Antidiscrimination Act and Posner´s efficiency thesis of law

Dagmar Brožová

University of Economics Prague

The antidiscrimination act is currently undergoing the approval procedure in the CR House of Parliament. The elaboration process of the antidiscrimination act and its incorporation within the CR precept of law was invoked by the EC¹⁾ legislation requirements regarding the provision of equality and protection from discrimination. According to the requirements of the act of the community, the legal system of each member state should not only forbid discrimination but should also define it, clearly specify the necessary related terms and define the tools of legal and institutional protection from discrimination.

The discussed proposal of the antidiscrimination act, (Chapter I) defines the basic terms, including equality and equal opportunities, § 2 article 1 states the following

…in this act the right for equality is to be understood as the right not to be discriminated against.

The following article (2) distinguishes between direct and indirect discrimination and lists what is to be considered as discrimination:

“…discrimination is to be considered as molestation, sexual harassment, persecution, the given suggestion to discriminate and the incitement to discrimination”.

“Direct discrimination is to be understood as acting, including neglecting, when dealing with one person as less favourably than dealing…with another person in a comparable situation from the reason of race, ethnic origin, nationality, sex, sexual orientation, age, health handicap, religion, beliefs or world view…” (article 3)

“Indirect discrimination means such a dealing or omission when based on seemingly neutral provision, criteria or practice, a person… is placed in a disadvantaged position in comparison to others”( §3, article 1)

¹) The CR is under the threat of sanctions from the EC if the antidiscrimination act will not be passed by the end of 2007.

§5 (2) states the following:

"Equal treatment is to be ensured by the approval of provisions which will become the condition for effective protection from discrimination and this can be demanded, in the light of good manners and when considering the circumstances and personal relationships of the person obliged to ensure such treatment; such equality also includes the ensuring of equal opportunities for everyone.”

Chapter II of the proposed act specifies the legal recourses for protection from discrimination (§10):

“In the event of breaching the statutory rights and obligations regarding equality or discrimination, such a person affected by this behaviour has the right to sue and demand a stop to the discrimination, demand the repair of the aftermath of the discrimination and receive adequate compensation...” (article 1)

In the event “… that the good reputation, credibility or social dignity of the affected person was damaged at a serious level due to the discrimination and such a person is entitled to financial compensation for the damage” (article 2)

The second part of the act regarding the ombudsman is amended in terms of the jurisdiction which will include equality and protection from discrimination. The act of the ombudsman for the proposal to the amendment of rights is to add to §1 article (5) which extends the ombudsman’s scope of responsibility:

“The ombudsman can act in the matters of rights for equality and protection from discrimination”,

further on, besides others §21 (b) defines the scope of the ombudsman’s activity as follows "...the ombudsman contributes towards the enforcement of the law regarding equality with all people regardless of their..., sex,...provides help to victims of discrimination when submitting the proposals for the commencement of court proceedings, carries out independent research, publishes news and issues recommendations regarding issues related to discrimination, exchanges the available information with European subjects..."

The third part includes changes made to further acts The fundamental change is the one made to the civic court rule (act No. 99/1963 Coll. as amended), where §133 is amended by article (3):

“The statement regarding direct or indirect discrimination based on sex will be considered by the court as proven in the terms of the approach to goods and services unless the opposite will emerge during the court proceedings,"

The antidiscrimination act itself provokes inconsistent reactions. On one hand we have voluntarily become EC members and from this title the community right takes preference over the nationality right; respectively we partially gave up our legal sovereignty to the benefit of our community right. As the agreements need to be maintained, “pacta sunt servanda”, the legislation of the antidiscrimination act is irreversible.

On the other hand, the act develops the basic principals which are already included in the fundamental legislation of the CR, in the Constitution and in the Declaration of Basic Rights and Freedoms. These declare equal rights as well as equal opportunity in the eyes of the law. The duty to ensure equality and protection from discrimination on the labour market is further governed by a number of labour-law provisions ²⁾. In terms of legal immaculacy, transparency of the entire legal system and efforts to rather simplify the legal system, the antidiscrimination act appears to be a redundant and unnecessary complication to the system. As the classic quotation says, “there is no need to create a new law where it is not needed (Charles Montesquieu, The spirit of the law, 1748).

It is not clear whether the provision of the proposed act cannot be interpreted as restriction of one of the basic human rights, which the right of ownership. The ownership right is one of the natural rights and represents the untouchable, fundamental element of our legal system. The owner’s right is, besides others, to use the object, gain the fruits and benefits and handle the object, i.e. to make decisions regarding its destiny. As the ownership rights cannot be restricted, the private owner cannot be therefore told who they should or should not employ and for what salary. The simple fact that the community right is superior to the national right cannot be satisfactory in this matter.

Then there is the disputable paragraph 5, article 2 which allows for the acceptance of certain provisions so that protection against discrimination is ensured. This does not eliminate the interpretation in the sense of the implementation of various affirmative actions which would benefit certain groups against other groups. The affirmative actions represent a fairly aggressive form of intervention into the free market which stresses the equality of the results at the end as the equality of opportunities at the beginning is considered insufficient. These could be soft forms of preferential treatment up to the hard setting of quotas or the redefinition of conditions in terms of their new setting in order to prefer certain groups, for example women on the labour market. This leads to positive discrimination and that itself, is breaching the rule of equal treatment.

²⁾ This mainly concerns Act No. 262/2006 Coll, Labour Code, Act No. 435/2004 Coll. re. Employment, Act No. 561/2004 Coll re. Pre-schooling, Grammar, Secondary, University and other education (Education law), Act No. 143/1992 re. Salary and Reward for Essential Work in budgets and other organisations and bodies, Act. No. 1/1992 Coll. re. Salary, Reward for Essential Work and average salary and further labour norms.

However such an approach in reality stigmatizes women. It confirms the prejudice towards them instead of removing it and creates the conviction that, women would not be able to obtain the relevant jobs under other conditions and without support. This in fact confirms the institutionalization of the actual discrimination. It depreciates the actual work results produced by women and mainly hurts the most competent and women who do not need the help of such provisions.

The affirmative actions include the entire line of implementation procedures which are demanded in terms of bureaucratic proceedings and represent high transaction costs. In the event of their implementation, the whole of society would have to declare the will to carry out such costs related to the provisions in terms of blunting motivations, lower created product and worsening wealth for everyone.

However, humans are unique personalities with different talents, abilities and mainly with different preferences. Everyone is willing and wants to make a different effort in terms of work and dedicate different amounts of time to work. Therefore equality in terms of activity results is an empty and artificially implemented term. It is the variety of talents and difference in their working which is the moving power of the development of society and therefore in order not to lose the motivational factor, this must be rewarded in a different manner.

The change of the provisions of the civic court ruling, which means that in the event that the attendant of the proceeding insists that he/she was directly or indirectly discriminated against because of their sex, the court will consider this declaration as proven unless the opposite emerged during the court proceeding. The Declaration of Basic Rights and Freedoms declares the right of every person who is being prosecuted to be considered as innocent until proven guilty by the final judgment of the court (see article 40 (2)). This change therefore does not respect this and reverses the generally known principal of the presumption of innocence. The subject accused of discrimination will have to prove before the court that he/she did not discriminate.

When transferring the burden of proof the legislators were led to the logical consideration that the information required for proof that the employer acted from a different motive than the discrimination is at the disposal of the defendant. It is only the defendant who can prove that different and less favourable treatment followed the legitimate goal and represented the adequately used means. This concerns the fact that it is up to the defendant’s party to explain the non-discrimination nature of their behaviour and the decision using reasonable and convincing arguments. The prosecutor cannot prove that the defendant did not have such a justified reason because he/she does not have enough information available.

Transfer of the burden of proof in discrimination cases was applied in the USA for the first time (at the beginning of the nineteen-seventies), 70. In Great Britain the so called Barton test is applied which is also included in the rights of the European Community (regulation: Committee 97/80/EC, article 4, regulation: Committee 2000/43/EC, article 8, regulation: Committee 2000/78/EC, article 8.). See Bobek, M., Boučková, P., Kühn, Z. (eds.): Equation and discrimination, Prague, C.H. Beck 2007, page 62-66

However the worries of the business entities prior to the approval of the antidiscrimination act have arisen already in terms of an interest from large insurance companies to arrange insurance against accusations and legal proceedings from discrimination. They do not want to suffer in terms of damage to their good name which would stigmatise them despite proving that their decision was not discriminatory and the court would eventually not allow the discrimination accusation to proceed. This step can, however be taken by strong corporate enterprises and it also plays in favour of the large law offices which therefore gain yet more rich clientele. This will then increase the costs of the law office services. The end result will be that the final consumer, who will be in need of a lawyer, will pay the price.

Another statement of fact from the explanatory report, that the antidiscrimination act does not positively enforce any obligations to the business subjects, is also worthy of our attention. In terms of the determination of obligations, as stated, it is necessary to see as negative, i.e. refrain from interference into the rule of equal treatment, with no other expenses linked to this, states the explanatory report. We believe that this is not totally true because in the event that the company will be prohibited to use the market opportunities in the name of equal treatment, for example a less flexible offer of female labour, then this will reduce company profits. Any possible affirmative actions would also mean increased company costs.

However, if this concerns the simplification of the actual validation procedure of inequality, it does not seem that the proposal of the act would be conducive to this. The validation procedure is only partially transferred from the accuser who, according to the current legislation, must prove that he/she was discriminated against; over on to the defendant who will have to prove that he/she did not discriminate. The actual validation procedure, i.e. the complexity of researching and presenting the evidence is not, however, affected by this.

Economics and Law

Discrimination is a market issue, it is a style of behaviour of the economic subjects on the market and how they use the opportunities offered by the market. For example, the discrimination on the labour market represents a costing strategy, a method of how employers set the labour cost of their own employees. Therefore, it is first of all the market itself which, under certain circumstances when its competition powers are suppressed, creates the space and the favourable conditions for the discrimination to take place. This is why the rehabilitation and full development of the market power which will reach the most effective functioning of the market should be the first tool for the suppression of the discrimination.

Incidentally, the lawyers themselves admit that"…in some situations, the effect of the market powers can ensure more effective (and at the same time more reliable) setting of the given relationships then law enforcement.” ³⁾ The stated quotation is also supported by some of the critiques of the legal economic analysis. They admit economic argumentation in opposition to excessive judicial activism. The economic argumentation is in some detail perceived as a corrector of the juridical positivism, respectively dogmatism which is often outside of the reality and which takes it back into the environment of real human relations. This however points out the “danger" of the absolutization of the economic effectivity which in their opinion, on its own cannot reason and legalize certain behavioural manners or methods. This therefore takes us to the fundamental problem of the relation between the economy and the law.

In order to have a functioning society, the harmony between the law and the legal conscience, for example a public poll, is important. The law should therefore always respect a solid society, how it regards the world, the history, tradition and current conviction of what is good and correct. It should not introduce artificial juridical institutions that society has problems to identify with. After that, the observance of the law by the subjects does not cause any special problems even if there is no actual knowledge of the precept of law. See Šíma, A., Suk, M.: Basics of Law, Praha, C.H. Beck 2004, s. 2

The most significant representative of the legal economic analysis is a professor Richard Posner from Chicago, the author of the book Economic Analysis of Law, 1972), the first text book of this discipline which has always remained up to its most recent issue, one of the most influential book titles up to the present day. He also founded a magazine called the Journal of Legal Studies, and with this therefore created the environment for its further development. According to Professor Posner, the doctrines and the legal system institutions can be explained and understood better if they endeavour to support an effective allocation of treasured sources and if they help to increase the wealth of society to the maximum.

³⁾ Cohn, S.: Race and Gender Discrimination at Work. Westview, Colorado 2000, s. 70

Posner´s efficiency thesis

Richard Posner formulated the legal efficiency thesis according to which common law should reflect the logic of economic efficiency and develop in the direction of the acceptance of the economically effective rules of law. The need to extend the legal education by interpretation of the basic economic principals is also related to this. Posner reminds us that the knowledge of the “laissez faire” doctrine of the traditional economy was part of general knowledge in the 18th and 19th centuries and its application in life then became part of a good upbringing of the educated classes in society. ⁴⁾

In this sense, the law should develop; respectively it should be created in accordance with the principals of Paret´s efficiency when only the Pareto-superior transaction increases wealth and fortune. In the event that the transaction costs are too high, they block the implementation of the market transactions; the courts are allocating the rights just as it would be done by voluntary market exchange. The judges should act in the real world of non-zero cost transactions within the meaning of the maximising of economic efficiency.

The efficiency thesis is mostly accepted by the economists who are tuned to the Chicago note; legal theory and practice is however much more reserved. For the law which has been developing mainly as a highly formal science and in its traditional approach is based entirely on the principal of justice, such an attitude appears to be too interventional, even daring and difficult to accept. ⁵⁾

Antidiscrimination Act and Posner´s efficiency thesis

If we look at the proposed antidiscrimination act via the prismatic thesis of legal efficiency, then this concerns only a formal construction which does not consider wider economic relations and is not composed in line with the principals of economic decision making, and most of all with the principals of economic efficiency. The purpose and effects of the norm can be totally contradictory. Therefore it cannot contribute towards economic wealth; it is quite the opposite, implementation requires sufficient financing by the tax-payer.

⁴⁾ See R. Posner, Economic Analysis of Law, Boston and Toronto, Little, Brown and Company 1972, s. 20, 21.

⁵⁾ A. T. Kronman, formally Dean of Yale Law School at Second Driker Forum for Excellence, 1995:“LAE represents a refreshing power in American legislation”...and..."remains one of the most influential schools of legislation theory in this country” (i.e. in the USA). www.leblog.cz from 22.6.2006

The antidiscrimination legislation should create a general framework for the implementation of transactions on the labour market. It should create favourable conditions for the development of market power and not to suppress and deform it. It should be in accordance and not in dispute with the economy and its principals, with economic rationality and logic which are the base for the decision making on the labour market. If the provision of law and its interpretation by the courts will not be in accordance with the economic principals, then the dispute between the economy and legislation will be a source of tension and dissatisfaction to citizens with the jurisdiction and with the protection of their own rights. It appears that the law registers and acknowledges new requirements only with difficulties and the defence lies in running to the legal positivism and formalism. The evidence of this can be, for example, the overlooking and reluctance of community law to take into account the quality and characteristics of the employee as well as the quantity and quality of the implemented work, respectively the performance when setting up the salary. These characteristics are totally fundamental for setting up the employee’s salary by the employer.

The law should not, under any circumstances, anticipate the results of the free decisions of the economic subjects regarding hiring of the labour service and setting the price for such a service and therefore it should not be telling free economic subjects for what salary they can or cannot hire a specific employee. Therefore it should not preference the statutory institutions of law before the private legal institutions.

The economic subjects, the employers as well as the employees, should have sufficient freedom for their own decision making within this general framework. The employers should decide as to which strategy they will choose in terms of hiring new employees, how they will create their work team and therefore who they will employ or not. The so called freedom of contract is one of the fundamental conditions for the functioning of market powers. The company has its own goal (usually the long term maximisation of profit) and it tries to head towards this goal by hiring new employees. The court ruling should not under any circumstances interfere, respectively limit, this freedom or even anticipate business decisions. The interpretation of the law should not mean subject intervention into the functioning of the market. Respectively this is towards the ownership rights whose constituent is the untouchable use and disposal of capital, and so it should include the freedom of contract and not to interfere into it.

The employees also have the right to a free decision as to which job position to accept or not. An employment contract is a highly voluntarily matter. When a person looks for a job position, he/she considers its financial and non-financial characteristics and makes a decision based on their own preferences. He/she does not have to give an explanation to anyone as to why he/she decided to refuse a specific job offer and accept another one. Such freedom in hiring should also be available to the subject - company on the other side of the labour market.

However, even the law must not interfere with the habits and traditions, cultural and social models (for example, family) or conviction based on the past experience. This would be in direct dispute with its own roots. The rule of equal treatment in the rewarding of men and women has applied in advanced Western European countries for decades and it represents one of the principals of European law, enforceable by law. Despite this, for example, the income differences between men and women in these countries still exist.

Discrimination of women due to the reason of their sex and the institute of law in the CR judiciary practice

Already, the legal system in our country is set so it can be applied through the course of the suppression of discriminatory behaviour. This is proven by the fact that discrimination cases are already subjected to court proceedings; however the application of this legal instrument in our country is by far, not yet used to its full potential.

Discrimination reaches the judiciary practice only very slowly. It can be said that it is in the stage of creating the precedence for court rulings. Discrimination in the fact of the case only works its way through to the stage when it will become legitimately accepted as a legal case. It needs to be said that the number of judges and lawyers – specialists in discrimination of women who, due to their sex, are brave enough to take on such causes with an unsure result and therefore create the already mentioned precedents, is very small. In reality, for women who feel discriminated against on the labour market, the first step in terms of finding a good lawyer is difficult enough. .

However, there is more than one reason why discrimination cases do not get to court. During the court proceedings, the woman has to prove that her salary was lower than the salary of her male colleague with the same productivity or that her employer treated her differently then her male colleague who is in the same position. Such a validation procedure does not have to be easy in real life. Partly due to the fact that the level of salaries is not generally discussed very often in companies, partly in many cases it is difficult to “measure” performance, quantity and particularly the quality of work. This mainly concerns managerial positions. Here, often the time spent in performing the job does not say much about the final success or failure which has the appearance of a unique outcome which can be compared only with difficulties. The quality of human capital, for example, the knowledge of foreign languages and their active use, ability to work with modern communication technology and other abilities play a large role in such cases. The complications in the validation procedure are one of the factors which discourage the application of the law. Due to this, the court process is considered as a risky matter. Another reason will no doubt be the costs of the court proceedings (in the event of a loss, also the obligation to pay the costs of the adverse party), compensation of the court charges and expenses and the costs of the lawyer, which are not low. Sociologists also allege that unsuccessful court proceedings would stigmatize women so they will not be able to find a job anywhere else. This is why hardly any of the women concerned decide to take the case to court.

The minimum information available also plays a role. The court ruling, with the exception of the three Czech supreme courts, is not normally published in our country. With no analysis and information available, the contribution of such cases for the future development of discrimination cases is devalued. The approach and proceeding of the court, the actual validation procedure as well as the reasoning of the final decision is not known to anyone (with the exception of the participants of such a specific court proceeding). This is the reason why they cannot serve as guidance and an example for the lawyers for how to prepare the accusation case even for the courts who should rule in such cases. The public is only generally informed of such cases by the media.

Rather than the multiplication of the legislation, the adoption of new acts and the extension of definitions, it would be more beneficial on the other hand to simplify things and make the legislation more transparent so that they become more understandable. Simplifying the process of legal actions and reducing their number during the entire procedure, creating the space for large, active involvement of the involved persons so everything could make the whole procedure easier and validation procedure simpler. All action should lead towards reducing the demand for legal services and therefore towards reducing costs and not otherwise. We believe that it would be beneficial to research new ways of how to pass the information from already closed court cases on to the public who could use it to educate and inspire themselves. This would make this tool accessible to those women who feel discriminated against but the difficulty, length and price of the court proceedings discourage them.

References

Bobek M., Boučková P., Kühn Z.(eds.) (2007), Rovnost a diskriminace. 1st. edition, Prague, C. H. Beck,

Boučková, P.(2004), Právní rámec podpory rovného zacházení a rovných příležitostí žen a mužů. Prague, Gender Studies

Cohn, S.(2000), Race and Gender Discrimination at Work. Westview, Colorado

Discrimination and law (2007), Prague, Gender Studies

Economic analysis of law, 10.8.2005, www.iPravnik.cz

Formalismus, ekonomická analýza práva a Schrödingerova kočka. www.leblog.cz

Ježek, T.(2000), Právo a ekonomie: život po rozvodu. In: Hayek semper vivus. Prague, Liberal institute

Listina základních práv a svobod (Declaration of Basic Rights and Freedoms)

Návrh antidiskriminačního zákona (Proposal of Antidiscrimination Law)

Posner, R.(1986), Economic Analysis of Law. Third edition. Boston and Toronto, Little, Brown and Company

Posner, R.(2001), Frontiers of Legal Theory. Harvard University Press

Šíma, A., Suk, M.(2004), Základy práva. Pro střední a vyšší odborné školy. 6th edition, Prague, C. H. Beck Press

Šíma, J.(2004), Ekonomie a právo, University of Economics Prague, Oeconomica Press

Annotation:

This paper deals with the Antidiscrimination Act proposal, which is currently untergoging the approval procedure in the Czech House of Representatives. Selected clauses of the proposal are submitted to critical analysis, including burden of proof transfer. It mentions particulary property rights and it criticises affirmative actions. The Posner´s efficiency thesis has been used as an instrument for expertising the Antidiscrimination Act proposal in term of economical efficiency. I.a.it points out that it is necessary to respect the freedom of choice and freedom contract. It focuses on discrimination of women due to their sex in the Czech juridicary practice.

Key words: Antidiscrimination Act, discrimination, economics and law, efficiency thesis of law, property rights