Fact Check

FRC Misleads On Economic Impact Of The Employment Non-Discrimination Act (ENDA)

July 11, 2013 2:59 pm ET

In the wake of the Senate Health, Education, Labor and Pensions Committee’s 15-7 vote in favor of the Employment Non-Discrimination Act (ENDA), Family Research Council (FRC) President Tony Perkins warned of dire consequences for businesses if the act becomes law. Extensive evidence shows, however, that protecting LGBT workers from discrimination is a boon for business.

ENDA Would Prohibit Employment Discrimination Against LGBT Workers

ENDA Would Ban Employment Discrimination On The Basis Of Sexual Orientation And Gender Identity. According to the Huffington Post:

ENDA would bar companies from factoring sexual orientation or gender identity into employment decisions. Employers are already prohibited by federal law from discriminating over race, religion, age, gender or disability. The proposal exempts businesses with fewer than 15 employees as well as religious organizations. [Huffington Post, 4/25/13]

Claim: ENDA Will Cause Companies To Lose Business

Perkins: Employers Will See “Millions Of Dollars In Lost Business” If ENDA Passes. In a July 10 “Washington Update,” FRC’s Perkins wrote:

If the bill passes, employers everywhere would face a very familiar dilemma: violate your conscience or pay the price. For those not concerned with religious freedom, there are the practical implications to consider like dress codes and lost profits. Just a few years ago, a completely secular clothing company, American Eagle, fired a man who dressed like a woman because his appearance was driving away business in its store. But according to the state's anti-discrimination law, the company's bottom line didn't matter nearly as much as this man's hurt feelings.

As part of a private settlement, American Eagle was forced to hire cross-dressers no matter how uncomfortable it makes customers or employees!... [H]omosexual and transgender activists will be able to use ENDA to sue employers into submission on an agenda that could cost them millions of dollars in lost business and costly litigation. [Family Research Council, 7/10/13]

Reality: Employment Discrimination Damages Businesses’ Bottom Lines

Center For American Progress: Workplace Discrimination Is Inefficient And Harms Recruitment Efforts. A March 2012 report by the Center for American Progress noted that discrimination causes less qualified individuals to be hired and can “adversely impact recruitment practices”:

In hiring and interviewing, discrimination similarly introduces inefficiencies by asking hiring managers to evaluate candidates on nonwork-related characteristics. When this occurs, less qualified individuals are hired, resulting in a suboptimal workforce. Hiring a less qualified employee, for example, simply because he or she is straight means a company will not realize the higher returns it would have had if it had hired a more qualified individual who happened to be gay. The fact that hiring one high-performing worker has the equivalent worth of hiring three mediocre workers underscores that making the wrong hiring decision can cost companies serious cash.

Discrimination can also adversely impact recruitment practices when companies discriminate against their existing employees. Understandably victims of employment discrimination will discourage others from seeking employment with the offending employer. The Level Playing Institute found that one in four individuals who experienced unfairness on the job say their experience strongly discourages them from recommending their employer to other potential employees.

Further, if a company’s discriminatory behavior becomes widely publicized, many fair-minded job seekers—gay or straight, transgender or not—will likely choose not to submit an application for employment with that company. In fact they would very likely apply with a competitor. [Center for American Progress, March 2012]

Center For American Progress: Replacing An LGBT Employee Leads To Thousands Of Dollars In Turnover Costs. According to the Center for American Progress report, “discrimination against gay and transgender workers certainly contributes” to high employee turnover costs:

Turnover costs that result from employment discrimination are significant. According to Peter Hom, professor of management at Arizona State University’s S.P. Carey School of Business, the costs of replacing a departing employee were somewhere between 93 percent and 200 percent of the departing employee’s salary.12 These estimates comport with one study that calculated the recruiting and staffing costs associated with replacing a departing employee somewhere between $5,000 and $10,000 for an hourly worker, and between $75,000 and $211,000 for an executive who makes an annual salary of $100,000.13 These estimates indicate that turnover-related costs have increased over the past decade with our economy shifting more toward industries that require highly skilled workers.

Discrimination against gay and transgender workers certainly contributes to these turnover-related costs. Due to discriminatory work environments, gay and transgender employees experience higher-than-average turnover rates.Gay men and women, for example, leave their employers due to workplace unfairness at twice the rate of straight white males.14 The failure to adequately retain gay and transgender employees results in substantial retention-related costs for businesses across the country. [Center for American Progress, March 2012]

Claim: ENDA Will Cause A Flood Of New Discrimination Lawsuits

Perkins: ENDA Will Lead To A Rash Of “Serial Lawsuits” Against Employers. According to Perkins’ “Washington Update”:

As FRC's Peter Sprigg explained on CNN, employers will be staring down serial lawsuits from disgruntled workers whose dismissal may have had nothing to do with their sexual behavior! They could sue "for 'discrimination' over a characteristic or sexual preference which is not even visible and of which the employer may have been unaware. In the case of public employers, such laws at the local and state level have led to large settlements being paid at taxpayers' expense." [Family Research Council, 7/10/13]

Reality: Local Non-Discrimination Ordinances Have Not Prompted Mass Lawsuits

Williams Institute: Local Non-Discrimination Ordinances Have Not Caused A Spike In LitigationAccording to a study from UCLA’s Williams Institute that evaluated the impact of local laws requiring government contractors to adopt non-discrimination policies:

Almost all of the localities surveyed reported almost uniform compliance with the contractor ordinances, with little to noresistance by contractors. Twenty-five of the 29 localities that provided information about their non-discrimination and affirmative action ordinances reported that contractors complied with the sexual orientation and gender identity requirements without resistance. Three of the 29 localities reported just minimal resistance initially but then the contractors agreed to comply when the requirements were explained to them.

Of all the localities that responded to the survey, none affirmatively reported that there had been individual enforcement investigations or actions for violations of these contractor requirements. Twenty-eight of the 29 localities reported that no complaints of sexual orientation or gender identity discrimination had been filed under their non-discrimination ordinances. The remaining locality was unaware if any complaints had been made because discrimination complaints were handled by a state agency, rather than the local agency implementing the contractor requirements. In addition, none of these localities reported that contractors had been barred from bidding on future contracts because they did not comply with these ordinances.

The contractor requirements have been adopted, implemented, and enforced with little disruption to government operations or work, administrative burden, cost or litigation. No locality reported that these ordinances made it difficult to find qualified contractors to carry out government work or operations. None of the localities that added sexual orientation and gender identity to non-discrimination or affirmative action ordinances reported that doing so was administratively burdensome or resulted in additional administrative or contractor costs. [Williams Institute, February 2012, emphasis original]

Center For American Progress: ENDA Would Help Employers Avoid Costly Lawsuits, Reduce Legal Penalties. According to a November 2010 report from the Center for American Progress, employers “would benefit most directly” from ENDA, as it creates “unambiguous employment guidelines” to “greatly reduce the risk of a discrimination lawsuit”:

It is the employers, however, who would benefit most directly from a federal law that clarifies the boundaries of Title VII and establishes explicit protections for LGBT workers. National legislation would allow employers to adapt to unambiguous employment guidelines and greatly reduce the risk of a discrimination lawsuit facing many businesses.

Studies show that employers that institute formal mechanisms for avoiding and dealing with workplace discrimination are significantly less likely to see the initial filing of a lawsuit by an employee. Employer-initiated efforts to deal with discrimination can work to preempt legal action, quickly reducing a business’s legal expenses.

If an employee does decide to sue an employer for employment discrimination and wins, good-faith efforts to deal with bias in the workplace can help to reduce the amount of damages a business is required to pay. The Supreme Court held in Kolstad that an employer’s efforts to enforce antidiscrimination policies in the workplace functionally shield the employer from punitive damages. Even modest efforts to deal with workplace discrimination, then, can allow employers to avoid tremendous penalties in court. [Center for American Progress, 11/10/10]

Reality: Businesses Overwhelmingly Support ENDA

Small Business Majority: Two-Thirds Of Small Business Owners Support A Federal Law Protecting LGBT Workers From Discrimination. According to a June poll conducted for Small Business Majority:

Small business owners strongly favor federal and state laws protecting gay and transgender people from discrimination in employment: More than two-thirds of entrepreneurs (67%) believe federal law should prohibit employment discrimination against gay and transgender people. Seven in 10 owners in states without such policies also agree their state should have a law prohibiting this type of discrimination, and 40% strongly agree.

[SmallBusinessMajority.org, 6/4/13, emphasis original]

Center For American Progress: Majority Of Fortune 500 Companies Support Protections For LGBT Workers. According to the Center for American Progress:

When you consider the fact that discrimination hurts businesses, it is not surprising that nearly all Fortune 500 companies have taken steps to protect their workers. Companies that don’t protect and support LGBT workers are increasingly out of step with corporate America. Of the Fortune 500 companies, 87 percent of businesses have established nondiscrimination policies that include sexual orientation, and 56 percent include gender identity. That number increases as you climb the fortune ladder: Of the Fortune 100 companies, 93 percent include sexual orientation and 82 percent include gender identity in their corporate nondiscrimination policies. [Center for American Progress, 4/24/13

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