Legal Issues Lecture 3 Legal Issues in HRM

Legal Issues Lecture #3

Legal Issues in HRM • Staffing • Hiring and firing procedures • EEO (coming attraction…) • Compensation & benefits • Safety • Labor relations 2 MGMT 412 | Legal Issues Fall 2008

More Why Worry? • Aren’t all these laws just a burden on business? • Legal compliance important • Cost of non-compliance • Public image • Also, too, legal compliance is generally good business Sources: “Add “value…” (2002); Grossman (2002); “Off the clock” (2003); Wright & Ferris (1995) 3 MGMT 412 | Legal Issues Fall 2008

Hiring & Firing Procedures • IRCA (1986) • Employee Polygraph Protection Act (1988) • WARN (1988) • Fair Credit Reporting Act (1970) • Uniformed Services Employment and Reemployment Rights Act (1994) • Employment at will 4 MGMT 412 | Legal Issues Fall 2008

Immigration Reform and Control Act (1986) • All employees must prove eligibility to work in U. S. • The I-9 • Problems…. . • Day labor • Companies providing fake IDs • Visa varieties and issues… 5 MGMT 412 | Legal Issues Fall 2008

Employee Polygraph Protection Act (1988) • Use of pre-employment polygraphs forbidden • Can be used in the investigation of “workplace incidents” • Governments, security firms, and employees of pharmaceutical manufacturers with access to controlled substances are exempt 6 MGMT 412 | Legal Issues Fall 2008

WARN (1988) • Worker Adjustment and Retraining Act) • Provides for advance notification of facility closings or major layoffs (33%+ of workforce or 500+ people) 7 MGMT 412 | Legal Issues Fall 2008

Fair Credit Reporting Act (1970) • If you use background checking for employment purposes, you must: • Have written consent from applicant (or current employee) to do so • Must notify employee if adverse decision is due to background check 8 MGMT 412 | Legal Issues Fall 2008

Uniformed Services Employment and Reemployment Rights Act (1994) Employers must rehire or reinstate military service members, provided that: • • • The person held a civilian job; The person provided notice to the employer that he or she was leaving the job for service in the uniformed services (unless giving notice was precluded by military necessity or otherwise impossible or unreasonable) The cumulative period of service must not have exceeded five years; The person was not released from service under dishonorable or other punitive conditions The person reported back to the civilian job in a timely manner This includes active duty as well as reserve obligations Finally, prior service, current service or plans to serve are protected (employment discrimination) • • 9 MGMT 412 | Legal Issues Fall 2008

Employment at Will • Common law doctrine: • Employers may hire, fire, demote and promote whomever they choose, unless a law exists to the contrary • Depends on state courts’ interpretations • General exceptions to EAW: • Public policy • Violation of law • Filing workers’ comp claim • Refusal to commit illegal acts) • Implied employment contract (the employee handbook) • Good faith and fair dealing 10 MGMT 412 | Legal Issues Fall 2008

Time Away From Work • Jury duty • Military service • FMLA Sources: “Ex-juror’s case… (1991); Hansen (2003); Segal, 2003 11 MGMT 412 | Legal Issues Fall 2008

Family And Medical Leave Act (FMLA) • Unpaid leave up to 12 weeks per year • • • Seriously ill family member Family member injured in military service (new) Emergencies arising from family member in military (new) Own illness Birth of a child Adoption of a child Companies with 50 or more employees, after 1 year employment Return to same or equivalent job Top 10% paid employees not eligible State laws may be more generous (for example, New York, New Jersey, Rhode Island, Hawaii, and California) 12 MGMT 412 | Legal Issues Fall 2008

Compensation • Fair Labor Standards Act (1938) • Davis-Bacon Act (1931) • Requires payment of “prevailing wage” for public works construction 13 MGMT 412 | Legal Issues Fall 2008

Fair Labor Standards Act • Originally passed in 1938 • Covers four main areas • Overtime • Minimum wage • Child labor • Peonage • Enforcement by Wage and Hour Division, Department of Labor 14 MGMT 412 | Legal Issues Fall 2008

Overtime Provisions • Overtime applies after 40 hours per week * • Overtime rate is 1½x regular hourly rate • Time worked: • Any time employees permitted or allowed to work • Waiting time • On-call if mobility restricted • Rest periods (< 20 minutes) covered, but not meal breaks * Some states have more generous provisions 15 MGMT 412 | Legal Issues Fall 2008

Exemptions From Overtime • Depends on actual content of work, not title • Types of exemptions • Executive • Administrative • Professional • Outside sales • Exemptable workers may be paid overtime as market demands Sources: “Managers to get $2. 9 million” (2001); “Overtime pay target of Eckerd lawsuit” (1999) 16 MGMT 412 | Legal Issues Fall 2008

Executive Exemption • Management is primary duty • Direct 2 or more full-time employees • Authority to hire, fire, or recommend personnel actions • Exercise high degree of independent judgment • No more than 20% of time on nonmanagement duties (40% in retail & service) Source: http: //www. dol. gov/_sec/media/speeches/541_side_by_side. htm 17 MGMT 412 | Legal Issues Eliminated as of August 23, 2004 Fall 2008

Administrative Exemption • Office or non-manual work related to management policies or general business operations • Exercise discretion and judgment • Assist a owner or executive or perform specialized or technical work or execute special assignments • No more than 20% of time on nonmanagement duties (40% in retail & service) Source: http: //www. dol. gov/_sec/media/speeches/541_side_by_side. htm 18 MGMT 412 | Legal Issues Eliminated as of August 23, 2004 Fall 2008

Professional Exemption • Type of work: • • Work requires advanced knowledge and education Original and creative artistic work Teaching IT professions (depending on pay) Work is intellectual and varied in character Work cannot be standardized as to time Salary requirement met (except for physicians, attorneys, teachers and some IT occupations) • No more than 20% of time on non-exempt work • Must pay OT if paid by hours worked Eliminated as of August 23, 2004 • • • Source: http: //www. dol. gov/_sec/media/speeches/541_side_by_side. htm 19 MGMT 412 | Legal Issues Fall 2008

Computer Employees • “Work requires theoretical and practical application of highly-specialized knowledge in computer systems analysis, programming, and software engineering. ” • “Consistently exercises discretion and judgment. ” • “Performs work that is predominantly intellectual and varied in character and is of such character that the output produced or result accomplished cannot be standardized in relation to a given period of time. ” • Minimum pay = $27. 63/hour 20 MGMT 412 | Legal Issues Fall 2008

Outside Sales Exemption • Sales away from employer’s place of business • No more than 20% of time on nonexempt work Eliminated as of August 23, 2004 Source: http: //www. dol. gov/_sec/media/speeches/541_side_by_side. htm 21 MGMT 412 | Legal Issues Fall 2008

Child Labor • Regulated by age categories: • Bars hazardous work • Hours worked • Provisions do not cover family-owned farms or businesses • Also some exemptions for legitimate apprenticeships 22 MGMT 412 | Legal Issues Fall 2008

Child Labor Restrictions • Under age 14 • 16 and 17 years old • Acting • No hazardous work • Newspaper sales • 18 and above • Casual babysitting and the like • No restrictions • 14 and 15 years old • No hazardous work • Limited hours 23 MGMT 412 | Legal Issues Fall 2008

Hours Limitations • No work during school hours • No more than 3 hours on a school day • No more than 8 hours on a non-school day • No more than 18 hours in a week when school in session • No more than 40 hours a week when school not in session • Between 7 am and 7 pm (9 pm in summer) 24 MGMT 412 | Legal Issues Fall 2008

Child Labor Enforcement 25 MGMT 412 | Legal Issues Fall 2008

Hazardous Occupations • • • Manufacturing or storing explosives Driving a motor vehicle Coal and other mining Wrecking and demolition Logging and sawmilling Power-driven woodworking machines Exposure to radioactive substances • • • Power-driven hoisting apparatus Power-driven metal working 26 • • Power-driven meat processing (including restaurant slicers) Power-driven bakery equipment Power-driven paper processing (including balers, compactors) Brick & tile manufacturing Operate circular saws, band saws Roofing (even on ground) Trenching and excavating MGMT 412 | Legal Issues Fall 2008

Minimum Wage • Currently $6. 55 / hour (as of July 24, 2008) • July 24, 2009: $7. 25 • Also – for tipped employees, it is $2. 13 • States may enact higher minimums (and that then applies) • Should minimum wage be raised? 27 MGMT 412 | Legal Issues Fall 2008

Trends in Minimum Wage 28 MGMT 412 | Legal Issues Fall 2008 Source: Do. L, Wage and Hour Division

State Minimum Wage Laws State minimum higher than Federal Same No state minimum State minimum lower than Federal Special rate Source: Do. L, Wage and Hour Division, 2008 29 MGMT 412 | Legal Issues Fall 2008

Benefits • Social Security Act (1936) • ERISA (1974) • COBRA (1985) • Health Insurance Portability and Accountability Act (1996) • Newborn and Mothers’ Health Protection Act (1996) • Mental Health Parity Act (1996) • Women’s Health and Cancer Rights Act (1998) 30 MGMT 412 | Legal Issues Fall 2008

Social Security Originally provided for old age insurance and disability coverage (1935) • Medicare added in 1965 • Benefits for: • • Retirement • Disability • Survivors (lump sum and monthly payments) Based on contributions from employers and employees • Majority of U. S. workers covered • Should Social Security be privatized? • 31 MGMT 412 | Legal Issues Fall 2008

ERISA Provisions Passed in 1974 in response to abuses of pension plans • Does not require that a plan be offered • • Covers: • Who is eligible? • Vesting (entitlement to employer contributions) • Plan funding required • Also established Pension Benefit Guarantee Corporation • Employers required to pay premiums to PBGC to cover company bankruptcies; if necessary, PBGC will assume payments 32 MGMT 412 | Legal Issues Fall 2008

COBRA • Provides for continuation of health coverage (if offered) • Employee pays 102% of total cost • Coverage period: • 18 months for terminated employees • 36 months for spouse / ineligible dependent 33 MGMT 412 | Legal Issues Fall 2008

Other Federal Laws Regulating Health Plans • Health Insurance Portability and Accountability Act (1996) • Newborn and Mothers’ Health Protection Act (1996) • Mental Health Parity Act (1998) • Women’s Health and Cancer Rights Act (1998) 34 MGMT 412 | Legal Issues Fall 2008

Health Insurance Portability and Accountability Act (1996) • Also known as HIPAA (also addresses confidentiality issues) • Limits exclusions for preexisting conditions (a condition for which you received treatment in the past 6 months) • Maximum pre-existing exclusion is 12 months (reduced by length of time of past coverage) • Pre-existing exclusion cannot be applied to pregnancy • Group plans cannot discriminate against employees and dependents based on their health status 35 MGMT 412 | Legal Issues Fall 2008

Newborn and Mothers’ Health Protection Act (1996) • Health plans must cover: • Hospital stays of 48 hours following a normal delivery or • Hospital stay of 96 hours following a delivery by cesarean section • Mother can decide to leave earlier • No incentives (to physicians or mothers) for shorter lengths of stay 36 MGMT 412 | Legal Issues Fall 2008

Mental Health Parity Act (1998) • Does not require that mental health be covered in health plan, but. . . • If you do cover mental health, dollar limits on coverage must be the same as for medical and surgical (except for substance / alcohol treatment) • You can: • Have higher copays or limit the number of visits for mental health benefits • Limit the number of covered visits, even if the plan does not impose similar visit limits for medical and surgical benefits 37 MGMT 412 | Legal Issues Fall 2008

Women’s Health and Cancer Rights Act (1998) • If health plan pays for mastectomy, must also pay for prostheses and reconstructive surgery • Many states mandate coverage for screening mammograms 38 MGMT 412 | Legal Issues Fall 2008

Safety • OSHA (1974) • Established standards for employee safety • Addresses on-the-job injuries and occupational illnesses • Hazardous Communication Standard • Requires Manufacturers’ Safety Data Sheets • OSHA requires recordkeeping and site inspections 39 MGMT 412 | Legal Issues Fall 2008

Labor Relations • Very much a specialist area • Federal laws • Norris-La. Guardia Act (1932) • Wagner Act (1935) • Taft-Hartley Act (1947) • Landrum-Griffith Act (1959) • Proposed: Employee Free Choice Act • State laws • Right-to-work laws (union shop illegal) 40 MGMT 412 | Legal Issues Fall 2008

Right to Work States Source: http: //www. nrtw. org. Note that this is a partisan source – the map is the only one I can find, though. 41 MGMT 412 | Legal Issues Fall 2008