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The Franken Amendment, in full the Franken Amendment to the Omnibus Appropriations act of 2010, is a law passed in October of 2009 that prohibits some forms of binding arbitration in employment contracts in firms that receive federal contracts. It was authored by Minnesota senator Al Franken. That may sound somewhat technical, although go and read the other node about it, and you will see it quickly becomes less abstract that it sounds. I decided to write this under its own node because I wanted to explain the amendment (somewhat) non-partially.

The Amendment was inspired by a heinous case of an employee of Kellogg Brown & Root, who was drugged and gangraped by her co-workers. Part of the confusion surrounding the amendment seems to be due to the fact that she was not given proper access to the police, since she was employed in Iraq at the time. This seems to be a separate point than the purpose of the amendment, which would deal with the access of an employee to a civil trial against their employer. There was never a question of someone signing away their ability to take criminal action in such a crime.

One of the more glib arguments in favor of the legalizing of prostitution is the statement that "How can it be illegal to sell something that you can legally give away for free?", and the basic logic of employment contracts, and against this amendment, is just that. In a civil trial, everyone has the right to sue, or not to sue. If someone signs an employment contract stating that they will not sue their employer, they are in essence selling something that they could give away for free. If a less heinous example was used, for example employees agreeing not to sue their employers if they slip and fall on a wet floor, people may be more sympathetic to these types of employment contracts.

In economic theory, considerations of these costs and benefits is naturally rolled up into the decision of an employee when they seek work. To again take a less violent example, say that someone is seeking work at two fast food restaurants. At one, they are paid $7.25 an hour, and do not have to sign an arbitration contract. At a second, they get paid a full $7.50 an hour, but have to sign a contract that says they will not sue if they accidentally stick their hand on a grill and french fry it. The prospective employee might decide that this is a good trade-off. What a bill that outlaws these types of contracts does is take away the rights of two private entities to decide for themselves what type of terms they wish to come to between themselves.

That is the theory, at least. In very, very basic economic terms. In more complicated economic terms, an employee seeking a job does not have perfect information about whether the company is a safe place to work at, and the employer is usually in an oligopolistic situation, where they can dictate terms that the employee might not naturally agree with. (As a side note, bringing up terms like "perfect information" and "oligopoly" to a free market fundamentalist or crass libertarian brings the same spark of recognition that reciting the Moons of Saturn to a goldfish does).

The lesson to be learned, I suppose, is that ideas such as "employees can choose their own working conditions" seem very fine and well, until you follow them through to their conclusion, which is someone being bullied and/or deceived into giving up their right to seek restitution for truly heinous acts permitted by incompetent or callous management. Or, in brief: ideology is not a toy.

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