oxides (NOx), often the result of coal-fired electric power plants, are released into the atmosphere and mix with water. States in the Eastern US and the Great Lakes Region including Illinois, Pennsylvania, Ohio, and New York were major producers of these emissions. These practices effected nearby states where emissions from power plants would get into the air, travel with the wind, and cause damage in other states. This mixture is called acid rain, and it damages and kills off vegetation when it lands on the ground. As a result of the 1989 amendments to the Clean Air Act, the amount of SO2 is limited to 8.95 million tons annually.

The mitigation of pollution in the atmosphere falls under the Federal Clean Air Act (CAA). Because there is a general cap, businesses working to comply with the CAA have options for how to reduce pollutants causing acid rain, while still maintaining production of energy. Some of these options include using coal with less sulfur, a process called “washing the coal” or “using devices called ‘scrubbers’ to chemically remove the SO2 from the gases leaving the smokestack” (US Environmental Protection Agency 2012).

the issue of which situations qualify as a “case or controversy” to establish standing

was clarified. In this case, several parties jointly brought an action against the

government to enforce environmental regulations. However, although several parties

brought suit, the US Supreme Court found that only one plaintiff, the state of

Massachusetts, needed to show standing. In this case, the court determined that the

state of Massachusetts had standing because the state would be subjected to harm

if sea levels rose as a result of greenhouse gases.

Although many legal issues remain unclear, advocacy groups have been

successful in establishing legal precedents that can help their cause. The National

Resources Defense Council (NRDC) brought litigation against the EPA to get the

agency to enforce the Delaney Amendment, a law banning certain pesticides in food

(Baron 2013). The courts found in favor of the NRDC (Baron 2013). (This principle

is also demonstrated in the case of the Endangered Species Act.)

In some cases, the courts will push the agency to act. In 1998, the Kyoto Protocol

required nations to reduce carbon emissions. Although a signatory to the Kyoto

Protocol (without ratifying), the US volunteered to reduce carbon emissions.

In Mass. v. EPA (2007), the Supreme Court ruled that under the Clean Air Act, the EPA had to list whether CO2 (carbon dioxide) was a pollutant (Baron 2013). Under

the Obama Administration, CO2 is indeed listed as a pollutant (Baron 2013).

President George W. Bush’s Administration did not regulate CO2 as a pollutant

(Baron 2013).

Environment Protection Regulatory Framework

Widespread government regulation of the effects of pollution on the environment

is a relatively recent development. In the early 1900s, President Theodore Roosevelt

established the National Park System and relied heavily on the power given to him

under the Antiquities Act allowing the executive to preserve land and sites of

historical or scientific value. As an avid outdoorsman, Teddy Roosevelt also created

the US Forest Service. In this tradition, Franklin D. Roosevelt expanded the national

parks with his Great Depression era program, the Civilian Conservation Corporation

(CCC). This program flourished until the United States’ entry into World War II

after the attack on Pearl Harbor (Franklin D. Roosevelt Library and Museum).

However, in the first part of the twentieth century, land was still viewed as for the

enjoyment of people rather than in terms of overall sustainability.

In the post-World War II era, ecology became a larger part of the public discourse

as the population grew with the baby boomer generation and new housing was built

for veterans returning home. Some began looking at the environment as a “public

good” rather than just an economic resource. Most importantly, in the 1970s, public

concern for the environment was running particularly high, affecting the political

climate and making change possible that may not otherwise have happened. Some

major events occurred during this era, altering public consciousness and leading up

to the changes of the 1970s. In 1962, Rachael Carson wrote Silent Spring (Carson 1990), a book that raised public awareness of the dangers of DDT pesticides

(a chemical pest control used as an insecticide from the 1940s and eventually banned

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from the US in 1972) (US Environmental Protection Agency 2012). The Cuyahoga River near Cleveland, Ohio caught fire in 1969 from a spark from a rail car, igniting flammable materials floating on the river. This event was well covered by the media locally and nationally, causing a discussion regarding the value of natural resources and modern industrial developments (US Environmental Protection Agency 2013). Although the river had caught fire several times before, this fire sparked the interest of the nation. These issues stirred the public’s interest and illustrated the fact that environmental resources are not unlimited. Conservation advocacy for protection of federally owned lands became an issue in the forefront during this time (Bates and MacDonnell 2010). As a result, in 1969 Congress passed the National Environmental Protection Act (NEPA), mandating that negative environmental impacts of potential federal agency actions needed to be listed on environmental impact statements (EIS) (US Environmental Protection Agency 2013).

Formation of the EPA

Although environmental matters were addressed by different entities in the federal government in 1970, some thought that these older agencies were acting in the interest of those they were intended to regulate (Lehne 2006). Ultimately, these functions were to be gathered under a single umbrella, the US Environmental Protection Agency. President Nixon issued an executive order, Reorganization Plan No. 3 of 1970 (an order codified as 5 U.S.C. App. at 1132–1137, 1982) causing structural reform, and the creation of the EPA. The agency was to be a single, inde pendent, executive agency not at the cabinet level, and unique inasmuch as it was not created by Congress. Born in the wake of elevated concern about environ - mental pollution, the agency was established on December 2, 1970 to consolidate a variety of federal research, monitoring, standard-setting, and enforcement activities to ensure environmental protection (Connelly, Smith, Benson, and Saunders 2003).

However, this formation structure created unusual regulatory challenges. Since agencies had their “own traditions and styles” (Connelly et al. 2003, p. 307), after the EPA was formed from different area agencies, legislation in single issue areas occurred (Connelly et al. 2003). “The fragmented structure of the EPA was reinforced by legislation, such as the Clean Air and Water Acts, which tended to focus on specific media” (Connelly et al. 2003, p. 307). This piecemeal policy- making occurred in part because of the political importance of environmental issues being dealt with individually as they appeared on the public’s radar screen, rather than reconstructing a framework altogether; for example, having separate departments take on different tasks. Instead of monitoring enforcement and research, Congress set out legal areas separately, like air, water, and pesticides (Marcus 1991).

Legislation

The US Code lays down different government subjects of authority by title. Most environmental statutes are under Title 42 of the US Code, which covers “public health.” Numerous environmental laws cover a broad range of relatively diverse

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Consumer, Employee, and Environment 163

environmental issues. A complete list of environmental laws and executive orders

can be found in Laws and Regulations at the EPA official website (http://www.epa.

gov). In the following, we introduce a few important pieces with regard to water

pollution, air quality, endangered species, and oil pollution.

WATER POLLUTION

The Refuse Act of 1899 is considered the first environmental law passed by Con -

gress. The Act prohibited “dumping of refuse” into navigable waters. In the absence

of the EPA, the Act was administered by the Army Corps of Engineers, focusing

on controlling debris that obstructed navigation.

Subsequently in 1948, 1956, and 1972, the Federal Water Pollution Control

Act, commonly referred to as the Clean Water Act (CWA), and a number of other

amendments were enacted to regulate the various aspects of water pollution.

The principal body of the CWA in effect is based on the Federal Water Pollution

Control Act Amendments of 1972. The CWA’s primary goal is to prevent water

pollution and maintain the integrity of the nation’s waters and wetlands, as well

as to provide public assistance for the improvement of wastewater treatment. The

CWA established the structure for regulating pollutants discharged into waters.

It also gave the EPA the authority to implement pollution control programs, such

as setting wastewater standards for industry.

EXHIBIT 5.6

EPA’s Superfund

In the 1980s, the EPA developed the Superfund program to clean up sites where toxic dumping had already occurred. The Superfund project includes 2,000 sites and has cost $600 billion. So that taxpayers are not overly burdened, parties that are responsible for the pollution are liable for paying for the clean-up (Baron 2013). More than 60 percent of toxic clean-up has been paid for by polluters (Baron 2013). If the party does not agree to finance clean-up of the pollution it has created, the EPA can pursue action in federal court to compel the companies to pay (US Environmental Protection Agency 2013).

The Superfund has lost popularity over time. Firms argued that at the time they dumped the waste it may have been legal. Also, all sites have to be cleaned to the same standards, when the levels of pollution dumped may differ. Initially, there was a tax on firms in general to pay for the Superfund clean-up projects (Baron 2013). Congress removed the tax on firms charged with site clean-up. This money now comes from the federal government and those firms that have caused the toxic dumping are responsible to pay for the clean-up from their own pollution (Baron 2013).

The CWA does not directly address groundwater contamination, which is covered by the Safe Drinking Water Act, Resource Conservation and Recovery Act, and the Superfund program. The Safe Drinking Water Act of 1974 gave the EPA the authority to set standards for drinking water quality and oversee the implementation of standards by state and local water suppliers. The Act was amended in 1992 to regulate more contaminants and was also renewed in 1996. The renewed Act requires all community water systems to provide consumer information (i.e., consumer confidence reports) about any significant contaminants in their water supply. The Resource Conservation and Recovery Act of 1976, which amended the Solid Waste Disposal Act of 1965, regulates the disposal of solid waste and hazardous waste and sets standards for groundwater monitoring. Exhibit 5.6 discusses one way the EPA has tried to address the problem of toxic clean-up of pollution.

OIL POLLUTION

The Oil Pollution Act of 1924, under the authority of the Public Health Service, prohibited the discharge of oil into coastal waters. In later decades, a number of oil pollution Acts were enacted. The Oil Pollution Act of 1961, mirroring the International Convention for the Prevention of the Pollution of the Sea by Oil (OILPOL) of 1954, prohibited the discharge of fossil fuel pollutants from nautical vessels along the US coastline. The OILPOL was an international environmental protocol evoked to restrict the disposal of hazardous waste that could potentially contaminate marine ecosystems. The 1973 Amendments of the Oil Pollution Act accentuated the OILPOL and acknowledged the embargo of coastal zones in trans-boundary waters. In 1990, as a response to the Exxon Valdez oil spill (see Exhibit 5.7), Congress enacted the Oil Pollution Act to mitigate and prevent civil liability from future oil spills off the US coast. The Act requires oil firms to have a plan to prevent potential future spills as well as a detailed containment and clean- up plan. The Act significantly improved oil spill governance in the United States.

164 Business–Government Relations in the Sociopolitical Arena

EXHIBIT 5.7

Exxon Valdez, Deepwater oil spill

Although environmental harm may not be a result of intentional decisions made by a corporation, firms are financially responsible for employee negligence or human error and mechanical malfunctions. The 1989 Exxon Valdez oil spill along the coast of Alaska and the more recent BP oil spill in the Gulf of Mexico are major examples of environmental disasters for which companies were held financially responsible for the error as well as the clean- up. In the case of the Exxon Valdez oil spill, the oil tanker ran aground, and although all of the circumstances were not clear, it was known that the ship’s

Consumer, Employee, and Environment 165

captain had been consuming alcohol and that another ship member made a navigation mistake (State of Alaska 1990). The Exxon Valdez disaster is particularly well known for the amount of wildlife harmed in Prince William Sound.

As a result of a guilty plea to criminal charges, the oil company agreed to pay a fine of $150 million. However, due to the company’s compliance with clean-up efforts, the fine was reduced to $25 million. Exxon agreed to pay $100 million in restitution and a settlement of $900 million over a period of ten years (US Environmental Protection Agency 2013). The EPA coordinated clean-up efforts between Exxon and the state and federal governments (Memorandum of Agreement and Consent Degree, 1991). These agreements fell under the Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. S 9601 et seq. and the Clean Water Act or Federal Water Pollution Control Act, 33 U.S.C. SS 1251–1376, as amended. As a result of the Exxon Valdez oil spill, Congress passed the Oil Pollution Act of 1990, increasing the safety measures for oil tankers (US Environmental Protection Agency 2013).

The Deepwater oil spill in the Gulf of Mexico by British Petroleum in 2010 was the largest oil spill in US history. On April 20, 2010, the Deepwater Horizon rig exploded, killing 11 people. Much of the reason that the oil spill was so damaging was because BP was unable to close the Macondo well at the bottom of the ocean for 87 days. The spill was devastating to marine wildlife and to the tourist industry in the states bordering the Gulf. BP paid $25 billion to clean up the damage (Barrett 2013).

Birds killed as a result of oil from the Exxon Valdez spill. Source: Wikimedia Commons.

166 Business–Government Relations in the Sociopolitical Arena

AIR QUALITY

In 1963, the United States enacted its first law, the Clean Air Act, addressing the issue of air pollution. The Act designated the EPA as the authority to develop and enforce regulations to protect the public from airborne contaminants. Later, the 1967 Air Quality Act mandated enforcement of interstate air pollution standards. A series of amendments to the Clean Air Act were passed in 1970, 1977, and 1990, enhancing and expanding the regulatory controls for air pollution. The 1970 amendments largely expanded the regulatory power to require comprehensive federal, as well as state, regulations for both stationary and mobile pollution sources. The 1990 amendments extended the coverage to acid rain, ozone depletion, and toxic air pollution. Most noticeably, the amendments mandated new auto gasoline reformulation, established standards for Reid vapor pressure (a measure of the volatility of gasoline) and leveled controls on evaporative emissions from gasoline. These standards have been extended to, and implemented by, many states.

ENDANGERED SPECIES

The Endangered Species Act of 1973 addresses how to protect species from extinction as a consequence of economic growth and development. The predecessor of the Act was the Endangered Species Preservation Act of 1966, which authorized the Secretary of the Interior to list and protect endangered native fish and wildlife species. The Endangered Species Conservation Act of 1969 amended the 1966 law to prohibit the importation and subsequent sale of species in danger of worldwide extinction in the United States. See Exhibit 5.8 below for an example of the Endangered Species Act in action.

EXHIBIT 5.8

The Spotted Owl issue

The purpose of the 1973 Endangered Species Act became controversial with the Spotted Owl issue. Old growth forests in the Pacific Northwest were being logged in a clear-cutting style, where trees are not selectively cut to avoid soil run off and not otherwise protected by legislation, state, or federal laws. Particular wildlife species, whose numbers were low, lived in these old growth forests. One of the species for which the forests serve as a habitat is the Northern Spotted Owl. In the case of the Spotted Owl, the Sierra Club Legal Defense Fund (SCLDF) became involved and strove to use laws as tools in the hope that federal courts would interpret those laws in a positive way to accomplish their objective of environmental protection. The timber companies strove to achieve the results they wanted through Congress.

The Northern Spotted Owl was not listed as an endangered or threatened species in 1989. When the case initially was brought to federal district court by the SCLDF, the court ordered the US Fish and Wildlife Service to

Consumer, Employee, and Environment 167

list the Spotted Owl as threatened or endangered. Although the USFWS listed the Spotted Owl as endangered in 1990, it did not designate a critical habitat to protect the owl from losing its home and avoid endangerment. The US Federal District Court for the District of Oregon ordered the agency to do this also (Kagan 2004).

The SCLDF also sued the National Forest Service. The court held that there was a need to preserve the entire biological community. US District Court for the District of Oregon found that the Northern Spotted Owl was “now threatened with extinction.” This ruling was appealed to the Ninth Circuit Court of Appeals and upheld. Part of the significance of this ruling is that it was “rejecting the agency’s scientific and legal counterarguments” (Barnes 2004, p. 16).

Spotted Owls. Source: Wikimedia Commons.

Implementation and Enforcement at Federal and State Level

As opposed to many other federal agencies that operate out of Washington, DC, where the vast majority of decisions are made at headquarters, the EPA has ten regional districts dividing up the states and territories. Regional offices are largely responsible for compliance with, and as with many regulatory agencies, settling with industry actors. Like many regulatory agencies, legal settlements are far more common than litigation, which tends to be used in only cases of clear criminality or significant corporate–government disputes (Eisner, Worsham, and Ringquist 2006).

Some states choose to depart from the federal government by increasing

protection due to physical, political, and economic environments in varying regions.

These differences from federal practices occurred in the two most populous states

of the US, California and New York, with two major pieces of federal legislation—

the Clean Air Act and the Clean Water Act.

Although the CAA mandates minimum standards for air quality, California has

determined that due to the smog level and particular circumstances of the state, it

needed more stringent standards for automobiles. The California Air Resources

Board passed “clean car” rules regulating the production, transportation, and

emission of fossil fuels from cars creating greenhouse gases (Rogers 2013). These

rules will require the auto industry selling new cars in the state to have almost no

emissions by 2025, forcing the automakers that market in the state of California to

adapt (Rogers 2013).

Similarly, certain states question whether the CWA is adequate to protect water

quality. As natural gas is more relied on as an energy source, the effects of the

hydrofracking style of drilling become a greater concern. Hydrofracking, or more

commonly ‘“fracking,” is the practice of drilling through bedrock using water

pressure, to reach any underlying fossil fuels. Afterward, the water needs to be

disposed of in such a way as to not pollute the drinking water supply. Although

many states, including Wyoming and Pennsylvania, have allowed fracking, the issue

has been particularly contentious in New York. Upstate New York has suffered from

the post-industrial economy (DeWitt 2013). The Marcellus Shale deposit is located

below the surface of many northeastern states, including New York, and covers a

large deposit of natural gas (Hobson 2013). However, the New York legislature is

unconvinced that the practice of fracking is safe for groundwater, and, for now, the

practice is prohibited (DeWitt 2013).

Further, the state of California has numerous types of ecosystems. Therefore, as

a state with a population over 38 million that is continuing to grow, California has

specific guidance for what types of chemicals can be used in various landscaping

practices (University of California Agricultural and Natural Resources 2006). There

has been encouragement by groups to add more natively grown plants to the

landscape (Matzge 2013). A list of approved chemicals that are less likely to hurt

the water table is available at the California Cal/Ecotox Website (http://www.oehha.

ca.gov/cal_ecotox/).

The Debate about Social Regulation

Social regulation, like any other government intervention, is not free from political

controversy. Whereas most people admit the need for social regulation, the degree

to which government regulates a particular industry for a specific protective purpose

tends to be a target of debate. Those in support of social regulation point out that

it can enhance economic efficiency and improve people’s well-being by eliminating

unsafe and unhealthy products, by improving working conditions, and by reducing

pollution. Consumer groups, civil rights groups, unions, and environmentalists are

general advocates of social regulation.

168 Business–Government Relations in the Sociopolitical Arena

Critics of social regulation are often represented by business interest groups as well as neoliberal economists. As the cost of social regulation is high, critics of social regulation often argue that many standards are not economically sound, in that costs may exceed benefits, leading to overregulation. Many regulations are rather rigid and ineffective, often stifling or reducing competition. They also point out that many rules and standards have unintended consequences, such as over burdening, market distortion, and tradeoff. For example, energy conservation and emission control regulations (e.g., the Energy Policy and Conservation Act of 1975) led to the production of lighter and more fuel-efficient cars, which may be less safe and contribute to higher fatality rates. In addition, many standards and regulations are considerably vague or poorly written, causing significant imple - mentation obstacles and resulting in regulation apart from the original purpose and scope.

Although most policy-makers and economists agree that cost–benefit analysis helps in determining the optimal level of social regulation, there is disagreement on how to measure the cost and benefit of a particular regulation. The benefits of social regulation are difficult to measure and often realized only after the regulation has been passed and implemented. Some social values, such as equity, fairness, and humanity, are hard to quantify in economic terms. Although some studies have been conducted in this area, data on the impact of regulations was weak, sparse, and incomplete (Boyne 2003).

Despite these arguments, there are continuing problems in demanding additional social regulation. In reviewing US regulatory history, it is evident that most social regulations were enacted as a response to tragedies or crises resulting from irresponsible business practices. One cannot help but think that if corporations were more socially responsible, many social problems could be avoided and the need for government intervention would diminish.

ANALYTICAL CASE: EMPLOYEES WITH DISABILITIES

James Carson is the owner of Kaber Corporation (KC), which manufactures garments for weddings and other unique occasions. Because of increased demand, Carson has realized that KC can hire two new employees in addition to the 48 employees who currently work for KC. Twenty people applied, with varying levels of experience in the garment industry. These new employees must be able to sew detailing into the garments. Although KC has continued accepting and filling small regular orders, weekend events are where it makes the majority of its revenue. Among the pool of applicants are Mike Harvey and Jennifer Johnson. Both job candidates passed a basic sewing skills test in the management office prior to their interviews.

Harvey is in a wheelchair and unable to stand. Generally, employees need to stand when putting the details on garments because the garments are so long.

Jennifer Johnson has a documented panic disorder. Johnson is a competent seamstress but becomes agitated when put in stressful situations. Carson is concerned about Jennifer because they often do not have much time to fill work orders.

Consumer, Employee, and Environment 169

170 Business–Government Relations in the Sociopolitical Arena

Questions for Discussion and Analysis:

1. How are the job obligations similar and different for Harvey and Johnson? Can the employees fulfill the “essential functions” of the job?

2. What reasonable accommodations could be made? 3. Does it matter that the applicant passes the sewing test? 4. Do the large-scale orders that are the basis for the firm’s income matter in this

question?

PRACTICAL SKILL

Complying with government regulation

It is critical for business to comply with government regulations, as violations always incur not only damages to society, but also costs to firms, such as the Walmart case indicates. Compliance with various laws can be onerous and complicated without effective planning and management. Here we use Trujillo Landscaping, Inc. as an example in our case scenario at the beginning of the chapter and offer a few tips about how to comply with environmental regulations.

Tip 1

Determine whether the legislation applies to your business. If you are not an independent business owner, ensure the competencies of other companies with whom you are contracting to do business. Have several checks on management and on design. Environmental legislation applies to businesses of all sizes and many sectors, such as food, agriculture, and construction, which is subject to specific laws and regulations.

Tip 2

Find out which laws are likely to affect your business and who enforce the laws. Know which level of government regulates your business or if it is regulated at more than one level.

Tip 3

Know where to find the relevant information. A good starting point will be the regulatory agency’s official website. For example, the EPA website offers complete compliance guidance as well as compliance assistance training. In addition, the Small Business Administration also offers assist - ance for legal compliance for a variety of legislation. For example, the EPA Office of the Small Business Program offers information on how businesses may comply with environmental standards at the state and federal levels.

SUMMARY AND CONCLUSION

1. The historical evolution of government indicates that social regulation was largely expanded during the Big Government Era. This chapter introduces government’s regulatory role in terms of protecting the consumer, employee, and environment.

2. Public interest theory, public choice theory, and self-regulation theory offer different lenses through which to see the rationale for regulation. Regardless of which theoretical framework seems the most accurate, social regulations have become increasingly intricate, and it is crucial that firms are aware of when their business practices involve an area that is covered by these social regulations.

3. The US Constitution provides the authority for regulation. Regulatory agencies assume the responsibility to promulgate rules, make policies, and resolve disputes.

4. US social protective regulation generally covers three areas, namely consumer protection, employee protection, and environmental protection.

5. Consumer protection laws and regulations are comprised of three major areas— prevention of fraud and misrepresentation of food, drugs, and cosmetics, protection of consumers from unfair competition and deceptive practices, and consumer product safety.

6. Employee protection regulations protect the welfare of employee, including wages, working hours, health, safety, and working conditions, as well as rights to equal employment opportunities.

7. Environment protection is enabled through both cap and trade and command and control. The EPA assumes the authority to regulate a variety of environmental issues, such as air quality, water quality, oil pollution, and endangered species.

8. Despite various arguments against social regulation, such as high cost, unintended effects, market distortion, and ineffective regulation, social regulation is deemed necessary and will continuously correct irresponsible business practices.

Consumer, Employee, and Environment 171

Tip 4

Develop a corporate compliance policy. If resources allow, it is best to develop a written compliance policy in consultation with relevant legal experts. The policy should be regularly reviewed and updated, routinely communicated to relevant staff, and supported by records of review and implementation.

Skills Exercise

Please brief Tomas Trujillo on the regulatory framework of the US and advise Tomas where and how to find relevant groundwater regulations for the Trujillo Landscaping business.

172 Business–Government Relations in the Sociopolitical Arena

STUDY QUESTIONS

1. Discuss the US regulatory framework. In your discussion, highlight the roles of the Constitution, federal regulatory agencies, the court, and state governments.

2. What are the three areas of consumer protection? Discuss fully and offer legislation examples.

3. Why is consumer protection necessary? What are the costs and benefits of consumer protection?

4. What are the two major aspects of employee protection? Discuss fully and offer legislation examples.

5. Why is employee protection necessary? What are the costs and benefits of employee protection?

6. Why is environmental protection necessary? What are the costs and benefits of environmental protection?

7. What are the arguments for and against social regulation?

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