Discussion 4

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Employees

Learning Objectives

After completing this chapter, you should be able to:

• Understand alternative positions on the nature of employment. • Discuss the ethical problems that arise with hiring and firing people. • Examine the ethics of wages and working conditions. • Discuss the merits of union membership. • Examine the ethics and complexities of whistleblowing.

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CHAPTER 6Section 6.1 Introduction

Contents

6.1 Introduction

6.2 Ethical Theories of Employment

The Capitalist View The Socialist View The Middle Ground: Virtue Ethics Employment and Social Power Conflicts

6.3 Hiring and Firing

Interviews Firing

6.4 Wages

Fair Pay Minimum Wage Salary Caps

6.5 Working Conditions

Occupational Health and Safety Understanding Hazards

6.6 Unions

History of Unions Professional Unions

6.7 Whistleblowing

Types of Whistleblowing Whistleblowing Guidelines Whistleblowing Laws

6.8 Conclusion

6.1 Introduction For many people, the term employee suggests that there is a boss and an underling, and that the worker is subject to the demands and whims of the boss. The cartoon image of an exploited, hum- bled worker readily comes to mind—low wages, poor working conditions, intimidation, and sexual advances. Yet in the world of business, there are many different kinds of employment and there- fore many different kinds of employees. Some we would indeed describe as being oppressed, or at least harassed, and others we would think of as having more power than their bosses.

The issues arising from employment that attract media attention are often legal breaches of con- tract, discrimination, employment of illegal labor, and so on. Contracts are complex, and employ- ment law litigation has escalated since the Civil Rights Act of 1964 and other employment acts. This escalation reflects the change in the law, but there are deeper, ethical, issues too:

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CHAPTER 6Section 6.2 Ethical Theories of Employment

• Do people have a right to a job? • Do employers have ethical responsibilities to

those they employ, and if so, how far do these responsibilities extend?

• What responsibilities do employees have to their employers?

• To what extent should employers be able to find out about employees’ personal lives?

• Should labor unions be allowed? • Should whistleblowers be given legal

protection?

Our thinking can be prejudiced by the presence of com- monly known laws on discrimination and minimum wages. To push on with an ethical frame of mind, we need to put aside legal concepts for the moment. Dis- crimination may be illegal, but is it immoral? Can it ever be right to discriminate between people because of personal prejudice? Although hiring illegal immigrants is illegal, does that make it wrong? If a promotion can be gained by spreading a private truth about a col- league competing for a post, should the information be used? Before hiring someone, should an employer fish around social networking sites for nonrelevant informa- tion? What kind of employer or employee should I be?

Because of the political nature of public sector employment, this chapter discusses the ethical problems of employment in the private sector. We will answer questions like those we just brought up, discussing the ethical responsibilities that employers and employees have to each other, ethical issues related to hiring and firing, and wages, working conditions, and unions. We will conclude by looking at whistleblowers. But let us get started by examining some theories of employment.

6.2 Ethical Theories of Employment In Chapter 2 we introduced the theories of capitalism and socialism. Let us look at how these two distinct theories view employment and its ethics before examining the middle ground between.

The Capitalist View

In the capitalist view of employment, the employer and employee negotiate a contract between themselves for their own benefits, period. This can be called the contractual theory of employ- ment. The terms of the contract may be breached and hence open up either party for a lawsuit, but if one side decides to act unfairly outside the bounds of the contract, then no rights problem occurs. An employee does not have a right to sue against unfriendly or unfair treatment unless there is a breach of contract (Machan, 1988, p. 227). For the capitalist, an employer cannot be

David Hitch

Should work resemble this cartoon of a classic case of the dictatorial manager bawling and whipping people into higher productivity? If not, why do many people believe that we need leaders and people to tell us what to do?

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CHAPTER 6Section 6.2 Ethical Theories of Employment

forced into doing something moral such as acting pleasantly to employees. However, in the capi- talist model, both employers and employees are seen as equals: Both may respect each other or not. Fairness cuts both ways.

For the capitalist, people do not have a right to a job, just as they do not have a right to an income or any product they see on the shelves. A job is a mutual contract between two people, that is all. This can imply that ethics does not even enter employment negotiations or the workplace: If workers are dissatisfied, they can leave; if a manager is dissatisfied with a worker, he or she can fire the worker.

A modified version of this stark view of employment accepts the contractual basis of employment but adds that both employers and employees do have other aspects to them: They can be nice to each other, avoid discrimination, encourage each other to fulfill their potential, provide flexibility. The capitalist world of Adam Smith can be seen as the bare minimum for any free society; once up and running, we can be ethical towards one another (if we choose!).

The Socialist View

According to Marx’s socialism, employees in capitalist systems have to work for employers and are thus slaves to the wage system; inevitably, even by definition, they are exploited. This can be called the exploitation theory of employment. Workers are defined as being without power or the means to sustain their own living. They are dependents whom the capitalist class exploits to make and sell products and services. For Marx, employment is defined by two opposing classes who can only struggle against one another. On the one hand, the capitalists struggle to keep wages low so that they may earn higher profits; on the other hand, the workers struggle to raise their wages so they do not starve. The simplistic duel between employers and employees is compli- cated in 20th-century ethics by notions of justice, fairness, and responsibility, but the image of the boss versus employee has not faded.

These two positions form opposing theories of employment that affect how we view employ- ment ethically. Marx encouraged workers to strive for all the rights and privileges they can get. Otherwise the money will just end up in the capitalists’ pockets. A capitalist sees employment as mutually beneficial and not a “winner takes all” situation where one person’s profit is another person’s loss.

The Middle Ground: Virtue Ethics

The reality for most workers and employers, however, probably lies somewhere in between the capitalist and socialist views. There are exploitative and manipulative bosses as well as lying and thieving employees. There are those who foster fairness and decency in the workplace, and others who prefer an aggressive, competitive atmosphere. There are employers who entrust and encour- age personal development and workers who cooperate, adapt, and innovate. In other words, the workplace is complex, and the ethical problems it generates cannot be fully described by either the capitalist or socialist view. A middle ground emerges in most discussions that seeks to find ethical solutions to the complexities of the workplace in the language of virtue ethics (or virtue theory). Virtue ethics focuses on the good character traits that people acquire. With employers

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CHAPTER 6Section 6.2 Ethical Theories of Employment

and employees, some good character traits would be reputation, morale, loyalty, discipline, pro- ductivity, and respect. These are ethically important qualities that capture aspects of work that we can relate to—Joe is a loyal worker, Shannon is diligent, Manuel is a respectful manager, Kai is flexible to work for, Anya’s firm has an excellent reputation with its workers, Martha’s teams are inspirational, and so on.

Virtue ethics tries to shed light on how we should proceed and act towards one another in the workplace by focusing on good character traits, such as being just, fair, disciplined, hardworking, etc. But such terms are themselves open to criticism. These virtuous character traits themselves have hidden assumptions about power structures in society, which we will look at next.

Employment and Social Power Conflicts

For critics of capitalism and the contractual theory of employment, there is another concern that stems from the observation that social and business relationships often involve power struggles between diverse groups of people. In forming a business contract, for example, the relationship between two people is not always that of two equals. Society is characterized by power relations in which men are generally perceived to have greater power than women; Whites more than eth- nic minorities; large corporations more than small businesses; producers more than consumers. We may not accept the simple two-class war that Marx describes, but we should look for other

kinds of hidden or subtle forms of exploitation in our language and acts.

When we hire another person, we are engaging in something more than just a contract to offer payment in return for skills or time. Inevitably, social relation- ships are implied in the interview and in the work- place, and they are filled with power games. Returning to the cartoon of the boss and employee, what if the boss has much greater economic or social power than the employee? That inevitably alters the potential contract made. In traditionally male-dominated cul- tures, this can be quite obvious—younger men have to trust older men and learn to hold their tongues, and women are further disempowered by their gender. A woman may be hired for various underlying assump- tions governing her weakness in society: She may be less likely to complain or to demand higher pay; she may look attractive to clients and hence gain higher sales. Her mind is less important than the social status she conveys.

In an attempt to produce a better and more ethical atmosphere for workers, some philanthropic employ- ers have created idealistic towns for workers to settle in. These are known as company towns, and we turn to these now as an interesting case study.

Associated Press

In the office, there are both subtle and obvious power structures, as in this exam- ple of a male boss dictating to a female typist while standing over her paternally.

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CHAPTER 6Section 6.2 Ethical Theories of Employment

The Case of Company Towns Historically, company towns were often the product of philanthropic or religious thinking. One of the first company towns was the Scottish village of New Lanark, where the socialist utopian Robert Owen turned a mill town into a centrally run village in which the workers were well provided for. Owen set up the first elementary school in the United Kingdom, and ensured that the workers had good housing and were well fed. Owen’s experiment attracted much attention, and later famous chocolate companies such as Cadbury set up model towns for their workers. While Owen was a socialist, the Cadbury family, of Bournville, were Quakers who believed in the innate equality of men and women and sought to provide better conditions for their working colleagues out of a religious duty.

Owen later traveled to the United States and set up a communal project in New Harmony, Indiana, in 1826. However, the project and other subsequent attempts to reproduce New Lanark failed. Meanwhile, as industrial production followed the migration of European peoples across the Mid- west, company towns based on non-socialist principles flourished for several decades.

The first and most famous, the town of Pullman in Chicago, was reminis- cent of Owen’s idealism, except it was less a socialist experiment than a paternalistically run town. George Pullman, the owner of Pullman Pal- ace Car Company, set up the town, which attracted attention and awards for meeting workers’ needs. Indeed, in contrast to other tene- ments in Chicago, Pullman’s town was initially highly attractive, clean, and modern. Amenities and utili- ties were provided, but when his business took a dive in 1893, Pull- man lowered workers’ wages but kept their rents high. The result was a bitter strike the following year.

The Pullman case provides a useful example of how employer–employee tensions can break out and of the issues that ethicists draw our attention to. On the one side, a powerful company run paternalistically, employing and housing thousands of people, suddenly faces a change in fortune that means it cannot keep up its charitable principles. On the other side, thousands of people and their families who have become accustomed to the higher standard of living the company offers experience their lives being disrupted and changed.

It is not surprising that unions emerged in such situations to help redress perceived and real imbal- ances. Unions, which we will discuss later in this chapter, set up representatives to negotiate better conditions and pay for workers who would otherwise be too weak to voice their demands and con- cerns. Characteristic of many strikes, however, the Pullman Strike brought in federal troops to restore order, essentially forcing workers to give up their strike. This caused political problems between the Illinois governor and President Cleveland, and the union agitator was sentenced to prison.

Snark/Art Resource, NY

Strikers in the Pullman Strike often had deplorable living condi- tions, as shown here.

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CHAPTER 6Section 6.3 Hiring and Firing

While there are many intricacies to the Pullman case, the story pro- vides us with a general descrip- tion of how tensions may erupt: Such tensions may be hidden and go undiscussed—until something sets them off, of course. But to what extent should businesses seek to avoid such tensions? Should they be forced to consider employees’ needs through legisla- tion and greater accountability to municipal, state, or federal agen- cies, or should they be just left to work things out with workers? When an employment contract is made, is it solely about dollars and cents or does it invoke deeper responsibilities?

As we have already learned, employers are subject to regulations concerning how they treat employees, particularly regarding discrimination, but they are also subject to consumer and moral pressure. Previous chapters have discussed whether the latter are sufficient to encourage employers to be scrupulous and fair in their dealings, and while free market proponents may prefer to keep governments out of employment deals, it is nonetheless a reality for all employers that they must deal with regulations concerning hiring and firing, wages, working conditions, and unions. We will now turn our attention to each of these issues.

6.3 Hiring and Firing From the capitalist, free market perspective, if I choose not to buy a certain product, no ethical problem arises: I am exercising my freedom of choice to purchase or not purchase. The same is true for the free market view of employment: Just as I may choose to hire an individual, I may also choose not to hire that individual, or to fire him or her. In both cases, the reasons for not acting are mine alone.

However, the labor market has generally been considered different from the markets for products and services. Marx railed against what he saw as the commoditization of people—the market system’s turning people into economic objects to be bought and sold like soap. Not all free market economists would disagree with him—Adam Smith was highly concerned about the menial nature of mass production, which could reduce a worker’s brain to mush:

The man whose whole life is spent in performing a few simple operations . . . has no occasion to exert his understanding . . . . He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. (1776/1981 p. 782)

In the 1890s, President Cleveland called in the United States 15th Infantry, Company C, to break up the Pullman Strike and restore order.

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CHAPTER 6Section 6.3 Hiring and Firing

The virtue ethicist, as you will recall, challenges us to consider the employment contract in more humane terms: Behind the employment contract are people with expectations and emotions that perhaps should be taken into account in hiring. Accordingly, it would be wrong to hire a person under false pretenses con- cerning how much the person was to be paid and what the job description would be, and indeed the law would chastise such practices as breaches of contract.

Yet is it also wrong to hire people knowing that the job may not last as long as projected, or that the job may be much more intricate than explained, or that it would be thoroughly unsuitable for the applicant in other regards? Prejudicial discrimination apart, ethi- cists draw our attention back to the human element. In employing someone, there is an element of promise keeping, a requirement of care and respect for others, and an implication that excellence should be pursued. In turn, this encourages loyalty to the employer (Guy, 1990). In other words, there is an inevitable moral dimension to hiring employees, and mutual respect helps both parties.

It would be difficult to legalize requirements of decency, care, and respect. But what if an employer shows no care for her employee? Should she be ethically con- demned or held legally responsible? Does she have to show care? What would that mean in the workplace? Should an employer have to consider the personal cir- cumstances of a potential applicant for a job? Or should personal life remain private and out-of- bounds in hiring decisions? We address these and other questions in the next section, where we discuss interviews.

What Would You Do?

You work for a decent salary in a field that you enjoy, but the line manager stresses you out every time she enters the office. You talk to colleagues and they are similarly dissatisfied, but in the present economic climate, no one wants to make a fuss in case they might lose their bonus or job.

1. Do you ignore the manager and proceed with your work as profes- sionally as you see fit, or do you ask her to show more respect?

2. Can you think of a situation in which you or someone you know has had to challenge a manager for generating stress? What were the outcomes of highlighting the problem?

3. If you were in a hiring role, what kind of character would you look for in a manager—efficient, pro- ductive, ruthless, competitive, compassionate, decisive, thought- ful? Create of list of values that you think are important and see if you can relate them to the ethical notions you are reading about.

Interviews

Interviews are highly problematic affairs. Inevitably, prejudices may affect an interview; the ethi- cist is quick to warn against personal considerations in favor of a more objective analysis of the candidate (or from the employee’s perspective, of the firm). Explicit discrimination on the grounds of race, gender, and age notwithstanding, personal assessments of a candidate obviously come into play in any interview. For example, the interviewer may find the candidate attractive, or want to find out more about his or her personal life than the job warrants knowledge of. The inter- viewer will also need to assess the candidate’s aptitude for the job: his or her intelligence, reflec- tion on prior experiences, capacity for self-direction, and interpersonal skills. Will the candidate be an asset or a liability in the workplace? Would his or her humor unsettle customers or other employees? Is the job seeker ambitious and trustworthy? What may appear to be a move towards negotiating an employment contract also involves a great deal of personal, subjective evaluation.

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CHAPTER 6Section 6.3 Hiring and Firing

Psychologists explain that we are good at recognizing whether we like or dislike a person immedi- ately. First impressions are often what interviewers rely on to assess an applicant. However, they also offer a warning that we need to be aware of for ethical considerations: First impressions are not always good indicators of how well a person may act in other contexts. That is, just because a would-be employee performs well in an interview does not mean that that person will perform well on the job. This conclusion is at odds with our intuition. Most of the time, we assume that people display the same character traits in different situations. We usually underestimate the large role that context plays in people’s behavior (Gladwell, 2000). Because of the slippery nature of the interview, human resources managers use two basic styles of interviewing: unstructured interviews and structured interviews.

Unstructured Versus Structured Interviews Some psychologists have dismissed the unstructured interview as

“essentially a romantic process, in which the job interview functions as a desexu- alized version of a date. We are looking for someone with whom we have a cer- tain chemistry, even if the coupling that results ends in tears and the pursuer and the pursued turn out to have nothing in common. We want the unlimited promise of a love affair.” (Gladwell, 2000, p. 68)

The unstructured interview is thus ineffective. Ethically, should we be flirting with a candidate as on a date? Can we remove our immediate personal like (or dislike) of a candidate to pursue a more orderly interview? That is where the structured interview comes in.

The structured interview proceeds with each interview using the same questions in the same order for all candidates. Psychologists claim that such interviews are better than unstructured ones when assessing an applicant’s true aptitude. Interestingly, structured interviews are also less likely to become targets for lawyers, as the interviewer is not likely to probe into personal ques- tions when he or she is following a script (OPM, 2008).

But critics of using only structured interviews claim that such interviews do not provide them with all of the information they need to make an employment decision. Some potential employ- ers therefore combine the structured interview with unstructured techniques. Interviewees may be invited to a hotel, for example, where they are interviewed formally. Following the structured interview, they are then observed in a social situation such as a dinner and are judged on their interpersonal skills. Do they tell politically incorrect jokes or drink too much alcohol? Do they get along well with others? The benefit of the unstructured interview and similar unstructured tech- niques is that they are not tied to a script and therefore enable the interviewer to throw curve- ball questions and create more “real world” scenarios to see how the job applicant responds. However, as noted, such interviews may cross the line of propriety, and the decision to hire may become more a subjective evaluation of chemistry than an objective assessment of ability.

From the ethical perspective, is it right to analyze how a candidate acts in a social situation that is unrelated to the workplace? It can be argued that such an interview process would be unethical on the grounds that it intrudes into private areas of the candidate’s life and has no bearing on pro- ductivity. It is thus inappropriate to observe and judge how someone relaxes in a bar or in a hotel environment, as it is none of the firm’s business. Analogously, it would be inappropriate to inquire

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CHAPTER 6Section 6.3 Hiring and Firing

into the candidate’s sexual orientation or to follow the candidate into nightclubs. So why proceed with a behavioral examination in a hotel? The capitalist ethicist here would reject any interview beyond that which is necessary for the job.

The virtue ethicist can reply that a person’s character has many aspects that do not appear in an interview, just as our best abilities are rarely seen in examinations. Rather, it is better for both parties to “get to know each other better” in the informal environments in which deeper layers of the personality emerge. For the virtue theorist, a person’s character is witnessed in the person’s habits, or typical acts during a day or over a few days. How does the person respond to inappro- priate comments, to humor, to a game, to an offer of a drink, to a political headline? To get the most out of an interview, the virtue ethicist suggests being with the candidate for longer and in different situations.

Background Checks Because standard interviews can be hit and miss, in recent years employers have used a variety of other techniques to assess a person’s character. A background check is one of these. Economi- cally, this can be seen as a cost-effective measure to avoid hiring the wrong person, but using background checks also raises some ethical concerns.

From a hirer’s perspective, the cost of employing someone is generally high. Additionally, it is esti- mated that 50% of résumés contain factual errors and that employee theft and fraud cost U.S. busi- nesses $50 billion annually (Jones, Schuckman, & Watson, 2004). It is no mystery that companies want to get it right. But when psychological testing is too expensive for the job, many employers have checked applicants’ Facebook pages and other social networking sites, for instance, to gain a better glimpse of a job applicant’s per- sonal interests and habits. In fact, a recent survey found that 40% of companies said they would check job applicants’ Facebook accounts (Jones et al., 2004).

This has stirred controversy. In some respects, if a person posts her thoughts and pictures of evenings out with friends on public sites, then it can be argued that a potential employer has the right to review her publicly declared deeds and mind- set either before or after screening (Finder, 2006). However, others see such behavior as an unwarranted intrusion into an applicant’s per- sonal life, which, they argue, does not relate to whether the person is competent to do a job or not.

What Would You Do?

You are a human resources manager for a large marketing firm. A job candidate is coming for an interview in the morn- ing. Her résumé is impressive and she seems to be a perfect match for the job.

1. In this situation, would you check the job candidate’s Facebook page? Why or why not?

2. What would you do if you found information on the job candidate’s Facebook page that you did not approve of, such as photos show- ing her partying or at political ral- lies you did not support?

3. To what extent should a candidate’s personal life remain unconnected to his or her application? Are there any personal matters that you think should be considered in hiring a candidate that would justify discov- ering them indirectly?

Associated Press/Ronald Zak

Surprised at what the Internet can hold on you? Austrian stu- dent Max Schrems, shown here, filed a request with Facebook in 2011 to obtain the personal data the company had about him. He received 1,222 pages of information, leading him to start a campaign to force the social networking site to follow data-privacy laws in Europe. Facebook argues that it already follows these laws.

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CHAPTER 6Section 6.3 Hiring and Firing

Do we have a right to enter another person’s private life? Some ethicists say no on grounds of privacy, but this presents an awkward problem. If an employer does discreetly check a blog or a Facebook page of an applicant and finds that it presents a very different pic- ture of the applicant than his résumé or interview did, is it not prudent then to seek another applicant? One example is that of a conservative Christian recruiter going through a pile of applications and rejecting a candidate based on her pro-choice feminist politics (Engler & Tanoury, 2004). This does not seem fair, but on meeting the candidate, the recruiter may very well sum up the candidate’s views and dismiss him or her anyway. Accessing a candidate’s profile online saves both parties the time and money involved. Besides, would the applicant wish to work for a conservative Christian, given her views?

Due Diligence Checking on job candidates’ Facebook pages may reduce the résumé pile on an employer’s desk, but some background checks may be made to avoid hiring a criminal, for instance, for a sensitive job. An inter- viewer may justly employ due diligence—checking a job candidate’s criminal record and employment history, performing a credit check, screening for drugs, and following up on the applicant’s references—if given the candidate’s permission.

This might seem a fair proposal to ensure that employees are not just capable but also honest and not disposed to criminal behavior. However, since that person has given permission to the employer, the information may again be accessed whenever the employer wants to know more about the workers—which raises an important question: For how long should a company continue to monitor an employee’s behavior outside of the workplace? One argument is that by monitoring an employee’s social behavior, a manager can determine whether that employee is losing focus or going through trouble outside work that may affect his productivity. For instance, the manager may become aware of the employee’s inability to keep a long-term relationship, which explains his mood swings in the office; or all night partying on the weekend could start to harm punctuality. Awareness of such pressures and tendencies may help a manager deal with an employee better— or become prepared to fire him for slacking.

Arguably, there comes a point when such research becomes intrusive, even though it may be sanc- tioned by law. Moreover, some research channels, such as the aforementioned social networking sites, can give an interviewer access to information that may not legally be used in judging appli- cability for employment, including the candidate’s age, relationship status, religious or political preference, and sexual orientation. According to the ethicist Michael Jones, companies should not be trawling for information on applicants that, unlike a credit history or a drug screening, could be unfairly taken out of context (Jones, Schuckman, & Watson, 2004). On this view, not peering into a person’s online activity is a matter of fairness. We should treat applicants equally and based on their aptitude for the job and what they do on the job, rather than on what clubs they frequent or whom they spend their weekends with.

What Would You Do?

You are a human resources manager for a large marketing firm. A job candidate is coming for an interview in the morn- ing. Her résumé is impressive and she seems to be a perfect match for the job.

1. In this situation, would you check the job candidate’s Facebook page? Why or why not?

2. What would you do if you found information on the job candidate’s Facebook page that you did not approve of, such as photos show- ing her partying or at political ral- lies you did not support?

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CHAPTER 6Section 6.3 Hiring and Firing

Negligent Hiring What if after a cursory and legally diligent search, a candidate ends up with the job but turns out to be highly unsuitable and even a danger or embarrassment to the company? Negligent hiring occurs when an employer should have known about an employee’s background that would have revealed his or her dangerous or untrustworthy character. One famous example is the Massa- chusetts court case Ward. v. Trusted Health Resources (1999), in which a health-care employee murdered two of his patients. In cases like this, companies often claim they could not predict that an employee would commit murder or steal from customers. But courts have generally found companies’ defenses wanting. This, in turn, has created strong incentives for businesses to find out more about potential employees before hiring them.

One company that does background checks on applicants has claimed that employers “have not only a right, but a vested interest to know about the people they are hiring” (Hamashige, 2000). However, unsuccessful applicants have a right to ask why they did not get the job, and although they have no right to know the reasons, it would seem inappropriate for an interviewer to respond, “We didn’t like your Internet profile.” Nonetheless, the trend may be for companies to conduct secret checks of applicants. In turn, there is a growing incentive for job seekers to clean up their Facebook pages.

Firing

When it comes to firing an individual, the free market proponent says that the decision to end a contract and hence an employment relationship is really up to both individuals concerned. Either an employer or an employee can terminate a contract, giving the notice required in the contract. The socialist retorts that dismissing workers is easier on the bosses, for they are rarely impover- ished by unemployment, while workers suffer.

The reality once again lies in between: An employer may be relying heavily on an employee to complete a project but suddenly find her employee giving notice. The project cannot be completed, customers are let down, and the business’s reputation suffers. On the other side, a

dismissal can lead to the employ- ee’s being unemployed and los- ing income and self-esteem, as is often portrayed in films and books. It is a sad trend that stock prices tend to rise when listed compa- nies announce layoffs. Sharehold- ers may respond positively to the company’s being seen as cutting costs and making itself more effi- cient: Labor costs are often the highest costs that companies have. Employment is a two-way street highly dependent on mutual trust and dependency—when either fails, the contract may be severed or conditions changed to force a resignation or early retirement.

Associated Press/Ed Andrieski

In this 2011 photo, filmmaker Michael Moore speaks to Occupy Denver protesters.

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CHAPTER 6Section 6.4 Wages

Employment at Will The moral foundation for firing in America rests upon the doctrine of employment at will (EAW), which was accepted by all states until 1959. “At will” means that an employer has the right to hire, promote, demote, or fire an employee at a moment’s notice when the relationship is not covered by a contract, union agreement, public policy, or legal statute. Employers may have their reasons for firing employees, but they do not have to explain their reasons under EAW.

Free market supporters believe that the right to terminate employment is similar to a right to end any personal relationship. Why must a woman provide a reason for no longer dating a man, or vice versa? More controversially, EAW doctrine is said to encourage responsibility and innova- tion in the workplace. If a company has to put up with slow, plodding staff, the threat of layoffs may encourage them to perk up, or firing them may permit the company to compete better with competition.

EAW is also supported on several other grounds:

• Just as a manager can dismiss, so too can an employee leave under EAW. • Employers or companies have a propriety right to hire and fire as they see fit. • In choosing a job, an employee implicitly understands that it is contingent rather than a

job for life. • Intervention into EAW only causes unnecessary interference with commerce and wealth

creation.

These arguments are often used to support EAW against entitlement theories that say workers have a right to a job and a right to know why they were dismissed.

Nonetheless, as one journalist stated twenty years ago, EAW is “on its last leg” (Flynn, 1996, p. 123). The right to fire people arbitrarily has become legally limited and employers restrained as to what they can ask an employee to do. For instance, an employer cannot ask an employee to break a law or violate stated public policy, and hence cannot fire the employee for not doing so. “At will” has its legal limits. But there is also something ethically questionable about treating staff as if they were commodities being thrown into the garbage. Ethicists generally agree that employees are persons deserving respect and deserving reasons for why they may be fired. For critics, EAW also promotes arbitrariness—in a world of employers and employees, the bosses may use their power arbitrarily.

However, EAW supporters would reply that irrational management is not conducive to a healthy, productive workplace, so while whimsical firings may occur, the incentive in the marketplace is to reduce costly whims; and managers who act randomly are not going to retain their employees for long.

6.4 Wages Wages are determined for the most part in the marketplace, in which workers supply their labor and firms demand workers. In this section, we will look at issues involving the ethics of wages. The most common concern is whether the going rates of pay are “fair.”

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Fair Pay

In the socialist perspective, employees often do not receive fair wages. The call for fair pay is an ancient one and reflects a notion that work somehow has an intrinsic value in itself. Pay should thus reflect the innate value of the work done, regard- less of how other people may value it.

However, free market proponents reject the notion of fair pay in preference for wages set by market con- ditions: When the demand for certain work rises, so too does the wage rate. Should the supply of work- ers expand, from migration or an increase in the birth rate, a downward pressure is put on wages. Demand and supply form an equilibrium wage rate, which is the going rate for work.

The problem with the free market wage rate is that workers are said not to possess sufficient bargaining power or information to negotiate for fair pay. Com- panies may then simply exploit workers’ ignorance to keep wages low. Adam Smith was no fan of com- panies, for he thought they would always conspire to keep wages low. Likewise, the early 19th-century English economist David Ricardo thought that wages for workers would never get above subsistence levels—that is, a wage rate that allowed them to feed themselves and their children but never get richer. Marx developed their ideas to propose that workers were always going to be exploited by capitalists, for workers do not own anything while capitalists exclu- sively own the means of production.

Minimum Wage

As socialism filtered into American liberal politics in the early 20th century, the idea was per- petuated that workers were being constantly exploited and kept on cheap wages. Minimum wage laws were then introduced in the Fair Labor Standards Act (FLSA) of 1938 to ensure that those in work receive a politically agreed-upon minimum. Interestingly, Congress had introduced minimum wages for women prior to the FLSA, but the laws were struck down by the Supreme Court for price fixing and interfering with the right to negotiate over pay (Adkins v. Children’s Hospital, 1923; Gor- man, 2008). Since the enactment of the FLSA, the federal government sets the minimum wage for the nation, while the states may set theirs above that level (Department of Labor, 2011).

Minimum wage laws generate much controversy. For proponents, they ensure that those in work are paid a rate that enables them to keep off the breadline and that may also reflect commu- nity values concerning a basic standard of living. Proponents also champion a living wage, which would also include the right to afford decent housing, child care, and health insurance.

Associated Press/David Zalubowski

In this 2006 photo, workers rally in support of raising the minimum wage in Colorado, calling for fair pay.

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For opponents, minimum wage laws only protect those who are in work. By introducing a legal minimum, the law separates those who are employed at the minimum wage from those who can- not now gain employment. Consider a young and inexperienced person who is keen to get a job. Employers would like to offer him employment at $3 an hour to see how he gets on, but the law decrees that he should be paid $6 an hour, for example. He remains unemployed. In a sense, his right to compete for work has been removed. He cannot legally offer his services for less than the minimum wage, which means that he either must volunteer and work for free or must remain unemployed. Without experience, it is more difficult to find work.

The evidence on minimum wages is also controversial, with some economists finding that they do not create unemployment and others saying that they do. Even if the law does not intrude, the fair-pay claim does hold our moral attention: It seems only fair and just to treat people as we would be treated, as the principle of the Golden Rule suggests. Accordingly, we should pay people according to how we would wish to be paid.

Salary Caps

Sometimes maximum wages (or salary caps) have been proposed to prevent high earners from earning more money, often because it is considered unfair that some should earn what is consid- ered an exorbitant fee for their work. During one presidential election, the Green Party called for a maximum wage of $100,000. Still, there have been no mandatory maximum wages since colonial times, when the land-owning colonists tried to impose wage rate restrictions in the face of scarce workers and declining currency values.

Nonetheless, there are examples of salary caps in the sports world, with the American professional football, hockey, soccer, and basketball leagues all collectively negotiating maximum salaries for teams and individual players. These are types of voluntary agreements, however, which can be rejected

by teams and by players, who may leave the major associations to form new ones based on free markets for wages (as seen in European soccer, for example). The aim of such sal- ary caps in sports is to ensure that smaller teams are not outcompeted by high-financed larger teams, and that any excesses earned by clubs are returned to the sport.

The caps attract controversy, as the effects are muddied by the leagues’ cartels—which, with the exception of baseball, effectively prohibit competing leagues from being set up. In turn, media companies work with the major leagues to create high barriers to entry for investors wanting to create a new team.

Associated Press/Frank Franklin II

In this 2011 photo, National Basketball Association players- union president Derek Fisher holds a news conference on labor talks. One of the issues in the talks was the salary-cap system.

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CHAPTER 6Section 6.5 Working Conditions

Calls for maximum wages are often made on grounds of fairness. There have been calls to limit bankers’ salaries and bonuses, but the concern is that highly paid executives would just leave to find high-paying jobs elsewhere. If an executive adds several millions to a company’s profits, would it not be right for her to be rewarded proportionately? Free market economists would agree: Salaries are negotiable between individuals and there should be neither a lower minimum nor an upper maximum wage rate. But the ethicist may inquire further and ask what kind of per- son needs to be rewarded in millions of dollars.

6.5 Working Conditions Work takes place in an environment, and that environment can often be as important to work- ers as the wage they are paid. Consider mining. The risk of working underground increases the wages that miners can command in the market relative to those who do surface quarrying, for instance. One thing that all commentators on working conditions agree on is that working condi- tions have improved immensely over the past hundred years—they just disagree on the causes for this improvement.

Occupational Health and Safety

Working conditions as a term in business ethics implies thinking about the welfare, health, and safety of employees in the workplace. However, it can also include the safety of stakeholders such as customers, suppliers, and nearby residents.

The unfortunate reality of work in the past meant that accidents and deaths in the workplace cost companies very little. Workers were expendable, and so there was little incentive to ensure their welfare and safety. Progressively, though, workers combined to reduce obvious risks and lax safety conditions, and legislation began to reflect their concerns, beginning with the railroad and mining industries. In 1970, President Nixon signed the Occupational Safety and Health Act (OSH Act), designed to free workers from unnecessary risk and unhealthy work conditions. The Act sought to

assure safe and healthful working conditions for working men and women; by authorizing enforcement of the standards developed under the Act; by assisting and encouraging the States in their efforts to assure safe and healthful working conditions; by providing for research, information, education, and training in the field of occupational safety and health; and for other purposes. (Occupational Safety and Health Act of 1970, Summary)

Critics claim that the Act caused an increase in companies’ costs, which meant layoffs and a loss of competitive edge against foreign companies. Safe and healthy workplaces are certainly more pref- erable from a third person’s point of view. But if an imposed increase in safety measures meant the loss of jobs, it might not be so welcome to those forced out of work. The free market approach says that as a country gets richer, people tend to want safer workplaces and homes, so it makes sense that competition for workers would also involve offering better workplaces, which would incentivize other companies to follow suit. In other words, if my company offered employees a day care center for their children, I would attract other companies’ employees to my company even if

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I paid them the same hourly rate. The OSH Act merely intrudes into what the market would cater for anyway—it is an unnecessary intrusion into business life.

Also importantly for critics, the OSH Act was a benefit to large corporations who could swallow the higher costs but it was a death knell for smaller companies faced with mandatory cost increases. The larger corporations could then buy up the smaller firms, or the smaller ones would simply go under. So from the free market perspective, there is no ethical problem as such: Some people may accept working in riskier jobs than others and accept occupational hazards in return for higher pay.

But what kind of corporation or firm would wish to put the lives of its employees at risk? From a moral perspective, it seems extraordinary to seek profits and turnover at the cost of human safety. There may be risk takers in society who enjoy cleaning windows of skyscrapers or climbing, but it would not be professional or diligent to expose the average employee to hazards beyond their understanding or anticipation. Critics raise concerns about the culture of safety both in the workplace and in the nation as a whole: Is it acceptable for employees to take unnecessary or inappropriate risks without proper training, for instance?

Indeed, when the North American Free Trade Agreement came into force in 1994, there were concerns that Canadian and American companies would lose out to competition from Mexico, which was perceived to have lax restrictions for health, safety, and environmental protection. In the long run, it was argued, other countries might catch up with higher U.S. standards, but what if the competing trading partners do not have a so-called safety culture? Would it be right for an American company to lower its safety standards and expect employees to accept a higher level of risk in the workplace?

Supporters of the OSH Act may have a pessimistic or cynical view of people and corporations that echoes Marx’s critique. Workers will be paid a minimum and will be subjected to risks beyond their calling in the capitalist system, so governments must step in to impose minimum require- ments. Otherwise, unsuspecting employees may hazard their health and lives because of lazy or exploitative managers. The capitalist replies that people have a right to take on risks if they so choose: You can ride a bike into a city or take a bus; one carries a higher risk than the other. If you do not understand or know the risks, that is your fault. But the capitalist reply here is an unfair and simplistic understanding of the modern workplace. With new technologies, workers may not know about hidden toxins or radiation in the workplace, for instance, that gradually wear down their health. We need an independent scientific organization to assess the potential threats work- ers face, and in many cases that assessment of facts is not available to workers.

Understanding Hazards

Some jobs carry greater risks than others, and these differences carry over into different popula- tion segments. Men are more likely to make claims for compensation and are more likely to suffer fatalities and severe injuries in the workplace than women (Sarkis, 2000, p. 21). Teenagers are also at high risk, particularly in summer jobs. More than 60 teens a year die in the United States from workplace accidents, and their rate of injury is 75% higher than adults’ (Torres, 2006). This imposes an ethical, legal, and economic burden on companies to do more. However, if youngsters are prohibited from taking employment on the grounds that they may come to harm, the loss of experience would mean that they enter the workforce older but still untrained and liable to cause harm. A stereotype of teenagers is that they are less risk averse than older people, which implies

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CHAPTER 6Section 6.6 Unions

that they are more vulnerable to unknown hazards than are more experienced people. When a young person asks to take on a job, should an employer reduce the risks he faces, or permit him to learn on the job? There is an added, special responsibility towards younger people: The adult is in a position of role model, guide, and teacher, and these are critical responsibilities not to be entered into lightly. It is because workers have felt that their concerns were ignored that some have turned to forming unions to protect workers in the workplace as well as strive for higher wages.

6.6 Unions A union is an organization whose purpose is to protect and enhance workers’ jobs. Since their emergence in the late 19th century, unions have been praised as the saviors of the working class and condemned as disruptive and violent organizations. For socialists, they are useful vehicles to empower the working man and woman and to educate them. For capitalists, unions are impediments to competition and growth. In turn, legislation has permitted them, banned them, allowed them under certain conditions, limited their actions, jailed their leaders, and hailed them as heroes. They are controversial, and even though membership declines and grows, they have played and continue to play a role in the modern economy.

Do you agree with union membership? Do you owe more to unions than you realize, or have they been a blight on American prosperity? A brief review of unions’ aims may help you decide.

History of Unions

Although attempts to protect the interests of a class of producers or artisans go back to medieval European guilds, labor unions only emerged with the industrial revolution. At this time, skilled workers banded together to challenge the technological shift toward mass production that was causing unemployment in rural areas. The industrial revolution shifted much production from the cottage and village into the factory and city. Thousands of workers could end up working for the same company, and unions emerged to become the voice of labor, taking up the demands of oth- erwise voiceless masses submerged in sprawling cities. Members of these early unions paid into a fund to assist members in need and to negotiate for better working conditions and pay.

Initially, labor unions were motivated politically to change not just the workplace but also society and government. By using the power of workers in pursuit of a socialist agenda, late-19th-century union leaders thought they could halt capitalism and what they saw as its inherently exploitative nature. In Europe, the 20th-century union movements maintained that political momentum to rewrite society and politics, but in the United States, the unions shifted motives. Instead of com- bating corporations and “fat cats” with socialism, the unions preferred to gain as much as they could from business turnover for their members in higher wages, fewer hours, better conditions, holiday entitlements, pensions, and so on. Instead of being socialist unions, they became business unions interested in filling their members’ pockets.

The early unions in the United States were small and did not last long. There were too many opportunities for companies to take their production elsewhere and hire people for less pay, or too many migrant workers for a union to grow. Gradually, however, as cities grew up and popula- tions became more stable, unions had a chance to develop and to assert their power. The union’s power rests in its ability to call all members out on a strike: It is a most persuasive bargaining tool.

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However, this power was often abused. Early unions were often violent, breaking up machinery that they saw as replacing their jobs and intimidating workers who preferred not to cooperate, calling them “scabs” and “blacklegs.” Not surprisingly, property owners turned to government to protect their property and in turn to intimidate the unions.

From a legal standpoint, up until 1840, unions were deemed as “criminal conspiracies in restraint of trade” (Goldberg, 1956, p. 157). However, following the rise of union activity, various prolabor laws were passed in the 20th century, alongside laws that also sought to restrain union activity that spilled over into violence and intimidation.

In Commonwealth v. Hunt (1842), the Massachusetts Supreme Judicial Court allowed that unions were lawful and that members were not collectively responsible for individual members’ acting crim- inally. In 1935, President Franklin Roosevelt signed the National Labor Relations Act (NLRA), or the Wagner Act. This act encouraged collective bargaining, facilitated the formation of the National Labor Relations Board, and made it easier for unions to be created (Reynolds, 2009). Union activism fol- lowing World War II was calmed in 1947 under the Labor–Management Relations Act (Taft-Hartley Act), but unions sidestepped the restrictions in the law to form union shops, in which employment does not have to be based on union membership but employees must join the union within a certain period of time or pay some fees to the union even if they do not wish to become full members.

Historians will champion whichever side they think has the moral right; many free market econo- mists do not mind unions in the abstract. Individuals, they argue, have a right to combine col- lectively. However, when the union imposes a monopoly on workers and says that they have no choice but to join, an ethical problem arises. In a world of choice, the closed-shop union removes choice. If you want to work in a profession and you have no choice but to join a union, your free- dom of choice has been removed.

But is union membership an ethical duty? On the one hand, it can be argued that unions have used up their usefulness. They helped foster a more tolerant and liberal society, but they are now defunct and even act as a brake on economic progress, as they tend to reject change and innovation as much as they reject low wages. Unions cannot do anybody any good in a dynamic marketplace. On the other hand, consider those whose lives have been improved through union action. Would women or Blacks have the same rights and respect they have today if unions had not been used in the cause to promote their dignity and freedoms? Addie Wyatt worked as a meat packer and rose to become the union representative. Her char- acter and intelligence brought her cause fame, and she later worked alongside Martin Luther King Jr. and on the Presidential Commission on the Status of Women. She was the

Addie Wyatt (second from right) worked hard to empower underpaid Black women in food processing factories; her intel- ligence and integrity brought her acclaim, and she later worked on the Presidential Commission on the Status of Women.

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first Black person to be named person of the year by Time magazine. Her civil rights efforts have been saluted. It can be argued that there is a duty of solidarity, especially amongst oppressed workers, to join a union to ensure that progressive measures are continued in corporations and government.

Unions continue to face additional challenges when dealing with questions of gender and racial equality on the job. Consider the following example: In 1993, the New York City Fire Department issued an order that no photos ought to be taken of its female firefighters. The department had been a male preserve for over a century, but women were gradually passing tests to qualify as firefighters. They struggled to gain acceptance and were harassed, intimidated, bullied, and sexu- ally assaulted. The women allied with the Vulcan Society, an organization of Black firefighters, to secure the respect they deserved (MacLean, 1999, p. 44–45).

In a male-dominated profession such as firefighting, the assumption is that women should not be firefighters, as one female captain of the New York Fire Department recalled:

“When I first came on the job 23 years ago, fighting fires was the easiest part of the job for me. Much harder was dealing with the hatred and discrimination that some male firefighters had for me. Now, many of the initial problems [New York City Fire Department] women firefighters encountered have improved.” (Berk- man, n.d.)

While there have been great improvements, the gains are superficial so long as more men, or more white people, are in positions of higher authority and economic power across the country.

Professional Unions

When we think of unions, we generally think of labor unions, but there are also professional unions such as the American Medical Association (AMA). And since unions’ policies are to raise wages, it is not surprising to find critics claiming that the AMA raises doctors’ wages by restricting entry to the profession (through its influence on licensing boards) and by demanding that competing health practitioners such as homeopaths and chiropractors be criminalized by the licensing boards (Cic- chetti, 2008; Peterson & Wiese, 1995, p. 144–147). In fact, at one point the AMA was found guilty of violating the Sherman Antitrust Act in its attempts to prohibit chiropractors from practicing (Wilk v. American Medical Association, 1990). While labor unions call opponents “scabs,” profes- sional unions call the competition “unsafe” or “cults,” yet professional unions have generally been immune to the backlash against unions that arose in the 20th century to control union action.

Generally, economists agree that both labor and professional unions act to restrict the supply of their labor to the market, in order to push wages up. This also implies that to the extent that a union is successful in raising wages for its members, nonmembers will suffer a relative decline in salary. The evidence, however, is unclear: The number of physicians has increased in the past few decades, contrary to this theory. But could the number of physicians have increased further if licensing of doctors were more relaxed? That is a harder question to answer. Milton Friedman and other free market economists have thought the AMA restricts entry (Friedman, 1980, p. 273), whereas the AMA and similar professional unions prefer to claim that their purpose is to ensure patient safety as well as look after physicians’ interests. What fuels the controversy is that over 200,000 Americans die annually from mistakes caused by physicians, and over 100 million Ameri- cans have been adversely affected by medical mistakes (Null, 2010, p. 50–51).

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CHAPTER 6Section 6.7 Whistleblowing

6.7 Whistleblowing A whistleblower is a person who informs the public or someone in authority about illegal activi- ties or some other misconduct that has occurred within an organization. The term is a metaphor based on the use of whistles in law enforcement and sports, where an official draws attention to some infraction by blowing a whistle. In this section, we will review types of whistleblowing, some guidelines for whistleblowers, and some laws that protect whistleblowers.

Types of Whistleblowing

Whistleblowing can be either internal or external. Internal whistleblowing occurs when employ- ees draw attention to a misdeed by a fellow worker or supervisor. The complaint takes place within an organization’s established operational structure, and thus relies on the organization to correct the problem. A famous example of internal whistleblowing occurred at the Firestone Tire and Rubber Company. Its director of development sent a memo to top management regarding flaws in one of its products, stating, “We are making an inferior quality radial tire which will subject us to belt-edge separation at high mileage” (“Forewarnings of Fatal Flaws,” 1979). The company did not correct the problem, and blamed reports of tire failure on consumers’ underinflating their tires. A government investigation determined that the tires were in fact defective and responsible for 34 deaths. Firestone was forced to recall seven million of those tires, the largest tire recall to date.

To deal with such problems, companies sometimes have whistleblower systems or hotlines. These are mechanisms that allow for employees to make complaints within the company struc- ture. Some areas of business, such as accounting, have laws that require the implementation of whistleblower systems to collect and resolve employee complaints or concerns. These might include telephone hotlines or Internet sites where complaints can be registered anonymously. Some companies encourage internal whistleblowing, partly as an effort to eliminate any miscon- duct on the part of employees and managers in the company and partly to avoid potential legal and public relations problems and thereby protect their image as transparent and responsible companies in the eyes of the public. There are also companies that specialize in whistleblower systems and sell their services to organizations, advertising that their systems are more effective and have a lower risk of costly retaliation claims.

Unlike internal whistleblowing, with external whistleblowing the informant goes outside the organization to seek some kind of remedy. Complaints of misconduct may be brought to the atten- tion of authorities outside the organization, such as governmental oversight offices, attorneys, the media, or special interest groups such as watchdog agencies. Here are two dramatic examples:

• In the mid-1990s, Jeffrey Wigand, a former vice president of the Brown and Williamson tobacco company, appeared on the CBS news show 60 Minutes and stated that his com- pany was “a nicotine-delivery business” and had intentionally manipulated its tobacco blend to increase the amount of nicotine in cigarette smoke. He went on to provide evi- dence in a case that resulted in a $246 billion settlement with the tobacco industry. His story is depicted in the feature film The Insider.

• In another case, four employees of the pharmaceutical company Eli Lilly filed lawsuits against their employer for illegally marketing the drug Zyprexa for the treatment of dementia in the elderly, a treatment that was not approved by the Food and Drug Admin- istration. The company pled guilty and was ordered to pay $1.42 billion, which included

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a $515 million criminal fine, the largest fine ever imposed on a company in the United States at that time.

Both of these are rather dramatic situations; for the typical whistleblower, appearing on national televi- sion or filing a billion-dollar lawsuit are not options. With many external whistleblowing situations, the employee simply complains to a government agency that oversees a particular area of business.

Suppose, for example, that a company violated a health or safety regulation by not providing proper protective gear for employees who work with hazard- ous material. An employee could bring the situation to the attention of the federal government through the OSH Act. In the case of violation of environmental regulations, such as improper disposal of hazardous waste, the employee could notify the Environmental Protection Agency (EPA). With violations of securi- ties regulations such as insider trading, the employee could contact the Securities and Exchange Commis- sion (SEC). For example, a vice president of Enron, Sherron Watkins, blew the whistle on her company when she informed the SEC of the irregular account- ing activities at her company. The SEC then investi- gated Enron, which ultimately led to the company’s bankruptcy.

Whistleblowing Guidelines

External whistleblowing can cause considerable harm to a company because of fines, lawsuits, and tarnishing of its public image. Consequently, employees who blow the whistle are caught in a conflict between loyalty to the company and loyalty to the public and the law. On the one hand, as members of the company they have a responsibility to look out for the best interest of their employer and avoid causing unnecessary harm. On the other hand, as citizens they have a respon- sibility to the public at large to draw attention to especially harmful activities of their company.

The act of going public with a complaint is not one to take lightly, however, and the argument can be made that in most cases it is not justifiable. Sometimes even well-intentioned whistleblowers get their facts wrong and cause a public spectacle even when the company has not committed an infraction (Tongue & Instone, 2006). Some types of whistleblowing can be unjustifiably con- frontational, such as creating a Web site that boldly states, “My company is dumping toxic waste in your backyard.” Also, some whistleblowing may be the consequence of the employee’s strong ideological convictions, which are disproportionate to the actual harm that a company does. For example, an employee who is especially sensitive over environmental issues may misconstrue a minor environmental infraction as a major one.

Associated Press/Ron Edmonds

Sherron Watkins is sworn in before Con- gress. She blew the whistle on Enron’s dubious accounting practices, and not long afterwards, she feared for her life.

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Ultimately, there should be guidelines for when external whistleblowing is appropriate. Of the various suggestions that have been made, here are five valuable ones offered by political philoso- pher Richard T. De George:

1. The firm, through its product or policy, will do serious and considerable harm to the public, whether in the person of the user of its product, an innocent bystander, or the general public.

2. Once an employee identifies a serious threat to the user of a product or to the general public, the person should report it to an immediate superior and make his or her moral concern known.

3. If an employee’s immediate superior does nothing effective about the concern or com- plaint, the employee should exhaust the internal procedures and possibilities within the firm. This usually will involve taking the matter up the managerial ladder, and if neces- sary and possible, to the board of directors.

4. The whistleblower must have, or have access to, documented evidence that would convince a reasonable, impartial observer that one’s view of the situation is correct, and that the company’s product or practice poses a serious and likely danger to the public or to the user of the product.

5. The employee must have good reason to believe that by his or her going public, the nec- essary changes will be brought about. The chance of being successful must be worth the risk one takes and the danger to which one is exposed (2006).

Whistleblowers such as Jeffrey Wigand are sometimes considered folk heroes for exposing great harm. Other times, however, they are depicted as disloyal snitches or emotionally unbalanced com- plainers. In either case, through their efforts, whistleblowers put themselves at risk of employer retaliation through layoffs, pay decreases, hour cutbacks, job reassignments, and even termination. Wigand himself maintained that he was harassed and publicly discredited by Brown and Williamson for whistleblowing. Unable to find a corporate job in the aftermath, he worked for a while as a high school teacher receiving $30,000 a year, which was one tenth of his former salary. The emotional impact on whistleblowers can therefore be very great.

Whistleblowing Laws

Just a few decades ago, whistleblowers had little protection from retaliation by employers, but laws have been passed more recently to safeguard them, and employer retaliation has subsequently been on the decline. We will look at three of the more important laws protecting whistleblowers.

The False Claims Act of 1863 The False Claims Act of 1863 aimed to help the government recover money from companies that defrauded governmental programs. It was signed into law during the Civil War as a mechanism for punishing military contractors who intentionally sold the government faulty weapons and sup- plies. The law was expanded in 1986 to allow citizens to sue on behalf of the government—in essence, to blow the whistle on companies that defraud the government. Most importantly, the law allows for whistleblowers to be rewarded by receiving a percentage of the money recovered. For example, in the Zyprexa case the four employees of Eli Lilly received nearly $80 million in their share of the settlement.

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CHAPTER 6Section 6.8 Conclusion

The Whistleblower Protection Act of 1989 Next, at the urging of President Jimmy Carter, Congress passed the Whistleblower Protection Act of 1989, the purpose of which was to protect employees in government jobs from whistleblower retaliation. As the act itself stated, it sought to “strengthen and improve protection for the rights of Federal employees, to prevent reprisals, and to help eliminate wrongdoing within the Govern- ment” (Whistleblower Protection Act of 1989, §2(b)).

The No FEAR Act of 2002 A final whistleblower protection law is the Notification and Federal Employee Antidiscrimination and Retaliation Act of 2002, more commonly known as the No FEAR Act, which aimed to dis- courage supervisors in government agencies from engaging in discrimination and retaliation. The act was sparked by the case of Marsha Coleman-Adebayo, an employee of the EPA, who alerted the agency that a specific U.S. company was engaged in an environmental violation. When the EPA did not take action, she reported the violation to external organizations. When she was later denied promotion, she filed suit. The EPA was found guilty of civil rights violations and ordered to compensate her with $600,000. In an effort to reduce the occurrence of similar lawsuits against the government, the No FEAR Act was introduced, which required federal employers like the EPA to regularly notify employees of their rights and remedies regarding discrimination and whistle- blower retaliation. The notification must include the following language relating to whistleblowing:

A Federal employee with authority to take, direct others to take, recommend or approve any personnel action must not use that authority to take or fail to take, or threaten to take or fail to take, a personnel action against an employee or appli- cant because of disclosure of information by that individual that is reasonably believed to evidence violations of law, rule or regulation; gross mismanagement; gross waste of funds; an abuse of authority; or a substantial and specific danger to public health or safety. (Office of Personnel Management, n.d.)

Deadlines for retaliation complaints range from a few days to several years, depending on the type of retaliation and the governing federal or state laws. Thus, whistleblowers who wish to complain of retaliation need to be alert to these varying timetables. One resolution for retaliation is a “make whole” remedy, whereby the employee is returned to the position and status that he or she held prior to the complaint.

From an ethical perspective, the whistleblower believes that justice ought to be done—there is a perceived duty to tell the truth because the corporation or government body is acting illegally, fraudulently, or without regard to worker safety. It takes courage to tell the truth and to stand up against one’s peer group and possibly against very powerful political and economic interests. The easier route is to do nothing, say nothing, and hope the problem will go away. But, as the philoso- pher Edmund Burke warned, evil flourishes when good men and women do nothing.

6.8 Conclusion In the marketplace, goods and services are constantly being produced and exchanged. Labor, too, is an economic service offered by people in return for a wage. The contract between two people generates more emotional debate than the buying and selling of cars, though, which reflects our

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CHAPTER 6Summary

moral concern that an employment contract should involve more than just the buying and selling of time, energy, and skills. When two people interact, there is a need for respect, a fair process, and a fair contract. What that means in practice can be difficult to spell out, and even though federal laws have tried to explain what it means, it is up to the courts to decide the interpretation of the laws.

In the last century, we have generally seen a move towards protecting workers from unfair treat- ment and unhealthy working conditions, and a shift of the burden onto corporations to treat their employees with respect and decency. But the relationship goes both ways: As employment costs more in terms of wages, worker-compensation schemes, and health and safety requirements, companies have an incentive to demand more knowledge about the people they intend to hire. So employees can no longer accept that all they have to offer is what is on their résumés and transcripts: Their entire social lives spilling onto the Internet are there for employers to exam- ine (Finder, 2006). In some respect, that captures the problem of seeing employment as more than just an economic transaction—if it’s a “person to person” transaction, then each has a right to demand more knowledge about whom they’re dealing with. But if employment law is overly regulated, then we may risk returning to employment as a commodity transaction. As long as the boxes are properly ticked and the hiring and firing are done according to the letter of the law, employers may overlook important values of decency, politeness, or fairness in the transaction.

Summary In this chapter, we reviewed ethical theories concerning the nature of employment. Capitalists see employment as a simple contract between two people that is generally mutually beneficial and generally needs no other ethical consideration. Socialists see it as a matter of exploitation that will always involve a dominant partner. Virtue theorists prefer to reflect on what kind of virtuous character traits managers or employees have. From the perspective of social power struggles, what is important are the subtle prejudices that may enter the expectations of workers and managers. In hiring people today, one of the greatest temptations is to survey their social networking online; we examined whether it is right to look up or to continue monitoring people’s online activity. In firing people, we considered the right to fire at will versus the recognition that firing people at will is not conducive to a healthy, ethical workplace. Finally, we reviewed whistle- blowers and considered how important they are in bringing ethical issues to the government’s or public’s attention.

Discussion Questions

1. Against due diligence testing and surveying of applicants, an alternative view is to impose a greater role on the diligence of managers in the workplace rather than employ- ing potentially low-quality Internet searches on employees. Through no longer having the temptation to check out online profiles, managers would have to assert greater observational skills at work and ask lawyers to tighten up contractual agreements. Do you agree that putting more responsibility on the people actually hiring is better than asking third parties to do criminal and online assessments of employees and applicants?

2. When reviewing a manager or an employee, to what extent do cultural considerations and stereotypes of people enter into the analysis? Are you aware of any gender or racial biases in your own thinking or in people’s assumptions about work colleagues?

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3. Unions and various workers in big corporations and governments sometimes protest about fair pay. Outline what you think constitute the essentials of fair pay in a given job and then examine the advantages and disadvantages of enacting minimum wages, a fair- pay ethic, and maximum wages in the United States.

4. Unions have been blamed for causing disruption to the advancement of the economy; they have also been praised for their work in drawing attention to and alleviating injus- tice in the workforce. But has their day ended? With union membership on the wane, do you think that unions have a function in the current economy? Why or why not?

5. Examine a particular case of whistleblowing of your choice. What ethical reasons moti- vated the whistleblower and what was the reaction of other employees, friends, and the media? Do you think that whistleblowing should be encouraged or do you think that it would only cause a great deal of crying wolf?

Key Terms

closed-shop union A union association that a worker must join.

commoditization of people A socialist view that employment contracts turn people into commodities to be bought and sold by corpo- rations as they see fit.

company towns Towns that have built up around a single company and in which all the workers’ needs are provided for by the company.

contractual theory of employment The view that employment is just a matter of a contract rather than any other ethical expectations, such as being decent.

due diligence A range of research that a busi- nessperson is expected to make before com- mitting to a contract.

employment at will (EAW) The theory that an employment contract should be instantly terminable by either party.

equilibrium wage rate The wage set by mar- ket conditions.

exploitation theory of employment The socialist view that of the two parties engaged in a job, the boss has more power and the worker possesses little if any power.

external whistleblowing When an employee makes a complaint to an external authority such as the police, the SEC, or another federal agency.

fair pay The idea that a wage should ade- quately reflect a worker’s needs and ability to live in society.

False Claims Act of 1863 U.S. federal law to assist the government in retrieving mon- ies from people and corporations who are defrauding it.

internal whistleblowing When an employee makes a complaint about a fellow worker or corporate procedures and keeps the complaint within the company.

Labor–Management Relations Act of 1947 U.S. federal law that removed the right of unions to used closed shops.

living wage A wage that should reflect an adequate standard of living in a society.

maximum wage The highest wage that may be paid according to a government.

minimum wage law A law that stipulates the minimum wage that can be paid to an employee.

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National Labor Relations Act of 1935 (NLRA) U.S. federal law that encouraged the use of collective bargaining by unions and employers.

negligent hiring When a company hires an inappropriate person and can be ethically cen- sured for not doing its due diligence.

Notification and Federal Employee Antidis- crimination and Retaliation Act of 2002 (No FEAR Act) U.S. federal law designed to stop federal supervisors from threatening or retaliating against federal employees who blow the whistle.

Occupational Safety and Health Act (OSH Act) Introducted by the Nixon administration to regulate the protection and welfare of workers in the workplace.

professional unions White collar unions such as the American Medical Association whose purpose is to protect members’ interests.

safety culture The prevailing ethical view in a company with regards to the health, safety, and welfare of employees.

structured interview An interview that fol- lows a set list of questions.

union An organization set up to protect and advance workers’ safety, work conditions, and wages.

union shop An alternative to the closed shop that mandated union membership upon enter- ing a job contract. In a union shop, workers were still obliged to join a union later or pay fees to the union even if they preferred not to be full members.

unstructured interview An interview that fol- lows the conversation that two people make rather than being prescribed by set criteria.

virtue ethics The view that morality is grounded in the virtuous character traits that people acquire.

whistleblower Someone who divulges to an authority that the company or department he or she is working in is breaking a law.

Whistleblower Protection Act of 1989 U.S. federal law to protect federal employees who blow the whistle on fraudulent or unsafe prac- tices in federal agencies.

whistleblower systems or hotlines Systems within a corporation that allow whistleblowers to make official and sometimes anonymous complaints.

working conditions The health and safety conditions of a workplace.

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