By Lauren E. Douglas

The year 2021 marks the forty-eighth anniversary of the mobile phone[1] and the eighty-third anniversary of the programmable computer.[2]  It is no secret that mobile devices are significantly more powerful than their inventors could have ever predicted.[3]  What started as clunky, cumbersome machinery has transformed into the backbone of society as we know it.[4]

Many aspects of corporate success are rooted in the evolution of the mobile device.[5]  To aid in their success, the majority of employers now permit the cross-use of electronic devices for personal and professional purposes—a movement known as “Bring Your Own Device” and lovingly referred to as “BYOD” for short.[6]  More specifically, the BYOD phenomenon is a practice whereby employees[7] use their own electronic devices[8] to do their jobs on the employers’ platforms.[9]  The BYOD practice is loved by employees and employers alike[10] and drives corporate activity in ways nearly unimaginable even ten years ago.[11]  In fact, in 2018, the BYOD market was predicted to reach nearly $367 billion by 2022.[12]  In the wake of the COVID-19 pandemic, the true number is likely even higher.[13]  Pandemic or no pandemic, it is clear that the BYOD era is here to stay.[14]

Despite the rising popularity of the BYOD workstyle, very few businesses actually enforce formal BYOD policies and instead simply allow employees to access corporate data on their own devices free of internal regulation.[15]  A study conducted in 2016 revealed that, even though roughly 70 percent of employees conduct work-related activities on their personal devices, only 39 percent of companies have a formal BYOD policy in place.[16]  This is dangerous; if companies do not regulate their BYOD practices, they risk breaches of sensitive corporate data and violations of federal privacy laws.[17]

The Tension Between Privacy Interests and Data Protection

Perhaps the most problematic issue that comes with implementing a BYOD policy is determining to what extent an employer can legally monitor and access its employee’s personal devices.[18]  The American Bar Association describes balancing the employers’ interests in data security with the employees’ rights of privacy as “the single greatest challenge” to a successful BYOD program.[19]  With that said, it must be recognized that employees enjoy a heightened right to privacy regarding information stored on their own personal devices as compared to employer-provided devices.[20]  Such protection may be found in both statutory and common law.

Specifically, the Computer Fraud and Abuse Act of 1986 (“CFAA”)[21] imposes criminal and civil penalties on individuals and companies that “intentionally access a computer without authorization or exceeds authorized access” to obtain “information from any protected computer.”[22]  The CFAA began as a means to protect government computers from hackers, but today the law reaches every computer connected to the internet.[23]  Of course, in 2021, computers are not the only devices used to conduct work.  Luckily, federal case law establishes that, in addition to desktop and laptop computers, the CFAA protects devices such as cell phones,[24] tablet devices, and even videogame systems.[25]  To supplement the CFAA, employees might also claim a violation of the Electronic Communications Privacy Act (“ECPA”), a subsection of the Stored Communications Act (“SCA”) that protects the privacy of electronic communications in electronic storage.[26]

So far, courts addressing the new BYOD privacy dichotomy seem reluctant to construe statutory protection broadly in favor of plaintiff-employees who had their personal devices wiped clean of all information.  For instance, in Rajaee v. Design Tech Homes, Ltd.,[27] a company remotely deleted all of an employee’s work and personal files from his mobile device after he resigned.[28]  The device was connected to the employer’s data server, allowing for remote access to email and calendar platforms.[29]  The employee sued for damages under the ECPA and the CFAA, but the court rejected both claims, reasoning that the personal data lost was not “electronic storage” as defined under the ECPA and was not a qualified “loss” under the CFAA.[30]  Such stringent readings of these statutes makes asserting a viable claim for lost personal data caused by the employer a very difficult feat for employees.[31]

Because technology moves light-years faster than the development of law,[32] the CFAA and ECPA are two of the closest statutes to the BYOD issue; there is currently no federal or state legislation directly addressing BYOD policies.[33]  Similarly, the relevant case law is negligible.[34]  It is thus vital for employers to create and implement comprehensive, transparent, and officially documented BYOD programs.  Thorough BYOD policies are important because, with the lack of statutory law on point, courts in many cases will look directly to the provisions in the BYOD policy to “determine the bounds of permissible employer conduct.”[35]

Private employees generally retain privacy interests in common law so long as their expectations are “reasonable.”[36]  When considering whether an employee has a reasonable expectation of privacy in electronic communications, courts tend to balance the following factors: (1) account ownership;[37] (2) device ownership;[38] (3) the security level of the communication;[39] and (4) published employer policies and whether they were routinely enforced.[40]  No one factor is dispositive and different courts may weigh factors differently.[41]  Because two of the four factors essentially look for whether a BYOD program exists, employers can cover a significant number of bases simply by drafting a formal policy.[42]

Best Practices for Employers

Despite the lack of concrete legal guidelines surrounding the BYOD phenomenon, an employer can mitigate the majority of its concerns by implementing a formal BYOD policy.  An effective policy should “emphasize security and contain clear instructions” regarding acceptable and unacceptable activities on personally owned devices that have access to corporate information systems.[43]  Additionally, an employer’s BYOD policy should make clear that “any and all company information and emails” on all personal devices remain “the sole property” of the company, and that the employer “in its sole discretion” may access and delete any company data that “may be in jeopardy.”[44]  No threat is too small when it comes to business use of personal devices, and providing express notice to employees is the very best way to mitigate legal liability surrounding BYOD policies.[45]

In addition to implementing a comprehensive, written BYOD policy, many companies—especially those that handle sensitive information—are utilizing Mobile Device Management (“MDM”) service providers to help mitigate the technical risks associated with allowing employees to access company data on their own devices.[46]  In essence, MDM broadens the scope of BYOD protection and is “designed to fill security gaps” in employee use of personal devices.[47]  MDM allows employers to exercise control over the device, monitor applications, and remotely wipe the device if it is lost or stolen—clearly a worthwhile addition to any BYOD policy.[48]

The Bottom Line

An astonishing number of employees and employers engage in the BYOD workstyle.  While BYOD practices often increase employee satisfaction and performance, and decrease employer costs, they come with inherent risks that cannot be ignored, such as data breaches and violations of federal privacy law.  Employers can mitigate many of these risks by implementing a strong written BYOD policy that clearly delineates the employers’ rights of access to each device.  Now more than ever, actively and uniformly enforcing a BYOD policy is the best mechanism to alleviate legal risks while the law plays catch-up with the modern technological workplace.

[1] Charlee Dyroff, Here’s How Much Cellphones Have Actually Changed Over the Years, Insider (July 25, 2018, 12:42 PM),

[2] When Was the First Computer Invented?, Computer Hope (June 30, 2020),

[3] See Dyroff, supra note 1 (“Over the past half-century, the cell phone has . . . evolved to connect us in ways that [its inventors] perhaps never imagined.”).  In fact, it is estimated that “the number of mobile-connected devices now exceeds the number of people on Earth.”  Danielle Richter, “Bring Your Own Device” Programs: Employer Control Over Employee Devices in the Mobile E-Discovery Age, 82 Tenn. L. Rev. 443, 458 (2015) (quoting Stephen Wu, A Legal Guide to Enterprise Mobile Device Management: Managing Bring Your Own Device (BYOD) and Employer-Issued Device Programs 1 (2013)).

[4] See Lindsey Blair, Note, Contextualizing Bring Your Own Device Policies, 44 J. Corp. L. 151, 152 (2018) (describing the impact of mobile devices on the corporate environment).

[5] See Richter, supra note 3, at 443.

[6] See Blair, supra note 4, at 152 (“BYOD policies rapidly expanded during the 2010s in [information-technology] communities and have [since] become increasingly common in other professional fields.”).

[7] For purposes of this post, the terms “employer” and “employers” refer only to private employers.  Similarly, the terms “employee” and “employees” refer only to employees of private employers.

[8] Although the term “BYOD” may refer to personal use by employees of employer-owned devices, BYOD is more often understood as employee use of a personally owned device to conduct work activities.  With BYOD, the Genie Is Out of the Bottle, So Deal with It, 23 No. 1 N.C. Emp. L. Letter 5 (M. Lee Smith ed., 2013).  The latter is the only form of BYOD that is discussed in this post.

[9] Id.  Such platforms include company email, calendar, and data servers.  Id.

[10] Employees favor BYOD policies because they provide the “freedom to ‘work and collaborate the way they prefer’” on devices familiar to them; employers favor BYOD policies because they cut costs and allow for a “‘more mobile, productive, [accessible], and satisfied’ workforce.”  Melinda L. McLellan et al., Wherever You Go, There You Are (With Your Mobile Device): Privacy Risks and Legal Complexities Associated with International “Bring Your Own Device” Programs, 21 Rich. J. L. & Tech., no. 3, 2014, at 1, 1.

[11] Id.

[12] Anna Johansson, Growth of BYOD Proves It’s No Longer an Optional Strategy, BetaNews, (last visited Mar. 11, 2021).

[13] See Alice Selvan, Adopting a BYOD Policy Amid the COVID-19 Era, ManageEngine (Dec. 3, 2020),  (describing how COVID-19 forced companies previously against the BYOD concept to accept it, as a substantial amount of remote work would not even be possible without it).

[14] See Richter, supra note 3, at 459 (“The growth of technology [in the] workplace is unavoidable and imminent.”).

[15] Id. at 445.

[16] Q4 2016: BYOD Trends & Practices, Trustlook Insights, (last visited Mar. 11, 2021).

[17] Id.  Such risks arise in large part because employers lose control when employees use their own devices and networks to store and transmit company data.  Bring Your Own Device (BYOD) . . . At Your Own Risk, Priv. Rts. Clearinghouse, (Oct. 1, 2014).

[18] Fredric D. Bellamy & Arturo Gonzalez, Crafting Bring Your Own Device (“BYOD”) Policies to Protect Your Company Data and Ensure Compliance With the Law, Nat’l L. Rev. (Oct. 11, 2018),

[19] Pedro Pavón, Risky Business: “Bring-Your-Own-Device” and Your Company, Am. Bar Ass’n (Sept. 30, 2013),

[20] Bellamy & Gonzalez, supra note 18.  In contrast, employers retain significantly greater control and access to company-owned devices that are merely provided to employees.  Richter, supra note 3, at 458.  However, the scope of employee rights surrounding employer-provided devices is outside the purview of this post and will not be discussed further.

[21] 18 U.S.C. § 1030.

[22] Id. § 1030(a)(2)(C).

[23] Brenda R. Sharton et al., Key Issues in Computer Fraud and Abuse Act (CFAA) Civil Litigation, Thomson Reuters Prac. L. 1 (2018),

[24] See United States v. Nosal, 844 F.3d 1024, 1050–51 n. 2 (9th Cir. 2016) (recognizing protection of cell phones under the CFAA); see also United States v. Mitra, 405 F.3d 492, 495 (7th Cir. 2005) (same).

[25] See United States v. Nosal, 676 F.3d 854, 861 (9th Cir. 2012).

[26] 18 U.S.C. §§ 2510–2523.

[27] No. H-13-2517, 2014 WL 5878477 (S.D. Tex. Nov. 11, 2014).

[28] Id. at *1.

[29] Id.

[30] Id. at *2 (citing Garcia v. City of Laredo, Tex., 702 F.3d 788, 791 (5th Cir. 2012)).

[31] CFAA claims are only cognizable if the plaintiff can show that the unauthorized access to his or her computer resulted in a loss of at least $5,000 in a one-year period.  See 18 U.S.C. § 1030(c)(4)(A).  This is often a high hurdle for plaintiff-employees to meet.  See, e.g., Rajaee, 2014 WL 5878477, at *3–4 (determining that plaintiff’s loss of personal photos, cell phone contacts, text messages, notes, and emails did not satisfy the CFAA’s “loss” requirement).

[32] See Richter, supra note 3, at 458 (“It is a common principle that ‘law follows technology.’”) (quoting Fabio E. Marino & Teri H.P. Nguyen, Perils of the “Bring Your Own Device” Workplace, Nat’l L. J. (Nov. 18, 2013, 12:00 AM),

[33] See McLellan et al., supra note 10, at 6.

[34] See Mendez v. Piper, No. H041122, 2017 WL 1350770, at *14 (Cal. Ct. App. Apr. 12, 2017) (recognizing that the law surrounding an employee’s “rights of ownership and privacy in personal information” stored on a personal device is actively evolving).

[35] Bellamy & Gonzalez, supra note 18.

[36] Blair, supra note 4, at 162–63.  Private employees do not enjoy the right to privacy under the Fourth Amendment; this is reserved for public employees.  Id.

[37] See, e.g., Mintz v. Mark Bartelstein & Assocs., Inc., 906 F. Supp. 2d 1017, 1033 (C.D. Cal. 2012) (concluding that the plaintiff had an expectation of privacy in his personal email account despite the fact that he used the account for work-related matters).

[38] See, e.g., Sitton v. Print Direction, Inc., 718 S.E.2d 532, 537 (Ga. Ct. App. 2011) (deciding that the use of an employee’s laptop to review that employee’s emails did not invade the employee’s privacy).

[39] See, e.g., Mintz, 906 F. Supp. 2d at 1033 (explaining the appropriateness of the plaintiff’s use of a password on his email account).

[40] See, e.g., In re Asia Global Crossing, Ltd., 322 B.R. 247 (Bankr. S.D.N.Y. 2005) (applying this four-prong test to determine whether employee privacy was breached).

[41] Blair, supra note 4, at 162–63.

[42] Id.

[43] Pavón, supra note 19.

[44] See H.J. Heinz Co. v. Starr Surplus Lines Ins. Co., No. 2:15-CV-00631-AJS, 2015 WL 12791338, at *4 (W.D. Pa. July 28, 2015) (describing a similar BYOD policy that gave Heinz Co. custody and control of any company data present on employees’ personal mobile devices), report and recommendation adopted, No. 2:15-CV-00631-AJS, 2015 WL 12792025 (W.D. Pa. July 31, 2015).

[45] See, e.g., Muick v. Glenayre Elec., 280 F.3d 741, 743 (7th Cir. 2002) (no reasonable expectation of privacy in workplace computer files where employer had announced that he could inspect the computer); Thygeson v. U.S. Bancorp, No. CV-03-467-ST, 2004 WL 2066746, at *20 (D. Or. Sept. 15, 2004) (no reasonable expectation of privacy in computer files and email where employee handbook explicitly warned of employer’s right to monitor files and email).

[46] Pavón, supra note 19.

[47] What Is the Difference Between BYOD and MDM?, Centre Technologies (Mar. 17, 2015),

[48] Priv. Rts. Clearinghouse, supra note 17.

Post Image by Ryan Adams on Flickr.

visa, approved, journey, template, service, tour, paperwork, visit, ticket, tourism, trip, international, immigration, sign, national, contract, permission, foreign, certificate, passport, business, hand, office, banner, paper, form, apply, application, document, authorization, embassy, agreement, text, product, logo, font, design, brand, graphic design, graphics, communication, illustration

Makenzie Taylor

Each year, 66,000 H-2B visa guest workers enter the United States to perform nonagricultural temporary and seasonal jobs[1] in industries such as forestry, landscaping, hospitality, seafood processing, and construction.[2] The workers typically perform “relatively low-skilled” jobs and often work in “geographic areas where the number of available U.S. workers is limited.”[3] They comprise less than 0.001% of total U.S. employment.[4]

Far from reducing job availability for U.S. workers, the H-2B program is essential to many smaller and seasonal businesses.[5] It “supplies a source of supplementary labor for [physically demanding] jobs that U.S. workers are unwilling to take.”[6] H-2B workers provide a “legal, stable and motivated work force,” allowing businesses to grow and create more jobs for Americans as well.[7] U.S. workers, though cheaper to hire, are not always available, interested, or dependable.[8]

By contrast, employers have reported that H-2B employees are consistently reliable and hard-working, and their productivity helps offset the cost of recruiting and hiring them.[9] H-2B employment also correlates with higher U.S. employment rates.[10] Without the program, many employers would go unstaffed, close their doors, and cause “lost income for American businesses, and lost tax revenues” for the States.[11]

The Problem

Despite these benefits, the program’s cumbersome nature discourages employer participation: “[T]he system [is] complicated, time-consuming, costly and inefficient.”[12] Petitioning employers must prove “[t]here are not enough U.S. workers who are able, willing, qualified, and available to do the temporary work.”[13] They must make “extensive efforts to recruit U.S. workers,” file documentation with four different government agencies, and foot the bill for guest workers’ visas and transportation costs.[14]

Once the 66,000 annual cap is reached, the U.S. Citizenship and Immigration Services (USCIS) stops accepting petitions and will not issue additional visas until the next year.[15] This means that even after expending significant time and money into the petition process, many employers fail to secure their necessary workforce and are in a worse position than before they applied. Even one small mistake in the “complicated application process can mean delayed approval or visas denied—both extremely costly for employers.”[16] The uncertainty involved in the petition process incentivizes employers to petition for more H-2B workers than they actually need, “just in case their business takes off or some of their workers quit after the quota is hit.”[17] Employers who do so, and whose petitions are approved, further decrease the likelihood of other employers receiving their necessary visas.

Employers may use the premium processing track to “expedite the adjudication of certain forms,” but doing so costs an additional fee of $1,500 per petition.[18] Employers are also financially responsible for guest workers’ roundtrip transportation to and from their home countries, daily meals and lodging, and for each “visa, visa processing, and other related fees.”[19] Finally, businesses often require consultants and lawyers to navigate the process, adding to their costs.[20]

Each employer individually shoulders the full financial burden of this process, because H-2B workers may not “switch employers during their visa terms.”[21] In order for a guest worker to continue working for a second employer after her original visa term ends, the putative secondary employer must file and receive approval for a petition “requesting classification and an extension of the alien’s stay in the United States.”[22] H-2B workers are required to leave the States at the end of their authorized period of stay,[23] so if the secondary petition has not yet been granted, the worker must travel home before turning around and returning to the States for the second job. This unnecessarily duplicative process only adds to employer cost and restricts the employees’ access to stable employment.

The Solution

Visa portability, whereby an H-2B worker may transfer her employment from one authorized employer to another without an intermediate petition process, is the best solution to this problem.[24] Portability would encourage cost-spreading, allowing employers to share in recruitment, visa, and transportation expenses for shared workforces. For example, Colorado’s Steamboat ski resort hires H-2B employees as dishwashers for its winter season, from late November to April.[25] Lindy’s Seafood in Maryland hires H-2B workers as crab pickers from April through December.[26] Visa portability would allow Steamboat to send its H-2B workers to Lindy’s at the end of the ski season for the start of Lindy’s crab-processing season, as long as both companies proved a seasonal need for temporary workers and were approved by USCIS. Steamboat and Lindy’s could share the costs of the visa petition and travel expenses and provide workers with a longer term of employment. This would increase efficiency and make H-2B employment more affordable—benefitting both the workers and U.S. businesses.

The Department of Labor has already set the stage for this change by allowing for broader dissemination of job offer information.[27] It has instructed that job orders may be stored as electronic records in an electronic job registry, resulting in a “complete, real-time record of job opportunities for which H-2B workers are sought.”[28] H-2B employers could use a similar system to match approved employers with available employees who are already in the States.[29] Additionally, requiring H-2B workers to fulfill their contract with the petitioning employer before accepting a new job would assuage any employer fears of H-2B workers jumping to new employers upon arrival.[30]


The H-2B visa program is an essential supplement to the U.S. workforce and economy, enabling small- and mid-size businesses to successfully perform seasonal and temporary operations in essential industries. Far from taking jobs away from U.S. workers, H-2B employees comprise a small segment of the workforce and their employment correlates with higher U.S. worker employment. In order to increase the program’s feasibility for businesses and ease its burden on both employers and foreign workers, the best solution is a policy of visa portability. This solution would increase efficiency, reduce costs, and provide more stable employment for a crucial segment of the workforce.

[1] H-2B Temporary Non-Agricultural Workers, USCIS (May 29, 2020),

[2] Kati L. Griffith, United States: U.S. Migrant Worker Law: The Interstices of Immigration Law and Labor and Employment Law, 31 Comp. Lab. L. & Pol’y J. 125, 135 (2009).

[3] Madeline Zavodny & Tamar Jacoby, The Economic Impact of H-2B Workers 4 (2010),

[4] Id. at 23.

[5] Charles C. Mathes, Note, The Department of Labor’s Changing Policies Toward the H-2B Temporary Worker Program: Primarily for the Benefit of Nobody, 80 Fordham L. Rev. 1801, 1814 (2012).

[6] Id.

[7] Zavodny & Jacoby, supra note 3, at 10.

[8] See id. (explanation by a forestry contractor that he has “hired dozens and dozens of American workers. Only a handful have ever shown up for work. Of those, we have never had one last more than two days.”).

[9] Zavodny & Jacoby, supra note 3, at 10.

[10] Id. at 2.

[11] Mathes, supra note 5, at 1813. See also Suzanne Monyak, Trump to Suspend New Work Visas Through 2020, Law360 (June 22, 2020, 3:37 PM), (reporting that in June 2020, President Trump restricted visas to “free up 525,000 jobs for Americans,” but he exempted food supply and seafood industry H-2B workers, evidencing the U.S. economy’s need for these workers and demonstrating that they do not compete with U.S. workers for jobs).

[12] Zavodny & Jacoby, supra note 3, at 20.

[13] Forms: H-2A, H-2B, and H-3 Visa, USCIS (Dec. 1, 2020),

[14] Zavodny & Jacoby, supra note 3, at 2.

[15] Zavodny & Jacoby, supra note 3, at 6.

[16] Id. at 20.

[17] Id. at 21.

[18] Premium Processing Fee Increase Effective Oct. 19, 2020, USCIS (Oct. 16, 2020),

[19] Fact Sheet #78F: Inbound and Outbound Transportation Expenses, and Visa and Other Related Fees under the H-2B Program, U.S. Dep’t of Labor, Wage and Hour Div. (2015),

[20] Zavodny & Jacoby, supra note 3, at 21. See also Griffith, supra note 2, at 136 (revealing the admission of some employers that “they opt out of the H-2 program entirely and hire undocumented workers because the ‘process is too expensive, taxing, and time-consuming’”).

[21] Griffith, supra note 2, at 135.

[22] 8 C.F.R. § 214.2 (h)(2)(i)(D) (2020).

[23] Fact Sheet #69: Requirements to Participate in the H-2B Program, U.S. Dep’t of Labor, Wage and Hour Div. (2009),

[24] See Mathes, supra note 5, at 1812–13 (explaining that legislation was introduced in 2005 that allowed “temporary guestworkers to change employers without penalty,” but the bill was never voted on).

[25] Employment FAQ, Steamboat Ski & Resort Corp, (last visited Jan. 6, 2021).

[26] Job Opportunities, Lindy’s Seafood, Inc., (last visited Jan. 6, 2021).

[27] Temporary Non-Agricultural Employment of H-2B Aliens in the United States, 77 Fed. Reg. 10038, 10128 (Feb. 21, 2012).

[28] Id.

[29] Mathes, supra note 5, at 1850.

[30] Id.

By Sophia Blair

On January 27, 2016, the Fourth Circuit issued a published opinion in the civil case, Prince v. Sears Holdings Corp., affirming the district court’s dismissal of a life insurance claim for preemption reasons. Plaintiff Billy E. Prince (“Prince”) brought suit against his employer, Sears Holding Corp. (“Sears”), claiming that Sears improperly administered his life insurance benefits resulting in claims of misrepresentation, constructive fraud, and infliction of emotional distress. However, the Employee Retirement Income Security Act (“ERISA”) preempted Prince’s state law claims, and the Fourth Circuit affirmed the dismissal of his complaint.

Mrs. Prince’s Life Insurance Coverage Never Became Effective

In 2010, Prince submitted an application to Sears for a $150,000 life insurance plan for his wife, Judith Prince (“Mrs. Prince”). In 2011, Sears sent an acknowledgment letter to Prince and began withholding premiums from his income. Later that year, Mrs. Prince was diagnosed with liver cancer and Prince confirmed her insurance coverage on his online benefits summary.

However, the next year Prince received a letter from Sears informing him that the insurance coverage for Mrs. Prince never became effective because he had not submitted an “evidence of insurability questionnaire.” Unless Prince submitted the questionnaire, Mrs. Prince’s coverage would be terminated. Mrs. Prince died in 2014 and Prince brought this suit.

Sonoco Three-Prong Preemption Test

In order to determine whether ERISA § 502(a) preempted Prince’s state law claims, the Fourth Circuit applied the three-prong preemption test from Sonoco Prods. Co. v. Physicians Health Plan, Inc. 338 F.3d 366 (4th Cir. 2003). Pursuant to this test, the following elements must be met:

(1) The plaintiff must have standing under § 502(a) to pursue its claim; (2) its claim must “fall[] within the scope of an ERISA provision that it can enforce via § 502(a)”; and (3) the claims must not be capable of resolution “without an interpretation of the contract governed by federal law,” i.e., an ERISA-governed employee benefit plan.

Prince conceded the first element, so the Fourth Circuit took up consideration of the last two prongs of the test.

Did Prince Have an Enforceable Claim Under ERISA § 502(a)?

The Fourth Circuit determined that whether Prince had an ERISA-enforceable claim depended on the scope of his claims. Prince argued that he could escape preemption because his claim relied on Sears’ actions prior to the denial of benefits because the company deducted premiums from his income and reported that he had coverage. The Fourth Circuit disagreed and found that his claims were enforceable under ERISA because they challenged the administration of the ERISA plan. Prince could bring suit for denial of coverage only because ERISA required Sears to provide it.

Prince made the secondary argument that his claim fell outside of the scope of ERISA because he was suing for damages, not benefits. Again, the Fourth Circuit rejected his argument because of precedent in the 4th Circuit and from the Supreme Court stating the contrary. See Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 54 (1987) (“The policy choices reflected in the inclusion of certain remedies and the exclusion of others under the federal scheme would be completely undermined if ERISA-plan participants and beneficiaries were free to obtain remedies under state law that Congress rejected in ERISA”);Wilmington Shipping Co. v. New England Life Ins. Co., 496 F.3d 326, 341 (4th Cir. 2007) ([P]reemptive scope is not diminished simply because a finding of preemption will leave a gap in the relief available to a plaintiff.”).

Can Prince’s Claims be Resolved Without Interpreting his ERISA-Governed Benefit Plan? 

The Third prong of the Sonoco preemption test required that Prince’s claim could be resolved without interpreting ERISA, in order to circumscribe preemption. Prince, again argued that he only challenged Sears’ action prior to the administration of the plan, but the Fourth Circuit found that distinction inconsequential. Resolving his claim required assessing Sears’ duty as an ERISA administrator, and Sears’ duty to Prince arose only from ERISA.

Likewise, Prince’s emotional distress claim required determining whether Sears’ administration of ERISA was so inept as to be outrageous. See Travis v. Alcon Labs., Inc., 504 S.E.2d 419, 425 (W. Va. 1998).


Because Prince’s claims met all three prongs of the Sonoco preemption test, the Fourth Circuit held ERISA completely preempted his state law claims, and affirmed the district court’s dismissal of them.

By: Brett H. McDonnell*


One way to make U.S. corporations more sustainable is to broaden the group of stakeholders whose interests are considered in making decisions.  One of the most important groups of stakeholders is corporate employees, both because their own stake is critical to their well-being and because employees may value the interests of other stakeholders more than corporate shareholders or managers do.  Yet, corporate law does nothing to encourage any role for employees in corporate governance.[1]  Corporate law focuses on just three groups within the corporation: shareholders, directors, and officers.  This Article evaluates a number of possible strategies for creating a role for employees in corporate governance.  The strategies include:

Using areas other than business association law to enhance the legal rights of individual employees;

Encouraging officer or director power, hoping that officers and directors will side with employees and other interests more than shareholders;

Encouraging shareholder power, hoping that employees agree with shareholders on the need to keep managers accountable;

Supporting unions as a source of countervailing power;

Promoting means for directly giving employees a collective voice within corporations, e.g. through employee representation on the board, employee councils, nonbinding employee votes on particular matters, employee surveys, or similar means;

Promoting noncorporate legal forms of business association in which employees can play a greater role; or

Promoting changes in corporate culture and norms that empower employees.

This Article suggests criteria for evaluating these strategies.  One must balance the probability of success of a strategy with the net benefits it would achieve if successful.  The benefits and costs of each strategy must include effects on the internal efficiency of corporations, on employee well-being, on the environment, and on the broader community.  One must also balance short-term and long-term effects of the differing strategies.  This Article applies these criteria to the seven listed strategies, and suggests a mix of strategies that appears most attractive at this point.  No strategy has much chance of improving sustainability in the short run.  But, in the long run, the last three strategies above—experimenting within states and corporations with various ways of giving employees voice within corporations and other legal forms—look most promising (or more accurately, least unpromising).

The Article is organized as follows: Part I considers the relationship between employees and sustainability; Part II lays out the competing strategies; Part III describes criteria for choosing among the strategies; and Part IV applies the criteria to the strategies to suggest the mix that appears most attractive.

I.  Employees and Sustainability

Why look to corporate governance as a way to promote sustainability?  Why not instead focus on legal changes that force or encourage companies to behave more sustainably?[2]  Such external approaches have serious limits.[3]  First, it would be quite difficult, and highly intrusive, to write laws that adequately constrain or price all external effects of corporate actions.[4]  Second, even if the laws were fully adequate in principle, they are likely to be under-enforced; therefore, enforcement depends on corporate actors to voluntarily comply.[5]  Third, corporations built to ruthlessly pursue profit are likely to capture the political system and prevent many needed laws from ever being passed.[6]  Thus, an external legal strategy needs to be supplemented by efforts to make corporations internally consider their effects on the environment and society.

Yet, any approach that looks to changes in corporate governance as a strategy for promoting sustainability faces serious objections from the conventional economic picture of the firm.  Markets should push firms to efficiently use available resources, and corporate governance itself should be adapted to minimize transaction costs.[7]  How can changes in governance improve the markets?  Part of the answer is that if, as just suggested, the law has not forced prices to internalize all relevant externalities, then we may want corporate decisionmakers to voluntarily choose to internalize those externalities.  But doing so, by definition, requires accepting a lower financial surplus than would otherwise be available.  Is it plausible that changes in governance can induce companies to do that?

I see two broad ways in which stakeholder theories of corporate governance hope to address this challenge.  First, they hope that giving more power to parties with environmentally friendly preferences will induce companies to be more “green.”  But there are two major limits to that answer.  One must explain why shareholder-focused companies will not take on such green-friendly actions themselves, if such actions will induce stakeholders to associate with the company more cheaply.  The answer to this is that, presumably, companies that give some real power to other stakeholders are able to more credibly commit to promoting their interests, and hence can better earn their commitment and loyalty.  The other, more severe limit, is that it would appear that most members of the major stakeholder groups, at least in the current state of human culture, are only willing to go a modest distance in accepting lowered economic returns in a trade-off for better environmental performance.[8]

A more promising reason arises for believing corporate governance can help if one believes that many, indeed most, current companies have large amounts of waste in their performance—as suggested by X-efficiency theory.[9]  If this is so (as I suspect it is, although that is a major debate), then there may well be room for improving the environmental impact of companies without lowering the stakeholder’s economic returns.  For addressing global warming, more efficient energy use by companies is a very promising area.[10]  Even if one believes this possibility exists, one must still explain why involving stakeholders in governance may help improve X-efficiency.  I suggest here why that may be so in the case of employees.

The relationship between employees and sustainability depends in part on the notoriously slippery concept of “sustainability.”[11]  A key focus is clearly on the environment, but many definitions also consider goals such as meeting present needs[12] or achieving a satisfactory moral and spiritual existence.[13]  One popular concept in business social responsibility is the “Triple Bottom Line,” the idea that businesses should measure their performance in terms of conventional profits and the impact on people and the environment.[14]  We should thus consider both the direct effect of the involvement in decision making on employees themselves, and the indirect effect of such involvement on both economic productivity and the environment.  I consider these effects quite briefly, in part because I have already explored them in an earlier paper.[15]

The first bottom line is conventional profits.[16]  Employee involvement may increase productivity and hence create stronger economic growth in a narrow material sense.  Heightened employee satisfaction may lead to improved effort and less need to engage in expensive monitoring.[17]  Moreover, employees are naturally knowledgeable about what is going on within a business and are likely to have good ideas about how to improve.[18]  There are, it must be said, a variety of countervailing costs.  I have considered these elsewhere.[19]  I believe the first bottom line, at least in large U.S. corporations, is that employees frequently have a suboptimal level of involvement in decision making even when looking only at increasing economic productivity and output.[20]  This is an instance of X-inefficiency at work.[21]

The second bottom line looks at how companies affect people.  Much evidence suggests that people feel better off if they are involved in making important decisions that affect their lives.[22]  Work is a major part of most adults’ lives, and research suggests that job satisfaction increases when employees are involved in decision making.[23]  Skills and habits learned through participation at work may also lead to greater participation in decisions in other spheres of life, leading to further increases in satisfaction.[24]

Of greatest importance to a discussion of sustainability, though, is how employee involvement might change the external impacts of corporations, particularly their impact on the environment—the third bottom line.[25]  Since environmental laws do not go far enough on their own to force businesses to internalize all the effects they have on the environment, we want internal decision makers to take into account—above and beyond any legal requirements—the environmental effect of their company’s actions.[26]  My claim: involving employees in corporate decision making will cause companies to more fully internalize such environmental effects.

Are there any good reasons to believe that claim?  I think there are a few, although it remains an open empirical question with little systematic evidence of which I am aware.[27]  One reason goes back to the first bottom line.  Inefficient use of energy and other natural resources may be widespread, and employees may have much useful knowledge about that waste.  For another, many[28] environmental externalities mainly affect communities near the place of work.  Compare the interest of employees with such local effects versus the interests of shareholders in a public corporation, shareholders in a closely held corporation, and top managers.  Employees work in the affected area and live nearby.  They are thus likely to feel the effects of environmental harm themselves and would like to avoid such harm.  Shareholders in a public corporation, on the other hand, do not live nearby and are thus not as likely to feel the effects of environmental harm.[29]  Shareholders in a closely held corporation are more likely to be as locally rooted as their employees.  However, such shareholders have a greater personal economic stake in a corporation’s profit than employees do, making them care less about goals other than profit maximization.  Managers are as likely to work and live locally as employees, hence they might be as prone to consider environmental effects as employees if they are not motivated to pursue shareholder interests,[30] although it is possible that high level corporate managers are likely to be more physically mobile in their careers than lower level employees, possibly dissipating their interest in the welfare of the local community.

Employee involvement could also change the norms felt by corporate decision makers.  A telling critique of the shareholder primacy model is that it induces shareholders and managers to adopt a simple measure of maximizing shareholder wealth as the sole criterion for judging corporate success.[31]  This is true even for managers who in their personal lives may care a lot about the environment: at work, they feel morally obliged to look after shareholders and the bottom line first.[32]  In corporations that focus significantly on responding to the ideas and preferences of their own employees, those employees are less likely than shareholders or managers to focus on a narrow norm of achieving a high stock price.

II.  Strategies for Increasing Employee Involvement

There are many possible strategies for encouraging businesses to take greater account of the interests of their employees.  I group these strategies into seven clusters, and briefly delineate and discuss them here.

Laws other than business association law.  One can try to protect the interests of employees through other areas of the law.  General contract law, agency law, and especially employment law, are widely used to protect employees.[33]  This gives individual employees a certain set of rights, either rights dictated for all employees of a certain kind within a legal jurisdiction, or rights negotiated between a company and its employees.  If a company violates one of these rights, employees may be able to sue in court to protect their rights or seek remedies from an administrative agency.[34]

Encourage officer or board power.  American corporate law[35] focuses on three main groups: shareholders, directors, and officers.  Employees play little part.  There is an ongoing power struggle between shareholders and managers (directors and officers) over what legal powers a public corporation’s shareholders have and what legal powers they should have.[36]  To encourage greater attention to the interests of employees while operating within this traditional focus of corporate governance, one must side with one or two of these nonemployee groups and hope that one’s preferred group will tend to act in the interests of employees.  Some scholars favorable to the interests of employees have argued for siding with corporate officers and directors over siding with shareholders, hoping that inside managers (who are themselves a kind of employee, after all) will choose to side with the employees with whom they work instead of the more abstract and distant interests of shareholders.[37]

Encourage shareholder power.  Perhaps employees share more common interests with shareholders than managers.  It may be that both would be hurt by self-dealing if managers are left too unaccountable.[38]  Shareholder interests may be brought closer to the interests of employees since most of the leading institutional shareholder activists are union or public employee pension funds.[39]  Indeed, some have even termed the growing clout of such funds “pension fund socialism.”[40]

Support unions.  Historically, the leading way in which employees have found a voice in a large number of companies was through unions.  Unions have been in decline for decades and have become quite a small part of the private sector in the United States.[41]  But millions of employees still belong to unions, and labor law reform and revised unionization strategy could increase the rate of unionization.  Both legal reform and internal reform of unions could also encourage unions to focus on more than just pay and benefits, thus using unions to increase employee voice over a variety of decisions.[42]

Promote means to give employees voice within corporations.  There are many ways to give employees more voice within corporations.  At the highest level, employees could elect some directors.  A step below that, Germany provides the example of work councils at the plant level that give employees a voice on a variety of issues.[43]  Employees could have nonbinding votes on particular issues, or employee opinion on some matters could be surveyed.[44]  Employees could be given a voice on a variety of issues.  Thus, one can classify possible laws along three axes: the level within a corporation at which employees have a voice, the scope of decisions over which they have a voice, and the degree or kind of voice they have over a particular matter.

Laws can be more or less aggressive in how they encourage any of those measures.  A law might require all corporations to provide a particular measure.  Or, a law might make a measure the default rule but allow corporations to opt out—and the law may choose how difficult opting out will be.[45]  The state can subsidize a preferred measure with direct payments or tax preferences.[46]  Or the law can simply permit—without affirmatively encouraging—some forms of employee voice.  Assuming the law allows a given form of voice, proponents need not focus attention on legal reform—they can instead focus on attempting to persuade individual corporations to adopt the measure, or forming new corporations that do.

When one considers both the large variety of possible forms of employee voice within a corporation and the large number of ways to encourage any particular form, this fifth category of strategy covers a very large range of options.

Promote other legal forms of business association.  Despite the wide range of legal options just discussed, and the great flexibility of U.S. corporate law, legal support for employee involvement in corporate governance will always be a foreign graft within corporate law.  Corporate law is designed for shareholders to elect boards that are responsible for running the company; accordingly, employees are simply absent from the law’s core DNA.

Employee advocates, thus, may want to pursue other legal forms of business association.  The worker cooperative is the most obvious form.[47]  Flexible forms like the limited liability company might be more easily adaptable than corporations to the goals of employee advocates.  Additionally, social responsibility advocates are currently exploring a variety of new legal forms that reflect their interests.[48]

Promote changes in corporate culture and norms.[49]  One staple of a certain strand of organizational behavior and management improvement literature is that the corporate culture should promote employee engagement.[50]  This strategy does not require any sort of legal change.  Rather, it seeks to promote change company-by-company through affecting the norms of managerial behavior.[51]  The management literature frequently makes the point that a corporate culture in which employees feel engaged offers many benefits to a corporation.[52]  However, there is at least some reason to be skeptical that this literature is just a “fad for the millennium.”[53]

This list of seven categories of strategies addressing the interests of employees is not exhaustive, and each category is itself broad and contains a range of options.  Still, I hope it provides some useful organization in thinking through the best strategies.

III.  Criteria for Choosing Among Strategies

Before evaluating the attractiveness of these strategies, we must first consider what criteria to use in making those evaluations.  Considering a wide range of factors makes comparisons more ambiguous, as inevitably some strategies will appear superior according to some criteria but inferior according to others.  Nonetheless, all the criteria considered matter and it won’t do to simply ignore them for simplicity’s sake.

We must think about the strategy’s probability of success and also how much good it would accomplish if successful.  The latter can be divided into several factors—the triple bottom line.[54]  We care about the net economic surplus (somewhat narrowly conceived in money terms) generated within companies, and also about the well-being (more broadly conceived) of employees themselves.  Beyond this, we care about the externalities that companies generate, and in particular about their effects on the environment.  Aggregating these different predicted effects is, of course, hard—and there is no objective, neutral, and authoritative way to do so.

Probability of a strategy’s success can also be divided into uncertainty concerning the chances the strategy will actually succeed in creating the intended employee involvement, and uncertainty about the effect that involvement would have if it were achieved.  For instance, consider a law intended to increase unionization.  There is uncertainty about how much of an increase in unionization any given law would achieve.[55]  There is also uncertainty as to how increased unionization, if it were (somewhat miraculously) achieved, would affect company output, employee satisfaction, and the environment.

Political feasibility is a crucial consideration in evaluating the probability of success.  One aim is to find strategies that are self-perpetuating and generative—not only can one see a path for initial political success, but also such success can create support for future, more ambitious initiatives.  One should, however, be careful about using political infeasibility to weed out a strategy too quickly.  What seems hard to imagine now may become imaginable in the future; indeed, academic exercises can sometimes crucially shape future ideas about what is possible and attractive.  As Keynes said:

Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.  Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.  I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.[56]

A final element to consider in evaluating strategies is short-run versus long-run effects and probabilities.  Some strategies (especially the first three in our list) are likely to pay off more quickly than others.  Other things being equal, these strategies are favored.  But presumably in a discussion of how to promote sustainability we should apply a low-discount rate and not overly handicap strategies likely to pay off only in the longer run, since creating businesses and an economy that are functional for the long haul is, after all, the defining focus of our task.

IV.  Choosing among Strategies

Finally, I apply the criteria of Part IV to choosing among the strategies listed in Part III.  My choices will be rough and utterly debatable.  But I hope that even those who disagree with the preferences expressed will find the framework helpful in thinking through the question of how to best go about increasing employee involvement in corporate governance as a way of creating more sustainable companies.  I consider each strategy in turn and conclude with an overall comparison.

Laws other than business association law.  Probability of success depends upon what types of legal change one contemplates.  Employers will fight changes that impose significant constraints on their ability to treat employees as they choose.  But modest changes in this area are probably one of the most politically viable among the strategies under consideration.  Employment law has seen a great deal of change in recent decades, in both legislation and in courts, which suggests that this is an area in which movement is possible.[57]

However, the potential gains from changes here may be quite limited.  There are presumably a variety of reforms available that could improve employee welfare.[58]  There are many fewer reforms that could do so while simultaneously improving net output as well (always a problem—after all, if such easy changes were out there, why wouldn’t companies already be acting accordingly?).  But for our purposes here the biggest problem with strategies that focus on changing judicially or administratively enforceable individual rights is that they don’t increase collective employee involvement in decision making.  Instead, they focus on employees as individuals with rights, not as a group that could help influence company behavior.[59]  Thus, these laws do not help us use employees to directly improve the way businesses affect the environment and other external constituencies.  The strategy nonetheless remains valuable insofar as it can improve the lot of employees without sacrificing (too much) in economic productivity, but it is of less interest for a conversation focused on sustainability.

Encourage officer or board power.  The next two strategies do not aim to increase employee involvement directly, but rather they help employees by promoting another group in corporate governance.  The big advantage of both of these strategies is that they have quite a good chance of political success.  The ongoing struggle between boards and shareholders is close and heavily fought—and both sides could win many battles.  Deciding to throw the weight of persons and organizations that favor employees to one side or the other could very well tip the balance of power.

Which side should employee advocates favor?  Shareholder power may lead to short-termism or cost-cutting measures that may hurt employees.[60]  Directors and officers that are not subject to excessive pressure from shareholders may better balance the interests of all corporate constituencies, including the employees, the environment, and the broader community.[61]  But note that directors and officers may often side with employees, but not with the environment or community.  After all, keeping employees happy and productive can more readily be reconciled with the interests of a company and its shareholders than protecting the environment above and beyond what the law requires.  If one believes that employees will tend to favor community interests,[62] then that is a real disadvantage of pursuing employee interests indirectly rather than by directly increasing employee involvement.  Moreover, siding with managers does little to increase the political power of employees, and hence does little to expand the long-run picture of what is feasible.

Encourage shareholder power.  Employee advocates could instead side with shareholders.  Doing so may both constrain self-dealing within particular corporations and reduce the power of the managerial class within society and politics as a whole.  Employees themselves are also increasingly important as shareholders, both through pension plans and through 401(k)s and similar holdings.  In choosing between this and the previous pro-management strategy, note that unions themselves (or at least the pension funds that they manage) have chosen shareholders over managers as their allies, with union funds playing a leading role in contemporary shareholder activism.[63]  Of course, from the perspective of those who put shareholder interests first, this union role in shareholder activism is problematic,[64] but it is a good thing from our perspective.

But again, as with the previous strategy, it may be that the persons put in power by shareholder activism, with the help of unions, may tend to favor employee interests but not environmental or other community interests.  This strategy does not give employees themselves more power, but only more power to another group (shareholders) that may side with employees on some issues but not others.  Again too, this strategy does little to directly empower employees politically, and hence does little to expand the long-run set of possibilities available.

Support unions.  This strategy has the great advantage of having achieved real success in the past.  Unions were instrumental in helping to improve wages and working conditions and giving employees some degree of voice within many companies[65] (although the matters subject to collective bargaining have been more limited than a sustainable corporation advocate would probably want to see).  It is disputed to what extent, if any, this came at the expense of economic productivity.[66]  Just as importantly, when unions were powerful, they had great political power, and that power made many other kinds of progressive reforms and policies more achievable.[67]  Unions are not always natural advocates of the kind of policies that those concerned with sustainability prefer—strong environmental laws, for instance, may create concerns about lost jobs.  Still, increased unionization would generally help put more progressive politicians in power, which on the whole would increase the range of politically feasible options for improving sustainability.  And unions may even sometimes support environmental regulation itself.[68]

The greatest defect of this strategy is also political.  Unionization levels have decreased for so long that it does not seem likely that the United States will ever return even close to the levels seen in the first few decades after World War II.  The weakness of unions is self-reinforcing, as companies successfully fight legal changes to make union organizing easier.[69]  Moreover, unionization is harder than it once was because of the changing nature of employment, including both the move from factories to service industries and the increasingly weak ties between employees and their companies.[70]

Promote means to give employees voice within corporations.  This strategy includes many variations, and thus it is hard to apply our criteria.  But this strategy is unlikely to have large payoffs in the short run.  The versions of this strategy that involve large legal changes that would strongly encourage or mandate significant employee involvement are politically quite unlikely to succeed,[71] while versions that involve smaller legal changes or a focus on organizing within particular existing or new firms may face less resistance, but will also bring about less widespread change in the short run.

On the other hand, the longer-run prospects for this strategy are more promising.  More modest legal changes in the short run may set the stage for bigger changes in the long run.  Experiments at individual companies may highlight successful approaches that eventually spread widely.[72]  A series of small-scale successes over time may help build political support for bigger and bolder experiments.

Promote other legal forms of business association.  This strategy also appears more promising for the long run.  States are unlikely to adopt drastically new statutes en masse, and even if they did, there are enough obstacles to highly innovative organizational forms that such a form will not be quickly adopted.  One might point to LLCs as a contrary example.[73]  But LLCs drew heavily upon existing experience with corporations and forms of partnerships and were not as radical as, say, worker co-ops.[74]  The LLC suggests that organizational change through new forms of business association is a promising strategy, but it is most likely to succeed if it is evolutionary rather than revolutionary.  Rather than leaping immediately to widespread adoption of a form that gives employees strong elements of control, we are more likely to succeed with a procession of innovations that gradually and incrementally extend employee involvement.

Promote changes in corporate culture and norms.  Changes in corporate cultures and norms can be accomplished without legal change.  Changes can occur incrementally and can build upon themselves.  Norm entrepreneurs can champion new norms, and if they are lucky they can create bandwagon effects leading to cascading change.[75]  The business school and management literature on empowering employees may represent such a norm cascade.[76]  But I wouldn’t hold my breath just yet as that literature is notoriously subject to fads, and employees should often be rightly skeptical of managers who come bearing gifts of alleged empowerment.

Choosing among the strategies.  Having briefly applied our criteria to each of the seven strategies, which looks most promising?  The answer depends on whether one focuses on short run or long run prospects.

In the short run, the first three strategies and perhaps the last look most promising.  Reforming laws (other than business association law) and encouraging board or shareholder power each offer some realistic chance of producing relatively immediate successes.  Unfortunately, the payoffs to increased sustainability from these three strategies look suspect.  Some improved employee rights through changes in employment law may increase employee well-being while not hurting productivity.  However, while employee well-being and productivity are indeed a component of sustainability broadly understood, insofar as we seek ways to directly improve the impact companies have on communities and the environment, stronger employee rights are unlikely to have much effect.  While such rights protect employees individually, they do little to increase employee involvement in core decision making.[77]

The second and third strategies have a somewhat similar problem.  In the ongoing battle between shareholders and boards, the fight is close enough that either side has a realistic chance at success, so whichever side employee advocates take, they have a real shot at short-run victory.  It is unclear which side is better for employees—I ultimately incline towards shareholders, largely because that is the side unions have taken.[78]  A caution on that argument, though, is that unions acting as fiduciaries in investing to meet pension obligations may have different interests than unions acting to pursue the interests of their members within the workplace.[79]  And even if that is the better side for employees, it is not necessarily the better side for communities and the environment.  Because these two strategies do not directly give decision making power to employees, these strategies do not bring employees’ perspective to bear in pushing companies in a more sustainable direction.  Indeed, I rather suspect that, on the whole, community and environmental interests are less endangered in companies that feature board primacy instead of shareholder primacy.[80]  For employees, the increased accountability that comes with shareholder primacy is on balance probably a gain, but for the community and environment, internal accountability is less important than the costs associated with the short-term bottom line focus that also follows from shareholder primacy.

Our final strategy, promoting norm changes, also has some chance at short run success, although only modestly so.  This strategy works manager-by-manager, corporation-by-corporation, and so modest gains are possible without major changes in the law.  There is even the possibility of a rapid large-scale norm cascade.[81]  I confess to skepticism that management literature happy talk is likely to lead to real widespread substantive change.  However, if that skepticism is misplaced, this strategy could be the only one with serious promise in both the short and the long run.

For bigger payoffs in sustainability, we must turn to the next three or four strategies, most of which will only succeed, if ever, in the longer run.  Among these, I would like to believe that large increases in unionization are possible, but I strongly suspect that the time for unions has come and gone.  That leaves us with a variety of experiments, legal and nonlegal, exploring greater employee involvement within both the corporate form and other forms of business association.  Some of these experiments will involve legal changes, most on a state-by-state basis.  Other experiments will work within existing laws and explore greater employee involvement company by company.  This local, case-by-case experimentalism is both a blessing and a curse.  It will take a long time and may never result in massive change that affects all or most businesses.  But, the experimentalism will help us figure out what works, and what doesn’t work, at relatively low cost, and the localism and gradualism give a way to start small and build strength over time rather than having to immediately fight powerful entrenched interests that are opposed to large scale change.

Truth be told, none of the strategies look all that rosy.  The ones that have the greatest hope of tangible results in the short run do not directly strengthen employee involvement in corporate governance, their effects on employee well-being are uncertain, and their effect on sustainability beyond employee well-being look small and sometimes negative.  The strategies that have potential for a bigger payoff in both employee well-being and sustainability as to community and environmental effects are quite unlikely to yield much gain in the short run, and even their long run prospects are highly uncertain.  Clearly, sustainability advocates should be looking at other options besides employee involvement.  And yet, increased sustainability is a goal for the long run, and one that ultimately must involve many struggles along many different fronts.  Some of the strategies for increasing employee involvement in corporate governance may prove to be among the struggles worth pursuing.

* Professor, University of Minnesota Law School.  I thank participants at the Wake Forest Law Review’s Symposium, “The Sustainable Corporation,” for useful comments.

[1]. See generally Jennifer G. Hill, Corporate Governance and the Role of the Employee, Partnership at Work: The Challenge of Employee Democracy: Labor Law Essays 110 (2003), available at

[2]. See Milton Friedman, The Social Responsibility of Business Is to Increase Its Profits, N.Y. Times, Sept. 13, 1970 (Magazine), at 33.

[3]. See Beate Sjafjella, Internalizing Externalities in E.U. Law: Why Neither Corporate Governance Nor Corporate Social Responsibility Provides the Answers, 40 Geo. Wash. Int’l L. Rev. 977, 981 (2009).

[4]. See id.

[5]. See id. at 993.

[6]. See id.

[7]. See Michael C. Jensen & William H. Meckling, Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure, 3 J. Fin. Econ. 305 (1976), available at

[8]. See Alissa Mickels, Note, Beyond Corporate Social Responsibility: Reconciling the Ideals of a For-Benefit Corporation with Director Fiduciary Duties in the U.S. and Europe, 32 Hastings Int’l & Comp. L. Rev. 271, 297–99 (2009).

[9]. See generally Harvey Leibenstein, Allocative Efficiency vs. ‘X-Efficiency’, 56 Am. Econ. Rev. 392 (1966) (explaining the theory of “X-Efficiency”); Robert S. Frantz, X-Efficiency: Theory, Evidence and Applications (2d ed. 1990).

[10]. Steve Ferrey, The New Climate Metric: Sustainable Corporations and Energy, 46 Wake Forest L. Rev. 383, 388–90 (2011).

[11]. See, e.g., Marilyn Averill, Symposium, Introduction: Resilience, Law, and Natural Resource Management, 87 Neb. L. Rev. 821, 826 (2009) (stating that “sustainability” is a notoriously slippery term).

[12]. Report of the World Commission on Environment and Development: Our Common Future, ch. 1, para. 49 (1987), available at (“Sustainable development seeks to meet the needs and aspirations of the present without compromising the ability to meet those of the future.”).

[13]. See United Nations Education, Scientific, and Cultural Organization, Universal Declaration of Cultural Diversity, art. 3 (2002), available (“Cultural diversity . . . also means to achieve a more satisfactory intellectual, emotional, moral, and spiritual existence.”).

[14]. See John Elkington, Cannibals with Forks: The Triple Bottom Line of 21st Century Business 69 (1997).

[15]. See Brett H. McDonnell, Employee Primacy, or Economics Meets Civic Republicanism at Work, 13 Stan. J.L. Bus. & Fin. 334 (2008).

[16]. Id. at 335.

[17]. Id. at 355; see also Tom R. Tyler, Promoting Employee Policy Adherence and Rule Following in Work Settings, 70 Brook. L. Rev. 1287, 1300 (2005); Tom R. Tyler & Steven L. Blader, Cooperation in Groups: Procedural Justice, Social Identity, and Behavioral Engagement (2000).

[18]. See McDonnell, supra note 15, at 355; Joseph E. Stiglitz, Credit Markets and the Control of Capital, 17 J. Money, Credit & Banking 133, 143 (1985); Margit Osterloh & Bruno S. Frey, Shareholders Should Welcome Knowledge Workers as Directors 6 (Institute for Empirical Research on Economics, University of Zurich, Working Paper No. 283, 2005).

[19]. McDonnell, supra note 15, at 350-53; see also Kent Greenfield, The Place of Workers in Corporate Law, 39 B.C. L. Rev. 283, 326 (1998).

[20]. Greenfield, supra note 19, at 286-87.

[21]. See supra note 9 and accompanying text.

[22]. Peter Warr, Well-Being and the Workplace, in Well-Being: The Foundations of Hedonic Psychology 392 (Daniel Kahneman et al. eds., 1999); B.D. Cawley, L.J. Keeping & P.E. Levy, Participation in the Performance Appraisal Process and Employee Reactions: A Meta-Analytic Review of Field Investigations, 83 J. App. Psych. 615, 628 (1998); McDonnell, supra note 15, at 354; Tyler & Blader, supra note 17, at 54-55.

[23]. McDonnell, supra note 15, at 354.

[24]. Melvin L. Kohn & Carmi Schooler, Stratification, Occupation, and Orientation, in Work and Personality: An Inquiry Into the Impact of Social Stratification 5, 33 (1983); Melvin L. Kohn, Unresolved Issues in the Relationship Between Work and Personality, in The Nature of Work: Sociological Perspectives 36, 54 (Kai Erikson & Steven Peter Vallas eds., 1990); Stephen C. Smith, Political Behavior as an Economic Externality, in Advances in the Economic Analysis of Participatory and Labor-Managed Firms: A Research Manual 123 (Derek C. Jones & Jan Svejnar eds., 1985); McDonnell, supra note 15, at 369-70.

[25]. Elkington, supra note 14, at 73.

[26]. See supra note 3 and accompanying text.

[27]. See McDonnell, supra note 15, at 362-63 (discussing a few snippets of evidence).

[28]. Though certainly not all—global warming is a key exception.

[29]. Shareholding in public corporations does have a local bias.  See sources cited in McDonnell, supra note 15, at 363 n.117 for examples. But even so, public shareholders are quite unlikely to be as heavily locally concentrated as their employees.

[30]. See infra Part II.

[31]. See McDonnell, supra note 15, at 361-62; Lawrence E. Mitchell, Corporate Irresponsibility: America’s Newest Export 3 (2001).

[32]. McDonnell, supra note 15, at 361-62.

[33]. Labor law is of course another critical area of the law, but I deal with unions as a separate strategy.

[34]. Employee Retirement Income Security Act, 29 U.S.C. § 1003 (2006).

[35]. The situation is different in some other countries.  In Germany, for instance, employees play a major role through the law of codetermination.  Rebecca Page, Co-Determination in Germany—A Beginner’s Guide, 33 Arbeitspapier 11 (March 2006), available at

[36]. See Lucian A. Bebchuk, The Myth of the Shareholder Franchise, 93 Va. L. Rev. 675, 676 (2007); Stephen M. Bainbridge, The Case for Limited Shareholder Voting Rights, 53 UCLA L. Rev. 601, 601 (2006).

[37]. See Mitchell, supra note 31, at 3; Margaret M. Blair & Lynn A. Stout, A Team Production Theory of Corporate Law, 85 Va. L. Rev. 247, 249 (1999).  Going back to the original debate within corporate law scholarship over managers versus shareholders, this was the position of Dodd.  Merrick Dodd, Jr., For Whom Are Corporate Managers Trustees?, 45 Harv. L. Rev. 1145, 1145 (1932).

[38]. See Bebchuk, supra note 36, at 731.  In the ur-debate, this was the position of Berle.  Adolf A. Berle, Jr., Corporate Powers as Powers in Trust, 44 Harv. L. Rev. 1049, 1049 (1931).

[39]. William H. Simon, The Prospects of Pension Fund Socialism, 14 Berkeley J. Emp. & Lab. L. 251, 251 (1993).

[40]. Id.

[41]. U.S. unionization rates peaked at 28.3% in 1958, and had declined to 11.5% by 2003.  Gerald Mayer, Cong. Research Serv., RL 32553, Union Membership Trends in The United States 1 (2004).

[42]. One existing law that discourages employee participation is found in the National Labor Relations Act.  29 U.S.C. § 158(a)(2) (2006).  See McDonnell, supra note 15, at 375 n.173 and accompanying text and sources cited there.

[43]. See Page, supra note 35, at 5.

[44]. Matthew T. Bodie, The Case for Employee Referenda on Transformative Transactions as Shareholder Proposals, 87 Wash. U. L. Rev. 897, 897 (2010); Thuy-Nga T. Vo,Lifting the Curse of the Sox Through Employee Assessments of the Internal Control Environment, 56 U. Kan. L. Rev. 1, 2 (2007).

[45]. Brett H. McDonnell, Sticky Defaults and Altering Rules in Corporate Law, 60 SMU L. Rev. 383, 384 (2007).

[46]. Id. at 385.

[47]. David Ellerman & Peter Pitegoff, The Democratic Corporation: The New Worker Cooperative Statute in Massachusetts, 11 N.Y.U. Rev. L. & Soc. Change 441, 441 (1983); John Pencavel, Worker Participation: Lessons from the Worker Co-Ops of the Pacific Northwest (2001); William Whyte & Kathleen Whyte, Making Mondragon: The Growth and Dynamics of the Worker Cooperative Complex (2d ed. 1988).

[48]. Dana Brakman Reiser, Benefit Corporations—A Sustainable Form of Organtization?, 46 Wake Forest L. Rev. 591, 593–606 (2011); Linda O. Smiddy, Symposium,Corporate Creativity: The Vermont L3C and Other Developments in Social Entrepreneurship, 35 Vt. L. Rev. 3, 3 (2010).

[49]. I thank Matt Bodie for suggesting this as an additional possible strategy.

[50]. Ricky W. Griffin & Gregory Moorhead, Organizational Behavior: Managing People and Organizations ch. 5 (9th ed. 2010); Steven H. Applebaum, Danielle Hebert & Sylvie Leroux, Empowerment: Power, Culture, and Leadership—A Strategy or Fad for the Millennium?, 11 J. Workplace Learning 233 (1999); Darrol J. Stanley, The Impact of Empowered Employees on Corporate Value, 8 Graziadio Bus. Rev. (2005), available at

[51]. See Stanley, supra note 49.

[52]. Id.

[53]. Applebaum, Hebert & Leroux, supra note 50.

[54]. See supra note 14 and accompanying text.

[55]. Perhaps, alas, there is less uncertainty than one would like—the chances of greatly increasing the degree of unionization in the United States seems quite bleak.

[56]. John Maynard Keynes, The General Theory of Employment, Interest, and Money 383 (1936).

[57]. For an overview, see Stephen F. Befort & John W. Budd, Invisible Hands, Invisible Objectives: Bringing Workplace Law and Public Policy Into Focus (2009).

[58]. Id. at 3.

[59]. Cynthia Estlund, Regoverning the Workplace: From Self-Regulation to Co-Regulation (2010).

[60]. Leo E. Strine, Jr., Toward Common Sense and Common Ground? Reflections on the Shared Interests of Labor and Management in a More Rational System of Corporate Governance, 33 J. Corp. L. 1, 16 (2007).

[61]. See Blair & Stout, supra note 37, at 315 (discussing the board as a mediating hierarch).

  [62]. See supra note 27 and accompanying text.

[63]. See Simon, supra note 39; Stewart J. Schwab & Randall S. Thomas, Realigning Corporate Governance: Shareholder Activism By Labor Unions, 96 Mich. L. Rev. 1018, 1019 (1998).

[64]. See Bainbridge, supra note 36, at 610.

[65]. Richard B. Freeman, What Do Unions Do? 3–4 (1984).

[66]. Id. at 162-63.

[67]. Id. at 191-92.  Interestingly, unions seem to have been more effective at helping pass general social legislation than legislation narrowly aimed at promoting their own power.

[68]. Bruce Yandle, Unions and Environmental Regulation, 6 J. Lab. Res. 429, 435 (1985).

[69]. John Logan, The Union Avoidance Industry in the United States, 44:4 Brit. J. of Indus. Rel. 651, 651 (2006).

[70]. See generally Daniel H. Pink, Free Agent Nation (2002) (discussing the changing nature of the American workforce).

[71]. Mandatory codetermination at the federal level, anyone?

[72]. See supra note 47 and accompanying text.

[73]. See generally Larry E. Ribstein, The Rise of the Uncorporation 1 (2010) (discussing the rise of LLCs).

  [74]. See Rory Ridley-Duff, Cooperative Social Enterprises: Company Rules, Access to Finance and Management Practice, 5 Soc. Enter. J. 50 (2009).

[75]. Cass R. Sunstein, Social Norms and Social Roles, 96 Colum. L. Rev. 903, 909 (1996); see also Eric A. Posner, Law and Social Norms 30 (2000); Robert C. Ellickson, The Market for Social Norms, 3 Am. L. & Econ. Rev. 1, 1 (2001).  For some welcome skepticism, see David E. Pozen, We Are All Entrepreneurs Now, 43 Wake Forest L. Rev. 283, 284 (2008).

[76]. See supra notes 49–52 and accompanying text.

[77]. See supra note 58 and accompanying text.

[78]. Brett H. McDonnell, Shareholder Bylaws, Shareholder Nominations, and Poison Pills, 3 Berkeley Bus. L. J. 205, 250 (2006); Brett H. McDonnell, Setting Optimal Rules for Shareholder Proxy Access (Minnesota Legal Studies Research Paper No. 10-03) [hereinafter “Shareholder Bylaws”], available at

[79]. Shareholder Bylaws, supra note 77.

[80]. Mitchell, supra note 31, at 3.

[81]. See Sunstein, supra note 74, at 912.