Chapter 17: Government and Legal Issues in Compensation

41. Legislation does not always achieve what it intends nor achieves what it achieves. True False

TRUE

57. In practice, the "going rate" for construction labor is the union rate. True False

TRUE

58. Prevailing wages protect foreign workers working as registered nurses. True False

TRUE

60. The Schultz v. Wheaton Glass case ruled that for jobs to receive equal pay, they do not have to be identical but substantially equal. True False

TRUE

62. Of the four affirmative defenses for unequal pay for equal work, "a factor other than sex" has prompted the most court cases. True False

TRUE

63. Pay differences for equal work may be justified for demonstrably business-related reasons. True False

TRUE

65. In Gunther v. County of Washington, the Supreme Court ruled that a wage discrimination suit could be brought under Title VII where the jobs were dissimilar. True False

TRUE

66. Women's median annual earnings compared to men's has changed from about 60 percent to 78 percent from 1980 to 2007. True False

TRUE

69. A higher proportion of women are employed by small versus large firms. True False

TRUE

70. The best evidence of true pay discrimination are statistical studies that account for gender differences in pay using legitimate factors. True False

FALSE

28. (p. 595) In _____ type cases, the focus is on the discriminatory consequences rather than the intent to discriminate? A. Disparate treatment B. Access discrimination C. Disparate impact D. Valuation discrimination

C

4. (p. 575) Which of the following is not true of the government's effect on the economy? Government _____. A. indirectly affects labor demand via government purchases B. affects labor supply via legislation C. affects demand for labor via interest rates D. immigration policy affects labor demand

D

40. (p. 607) _____ has produced more comparable-worth pay increases than any other approach. A. Integrative bargaining B. Win-win bargaining C. Interest-based bargaining D. Collective bargaining

D

51. "Living wages" are generally four to five times the federal minimum wage. True False

FALSE

54. Sam is computer system troubleshooter. His company requires him to wear a beeper when he is not at the office during weekends, but not evenings. Sam is eligible to receive pay for his "on-call" time. True False

FALSE

56. The purpose of prevailing wage laws is to assure that government projects do not waste tax dollars. True False

FALSE

64. Disparate treatment occurs when a seemingly neutral employment practice disproportionately excludes a protected group from employment opportunities. True False

FALSE

67. Women of all ethnic groups are less likely than men to seek part-time and flexible work arrangements. True False

FALSE

68. The gender wage gap is moderate for recent college graduates and decreases as the cohort ages. True False

FALSE

Compare and contrast disparate treatment and disparate impact.

Court cases have established two theories of discrimination behavior under Title VII: (1) disparate treatment and (2) disparate impact. Disparate Treatment: Disparate or unequal treatment applies different standards to different employees: For example, asking women but not men if they plan to have children. In Japan, for example, women college students continue to report that recruiters ask them different questions than are asked of male college students. The mere fact of unequal treatment may be taken as evidence of the employer's intention to discriminate under U.S. law. Disparate Impact: Practices that have a differential effect on members of protected groups are illegal, unless the differences are work-related. Under disparate impact, whether or not the employer intended to discriminate is irrelevant. A personnel decision can, on its face, seem neutral, but if its results are unequal, the employer must demonstrate that the decision is work-related. The two standards of discrimination—disparate treatment versus disparate impact—remain difficult to apply to pay issues, since pay differences are legal for dissimilar work. It is still not clear what constitutes pay discrimination in dissimilar jobs in the United States.

12. (p. 582) Which of the following occupational groups are not likely to be categorized as exempt? A. Administrative B. Professional C. Executive D. Clerical

D

25. (p. 592-593) _____ is not a "factor other than sex" in the Equal Pay Act. A. An employee's previous pay rate B. Shift differential C. Seniority D. Business necessity

A

11. (p. 580) A study of the effects of the living wage law in Los Angeles found all but the following _____. A. employees covered by the law received a pay increase of 20 percent B. one percent of covered jobs were lost C. a higher proportion of new hires were female D. turnover and absenteeism declined

C

24. (p. 592) Factors such as shift differential, temporary assignment, and training programs are examples of _____. A. working conditions B. "essential functions" C. factors other than sex D. bases of substantially equal

C

59. The two types of discrimination recognized in law are valuation discrimination and disparate treatment. True False

FALSE

61. In cases of equal pay, the formal job description is more important than the actual work performed. True False

FALSE

8. (p. 576) All of the following except _____ are provisions of the 1938 Fair Labor Standards Act. A. prohibition of hazardous work B. the minimum wage C. prohibition of child labor D. hours of work

A

9. (p. 577) The Worker Economic Opportunity Act _____. A. exempts stock options from the calculation of overtime B. stiffens requirements for reporting executive pay C. is unpopular with employers since it raises total wage costs D. extends SEC pay disclosure requirements to highly paid executives

A

22. (p. 590) A group of female employees have sued your company claiming their job is substantially equal to a job performed by men. Which of the following is your company's best defense? A. The job classifications are different B. Some factor other than sex C. Men occasionally perform two additional small tasks D. Most women were hired through a different source than men

B

33. (p. 599) Under Title VII, pay differences between dissimilar jobs will not be prohibited if the differences are based upon all of the following except _____. A. content of the work B. traditional pay patterns C. value to the organization's objectives D. the ability to attract employees in the external market

B

37. (p. 601-602) The key factors explaining the gender pay gap are differences in _____. A. qualifications and work/occupation B. work/occupation and work-related behaviors C. union membership and discrimination D. discrimination and firm/industry

B

5. (p. 576) The _____ Act extends the prevailing-wage concept to manufacturers or suppliers of goods for government contracts. A. Sarbanes-Oxley B. Walsh-Healey C. Fair Labor Standards D. Davis-Bacon

B

30. (p. 596-597) A(n) _____ is "a grouping of employees who perform similar work, and occupy positions with similar responsibility levels and involving similar skills and qualifications." A. NOV B. FCSS C. SSEG D. OWBPA

C

48. The purpose of minimum wage legislation is to maximize the number of employed people. True False

FALSE

43. Government employment is growing faster than the population. True False

TRUE

45. The Mental Health Act of 1997 requires coverage of mental illness as any other medical condition. True False

TRUE

1. (p. 574) The executive branch of the federal government _____. A. enforces laws through agencies and its other bodies B. passes laws C. interprets laws and considers their constitutionality D. changes existing laws or passes new ones

A

13. (p. 582) All of the following are criteria used in determining exempt status for executives regarding overtime pay provisions except _____. A. engage in semi-routine activities B. primarily undertake management duties C. supervise two or more employees D. authority to hire or fire other employees

A

27. (p. 594) The ADEA _____. A. prohibits discrimination on the basis of sex, race, or color B. was amended in 1990 to include the Older Workers Benefit Protection Act C. typically focuses on differences in pay, promotions, pay raises, and performance reviews D. prohibits discrimination on the basis of national origin in any employment condition

B

20. (p. 588) Prevailing wage laws _____. A. set pay for work done to produce goods and services contracted by the state government B. are the maximum wages that must be paid for work done on covered government projects or purchases C. require that contractors determine the "flat rate" for construction labor in an area D. was passed in response to conditions on projects such as the construction of the Hoover Dam during the Depression

D

26. (p. 593) Which of the following is not a guideline for interpreting the Equal Pay Act? A. Determination of substantially equal is based upon the content of actual work performed B. Men and women may be paid differently if there are seniority differences C. Men and women may be paid differently if there are performance differences D. Men and women may be paid differently if customers prefer one sex over the other

D

50. Because relatively few people are paid minimum wage, raising the minimum wage does not affect pay structures. True False

FALSE

53. The objective of the overtime provision of FLSA is to share available work by making it more costly for employers to schedule overtime for current employees than to hire additional workers. True False

TRUE

10. (p. 578-579) Which of the following is not true regarding minimum wage? A. Nearly three-fourths of those earning minimum wage or less are in service occupations. B. The percent of women and men earning minimum wage is approximately equal. C. Minimum wages are more common in retailing than other industries. D. The minimum wage directly affects only a small number of people.

B

15. (p. 584) The _____ Act requires workers be given a number of breaks during the workday. A. Portal-to-Portal B. Occupational Safety and Health C. Fair Labor Standards D. Equal Pay

B

2. (p. 574) Which of the following is the least likely response companies would make to legislation? A. Lobbying B. Token compliance C. Auditing their practices D. Defending company practices in court

B

What are the four basic steps in establishing a comparable-worth plan?

Establishing a comparable-worth plan typically involves the following four basic steps: 1. Adopt a single "gender neutral" point job evaluation plan for all jobs within a unit. If employees are unionized, separate plans have been prepared for each bargaining unit and take precedence over previous agreements. The key to a comparable-worth system is a single job evaluation plan for jobs with dissimilar content. 2. All jobs with equal job evaluation results should be paid the same. Although each factor in the job evaluation may not be equal, if the total points are equal, the wage rates must also be equal. 3. Identify the percentages of male and female employees in each job group. A job group is defined as a group of positions with similar duties and responsibilities that require similar qualifications, are filled by similar recruiting procedures, and are paid under the same pay schedule. Typically, a female-dominated job group is defined as having 60 percent or more female incumbents; a male-dominated job group has 70 percent or more male incumbents. 4. The wage-to-job evaluation point ratio should be based on the wages paid for male-dominated jobs since they are presumed to be the best estimate of nondiscriminatory wages.

42. While government affects the supply of labor through legislation, it has little effect on the demand for labor. True False

FALSE

44. The overall effect of immigration is an increase in wages for low skilled workers. True False

FALSE

46. All employees are covered by the Fair Labor Standards Act of 1938 and its amendments. True False

FALSE

71. (p. 574) What are the three branches of the federal government In the United States? What are their functions?

In the United States, there are three branches of federal government and each plays a role in the legal and regulatory framework in which employers work toward compliance objectives. The legislative branch (Congress) passes laws (or statutes). The executive branch, headed by the President, enforces laws through agencies and its other bodies, and the judicial branch interprets laws and considers their constitutionality. Over time, the legislative branch may change existing laws or pass new ones. The way that the judicial branch interprets laws can also change.

73. (p. 578) What is the Fair Labor Standards Act of 1938? What are its major provisions?

The Fair Labor Standards Act of 1938 (FLSA) covers all employees (with some exceptions) of companies engaged in interstate commerce or in the production of goods for interstate commerce. In spite of its age, this law remains a cornerstone of pay regulation in the United States. The FLSA's major provisions are: 1. Minimum wage 2. Hours of work 3. Child labor An additional provision requires that records be kept of employees, their hours worked, and their pay.

23. (p. 592) Experience, training, education, and ability as measured by the performance requirements of a particular job are the Department of Labor's definition of _____. A. effort B. skill C. responsibility D. working conditions

B

21. (p. 589) Denial of jobs, promotions, or training opportunities to qualified women or minorities are examples of _____ discrimination. A. access B. valuation C. disparate treatment D. preferential treatment

A

16. (p. 584) Susan works in a sterile laboratory that requires her to scrub and put on protective clothing. Which of the following acts determines whether she should be paid for this time? A. The Fair Labor Standards Act B. The Occupational Safety and Health Act C. The Portal-to-Portal Act D. The Health Care Workers Protection Act

C

47. If federal and state minimum wage laws cover the same job, workers should be paid at or above the higher rate. True False

TRUE

49. Minimum wage jobs are very rare in the software, chemical, oil, and pharmaceutical industries. True False

TRUE

52. A "living wage" provides for a minimum wage tailored to living costs in a city or geographic area. True False

TRUE

55. A government-defined prevailing wage is the minimum wage that must be paid for work done on covered government projects or purchases. True False

TRUE

14. (p. 582) To qualify for the administrative employee exemption, which of the following tests must be met? A. The employee must be compensated on a salary or fee basis at a rate not less than $455 per week. B. The employee's primary duty must be managing the enterprise. C. The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent. D. The employee must have the authority to hire or fire other employees.

A

What are the sources of earnings gaps?

Some of the more important sources, of earnings gaps include the following: • Work/occupation differences • Work-related behavior • Labor market conditions • Firm/industry differences • Union differences • Discrimination Considerable research has examined the factors which are the central sources of the wage differences between men and women and the racial/ethnic groups. The issue, especially any proposed remedies, continues to generate research and debate. The primary sources contributing to the gender gap differ from the primary sources for the race/ethnic gaps. It appears that differences in the work/occupation and differences in work-related behaviors are central to understanding the remaining gender wage gaps. In contrast, differences in qualifications, especially educational levels and work-related experience as well as differences in occupations, are important sources of the gaps for both blacks and Hispanics compared to white men.

18. (p. 585) Compensatory time off would _____. A. give employers and employees the option of trading overtime pay for time off B. provide employees overtime pay after 8 hours for a 10-hour workday C. allow an employer flexibility in the use of "on-call" employees D. enable employers to monitor the employment practices of subcontractors

A

32. (p. 598) To determine pay discrimination on jobs of dissimilar content requires a standard that allows jobs of dissimilar content to be declared comparable and allows pay differences for jobs that are not comparable. This standard is _____. A. job evaluation B. comparable worth analysis C. disparate impact analysis D. point factor market comparison

A

36. (p. 601) Which of the following factors has not been suggested as an explanation of the earnings gap between the sexes and among minorities? A. Personality and cultural differences B. Industry and firm differences C. Union differences D. Work-related behavior differences

A

76. (p. 592) (p. 592) What are the definitions of skill, effort, responsibility, working conditions according to the Department of Labor? What are the conditions that must be met for an employer to support a claim of unequal work?

The Department of Labor provides these definitions of the four factors. 1. Skill: Experience, training, education, and ability as measured by the performance requirements of a particular job. 2. Effort: Mental or physical—the degree of effort (not type of effort) actually expended in the performance of a job. 3. Responsibility: The degree of accountability required in the performance of a job. 4. Working conditions: The physical surroundings and hazards of a job, including dimensions such as inside versus outside work, heat, cold, and poor ventilation. Guidelines to clarify these definitions have evolved through court decisions. For an employer to support a claim of unequal work, the following conditions must be met: 1. The effort/skill/responsibility must be substantially greater in one of the jobs compared. 2. The tasks involving the extra effort/skill/responsibility must consume a significant amount of time for all employees whose additional wages are in question. 3. The extra effort/skill/responsibility must have a value commensurate with the questioned pay differential (as determined by the employer's own evaluation). Time of day (e.g., working a night shift) does not constitute dissimilar working conditions. However, if a differential for working at night is paid, it must be separated from the base wage for the job.

72. (p. 576) What does the Securities Exchange Act of 1934 do? The Securities Exchange Act Of 1934 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.

The Securities Exchange Act Of 1934 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.

19. (p. 586) Which of the following regarding child labor is not true? A. Persons under 18 cannot work in hazardous occupations such as logging and mining B. Persons under 16 cannot work in jobs involving interstate commerce unless working for a parent or guardian C. The ILO finds that on a global basis child labor is increasing D. The highest rates of child labor are in sub-Saharan Africa

C

29. (p. 595) _____ prohibits discrimination on the basis of race, color, religion, sex, or national origin. A. Executive Order 11458 B. The FMLA C. Executive Order 11246 D. The Rehabilitation Act

C

3. (p. 575) The government has interests in compensation decisions related to all but _____. A. the fairness of pay procedures B. safety nets for the unemployed and disadvantaged C. earnings compared to foreign workers D. overtime and child labor

C

34. (p. 599) Under Title VII _____. A. pay discrimination is limited only to equal jobs B. discrimination may be proved by indirect evidence of an employer's intent C. intentional discrimination is prohibited whether or not the employees in question hold the same or different jobs D. pay discrimination cannot occur in setting different rates for different jobs

C

38. (p. 603-604) Which of the following statements regarding wage differences in industries and firms is not true? A. Men's wages are 54 percent higher in large firms than small B. Women's wages are 37 percent higher in large firms than small C. Female employment is more heavily concentrated in large than small firms D. The pay premium for switching jobs accrues to white males, but not women and minorities

C

6. (p. 576) The Davis-Bacon Act _____. A. states that income from most stock plans need not be included in calculating overtime pay B. increases border of proof on employers to rebut some discrimination claims C. requires that mechanics and laborers on public construction projects be paid the "prevailing wage" in an area D. extends prevailing-wage concept to manufacturers or suppliers of goods for government contracts

C

) How can a proactive compensation manager influence the nature of regulations?

Compliance with laws and regulations can be a constraint and/or an opportunity for a compensation manager. The regulatory environment certainly constrains the decisions that can be made. Once laws are passed and regulations published, employers must comply. But a proactive compensation manager can influence the nature of regulations and their interpretation. Astute professionals must be aware of legislative and judicial currents to protect both employers' and employees' interests and to ensure that compensation practices conform to judicial interpretation. A compensation manager can best undertake these efforts in the following ways. First, join professional associations to stay informed on emerging issues and to act in concert to inform and influence public and legislative opinion. Second, constantly review compensation practices and their results. 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.

17. (p. 585) Employers were more likely to offer bonuses, gain-sharing, and stock options after the passage of the _____. A. FLSA B. Davis-Bacon Act C. Sarbanes-Oxley Act D. Worker Economic Opportunity Act

D

31. (p. 598) Regarding pay differences for different jobs, _____. A. there is considerable acceptance of comparable worth B. the courts favor reliance on use of unbiased job analysis results C. court decisions have been inconclusive D. courts continue to uphold use of market data to justify differences

D

35. (p. 599) Regarding gender pay gaps, which of the following is true? A. The gap is largest for Asians B. The gap between black and white women is more than between black and white men C. Asian women earn less than white women D. Overall, the gender gap has decreased

D

39. (p. 606) Which of the following is not one of the steps in establishing a comparable-worth pay plan? A. Adopt a single, "gender neutral" point job evaluation plan for all jobs within a unit. B. All jobs with equal job evaluation points should be paid the same. C. Identify the percentages of male and female employees in each job group. D. Base the wage-to-job evaluation point ratio on wages paid for female-dominated jobs.

D

7. (p. 576) Under the _____ Act, executives cannot retain bonuses or profits from selling company stock if they mislead the public regarding their company's financial condition. A. Worker Economic Opportunity B. Davis-Bacon C. Walsh-Healey D. Sarbanes-Oxley

D

75. (p. 589-591) Distinguish between access discrimination and valuation discrimination.

The law recognizes two types of discrimination: access discrimination and valuation discrimination. The charges of discrimination and reverse discrimination that most often make the news involve access discrimination: the denial of particular jobs, promotions, or training opportunities to qualified women or minorities. A second legally recognized interpretation of discrimination is valuation discrimination, which looks at the pay women and minorities receive for the jobs they perform. This is the more salient definition for our purposes. The Equal Pay Act makes it clear that it is discriminatory to pay women less than males when they are performing equal work. This definition of pay discrimination hinges on the standard of equal pay for equal work. Many believe that this definition of valuation discrimination does not go far enough. They believe that valuation discrimination can also occur when men and women hold entirely different

74. (p. 582) What are the tests that must be met to qualify for the executive employee exemption?

To qualify for the executive employee exemption, all of the following tests must be met: • The employee must be compensated on a salary basis (as defined in the regulations) at a rate not less than $455 per week; • The employee's primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise; • The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and • The employee must have the authority to hire or fire other employees, or the employee's suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.