Mandatory restrictions in employment law, seeking to promote the welfare of workers, are debated fiercely. Proponents argue that they protect workers. Opponents believe that they spawn inefficiency and harm workers. Yet all agree that restrictions trigger such effects only when obeyed. This Article challenges the conviction that the welfare effects of mandatory restrictions depend on obedience. We show experimentally that when restrictions are disobeyed, workers’ reservation wages rise, i. e., workers charge higher wages when offered employment that violates the restrictions. That, in turn, produces welfare effects similar in nature to those produced when restrictions are obeyed. This observation is therefore important to both proponents and opponents of employment regulation. We establish this claim experimentally by measuring the effects of disobeyed restrictions on workers’ reservation wages. We then investigate several hypotheses as to why these effects are generated. Last, we point out that our findings have important implications in other contexts of contractual regulation, such as in the domain of consumer protection.

Among the major decisions any legal system must make is deciding whether to establish general courts with broad jurisdiction, or specialized courts with limited jurisdiction. Under one influential argument—advanced by both judges and legal theorists—general courts foster coherence within the legal system. This Article identifies a distinct effect of establishing general courts: the “complementarity effect.” In the case of complementarity, general courts strategically apply different principles in different fields, such that litigants losing in one sphere (e.g., public law) are compensated in another (e.g., private law). We support this conjecture by analyzing three case studies.

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In contract law, common mistake or frustration are grounds for relieving the promisor from the obligation to perform. Conventional economic theory justifies relief by appealing to its effect on the promisee’s incentives, namely, her incentives to act efficiently to prevent the unfavorable occurrence or its associated losses. The Article challenges this justification. While relief may indeed generate efficient incentives under certain conditions, these are not the conditions in which it is in fact granted. Consequently, the cases in which the conventional theory recommends that relief be provided and those in which it is actually awarded, are incompatible. Based upon this premise, the Article develops a new theory of the law of common mistake and frustration, bearing descriptive and prescriptive implications. Under the new theory, the purpose of relief is not to incentivize promisees, but rather to determine the legal consequences of non-contemplated events. Viewed in this light, the Article identifies a new set of efficiency rationales for the rule. Under specified conditions, relief allows contracting parties to (1) refrain from welfare-reducing trade in unquantifiable risk; (2) maintain control over the distribution of contractual gains; and (3) overcome disincentives to form efficient contracts. The Article analyzes the conditions under which these virtues are applicable, and finds that they generally correspond to those in which relief is actually awarded.