MGT 468 - Chapter 17 - Government and Legal Issues in Compensation

MGT 468 - JSU - Chapter 17 - Government and Legal Issues in Compensation

executive

The _________ branch, headed by the President, enforces laws through agencies and its other bodies (e.g., the Department of Labor),

judicial

The _______ branch interprets laws and considers their constitutionality.

legislative

The ________ branch may change existing laws or pass new ones.

regulatory environment

The ____________ is also a function of state and local laws, which often cover employers not covered by federal laws and/or include requirements that go beyond federal laws.

Title VII

_________ of the (federal) Civil Rights Act, which prohibits employment (including pay) discrimination on the basis of race, color, religion, sex, or national origin, covers employers with 15 or more employees.

race, color, religion, sex, or national origin,

Title VII of the (federal) Civil Rights Act, which prohibits employment (including pay) discrimination on the basis of ___________ covers employers with 15 or more employees.

15

Title VII covers employers with ____ or more employees.

Fair Labor Standards Act of 1938 (FLSA)

The _______________ covers all employees (with some exceptions, discussed later) of companies engaged in interstate commerce or in the production of goods for interstate commerce.

Minimum wage

Hours of work (including overtime)

Child labor

The FLSA’s major provisions are:

Minimum-wage

____________ legislation is intended to provide an income floor for workers in society’s least productive jobs. When first enacted in 1938, the minimum wage was 25 cents an hour. It has been raised periodically; in 2009, it was raised to $7.25 and has remained there.

Workers Compensation

A form of no-fault insurance, covers injuries/diseases arising from employment.

food/food, retail, financial, transportation/shipping

The industries with the most FLSA claims are ______ services, ___, _____ services/insurance, and ___________.

medical care, temporary or permanent disability payments, survivor benefits, rehabilitation and training

Benefits given for worker compensation include:

Benefits given for worker compensation

The following describe what:

medical care, temporary or permanent disability payments, survivor benefits, rehabilitation and training

False

True or False:
Worker Compensation is covered by federal laws and statutes.

Forty-five

_______ states plus the District of Columbia have their own minimum wages to cover jobs omitted from federal legislation.

$15

A revised Executive Order issued (in preliminary form) in April 2021 requires federal contractors to pay a minimum wage of _____ per hour.

a higher minimum wage, which is intended to help low wage workers, runs the risk of reducing employment opportunities for these very workers it is intended to help.

The concern with higher minimum wages is:

employment opportunities

A higher minimum wage, which is intended to help low wage workers, runs the risk of reducing ____________ for these very workers it is intended to help.

the gains through higher wages are greater than the losses of jobs and/or hours.

Whether a minimum wage “works” or not depends on whether:

the employee who receives them

Under the Fair Labor Standards Act, tips are the property of:

the employer must make up the difference during the pay period

If an employee’s tips combined with the employer’s direct wages do not equal the minimum wage:

True

True or False:
Contemporary employers face (1) an increasingly skilled workforce with higher training costs per employee and (2) higher benefits costs, the bulk of which are fixed per employee.

(1) an increasingly skilled workforce with higher training costs per employee and (2) higher benefits costs, the bulk of which are fixed per employee.

Contemporary employers face:

8 ; 12 ; seventh

State laws sometimes go beyond the FLSA. California, for example, requires time and a half pay for working more than ___ hours in a day and double time for working more than ___ hours in a day. It also requires premium pay for working a 12 ____day during a week.

18 ; 16

Under the Child Labor Law, persons under ___ cannot work in hazardous jobs such as meat packing and logging; persons under ___ cannot be employed in jobs involving interstate commerce except for nonhazardous work for a parent or guardian. Additional exceptions and limitations also exist.

sub-Saharan Africa

The highest rates of child labor are in ________, where high population growth, grinding poverty, and the HIV/AIDS epidemic have left a lot of families in need of the income that children can provide

Worker Economic Opportunity Act,

The _____________ a 2000 amendment to FLSA, allows stock options and bonuses to be exempt from inclusion in overtime pay calculations.

Social Security, unemployment compensation, and workers compensation taxes

U.S. employers are legally obligated to pay _______, ____________, and ___________ on wages and salaries on behalf of their employees.

Prevailing wage laws

_____________ set pay for work done to produce goods and services contracted by the federal government.

A government-defined prevailing wage

The minimum wage that must be paid for work done on covered government projects or purchases.

access discrimination

The denial of particular jobs, promotions, or training opportunities to qualified candidates on the basis of sex, race, and other protected classes

Valuation Discrimination

Looks at the pay women and minorities receive for the jobs they perform.

Pay Equity

A broad term, commonly used both as a goal (to eliminate pay discrimination) and to encompass an array of policies/practices intended to reduce/eliminate pay discrimination

Federal Pay , Title VII, and E.O. 11246

The ______ Act, _____ and __________ are other key federal laws in the area of pay equity.

Davis Beacon Act

Enacted in 1931 and Requires that mechanics and laborers on public construction projects be paid the “prevailing wage” in an area.

Securities Exchange Act

Enacted in 1934 and Created the Securities and Exchange Commission (SEC). Currently, the SEC requires companies that have more than $10 million in assets and whose securities are publicly traded and held by more than 500 owners to periodically report information, which is available to the public. This includes disclosure of compensation received by the CEO, CFO, and three other highest paid executives.

Walsh-Healey Public Contracts Act

Enacted in 1936 and Extends prevailing-wage concept to manufacturers or suppliers of goods for government contracts.

Fair Labor Standards Act (FLSA)

Enacted in 1938 and Sets minimum wage, hours of work, overtime premiums; prohibits child labor.

Equal Pay Act

Enacted in 1963 and Equal pay required for men and women doing “substantially equal” work in terms of skill, effort, responsibility, and working conditions.

Title VII of Civil Rights Act

Enacted in 1964 and Prohibits discrimination in all employment practices on basis of race, sex, color, religion, or national origin.

Executive Order 11246

Enacted in 1965 and Prohibits discrimination by federal contractors and subcontractors in all employment practices on basis of race, sex, color, religion, or national origin.

Age Discrimination in Employment Act (ADEA)

Enacted in 1967 and Protects employees age 40 and over against age discrimination.

Pregnancy Discrimination Act (PDA)

Enacted in 1978 and Pregnancy must be covered to same extent that other medical conditions are covered.

Americans with Disabilities Act (ADA)

Enacted in 1990 and Requires that “essential elements” of a job be called out. If a person with a disability can perform these essential elements, reasonable accommodation must be provided.

Immigration Act of 1990

Created the H-1B classification for temporary employment of foreign workers in specialty occupations or as fashion models. Intent is to help employers who cannot otherwise obtain needed business abilities and skills from the U.S. workforce.

Civil Rights Act of 1991

Increases burden of proof on employers to rebut some discrimination claims. Stronger remedies available in cases of international discrimination.

Family Medical Leave Act (FMLA)

Enacted in 1993 and Requires employers to provide up to 12 weeks’ unpaid leave for family and medical emergencies.

Mental Health Act

Enacted in 1997 and Mental illness must be covered to same extent that other medical conditions are covered.

Worker Economic Opportunity Act

Enacted in 2000 and Income from most stock plans need not be included in calculating overtime pay.

Sarbanes-Oxley Act

Enacted in 2002 and Executives cannot retain bonuses or profits from selling company stock if they mislead the public about the financial health of the company.

Financial Accounting Standards Board (FASB) Statement 123 R

Enacted in 2004 and Value of all employee stock options must be expensed at estimates of fair value on financial statements (as/when they vest).

Securities and Exchange Commission (SEC) rule change on executive compensation disclosure

Enacted in 2006 and Adopts enhanced executive compensation disclosure requirements. For example, the Compensation Discussion and Analysis in the proxy statement must address the objectives and implementation of executive compensation programs.

Lily Ledbetter Act

Enacted in 2009 and Employers can be liable for current pay differences that are a result of discrimination (as defined under existing laws such as Title VII of the Civil Rights Act) that occurred many years earlier.

Troubled Asset Relief Program (TARP), American Recovery and Reinvestment Act of 2009 (ARRA)

Financial institutions receiving funds from TARP have restrictions on compensation. Prohibits use of several compensation programs, including, but not limited to bonuses, retention awards, and incentive pay, except where part of a preexisting employment contract, during the period TARP funds are received. Restricted stock is permitted if one-third or less of annual compensation. In firms receiving the largest TARP assistance, restrictions cover senior executives and next 20 highest paid employees.

The Patient Protection and Affordable Care Act

Enacted in 2010 and Creates employer mandate (for those with 50 or more employees) to provide qualifying health insurance coverage or face financial penalties.

SEC

Executive compensation rules and enforcement.

The DOL’s Wage and Hour Division (WHD)

Monitors and enforces compliance with the FLSA, FMLA, Davis-Bacon, page 623Walsh-Healey, H-1B (temporary foreign) worker classification part of The Immigration Act of 1990, and other Acts.

The DOL’s Equal Employment Opportunity Commission (EEOC)

Monitors and enforces compliance with equal employment opportunity laws, including Title VII of the Civil Rights Act, ADA, ADEA, PDA, and the Equal Pact Act.

The DOL’s Office of Federal Contract Compliance (OFCCP)

Monitors and enforces compliance with equal employment opportunity laws, primarily Executive Order 11246, which applies to companies that do business (federal contractors and subcontractors) with the federal government

Internal Revenue Service (IRS)

Tax treatment of employee and executive compensation, including rules (e.g., nondiscrimination tests) for which compensation costs can be deducted. Also monitors employer decisions to classify workers as employees versus independent contractors, which has tax revenue implications.

Financial Accounting Standards Board (FASB)

Engages in ongoing rule-making regarding accounting treatment of executive and employee compensation. FASB rules are given great deference by the SEC.

Federal Trade Commission

Enforces antitrust laws, which includes prohibiting employers from collusion in fixing prices (i.e., pay) in compensation or collusion in the form of agreeing not to recruit each other’s employees (see Hi-Tech Employee Antitrust Settlement and Animation Workers Antitrust Settlements websites).

Arbitration (deferral to)

Many employers now ask employees to sign agreements that require them to use arbitration systems to resolve individual employment disputes in lieu of filing a lawsuit or filing a complaint with a government agency. The employer must provide “consideration” (something of value) in return for employees giving up their right to sue in individual dispute cases.

Noncompete Agreements

Many employers ask employees to agree not to work for a competitor within a certain time of leaving the employer. Consideration must be provided to the employee in return for waiving this right. Enforceability varies by state and typically as a function of the level of the employee and the degree to which the employee has access to valuable information or resources related to competitiveness.

State and Local Laws

Minimum wage, classification of workers as employees or independent contractors, prohibition against asking applicant salary history.

Executive Order 13665

Enacted in 2014 and Prohibits federal contractors and subcontractors from having pay secrecy policies.

Executive Order 13658

Enacted in 2014/2021 and The original order required federal contractors to pay a minimum wage of $10.10/hour, indexed to inflation (resulting in $10.95 in 2021). In 2021, the rule was revised to require $15/hour, which will continue to be indexed to inflation.

Independent Compensation Committees

Falls under the Dodd-Frank Wall Street Reform and Consumer Protection Act and Standards for listing a company on an exchange require that compensation committees include only independent directors and that the committee has authority to hire its own compensation consultants.

clawbacks

Falls under the Dodd-Frank Wall Street Reform and Consumer Protection Act and Requires public companies to set policies to allow executive compensation to be taken back if it was based on inaccurate financial statements that did not comply with accounting standards.

Executive Compensation Disclosure

Falls under the Dodd-Frank Wall Street Reform and Consumer Protection Act and Requires reporting of the ratio of chief executive officer (CEO) pay to worker pay (CEO Pay Ratio) and the magnitude of the relationship between executive pay and corporate financial performance.

Increased Oversight of Financial Industry

Falls under the Dodd-Frank Wall Street Reform and Consumer Protection Act and Directs regulators to develop rules specific to the financial industry.

“Say On Pay”

Falls under the Dodd-Frank Wall Street Reform and Consumer Protection Act and Nonbinding vote by shareholders to approve or disapprove executive pay.

No

Are Police, fire fighters, paramedics, and other first responders considered exempt under the Fair Standards Labor Act?

Prevailing Wage Laws

Set pay for work done to produce goods and services contracted by the federal government

Government-defined prevailing wage

The minimum wage that must be paid for work done on covered government projects or purchases.

access discrimination

the denial of particular jobs, promotions, or training opportunities to qualified candidates on the basis of sex, race, and other protected classes.

access discrimination and valuation discrimination

The law recognizes two types of pay discrimination. What are those?

valuation discrimination

Griggs v. Duke Power Co. (1971)

Which U.S. Supreme Court case struck down the use of employment tests (requirement to have a high school degree, aptitude test scores) to select applicants for positions because use of these tests screened out a higher proportion of Blacks than whites, without adequate evidence that doing better on these tests was associated with significantly better performance on the job.

Exempt Employee

Employees that work for an employer not bound by the minimum wage and overtime provisions of the FLSA. This means they are typically paid a fixed salary, regardless of the number of hours worked, and are not eligible for overtime pay

Access discrimination

The denial of particular jobs, promotions, or training opportunities to qualified candidates on the basis of sex, race, and other protected classes

Valuation Discrimination

Looks at the pay women and minorities receive for the jobs they perform.

Equal Pay Act (EPA) of 1963

Part of the FLSA; forbids wage discrimination on the basis of gender if employees perform equal work in the same establishment. Jobs are considered equal if they require equal skill, effort, and responsibility and are performed under similar working conditions.

Differences in pay between men and women doing equal work are legal if these differences are based on any one of these four criteria, called an affirmative defense

The following describe what:
Seniority

Merit or quality of performance

Quality or quantity of production

Some factor other than sex

Skill

Experience, training, education, and ability as measured by the performance requirements of a particular job.

Effort

Mental or physical—the degree of effort (not type of effort) actually expended in the performance of a job.

Responsibility

The degree of accountability required in the performance of a job.

Working Conditions

The physical surroundings and hazards of a job, including dimensions such as inside versus outside work, heat, cold, and poor ventilation.

Shift differentials; temporary assignments; bona fide training programs; differences based on ability, training, or experience; and other reasons of “business necessity.”

Factors other than sex include:

Disparate Treatment

A form of employment discrimination where an individual is treated differently (and less favorably) than others because of their membership in a protected class, such as race, gender, or religion. It involves intentional discrimination and is illegal under various anti-discrimination laws.

Disparate Impact / Adverse Impact

Refers to employment practices or policies that, while seemingly neutral on the surface, disproportionately and negatively affect members of a protected group. It's essentially unintentional discrimination arising from practices that, though applied to everyone, have a significantly different and negative effect on certain groups

Executive Order 11246

It requires covered government contractors to file affirmative action plans

OFCCP

Monitors and enforces compliance with equal employment opportunity laws, primarily Executive Order 11246, which applies to companies that do business (federal contractors and subcontractors) with the federal government.

Comparable Worth

Says that if jobs require comparable skill, effort, and responsibility, the pay must be comparable, no matter how dissimilar the job content may be.

job evaluation points

A method used to determine the relative value of different jobs within an organization, typically as part of a compensation and pay structure. This process involves assigning points to various job factors like skills, responsibilities, effort, and working conditions to quantify the job's worth. These points are then used to establish a fair and equitable pay scale, ensuring that jobs with similar point totals are compensated similarly

Six (6) major sources of Earning Gaps or reasons for differences between men and women

The following describe what:
Work/occupation differences

Work-related behavior

Labor market conditions

Firm/industry differences

Union differences

Discrimination

Proactive approaches for Employers to be in compliance with Compensation Laws and Regulations

The following describe what:
• Join professional associations to stay informed on emerging issues and to act in concert to inform and influence public and legislative opinion.

• Constantly review compensation practices and their results. Be sure to consult with legal counsel in doing so, as attorney-client privilege and protection of work product are important issues to understand prior to conducting analyses on an organization’s compliance. The fair treatment of all employees is the goal of a good pay system, and that is the same goal of legislation. When interpretations of what is fair treatment differ, informed public discussion is required. Such discussion cannot occur without the input of informed managers.

Work/occupation differences

Work-related behavior

Labor market conditions

Firm/industry differences

Union differences

Discrimination

What are the six (6) major sources of Earning Gaps or reasons for differences between men and women?