Chapter 13

Fair Labor Standards Act (FLSA)

Under the FLSA a minimum wage of a specified amount must be paid to all employees in covered industries. The FLSA provides that Congress has the power to periodically change the specified amount of minimum wage to compensate for the increase in the cost of living due to inflation.

Unemployment Compensation

In 1935, Congress enacted the Federal Unemployment Tax Act (FUTA) that created a state-administered system to provide unemployment compensation to eligible employees who lose their jobs. Under FUTA's requirements, employers must pay unemployment taxes to the state, and the money is deposited into the federal government's unemployment insurance fund. Each state establishes the eligibility requirements and administers the payments to the eligible unemployed workers.

Employee Retirement Income Security Act (ERISA)

Although employers are not required to establish pension plans and other welfare benefits (e.g., vacation, sick time, etc.), when the employer provides such benefits, it must comply with the record-keeping, disclosure, and other requirements of ERISA. ERISA applies to private employers, and thus federal, state, and local government pension funds are exempt from its coverage. Some of the ERISA requirements are as follows: Pension plans must be in writing and a pension fund manager must be named. The employer cannot invest more than 10% of the pension's funds in securities of the sponsoring employer. The named pension fund manager has a fiduciary duty to act as a "prudent person" for the administration of the pension's funds. Vesting requirements (vesting occurs when an employee has a right to receive pension benefits): a. Require the employer's contributions to be completely forfeitable for a period up to five years and totally vested after that period of time, or b. Require the employer's contributions to be gradually vested over a seven-year period and completely vested after that period of time.

Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)

COBRA prohibits employers from eliminating a worker's medical, optical, or dental insurance coverage on voluntary or involuntary termination of the worker's employment, or when a worker is not eligible for the benefits because his or her hours were reduced. Workers who are fired for gross misconduct, or if the employer completely eliminates its group benefit plan, are excluded from this protection. Under COBRA, the employer must offer the continuation of medical, dental, or optical benefits to the employee and his or her dependents under the employer's policy. The employee is responsible for paying the premiums for the policy plus up to a 2% administration fee for a period of 18 months, or 29 months for a disabled worker. An employer who refuses to comply with the law may be required to pay a penalty up to 10% of the annual cost of the group plan or $500,000, whichever is less. The employee must fill out appropriate paperwork within a specified period of time after employment separation and submit it to the employer.

Family and Medical Leave act of 1993 (FMLA)

The FMLA went into effect in 1993 and provides protection to employees who need time off from work for family or medical reasons. The FMLA applies to employers who have 50 or more employees and provides for eligible employees to receive up to 12 weeks of family or medical unpaid leave during any 12-month period. Any of the following events would make an employee eligible to receive this benefit if he or she has worked for employer for at least one year and has performed more than 1,250 hours of service during the preceding year: (a) The birth of a child; (b) The adoption of a child; (c) The placement of a foster child in the employee's home; (d) The care of a seriously sick spouse, parent, or child; or (e) Any serious health condition that prevents the employee from performing any of the essential functions of his or her job.

Employee Privacy Rights

The Omnibus Crime Control and Safe Street Act allows employers to ban calls for private use and monitor calls for compliance but prohibits employers from listening to the conversations of personal calls and disclosing the content of those conversations. Any violators of this act are subject to fines.

Occupational Safety and Health Act of 1970 (OSH Act)

The primary statutory regulation designed to provide a safer workplace is the OSH Act, which requires every employer to provide its employees a workplace environment free from any recognized hazards that are likely to cause death or serious bodily harm. Only private employers are within the scope of the OSH Act, and thus the federal, state, and local governments are exempt.

Drug Testing

To promote safety and increase productivity, employers are using various forms of testing for employees. Drug testing is often required as a condition of employment. Each state may have different laws governing this type of testing, but many states have statutes allowing drug testing by private employers with restrictions on when the testing is appropriate and how it is performed. For private and government employers, the drug testing must be reasonable. Pre-employment testing is frequently used by employers to increase productivity, save money, and reduce turnover rates. The Employee Polygraphic Act of 1998 prevents employers from using lie-detector tests for screening job applicants or randomly administering such tests to existing employees unless the test is used in specific instances where the employer has suffered an economic injury. Aptitude tests, typing tests, and professional exams are allowed so long as the tests are designed to evaluate necessary skills for the job. Employees in certain occupations, such as pilots, may be required to undergo medical tests.

Immigration Reform and Control Act (IRCA)

Under the IRCA and the Immigration Act of 1990, it is unlawful for employers to hire illegal immigrants. The law mandates all U.S. employers to complete INS Form I-9 for each employee. This requirement imposes an obligation on the employer to inspect documents and determine the employee's eligibility to work in the United States. Finally, employers must maintain records of each employee and post in the workplace notices regarding the law. All violators are subject to criminal and civil penalties.

Workers Compensation Laws

Workers' compensation laws are intended to provide a remedy for injured workers or their dependents. They are state laws and thus they differ among states. Coverage does not depend on whether the injury was caused by the employer's fault.