Transcript 17 Government and Legal Issues in Compensation

17-1
Chapter
17
McGraw-Hill
Government and
Legal Issues in
Compensation
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Learning Objectives
17-2
After discussing Chapter 17, students should be able to:
1.
2.
3.
4.
5.
6.
Discuss the government’s role in the employment
relationship and its interests in compensation
decisions.
Identify the major provisions of the Fair Labor
Standards Act and describe how this Act affects the
regulation of pay.
Identify the key components of the Equal Pay Act of
1963 and explain how they affect wage
discrimination.
Discuss how the two theories of discrimination under
Title VII of the Civil Rights Act of 1964 (as amended)
affect pay issues.
Explain the difficulties and issues in determining pay
discrimination for dissimilar jobs.
Discuss the social implications of the earnings gap
between men and women and among racial groups.
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17-3
Overview of Federal Regulations
Legislation establishes a
minimum wage, governs
overtime pay, protects
employees from
discrimination, regulates
benefits, and determines how
compensation is taxed.
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Government: Part of the
Employment Relationship
17-4
Government
is a key stakeholder in
compensation decision making
Governments’
usual interests are
whether
 Procedures
for determining pay are fair (pay
discrimination)
 Safety
nets for the unemployed and
disadvantaged are sufficient (minimum wage,
unemployment insurance)
 Employees
are protected from exploitation
(overtime pay, child labor)
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Exhibit 17.1: Evolving Nature of
United States Federal Pay Laws
Davis
Bacon Act
Copeland
Fair
Title
Act
(1936)
Pay Act
(1938)
(1963)
VII of Civil Rights Act
Service
(1964)
Contract Act
(1965)
Discrimination Act
(1967)
Wage
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(1934)
Labor Standards Act (FLSA)
Equal
Age
(1931)
Act
Walsh-Healey
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Garnishment Law
(1968)
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Exhibit 17.1: Evolving Nature of
United States Federal Pay Laws
Fair
Credit Reporting Act
(1970)
Pregnancy
Discrimination Act
(1978)
Americans
with Disabilities Act
(1990)
Civil
Rights Act
Family
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(1991)
and Medical Leave Act
Insurance Portability and
Accountability Act (HIPPA)
(1993)
Health
Small
Business Job Protection Act (1996)
Mental
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(1996)
Health Act
(1997)
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17-7
Fair Labor Standards Act (1938)
Three Major Provisions
 Minimum
 Hours
of work

Overtime pay

Employee status

Exempt

Nonexempt
 Child
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wage
labor
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17-8
Minimum Wage
Legislation
is intended to provide an
income floor for workers in society’s least
productive jobs
 Federal
minimum wage is $5.15
an hour (set in 1997)
Almost
all states have their own
minimum wage to cover jobs omitted
from federal legislation
If state and federal
legislation cover same
job, the higher rate prevails
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17-9
Minimum Wage Under FLSA
 1938
 1978
 1979
 1981
 1990
 1991
 1997
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$0.25
$2.65
$2.90
$3.35
$3.80
$4.25
$5.15
per
per
per
per
per
per
per
hour
hour
hour
hour
hour
hour
hour
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Effects of Minimum Wage Rate
Increases on Wage Structure
Direct
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and indirect effects
 Direct
effect – Refers to increase in wages for jobs
at bottom of wage curve that have been below
minimum wage
 Indirect
effect – Refers to changes in remainder of
the wage curve to maintain appropriate differentials
for jobs that deserve higher pay
Analysis
indicates indirect effect is usually
greater than direct effect
Companies
spend more money on increasing
pay of high-level jobs than they spend on
raising pay of low-level jobs to new minimum
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17-11
Employee Status Under FLSA
When
classified as an employee, an
organization must
 Withhold
federal/state/local income taxes
 Match Social Security/Medicare withholding
 Include person in company benefit programs
 Pay for unemployment insurance and
workers’ compensation
 Allow up to 12 weeks of unpaid leave for
family emergencies (after one year of service)
 Provide any other state or federally mandated
benefits
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17-12
Contractor Status Under FLSA
To
be classified as a contractor, a person
must
 Have
ability to set own hours and determine
sequence of work
 Work off-site
 Work by the project rather than have a
continuous relationship with the employer
 Be paid by the job
 Have an opportunity for profit and loss
 Furnish own tools and training
 Be self-employed or work with a leasing
company
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Exempt and Non-Exempt
Status Under FLSA
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Non-exempt
employees are included in
FLSA regulations and have full protection
of law
Exempt employees are excluded from
FLSA minimum wage and overtime
provisions
Four classifications of exempt employees
 Executives
 Professionals
 Administrative
employees
 Outside salespeople
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17-14
FLSA Basic Overtime Provisions
Non-exempt
workers
must be paid 1.5 times
their regular rate of
pay for hours worked
in excess of 40 in any
workweek
Regular rate of pay
includes base pay
plus
Non-discretionary
bonuses
 Shift premiums
 Production bonuses
 Commissions
 Overtime
is paid on
time worked, not
time compensated
 A workweek is any
fixed, recurring
period of 168
consecutive hours
2004

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17-15
Compensatory Time Under FLSA
Compensatory
time off may sometimes be
offered instead of cash overtime
Rate
is the same as for cash
Public
employees can accumulate
compensatory time
In
private sector, practice of allowing
compensatory time must be part of an
established plan
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17-16
Child Labor Provisions
FLSA
restricts hours and conditions of
employment for minors
Persons
under 18 cannot work in
hazardous jobs
Persons
under 16 cannot be
employed in jobs involving
interstate commerce
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17-17
FLSA Compliance: Enforcement.
Wage
and Hour Division of U.S.
Department of Labor enforces FLSA
minimum wage and overtime provisions
Equal
Employment Opportunity
Commission (EEOC) enforces equal pay
provisions
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17-18
When State Laws Differ
Pay
frequency, minimum wage,
severance or vacation pay, or unclaimed
wages may be governed by individual
states
Rule
of thumb - Whenever state and
federal laws differ, follow regulation
that most benefits employees
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17-19
Pay Discrimination: What Is It?
Law
recognizes two types of discrimination
 Access
discrimination – denies particular
jobs, promotions, or training opportunities to
qualified women or minorities
 Valuation
discrimination – looks at pay
women and men receive for the jobs they
perform
 It
is discriminatory to pay minorities or women less
than males when performing equal work - working
side-by-side, in the same plant, doing the same
work, producing the same results
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17-20
Types of Antidiscrimination Acts
Equal
Civil
Pay Act (1963)
Rights Act (1964)
Age
Discrimination in Employment Act
(1967)
Wage
Garnishment Act (1968)
Americans
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with Disabilities Act (1990)
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17-21
Discriminatory Compensation Practices
Types
of compensation practices which
may be discriminatory
Extra
pay plans
Leave
policies
Maternity
Pension
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leave
policies
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17-22
Equal Pay Act (1963)
Prohibits
wage discrimination on the
basis of gender when
Employees
perform work in
the same establishment, or
Employees
perform jobs
requiring equal skill, effort,
and responsibility under
similar working conditions
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17-23
What Is Discrimination Under EPA?
A plaintiff would have a prima facie
case if he/she received a lower wage
than members of opposite sex for
performing work that requires
substantially the same skills, effort, and
responsibilities under similar working
conditions - all performed at the same
location.
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17-24
Provisions of Equal Pay Act
Equal

work is defined in terms of
Skill, effort, responsibility, and working conditions
all performed at the same location
Differences
in pay are legal if differences are
based on any one of four criteria

Seniority, merit or quality of performance, quality or
quantity of production, or some factor other than sex
Not

permitted are defenses such as
Union rules or the wage is prevailing pay for market
Time
of day does not constitute dissimilar
working conditions

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However, if a differential for working at night is paid,
it must be separated from base wage for job
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17-25
Title VII of the Civil Rights Act (1964)
Prohibits
discrimination in all terms and
conditions of employment on the basis of
race, religion, ethnic group, sex, or
national origin.
Defines
two theories of
discrimination behavior
 Disparate
treatment
 Disparate
impact
Civil
Rights Act of 1991 reinforced
these two standards of discrimination
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17-26
Theories of Discrimination
Disparate
treatment
 Occurs
when an employee who is a member
of a protected group is intentionally paid less
Disparate
impact
 Occurs
when an apparently
neutral compensation practice
results in unintentional wage
discrimination for a protected group
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17-27
Pay Discrimination and Dissimilar Jobs
Gunther
v. County of Washington
 Supreme
Court determined pay differences for
dissimilar jobs may reflect discrimination
Proof
 Use
of discrimination
of market data
Spaulding
 Jobs
of “comparable worth”
AFSCME
McGraw-Hill
v. University of Washington
v. State of Washington
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Exhibit 17.6: Possible
Determinants of Pay Differences
Differences
in
firms
Differences in
employee work
behaviors
Differences
in
work
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17-28
Differences
in
employees
Differences
in Pay
Discrimination
Differences
in
unions
Differences
in labor market
conditions
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17-29
What Is Comparable Worth?
If jobs require comparable
skill, effort, and
responsibility, the pay must
be comparable, no matter
how dissimilar the job
content may be.
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17-30
Comparable Worth
Establishing
a comparable worth plan
involves the following four basic steps
 Adopt
a single job evaluation plan for all jobs
within a unit
 All jobs with equal job evaluation results
should be paid the same
 Identify general representation (percentage
male and female employees) in each job group
 The wage-to-job evaluation point ratio should
be based on the wages paid for maledominated jobs since they are presumed to be
free of pay discrimination
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