THE IMPLICATIONS OF EMPLOYMENT LIABILITY FOR WELFARE-REFORM

We analyze the importance of employment liability as a potential barri er to welfare reform. In particular research linking wrongful terminat ion doctrines to labor marker outcomes is integrated with empirical an alyses of welfare caseloads to obtain evidence of the likely importanc e of liability risk to the willingness of firms to hire welfare partic ipants. Calculations suggest that liability concerns were probably not a major factor in past decisions about whether or not to hire AFDC re cipients. Nationally the elimination of tort liability for wrongful te rmination could have provided additional jobs for fewer than one perce nt of welfare recipients. However with evolving court doctrines, liabi lity risks could become more important in the future, especially in th ose state jurisdictions, such as California, where employers tradition ally have faced the prospect of punitive damages for wrongful terminat ion.