ECON 448: Gov and Legal Issues

Legislative branch

• Headed by congress

• Enacts and passes laws

Executive branch

• Headed by president

• Enforces laws

Judicial branch

• Headed by Supreme Court

• Interprets law

• Supreme court is court of final appeal

Fair Labor Standard Act of 1938 (FLSA)

• Covers all employees of companies engaged in interstate commerce or in the production of goods for interstate commerce

• Major provisions include minimum wage, hours of work, overtime, child labor

Minimum wage

• FLSA established $7.25/hr

• Permits a lower “training wage”

• half states have min wage higher than federal rates

• some cities and counties also have a min wage ordinances

• If multiple laws cover same job, higher rate prevails

Training wage

• Paid to workers under age of 20 for up to 90 days

• approx 85% of minimum wage

Tipped wages

• employers only have to pay $2.13 of direct wages

• if $2.13 + tips do not equal the federal minimum hourly wage, the employer must make up the difference

• Many states require higher direct wage

Overtime

• Rate is 1.5 times employee’s usual hourly rate for time spent above 40 hrs/week

• usual hourly rate includes regular bonuses, and piece-rate payments

• Stock plan income, gifts, or special-occasion bonuses are not included

• pay is required even if employee was not expected or asked to work more than 40 hours

Overtime calculation

• Pay for the first 40 hours / hours (40) = hourly rate

• hourly rate * 1.5 = overtime pay

Exempt employees

Managers, outside salespeople, and other employees are not required to be given overtime

Nonexempt employees

Employees covered by FLSA requirements for overtime pay no matter what like manual laborers, blue collar workers, and first responders

Child labor

• Under 18 cannot work in occupation defined hazardous by the DOL

• Under 16 cannot work in jobs involving interstate commerce, except for a parent or guardian

• exceptions are baby-sitting, acting, delivering newspapers

Living wage

• Minimum wage tailored to living costs at local levels

• Covers only city/state employees, or city/state contractors

• Cover only base wages

• Not part of FLSA

Prevailing wage laws

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

Government-defined wage laws

Minimum wage that must be paid for work done on covered government projects or purchases

How to classify employee or independent contractor

• Based on how much control the firm has

• Type and permanency of the relationship

• Tax law (by IRS) and ERISA are relevant

Equal Employment Opportunity (EEO)

The condition in which all individuals have an equal chance for employment, reguardless of their race, color, religion, sex, age, disability, or national origin

EEOC

• EEO enforcement agency

• responsible for enforcing most EEO laws

• Complaints must be filed within 180 days of incident

• EEOC has 60 days to investigate

Title VII of the Civil Rights Act of 1964

• Major law regulating employment opportunity in US

• Prohibits employers from discriminating based on race, color, religion, sex, national origin

• Applies to organizations that employ 15 or more people

• Employers may not retaliate

The 1967 Age Discrimination in Employment Act (ADEA)

Protects employees 40 and older from age discrimination

1990 Americans with Disability Act (ADA)

Must accommodate a person able to fulfill “essential elements” of a job

Equal Pay Act (1963)

• Equal pay for men and women doing “substantially similar” work in same firm

• Jobs are = if require equal skill, effort, and responsibility, performed under similar working conditions

Affirmative defense for equal pay act

• Seniority

• Quality or quantity of production

• Merit or quality of performance

• a factor that is not sex

The Lilly Ledbetter Fair Pay Act (2009)

Employers liable for pay loss resulting from discrimination can still be sued as long as 180 days from last pay, and it resets for every new payment

Disparate treatment

Differing treatment of individuals based on race, color, religion, sex, national origin, age, or disability status

Disparate impact

A condition in which employment practices are seemingly neutral yet disproportionately exclude a protected group from employment opportunities

Four-Fifths rule

Evidence of discrimination if the hiring rate for a minority group is less than 4/5 the hiring rate for the majority group

4/5 rule example

Men: 80 total, hired 48 → 48/80 = 60%

Women: 40 total, 12 hired → 12/40 = 30%

hiring rate: 30%/60% < 80%

Access discrimination

The denial of particular jobs, promotions, or training opportunities to qualified candidates based off sex, race, and other protected classes

Valuation discrimination

Looks at the pay women and minorities receive for the jobs they perform (Equal pay for equal work)

Definition of Equal

• Skill

• Effort

• Responsibility

• Working conditions