Sanjukta Paul's Marxist legal historiography

Sanjukta Paul writes 

the law of agency imposes upon employees various duties, notably the duties of loyalty and obedience, which are automatically read into any employment contract or relationship.

The law of agency also applies to non-employees who owe primary duties to the principal as a result of a fiduciary relationship. This agency may be express, implied, or apparent. Such agents are liable to indemnify a principal for loss or damage resulting from violations of these duties. In general, employees are not liable for damages caused by negligence whereas non-employees may be held to a stricter standard. Employers are expected to either dismiss or otherwise make proper provision against damages resulting from the conduct of a disobedient, not diligent, or otherwise negligent employee.

Since employees stand in a fiduciary relationship to employers, it follows that they have primary duties to the principal. There is nothing sinister in such duties being 'read into' their employment contract or relationship. However, in practice, their liability is likely to be less not more than if they were non-employees with a similar fiduciary relationship to the principal.

An employee may not compete against her employer;

False. There is only a requirement to disclose any possible conflict of interest, such as work for a competitor or a relationship that could compromise the employer.

and even absent direct economic competition, she generally may not act counter to the interests of her employer even outside work-time.

Again false for the same reason.

Violating these duties are in theory and occasionally in practice torts, not just terminable offenses. For example, one court held that the tort of disloyalty lies when employees publicly report unsafe food handling practices by their employer.

This is utterly false. It is never illegal to report illegal actions though the manner of so doing may be restricted for reasons of State or in the Public interest. An affirmative defense is available against an action in tort in this regard.

Moreover, a 'whistle-blower' employee of a large corporation with publicly traded shares now enjoys a higher degree of protection than ever before.

As a recent Forbes article states-

Section 806 of the Sarbanes-Oxley Act (“SOX”) prohibits publicly-traded companies from retaliating against employees who report various acts of wrongdoing to their employers. Employers have consistently attempted to narrow the protections afforded employees under this section, arguing that SOX covers only reports of conduct amounting to a fraud on the company’s shareholders. Now, a recent Tenth Circuit opinion, Lockheed Martin Corp. v. Admin. Review Bd., U.S. Dep’t of Labor, 11-9524, 2013 WL 2398691 (10th Cir. June 4, 2013), has held that the employers’ narrow reading is wrong and that Section 806 is significantly broader, essentially finding that a report identifying any fraud or violation of an SEC regulation, even if it does not impact shareholders, triggers SOX’s protections. Although attorneys representing management have suggested that this opinion will not change the way employers deal with whistleblowers, it should.

In Lockheed, Andrea Brown, a Director of Communications for Lockheed, brought an action for retaliation under Section 806, claiming that she had been constructively discharged after complaining to the company about the conduct of its Vice President of Communications, Wendy Owen. Brown notified Lockheed’s Human Resource Department that Owen had engaged in sexual relations and other inappropriate conduct with various soldiers who participated in Lockheed’s pen pal program, including using company funds to purchase a laptop for one of the soldiers and paying for hotel rooms and limousines. Brown also complained that Owen had been less available to discuss work issues during the time that she was involved with these soldiers. After speaking to Brown, Lockheed conducted an investigation and apparently withheld Owen’s bonus based on the complaint. Brown told Owen she was the source of the complaint; thereafter, Brown was subject to various acts of retaliation, eventually culminating in her constructive discharge.
Brown filed a complaint for retaliation under SOX Section 806 with the Occupational Safety and Health Administration. Brown’s complaint was upheld after a hearing and then on administrative review. On appeal to the Tenth Circuit, Lockheed sought to overturn the administrative findings based on the argument that the conduct about which Brown had complained was not “protected activity” under Section 806 because Brown did not allege shareholder fraud as required by SOX. The Circuit rejected Lockheed’s argument. As the Tenth Circuit explained, Section 806 provides that no publicly traded company or its officers or employees may retaliate against an employee for providing:

information … or otherwise asssit[ing] in an investigation regarding conduct which the employee reasonably believes constitutes a violation of … [18 U.S.C. §§] 1341, 1343, 1344, or 1348, any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders ….

Since few public companies tell their shareholders they are going to permit sexual harassment or other actions which violate Federal law, it follows that employees of such companies have a very high level of protection against the sack, let alone being dragged into Court for the 'tort of disloyalty'.

Why is Paul suggesting otherwise? Let us look at the case she links to. It was about a very big, Dutch owned, supermarket chain which was violating the Federal Meat Inspection Act of 1906. Clearly, no whistle-blower could be fired for reporting violations of this Federal law. Indeed, in the Nineties, the company paid large fines for various Labor law violations and gave an undertaking not to retaliate against any employees who had testified against them or taken any other similar action.

Given this background, how can Paul claim that 'the tort of disloyalty lies when employees publicly report unsafe food handling practices by their employer?' The answer is that Paul is misrepresenting the case she refers to. It was about two employees of a TV company who fraudulently gained employment with the Food Company for the primary purpose of exposing their malpractice. This is tortious.

As the Federal Court observed

What Dale and Barnett did verges on the kind of employee activity that has already been determined to be tortious. The interests of the employer (ABC) to whom Dale and Barnett gave complete loyalty were adverse to the interests of Food Lion, the employer to whom they were unfaithful. ABC and Food Lion were not business competitors but they were adverse in a fundamental way. ABC's interest was to expose Food Lion to the public as a food chain that engaged in unsanitary and deceptive practices. Dale and Barnett served ABC's interest, at the expense of Food Lion, by engaging in the taping for ABC while they were on Food Lion's payroll. In doing this, Dale and Barnett did not serve Food Lion faithfully, and their interest (which was the same as ABC's) was diametrically opposed to Food Lion's. In these circumstances, we believe that the highest courts of North and South Carolina would hold that the reporters-in promoting the interests of one master, ABC, to the detriment of a second, Food Lion -committed the tort of disloyalty against Food Lion.

Paul says

An employee may not compete against her employer; and even absent direct economic competition, she generally may not act counter to the interests of her employer even outside work-time

This is false. An employee may not take a job for the specific purpose of stealing clients. She may do the same kind of work that she does for the company in her spare time but no tort arises. She may also act counter to the interests of her employer outside work-time unless she only took the job so as to cause harm to it. For the tort of disloyalty to arise there must be a strong and overriding intent to act against the employer. In the ABC/Food Lion case, the tort of disloyalty meant that trespass, too, had occurred. However, the Court found, there was no 'Unfair Trade Practice' because ABC and Food Lion weren't competing.

Paul is seriously misrepresenting American Law. A person who works full time for Company A, may also work for its competitor, Company B, in their spare time. An employee is not bound to do nothing against the interests of her company outside work-time. True, she may be peremptorily dismissed in an employment 'at will' state unless she is in a 'protected' class. But she need fear no further action in tort.

What was the outcome of the case brought by Food Lion? The two journalists were convicted of disloyalty and trespass and were forced to pay the extortionate sum of.... 2 dollars. This huge sum caused them immense financial distress- I don't think. But Paul does. She quotes this judgment as proof that the Law favors the Big Corporation over the humble employee. If you wreck their business by blowing the whistle you may have to shell out...2 bucks.

Paul's next target is 'non-compete' clauses.

As another example of the reach of the duty of loyalty, covenants not to compete that extend past the term of employment are, in most jurisdictions, either presumptively permissible within a “reasonable” temporal or geographic scope, or at least more likely to be permissible when they are incident to an employment contract than when they are free-standing or incident to some other sort of contract. Notably, such restraints typically include a prohibition on employees’ going into business for themselves in competition with the employer—a restraint on horizontal competition that is otherwise viewed with supreme suspicion by antitrust law. The law thus effectively extends employees’ duty of loyalty past the end of the employment relationship itself. This is “special” treatment of the labor relationship—in the direction of suppressing the market competition that the pre-analytic vision of 1L contracts generally favors—and it also echoes the historical origins of the modern duty of loyalty, wherein it was not always so easy for employees to end employment relationships in the first place.

California prohibits non-compete clauses for all but equity stakeholders. Most States, like Paul's native Michigan, restrict duration to one year and never more than three. Furthermore, the employer has to show that the clause is reasonable in terms of protecting their business interests against an unfair type of competition. The recent Huron Technology vs Sparling (2014) decision shows that a lot of non compete clauses are not fit for purpose.

The type of employee who could be subject to a non compete clause is very different from the average wage earner. We are speaking of people with a highly specialized skill, acquired on the job, or with contacts cultivated on the company dime. This is not the class of people Labor laws are intended to protect. Paul has conjured out of thin air a monstrous Legal machinery which punishes workers for disloyalty to the Company even in their few precious hours of rest. Even after such workers are discharged- or thrown on the scrapheap- they remain chained to the Company by a non-compete clause. We see before our mind's eye, a Law Professor who fears to explain the law to a member of the public in her leisure hours lest her University sue her for illegally undermining their business model. She trembles lest she cheer for the wrong team when her College's football team plays against a rival. Finally, she goes mad and is thrown on the scrapheap. Can she pick herself up and go back to expounding the intricacies of the Law- not perhaps at a University- but at a truck-stop or homeless shelter? No! She is shackled by her non compete clause!

Paul quotes Prof. Christopher Tomlins- whose current research concerns 'what opportunities exist for renewing the attempt to create a Marxist legal historiography, and what responsibilities attend that effort.' - as follows

the essential characteristic of the relationship created by the employment contract was that it was assumed to reproduce the magisterial authority of the master in the person of the employer … the relation of master and servant was less a discrete instance of the more general phenomenon of contract than itself a particular species of legal relation with its own particular incidents, in this case incidents geared to the representation of the authority of the master as a matter of law.[1]
Thus, “[r]epresenting employment relations in the voluntarist language of contract…mystified the existence and exercise of power in the employment relationship.”[2]
This is still true. “Freedom of contract” is still sometimes invoked by judges to undermine or read narrowly statutory employee rights, and against the democratic coordination of markets.

The case Paul is referring to was a 1998 case regarding 'on call' emergency medical technicians who argued that they should be paid the full rate even if they were at home watching TV. Paul, no doubt, thinks 'statutory employee rights' include being paid regardless of whether you come in to work or not. She thinks Judges are being very mean. However, in this case, the Judges say that, according to the Department of Labour's implementing regulations, an employee who is not required to remain on the employer's premises but is merely required to leave word at home or with company officials where he or she may be reached is not working while on call. Time spent at home on call may or may not be compensable depending on whether the restrictions placed on the employee preclude using the time for personal pursuits. Where, for example, a firefighter has returned home after the shift, with the understanding that he or she is expected to return to work in the event of an emergency in the night, such time spent at home is normally not compensable. On the other hand, where the conditions placed on the employee's activities are so restrictive that the employee cannot use the time effectively for personal pursuits, such time spent on call is compensable.

Contra Paul, the Judges did not deny employees their statutory rights. It was the Department of Labor. What of 'democratic coordination of markets'? The Judges noted that the two EMTs who brought the case had asked to be put on call. The Employer had not commanded it. Rather, the employees initiated this coordination. 

Paul may believe that she is developing a Marxist legal historiography, or jurisprudence, which is what Christopher Tomlins wants, but is she doing it responsibly? Is telling stupid lies a methodology which responsible legal scholars should adopt?

But meanwhile, the basically anti-contractarian nature of the duty of loyalty and the duty of obedience are still present and indeed have invaded other areas of commercial law.

A non-contractarian duty is one which arises in the absence of consideration. If duty and loyalty are judged essentially 'anti-contractarian', it is not the case that nobody will be loyal or dutiful but rather that they will not be able to do it for a consideration and upon such terms as a Judge might find unreasonable or unconscionable or which could be regulated by Legislation and supervised by an Organ of the State. The result would indeed be the disappearance of Capitalism. But its replacement would be feudalism. You swear fealty to your liege and work for him for no fixed reward. Of his generosity he may reward you but is not obliged to do so.  No doubt, your liege lord may call himself a Commissar and refer to you as 'Comrade' but your life would be as much at his mercy as if you were a serf and he your legal owner.

Still, under such a regime, at least Corporations would disappear. But what would replace the type of legal personality which such entities have such that they survive the death of one or all of its original owners? Hereditary right is one possibility. Your liege lord is generous. He lets you have some food and permits you to marry. Then he dies. His heir is cruel. He rapes your wife and whips you into the fields till you drop dead of exhaustion. Another possibility is that your employer is the Communist Party which establishes 'the dictatorship of the proletariat' by exercising control over the entire productive resources of the country. It may be that the Beloved Leader is kindly and of a pacific disposition. Then he dies or is purged. The new Leader gulags your sorry ass. Suddenly, Marxist jurisprudence doesn't look so appealing anymore.

Of course, the above strictures only apply where there is inequality to begin with. But to maintain Equality one must not let in people with lower productivity or coercive power. One must also try to keep people with higher productivity and coercive power out. However, this may involve being defeated in battle and enslaved. Thus Equality can only be maintained if one's people are the most productive and powerful in the world and rigorously deter immigrants. But, without contract law, one's economy will fall behind. Thus Equality will inevitably be extinguished by military defeat and conquest.

Paul is of Indian origin. Her parents or grandparents must have known that they would be relatively poorer and less powerful, at least initially, in America compared to their social standing in India. Yet they emigrated and rose up by their own hard work. I imagine they must initially have been employees though, it may be, they set up their own businesses and became employers. Had they emigrated to the Soviet Union or Communist China, they'd have received short shrift.

Actually, that isn't quite true. There was an Indian origin chemist who worked for Dow chemicals. He was sent to the Soviet Union to work on a joint-venture there. The Soviets appreciated his talents and kept him on. He was well paid and married a charming Soviet lady and raised a family. Since his work was vital to the Five year Plan, the Security services pandered to his every need. Meanwhile, a genuine Indian Marxist, 'Chatto'- Sarojini Naidu's brother- either starved to death or was purged by Stalin. Incidentally, Stalin honored his contracts with Dow Chemicals and Ford and GE and so forth. It was only actual Marxists who emigrated to the Worker's Paradise who ended up with a bullet to the head.

Rules may seem tyrannical to those obliged to follow them so as to earn a little money to keep body and soul together. However, the absence of rules is even more fatal to those with lower endowments with regard to productivity or coercive or other similar power.

The law of contract envisages a mutual setting of rules. It is not necessary that contracts be justiciable or enforceable for them to exist. They may arise in accordance with the folk theorem of repeated games.

Where one party has greater power than the other, a justiciable contract can be examined for fairness, reasonableness, and subjected to tests arising from public policy. If employees are, in general, weaker than employers, and if the Justice system is efficient, and Public Policy is sound, then applying the Law of Contract to Employees is a salutary measure because it allows a decentralized, purely voluntary, coordination process to be very economically regulated by Legislation and Organs of the State. In Economic theory, we would speak of superior public signals making possible better correlated equilibria.

Paul considers Economic theory of the sort taught at Harvard or MIT or the LSE to be mischievous. She refers to it as 'pre-analytic vision' and says

Contracts is more than an area of law; it is a key piece of the vision we lawyers bring to many other areas of law. The 1L Contracts course supplies a foundation-stone of the “pre-analytic vision” with which lawyers will eventually think about many other things, including labor relationships.

Paul is wrong. Only by studying Economic theory- which is mathematical and has a game-theoretic representation- can one acquire the 'pre-analytic vision' she complains of. Taking a Contracts course won't cut it. Nor will taking advanced courses in Labor law. You actually have to know pretty high level mathematical economics to be able to speak of what a Marxist Labor jurisprudence might look like- this would involve building on Kantorovich or Morishima's work- or what a Libertarian jurisprudence would specify or else what a Social Democratic jurisprudence might involve.

Labor regulation as such is addressed only in the optional upper-level curriculum, and it is relatively marginalized even there. As a result, many lawyers, notably in the commercial and business sphere, will bring to their dealings with labor issues the contracts “vision.”

So much the worse for those who rely upon them! Lion Foods must have spent a pretty penny on its lawyers. It ended up receiving the princely sum of 2 dollars in return for all that effort!

That vision ultimately tends to erase the law’s deep involvement in constituting labor relationships.

The law only 'constitutes labor relationships' when it is directly responsible for employing people.  Otherwise it has an enforcement or regulatory role.

It thus tends to furnish apparent justification for the exercise of power by the already-powerful, in pursuit of private ends rather than the public interest, on the stage created and sustained by law.

Anyone can go to law on the basis of 'apparent justification'. Paul needs to show at least one case where American Judges have helped the already powerful and hurt the little guy being trampled down. This she has signally failed to do. She is a poor advocate for 'Marxist legal historiography' because every case she has mentioned turned out not to support her argument in the slightest. This raises the question, is she genuinely stupid or is she being paid to act stupid so as to discredit her supposed cause?