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Informed consent is a legal and ethical condition of voluntary agreement based on adequate knowledge and understanding of relevant facts, implications, and consequences when participating in research or undergoing a diagnostic, therapeutic, or preventive measure. Subjects must be in possession of all their faculties without impairment of judgment at the time of consenting. Furthermore, subjects may not waive or appear to waive any of their legal rights or release or appear to release the investigator, the sponsor, the institution, or agents thereof from liability for negligence.

Although the legal concept of informed consent is most commonly associated with medical procedures and research studies, it also has ethical relevance in the broader context of business, particularly in protecting employees from potential privacy violations by employers. Certain legal guidelines have been enacted to protect employee rights to informed consent, such as the Polygraph Protection Act of 1988, which not only prohibits most employers from using a polygraph (lie detector) as preemployment testing but also requires exempted employers to obtain the informed consent of their candidates prior to testing. The concept of informed consent in this sense has as much to do with business ethics as business law since employers in the United States continue to enjoy a great deal of latitude in choosing when, where, and how to limit the privacy of their potential and present employees.

Informed consent implies deliberation and free choice. Subjects must be allowed to deliberate on the basis of sufficient information of what exactly they are consenting to and how it may affect them in the future. And, of course, such information needs to be in language the subject can understand, minimizing legalistic or other specialized vocabulary. Sometimes employers assume that merely informing their workers of a pending privacy intrusion such as monitoring employee Internet use, installing hidden cameras, drug tests, personality tests, or criminal and health background checks is to comply with this rule. After all, the employee has been informed and is usually free to quit at any time. But this common assumption overlooks the pressures, expressed or implied, exerted on employees to conform to organizational policy. Not only is there social pressure to conform; often employees cannot expect to obtain gainful employment elsewhere at short notice. When these factors are in place, which is often the case, the subject is informed of the procedure, but genuine consent is difficult to ascertain. This is why polygraph tests have been forbidden as a condition of hire for most jobs that do not require a high degree of security clearance. The legal claim here is that subjects should never be coerced into sacrificing their right to privacy unless there is a greater interest in preserving the public from undue harm.

Thus, contractarians tend to interpret informed consent as placing equal emphasis on consenting as being informed. They point out that if employees cannot opt out of the procedure, full consent has not been obtained. Employers will then reply that none of their common screening procedures will be possible if most candidates opt out. This is the point at which ethical and legal dilemmas occur. Most ethicists maintain that employers do have the right to invade their employees' privacy without their full consent so long as a strong case is made for the necessity of the procedure, namely, to protect the public and/or business from a clear and present danger sufficient to override the right to privacy. Still, libertarians claim that all private employers should have the right to infringe on their employees' privacy within the confines of the law, so long as employees are informed of the infringement. Coercion would thus be acceptable in a capitalist system in which employees are free to leave jobs at will.

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