15: Federal Employment Laws That Impact Compensation and Benefits

The big picture

A useful way to view EEO and Affirmative Action rules in their entirety is to use the concept of protected groups. If compensation differentials exist between the majority of employees and members of protected groups, the employer must be prepared to justify them. All compensation policies, programs, and practices of an organization should be examined as steps intended to guarantee that no discrimination against protected groups has occurred or can occur. Hire, fire and promotion processes that are effectively documented, objective, performance based, and consistently applied become tools for promoting a transparent and open work environment versus a potentially litigious one.

HIPAA affects how employers:

A) Protect employee health information

Which of the following employees may collect unemployment insurance?

C) Gerald, who was discharged due to budget constraints.

What is not a legitimate source of wage data for Prevailing Wage Determinations?

C) Private surveys that provide national averages

A company may protect itself from liability if:

C) if the reasonable accommodation will cause undue hardship to the business

Two Types of Discrimination

Disparate treatment & Disparate impact

Prevailing Wage Laws

Federal and state governments passed laws that require government contractors to pay "prevailing" rates.

Defined benefit plans.

For defined benefit plans, an organization can use any of three vesting methods under ERISA: Immediate vesting Five-year cliff vesting which is 0% vesting for less than 5 years of service; 100% vesting after 5 years, or any other cliff vesting arrangement that provides 100% vesting in less than 5 years Seven-year graded vesting which is 0% for years 1 and 2; 20% after year 3, plus an additional 20% each subsequent year until 100% vested after 7 years, or any other graded vesting arrangement that provides 100% vesting in less than 7 years

FLSA Overhaul

In August 2004, the Department of Labor update of the FLSA regulations was the first overhaul of the Act in over 50 years. The changes were designed to simplify the rules for the application of FLSA executive, administrative or professional exemption tests, or EAP exemptions. The law states that for an employee to be exempt, the position must: -be salaried (a few exceptions exist) -pay at least $455 per week or $23,660 per year -be a position whose "nature of duties" are exempt

Equal Employment Opportunity and Affirmative Action

Let's take a look at each of the laws and regulations that most affect compensation and benefits. We'll start with the Equal Employment Opportunity Act. The laws enforced by the Equal Employment Opportunity Commission (EEOC) are the following: Title VII Civil Rights Acts of 1964 and 1991 The Pregnancy Discrimination Act The Equal Pay Act of 1963 (EPA) The Age Discrimination in Employment Act of 1967 Title I of the Americans with Disabilities Act of 1990 (ADA) Sections 102 and 103 of the Civil Rights Act of 1991 Sections 501 and 505 of the Rehabilitation Act of 1973 The Genetic Information Nondiscrimination Act of 2008 (GINA) State laws on civil rights matters have been in effect longer but have been superseded by federal laws.

New Overtime Rule

On January 1, 2020, a new overtime rule took effect increasing the salary threshold to $684 a week ($35,568 a year). To be exempt from overtime, employees must now be paid a salary of at least the new threshold amount. The duties test from 2004 remains the same. To comply with these regulations, a job analysis on positions mostly likely impacted by these changes should be performed.

The Affordable Care Act

Permits young adults to stay on their parents' employer sponsored-plan until age 26. Eliminates pre-existing conditions, lifetime and annual limits. Prohibits gender discrimination Requires employers with greater than 50 "full-time equivalent" employees (this includes a full-time equivalent for every 30 hours worked) to offer qualified employer-sponsored health insurance plans or pay penalties as part of the Employer Shared Responsibility Payment. An employer sponsored qualified plan:Is affordable - it does not cost more than 9.5% of the employee's household income andProvides minimum value - it must have an average cost sharing of 60% Provides a tax credit to small employers based on the number of employees and average annual wage. Small Business Tax Credit Information

Fair Labor Standards Act

The Fair Labor Standards Act or FLSA is often called the wage and hour law. It was originally passed in 1938, overhauled in 2004, and a new rule establishing overtime pay eligibility took effect on January 1, 2020. The FLSA has four provisions that affect compensation programs. They are the following: minimum wages overtime pay equal pay and record keeping requirements

Social Security and Medicare (FICA)

The common payroll deductions known as FICA, required by the Federal Insurance Contributions Act of 1936, are for Social Security and Medicare. Both employers and employees pay taxes to contribute to Social Security which is also known as old age, survivors, and disability insurance (OASDI) and Medicare which is hospital and medical insurance for the aged and disabled. Employer and employee taxes and the earnings subject to tax have been rising along with benefits. For 2019, the maximum taxable wage is $132,900.

Summary

The legal environment surrounding compensation and benefits continues to become more structured and demanding for employers. The basic laws that cover employee compensation were developed during the Great Depression. But recent legislation is a function of the demands for social justice that have come about since the late 1960s. Fair Labor Standards Act The Fair Labor Standards Act (FLSA) continues to serve as the foundation for wage legislation and sets the standards for overtime and record-keeping requirements. Equal Pay The Equal Pay Act of 1963 was passed as an amendment to the FLSA. The Equal Pay Act prohibits salary differentials between men and women employed by the same establishment in jobs that require equal skill, effort, and responsibility. The concept of equal pay was expanded further through cases involving comparable worth. Comparable worth calls for equal pay for jobs of comparable value within an organization. Prevailing Wages The U.S. government also requires that employers who are party to federal contracts pay prevailing rates. In addition, a set of federal regulations now governs what employers can pay immigrants. Equal Employment Opportunity Equal employment opportunity (EEO) rules and affirmative action (AA) guidelines are found in several laws, a number of executive orders, and some case law. Equal employment opportunity programs prohibit discrimination based on race, color, gender, religion, age, or national origin in any of the terms of employment stipulated by employers, employment agencies, or labor unions. Affirmative action programs call for positive steps to correct the results of past discrimination. Tax Laws Continually revised by Congress, tax laws have an important impact on employer benefit costs. Under the present U.S. internal revenue code, certain benefits are not taxed — medical and dental insurance are examples. However, other services or perquisites may be taxed. For example, services or perquisites provided only to executives are considered taxable. Because of this, executive compensation is continually altered to take advantage of changing tax laws. Benefits In the field of benefits, there's a continuing trend toward legislation to protect employees' investment in their benefits. More than ever, it is necessary for employers and human resources professionals to know what federal law requires. Legally required employee benefit programs include: Social Security Unemployment Insurance Workers' Compensation How employers administer their health and medical programs are determined by federal acts: The Family and Medical Leave Act (FMLA) provides all eligible employees with leave of up to 12 weeks per year for specified family and medical reasons. Leave may be paid if the employee has earned paid time off, or unpaid if not. The Consolidated Omnibus Budget Reconciliation Act (COBRA) entitles all eligible employees and their spouses and dependents to extend their group health benefits for up to 18 months. The Health Insurance Portability and Accountability Act (HIPAA) further protects an employee's right to health-insurance coverage. HIPAA's purpose is to provide coverage security for small employers and those leaving employment. The Affordable Care Act is intended to ensure that all employees are covered by health care insurance either by their employer or through individually purchased coverage. Employee Retirement Income Security Act (ERISA) ERISA was passed to ensure that pensions offered by private-industry employers meet certain standards and are received by employees.

Disparate impact

The second, disparate impact examines the effect of discrimination. Discrimination may be assumed if a protected group is not represented in a job category as much as might be expected. A common test for adverse impact is the four-fifths rule, which states that the selection rate for any protected group must be no less than four-fifths or eighty percent of the selection rate for the group with the highest selection rate. For example, we have a population of 10,000 people where 5,000 are "protected" and 5,000 are non-protected. Further assume that all 5,000 of the non-protected individuals are "selected" for some positive employment outcome (i.e., promotion, discretionary bonuses etc.), and that 4,000 of the 5,000 protected individuals are "selected". The calculation of the 80% Rule is 80% and hence no concern for disparate impact. Previous

Wage Legislation

Types are below

A) affirmative action

Which civil-rights program calls for positive steps to correct the results of past discrimination?

Comparable Worth Cases

case 1, 2 & 3

How to calculate overtime.

multiply total after normal hours by 1.5

What does vesting mean?

B) After a certain time, you have an ownership interest in the retirement plan.

Workers' Compensation Costs

Costs to employers are influenced by the provisions of state law, as well as by the employer's accident record. The cost of Workers' Compensation has been rising dramatically in recent years due to: A rise in medical costs Redefinition of on-the-job injury or accident Employee misuse of the system Lawyers inserting themselves into a process that is supposed to be a no-fault system.

Taxation of executive compensation

Many elements of executive compensation, however, are nonqualified plans that are subject to taxation. These plans may be introduced, expanded, or eliminated in response to changes in tax laws. For executives, companies may offer additional plans that have a different set of tax treatments depending on their design and administration. For instance, the extent of stock option offerings responds to changes in tax laws. Various forms of deferred income and restricted stock also seem to vary in response to tax-law changes. For all of these reasons, knowledge of and effective application of tax laws are an important part of compensation and benefit programs. For more information on forms of executive compensation, see our Courses: 12: IRS Reasonable Executive Compensation 18: Intermediate Sanctions 21: Compensation for Business Leaders and 42: Accumulated Earnings and Deferred Compensation Keeping abreast of the tax treatment and corresponding definitions of different compensation elements is critical.

Employer Coverage

Most employers are required to comply with FLSA if they have: at least two employees that are engaged in interstate commerce at least two employees that produce goods for interstate commerce OR employees that handle, sell, or otherwise work on goods or materials produced for or moved in interstate commerce Covered employers also include: Retail or service establishments with $500,000+ annual gross sales Employers of domestic workers who are paid at least $100 per year. Construction companies, laundries, dry cleaners, private hospitals, and schools, regardless of business volume.

Tax Laws

Tax laws are an obvious part of the legal environment of compensation administration. Anyone who has ever received a paycheck is aware of income-tax withholding. Less obvious, however, is the influence of tax laws on broad-based benefits and executive compensation.

Americans with Disabilities Act

The Americans With Disabilities Act of 1990 states that discriminating against a disabled person is illegal and defines a "qualified individual with a disability" as one who: satisfies the job-related requirements of the employment position he or she holds or is applying for with or without reasonable accommodation, can perform the essential job functions of that position. Many cases are attributed to employer's inflexibility to provide reasonable accommodation as it relates to time-off policies such as sick, paid, unpaid, disability and FMLA. Creative time-off policies can be effective in curtailing such allegations. If you can show that a specific accommodation would result in undue hardship, being disruptive to other employees or to your ability to conduct business, you may have a viable undue-hardship defense. The government doesn't require you to make an accommodation that would impair operations or put other people out of work. Having accurate and updated job descriptions is crucial to defend hiring choices. The job description may end up being the only defense to establish the essential elements of a job. According to the act: "If an employer has prepared a written description before advertising or interviewing applicants for the job, this description shall be considered evidence of the essential functions of the job."

Health Benefits

There are several acts that affect how employers provide health insurance plans to their employees. These are the: Consolidated Omnibus Budget Reconciliation Act (COBRA) Health Insurance Portability and Accountability Act (HIPAA) Affordable Care Act (ACA) Family and Medical Leave Act (FMLA) Pregnancy Disability Act Uniformed Service Employment and Reemployment Rights Act (USERRA)

Comparable Worth Not Completely Defined

These three cases questioned the adequacy of the market as a criterion of job worth. Job evaluation as a formal method of comparing jobs is a logical potential solution as long as: When job evaluation plans use market salary rates as a basis for key jobs, the job evaluation and market rates are not separate criteria. The same job evaluation plans are used for traditional "men" versus "women" jobs. Neutral / objective job evaluation plans are used.

Overview

We'll focus on the laws and regulations that have the most impact on compensation and benefits decision makers. First we'll look at compensation laws affecting wages and salaries, including the: Equal Employment Opportunity (EEO) Affirmative Action Equal Pay Act or EPA Collective Bargaining Laws Fair Labor Standards Act or FLSA Vietnam Era Veterans Readjustment Assistance Act (VEVRAA) Prevailing Wage Laws Tax Laws Then we'll look at laws that mandate benefits, such as Social Security, Unemployment Insurance, and Workers' Compensation. Finally, we'll examine a number of other benefits laws, including the: Old Age, Survivors, Disability and Health Insurance Program (OASDHI) Consolidated Omnibus Budget Reconciliation Act or COBRA Health Insurance Portability and Accountability Act or HIPAA Affordable Care Act Family Medical Leave Act or FMLA Pregnancy Disability Act Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) Employee Retirement Income Security Act or ERISA.

According to EPA, salary differentials between men and women are allowed when they are based on:

A) legitimate seniority systems

The following Fair Labor Standards Act (FLSA) provisions affect which of these compensation programs:

A) minimum wages, overtime pay, and hours worked

Which group of employees might be eligible for overtime pay according to FLSA?

A) salaried executive assistants

The Pension Benefit Guaranty Corporation ensures that:

A) vested benefits up to a certain amount per month are guaranteed to participants

Affirmative Action:

Affirmative action programs, laws, and practices call for positive steps to correct the results of past discrimination. Government contractors are the major group required to have affirmative action programs, and the executive orders previously mentioned spell out most of the requirements. Affirmative action programs also require: Documenting employer activities Maintaining records Updating periodic reports Executive orders 11246 of 1965 and 11375 of 1967 are the foundation of affirmative-action programs. Disabled persons and Vietnam Veterans are also covered by both EEO and affirmative action requirements. Employer coverage varies somewhat under the different legislation and regulations. Affirmative Action does not mean that managers are expected to hire unqualified applicants. Additionally, Affirmative Action quotas are not automatic. The implementation of quotas must be ordered by a court of law. A true quota situation has rarely occurred across the United States. Affirmative Action is usually implemented as a voluntary goal-oriented program. Example Affirmative Action Plan: Oregon Health Authority for 2017 - 2019 Remember, while EEO and AA plans are different, they do have one thing in common: they both require employers to demonstrate fairness in hiring and firing decisions.

Comparable Worth Not Completely Defined part 2

At present, it seems best to label comparable worth a complicated legal concept that may crystalize with further court cases or through legislation. The issue is whether jobs or people in the organization are being paid on a nondiscriminatory basis. While not in law, it should be noted that inspections of the Department of Labor's Employment Standards Administration's Office of Federal Contract Compliance Programs (OFCCP) clearly examine issues that would fall into the area of comparable worth. Congress is currently reviewing a bill that is intended to strengthen the EPA called the, Paycheck Fairness Act. This new proposed bill is the outgrowth of women still being paid only $0.81 for each $1.00 a male counterpart is paid. The bill would: allow employees to disclose salary information with co-workers despite workplace rules prohibiting disclosure. require employers to show that any wage discrepancies are based on genuine business requirements The more internal and external factors you include in the job evaluation process, the more objective, holistic, and defensible the results.

Contractors holding government service contracts of $2,500 or less must pay service employees at least the minimum wage. This is stated in which act?

B) McNamara-O'Hara Service Contract Act

Which of the following benefits is taxed under the present U.S. internal revenue code?

B) perquisites provided only to executives

The Family and Medical Leave Act (FMLA):

B) provides for up to 12 weeks of leave for medical reasons

Comparable Worth

Based on the Civil Rights Act, comparable worth extends the concept of "equal pay for equal work" to "equal pay for jobs of equal value." Comparable worth flows from an observation that women are paid less than men and the idea that when jobs filled mostly by women are judged "comparable" to jobs filled mostly by men, wages for both should be the same. Proponents of comparable worth argue that there are female-dominated occupations, so the labor market discriminates against them. To overcome this kind of discrimination they call for equal pay for jobs of comparable value within an organization. This differs from EPA. The EPA dictates that the jobs being compared must be substantially equal in terms of duties, responsibilities, skill, and working conditions. There are three major court cases that serve to illustrate the issue.

Workers' Compensation Benefits

Benefits are usually based on a worker's pay at the time of injury and the state average weekly wage. Worker's Compensation Benefits provide for: permanent total disability and temporary total disability permanent partial disability survivor benefits for fatal injury medical expenses and rehabilitation Maximum and minimum benefit payments for specified injuries and total claims are typically specified by law, as are time limits. Workers' compensation includes payment for: medical treatment death benefits and salary replacement benefits

Benefit Legislation

Broad-based employee benefit programs are highly regulated by federal legislation. We will examine three types of benefits in the remainder of this course: Required benefits covered by the Old Age, Survivors, Disability and Health Insurance Program or OASDHI Health and medical benefits covered by FMLA, COBRA, HIPAA, and the Affordable Care Act Retirement plans that must meet ERISA requirements

Proponents of comparable worth argue that women have been "crowded" into female-dominated occupations. As a result, the cost of labor market:

C) inherently discriminates against women

Workers' Compensation is determined by:

C) state law

COBRA

COBRA entitles all eligible employees and their spouses and dependents to extend their group health benefits for up to 18 months. Employees are able to purchase extended health care coverage if their jobs ended for any reason other than gross misconduct. To qualify, the employee must have been a participant in the company's group health plan prior to the qualifying event. The company must provide the employee with written notice explaining the employee's rights under COBRA. The employee has 60 days from the date of notice to elect COBRA coverage. This coverage begins the day that health care coverage ended and lasts from 18 months to 36 months depending on the qualifying event such as voluntary termination or divorce. The employee pays the entire group rate premium for health care coverage plus a small surcharge, typically amounting to 102% of the monthly premium.

Employee Coverage

Depending on the job, some employees are not covered by FLSA minimum wage provisions. They are referred to as "Exempt Employees". The five major groups of exempt employees are executives, administrative employees, professional employees, both learned and creative, outside sales personnel whose jobs match the definitions provided by the Wage and Hour Division of the Department of Labor and specific computer professionals. The FLSA overhaul of 2004 simplifies these "white collar" exemptions. We'll look at these a little later. Employees who are exempt from minimum-wage provisions are also exempt from overtime provisions. Employers may provide financial remuneration in the form of spot bonuses, compensatory time-off, etc. to exempt employees to recognize the extra hours worked, although they're not required to do so. Employees who are covered by the minimum wage and overtime pay provisions of the FLSA must be paid overtime at the rate of 1½ times their regular pay for all hours worked over 40 in a workweek. They are referred to as "Non-Exempt Employees". A careful analysis of job duties is crucial to determining exemption status compliance. Basing FLSA classification on job title or salaried payroll type alone can lead to misclassified employees and have a snowball effect on legal fees and employee relations.

Equal Employment Opportunity:

EEO laws prohibit discrimination against an employee or job applicant based on race, color, religion, sex (including pregnancy, gender identity, and sexual orientation), national origin, age (40 or older), disability or genetic information. Also, a person may not be discriminated against due to a discrimination complaint, a discrimination charge, or a discrimination investigation or lawsuit. EEO laws are applicable to hiring, firing, promotions, harassment, training, wages, benefits, and all other types of work situations. Typically, most employers with 15 or more employees are covered by EEOC laws, and those with 20 or more employees are subject to age discrimination laws. Employment agencies and labor unions are typically also covered by EEOC laws. Example EEO Policy Statement: Dell Example EEO Plan: University of North Carolina at Greensboro An annual EEO-1 report must be filed by March 31 of each year for applicable organizations that are: Subject to Title VII of the Civil Rights Act of 1964, as amended, with 100 or more employees; or Subject to Title VII of the Civil Rights Act of 1964, as amended, with fewer than 100 employees if the company is owned by or corporately affiliated with another company and the entire enterprise employs a total of 100 or more employees; or Federal government prime contractors or first-tier subcontractors subject to Executive Order 11246, as amended, with 50 or more employees and a prime contract, or first-tier subcontract amounting to $50,000 or more. This is an annual filing required by both the EEOC and the Office of Federal Contract Compliance Programs (OFCCP). The EEOC uses EEO-1 data to support enforcement of civil rights while analyzing employment practices, such as the representation of female and minority workers within companies. The OFCCP uses the data to determine which organizations to select for compliance reviews. Both federal agencies are responsible for enforcing federal anti-discrimination laws. The EEO-1 report gives these agencies the data they need to determine how effective an organization's anti-discrimination practices are and if a closer review of its employment practices should take place. A federal audit may take place when further review is needed.

ERISA Employer Requirements

ERISA requires that employers provide plan participants with important information about defined benefit and defined contribution plans and sets minimum standards for: funding vesting participation and benefit accrual ERISA requires plan fiduciaries (those who manage an employee benefit plan and its assets) to be accountable to the extent that they may be responsible for restoring losses to the plan. ERISA also allows participants to sue for benefits and breaches of fiduciary duty.

Recordkeeping

Employers must collect and keep certain information on nonexempt employees to permit the Wage and Hour Division to enforce the minimum-wage and overtime provisions of the FLSA. Employee records are typically maintained through HRIS, Payroll or Time & Attendance systems. FLSA recordkeeping requirements include: Employee's full name and social security number Address, including zip code Birth date, if younger than 19 Sex and occupation Time and day of week when employee's workweek begins Hours worked each day Total hours worked each workweek Basis on which employee's wages are paid (e.g., "$9 per hour", "$440 a week", "piecework") Regular hourly pay rate Total daily or weekly straight-time earnings Total overtime earnings for the workweek All additions to or deductions from the employee's wages Total wages paid each pay period Date of payment and the pay period covered by the payment3 Each employer must preserve for at least three years payroll records, collective bargaining agreements, and sales and purchase records. Records on which wage computations are based should be retained for two years, for example, time cards and piece work tickets, wage rate tables, work and time schedules, and records of additions to or deductions from wages. These records must be open for inspection by the Wage and Hour Division's representatives, who may ask the employer to make extensions, computations, or transcriptions. The records may be kept at the place of employment or in a central records office.3

Exceptions

FLSA exceptions for employers include: Limited circulation newspapers Fishing Seasonal amusement and recreational establishments Businesses with less than 500k in annual revenue Here are some additional jobs that are typically exempt from overtime provisions of the FLSA: agricultural employees railroad and airline employees some local delivery people truck drivers taxi drivers Employers may seek permission to pay people less than minimum wage if they are apprentices, disabled workers, or full-time students.

Defined contribution plans.

For defined contribution plans, ERISA requires companies to adopt a schedule at least as generous as one of two vesting schedules: Three-year cliff vesting which is 0% vesting for less than 3 years of service; 100% vesting after 3 years Six-year graded vesting which is vesting beginning in the employee's second year of service; it increases by 20% each year until the employee is fully vested at the beginning of the sixth year of employment An organization may always use a more generous vesting schedule than those just mentioned.

States' Rights

HIPAA allows states to pass legislation affecting employer medical plans as long as those laws are more beneficial than federal law. Federal HIPAA law typically sets the "floor" or minimum requirements and state laws exceed these as the "ceiling" or maximum requirements.

HIPAA

HIPAA is a federal law that imposes portability, non-discrimination, and certain other requirements on employer-sponsored health plans. HIPAA also includes regulations covering how employers must protect employees' medical privacy rights as well as the electronic disclosure of employees' medical information. It requires employers to cover employees' and their dependents' preexisting health conditions under certain circumstances, as well as protect the privacy of health information. It also ensures access to insurance for some employer groups and individuals previously unable to purchase health insurance. Human Resources has a pivotal role to play when it comes to the HIPAA Privacy Rule, which applies to protected health information. Protected health information is individually identifiable information that relates to a participant's past, present or future physical or mental health condition, treatment for the condition, or payment for treatment. Examples of protected health information include information related to benefits enrollment, claims processing, claims dispute resolution and premium payments. To comply with this requirement, HR departments must keep two files for each employee, one related to employment non-health related records and a second file containing all health information. A related rule is the HIPAA Security Rule which applies only to protected health information stored or transmitted electronically and is typically a shared responsibility between HR and IT. These provisions apply to employers sponsoring self-insured group health, dental and/or vision plans with 50 or more participants or that are administered by a third-party.

Case 3

In case three, jail matrons doing work similar to (but not equal to) that of prison guards charged that they were being discriminated against because the difference in pay between the two jobs was much greater than the difference between the jobs themselves. In this case, the Supreme Court ruled that women who file lawsuits charging gender discrimination in pay matters may have valid claims under civil rights law.

Wage Requirements for Foreign Nationals

In the United States, employers hire foreign nationals, particularly in professional areas. One of the legal requirements to hire a foreign national is paying the "prevailing wage." The U.S. government sponsors a salary survey, the Occupational Employment Statistics or OES survey, to provide a data source for Prevailing Wage Determinations to be submitted with Labor Condition Applications. It contains 800 broad job categories with six-digit job codes and updated job-family descriptions. The US Department of Labor's General Administrative Letter (GAL) 2-98, the Permanent Labor Certification Program regulation published on December 27, 2004 and other regulations state alternative sources to OES can be submitted to determine prevailing wages such as: A wage rate set forth in a collective bargaining agreement; A wage rate for the occupation and area of intended employment under either the Davis-Bacon Act or the McNamara-O'Hara Service Contract Act, which are available at www.wdol.gov; A wage rate produced by a survey conducted by an independent authoritative source that meets the requirements set forth in Departmental regulations; or A wage rate produced by another legitimate source of information. Use of Private Surveys to Determine a Wage Rate If your company chooses to purchase a private survey to find salary data for a job, guidelines must be followed. Survey Data at the time of submission must be no more than 24 months old Wage data must be collected across industries Report arithmetic mean if available, otherwise the median Submit methodology documentation covering statistic validity and data collection Surveys are geographic and must provide data for the area of intended employment and Submitted job descriptions must match the survey descriptions While many private surveys meet most of these requirements, the one factor that is often missing is geographic specificity. Many surveys report data on a regional basis and do not break it down further than a particular state. Each state varies as far as what data and surveys are acceptable. Just because a State Employment Service Agency accepts your private survey for a particular case does not mean it applies to any other similar case. There is no burden of proof on the Employer that Department of Labor OES data is correct as long as the survey meets requirements.

Case 2

In the second case, a union charged that Westinghouse Corporation had historically established classes of jobs for wage-setting purposes that discriminated against women. They demonstrated that Westinghouse had segregated "women's" jobs from "men's" jobs and set lower rates for the former. The federal district court decided that such a practice discriminated against women and ordered it stopped. The court upheld plaintiff's claims based on the equal-work standard.

Minimum Wage

Minimum-wage provisions establish a "floor" on the amount of pay an employee must receive. As of July 24, 2009, the U.S. federal minimum wage per hour is $7.25. In some jurisdictions the minimum wage is much higher than the federal minimum. In California, for example, the minimum wage is $11.00 per hour. Even within certain state jurisdictions this minimum rate can be different. For example, San Francisco currently has a minimum wage rate of $15.00 per hour. And the Los Angeles City Council approved an ordinance for a $15 per hour minimum wage to be phased in by 2020. FLSA Advocates say a minimum wage is required because of the imbalance of power between the employer and employee. This is particularly true in the lower levels of the economy. It also reduces dependence on government funded welfare programs and lowers the cost of government. FLSA Opponents argue that a minimum wage creates unemployment for the lowest level of workers and places a burden on small businesses. In the past, Congress raised the minimum wage by amending the FLSA whenever the floor would fall below about 50% of average hourly earnings. But the U.S. Congress failed to manage the minimum-wage level for the ten-year period from 1997 to 2007, which caused various states to enact minimum-wage laws with higher minimums than the national law. State minimum-wage rates prevail if they are higher than the national rate. The federal rate takes precedence if an employer engages in interstate commerce, like processing a credit card payment. The latest breakdown of minimum wages for the US is: 29 States and the District of Columbia exceed the federal requirement 16 States match the federal requirement 5 States with no minimum requirement - they default to the federal standard There are 18 states (AK, AZ, CA, CO, DC, FL, ME, MN, MO, MT, NE, NJ, NV, NY, OH, OR, SD, and WA) that have scheduled annual adjustments for their minimum wages based on varying formulas.

OASDHI

The Old Age, Survivors, Disability and Health Insurance Program is the US federal social insurance program that provides monthly benefits to qualified retirees, after age 65, with a partial benefit for retirees at age 62, their dependents, their survivors, and, in some cases, disabled workers. The source of funding for these benefits are federal taxes withheld from the paychecks of most workers with the exception of public employees and certain union employees. Self-employed persons are also required to pay the tax. Most workers are covered by OASDHI provisions with the following exceptions: federal civilian employees in the federal retirement system state and local government employees who have chosen not to participate some agricultural and domestic workers employees of some nonprofit organizations who have not arranged coverage

Pension Benefit Guaranty Corporation

The Pension Benefit Guaranty Corporation, or PBGC, is a federal agency established to ensure that vested defined benefit plans, or pensions, are paid to employees when the employer is unable to fund the defined benefit plan due to financial problems. A covered employer pays a charge per plan participant per year into the Pension Benefit Guaranty Corporation as an insurance premium. Vested benefits of up to a certain amount per month are guaranteed to participants. The PBGC does not guarantee the following benefits: vacation pay health care severance pay other non-basic benefits

Social Security Record Keeping

Social Security requires employers to provide each employee with a W-2 form by January 31 for the previous calendar year. For each employee receiving wages, employers are required to maintain and report the following information: amounts and dates of wage payments amount of tips received name, address, occupation, periods of employment Social Security number

Davis-Bacon Act

The Davis Bacon act of 1931 requires the secretary of labor to determine prevailing rates applicable to government construction contracts in excess of $2,000. The law is controversial primarily because the secretary has used union rates in the geographical area as the prevailing rate. Employers argue that: the law doesn't require the secretary of labor to use union rates using union rates raise wages and government expenditures Labor leaders argue that changes in administration of the law would weaken: unions union contractors

Pregnancy Disability Act

The Pregnancy Disability Act (PDA) of 1978 prohibits discrimination against employees and applicants on the basis of "pregnancy, childbirth and related medical conditions." This covers any aspect of employment, including hiring, firing, pay, job assignments, promotions, layoff, training, fringe benefits, such as leave and health insurance, and any other term or condition of employment. Any employer that's subject to Title VII of the Civil Rights Act of 1964 (i.e., has 15 or more employees including part-time and temporary workers) must comply with the Pregnancy Disability Act and provide the same reasonable accommodations for an expectant worker that are provided for any "disabled" employees unable to perform their regular duties. Single women can't be excluded from maternity benefits. How you administer and evaluate other "disabilities" should be consistently applied to pregnancies and related conditions. During pregnancy leave, the employee continues to accrue seniority and remain eligible for pay increases and benefits. The number of Pregnancy Disability Act claims have begun to decline as you can see from the table.

ERISA

The Employee Retirement Income Security Act of 1974, or ERISA, was originally passed to regulate defined benefit plans, also known as pensions, offered by private-industry employers. Today, it covers both defined benefit plans and defined contribution plans, which include corporate 401(k) plans, 403(b) plans, for public schools, tax-exempt organizations and certain ministries, or simple plans for small employers. Defined contribution plans will generally be portable allowing for rollover into a similar type of plan with another employer or individual retirement account (IRA).

Gender Based Pay Differentials: Equal Pay Act

The Equal Pay Act of 1963, or EPA, is an amendment to the FLSA, administered by the EEOC. It prohibits wage differentials between men and women employed by the same establishment in jobs that: -require equal skill, effort, and responsibility -are performed under similar working conditions EPA requires that all three factors (skill, effort, and responsibility) are substantially equal for the jobs to be judged equal. Likewise, working conditions must differ significantly if pay differentials are to be justified. Note that the comparisons are with job content and not with job titles. EPA provisions specifically approve some conditions as justifying pay differences when they result from legitimate pay practices such as: -seniority systems -merit systems -production systems related to quantity or quality. For example, Firewomen entered the firefighting profession after a time when most incumbents in the profession were men. If a Fire Department's pay practice is based on a seniority system we would naturally see a justified gender differential due to this workforce trend and legitimate seniority pay system (all things being equal).

Overtime Pay

The FLSA federal statute requires that nonexempt employees receive overtime pay equivalent to 150% of the hourly rate for all hours worked in excess of a 40 hour workweek with no daily hour limit. The employer establishes the workweek. It may begin on any day of the week and at any hour of the day. Hours cannot be shifted from one week to another. A week is a fixed period of 168 hours or 7 consecutive 24-hour periods. But there are exceptions to the rule. For instance: A hospital may use 14-day work periods and an 80-hour breakpoint. Some employers are permitted week-to-week balancing under a collectively bargained, guaranteed-wage plan. States may have additional requirements for when overtime is to be paid. For example, the State of California has additional requirements as follows: One and one-half times the employee's regular rate of pay for all hours worked in excess of 8 hours up to and including 12 hours in any workday, and for the first 8 hours worked on the seventh consecutive day of work in a workweek; and Double the employee's regular rate of pay for all hours worked in excess of 12 hours in any workday and for all hours worked in excess of 8 on the seventh consecutive day of work in a workweek2.

FMLA

The Family and Medical Leave Act of 1993 (FMLA) is a United States federal law requiring covered employers to provide employees job-protected and unpaid leave for qualified medical and family reasons. Qualified medical and family reasons include: personal or family illness, family military leave, pregnancy, adoption, or the foster care placement of a child. The FMLA provides eligible employees with leave of up to 12 weeks per year. Leave may be paid or unpaid depending on any paid time off an employee has accrued. Such leave may be for: the birth of and to bond with a new-born child an employee's adoption or foster care of a child care of an immediate family member (spouse, child, parent) with a serious health condition or an employee's own serious health condition qualified exigencies when an employee's spouse, child, or parent is on covered active duty or called to covered active duty as a member of the regular armed forces or the national guard. FMLA also provides eligible employees up to 26 workweeks of unpaid, job protected leave in one 12-month period to care for a covered service member with a serious injury or illness. The employee is to give 30 days' notice before taking such leave, when practical. The employee retains all benefits during the leave and is entitled to return to the same or equivalent position. Employers should understand the legal requirements of managing FMLA concurrently with other leaves such as sick, disability, workers' compensations, or vacation. The FMLA allows employers to require employees, or employees to elect to substitute accrued vacation, sick, or other paid leave for all or part of the 12 weeks of unpaid leave. Employees on workers' compensation leave typically receive some benefit payment as a percent of their normal pay. In recognition of this benefit, the FMLA regulations do not allow the use of paid leave if the employee is receiving workers' compensation, even to make the employee "whole" or if requested by the employee. However, the employer may designate the leave as FMLA leave and count it against the employee's 12-week FMLA entitlement. Some states may have supplemental leave regulations that are in addition to the FMLA.

McNamara-O'Hara Service Contract Act

The McNamara-O'Hara Service Contract Act of 1965 extends Davis-Bacon concepts to government contracts for services such that: Contractors holding service contracts of $2,500 or less must pay service employees at least the minimum wage. Contractors holding service contracts in excess of $2,500 must pay employees no less than the wage rates and benefits found by the Department of Labor to be prevailing in the area, or no less than the compensation (pay and benefits) found in the previous contractor's collective-bargaining agreement. The OFCCP audits federal contractors to ensure that there is no discrimination in government contracts. Compensation and benefits are also affected by OFCCP since part of the reason for these audits is to examine wages and salaries by job category and level. For example, a call center business unit of a manufacturing corporation that was a large government contractor was charged with discriminatory pay practices against women employees. The respondent presented pay levels as well as performance evaluation ratings as part of its merit system to have the case dismissed and justify the pay difference based on a legitimate merit system.

National Labor Relations Act

The National Labor Relations Board (NLRB) is an independent federal agency enforcing the National Labor Relations Act, which guarantees the right of most private sector employees to organize, to engage in group efforts to improve their wages and working conditions, to determine whether to have unions as their bargaining representative, to engage in collective bargaining, and to refrain from any of these activities. It acts to prevent and remedy unfair labor practices committed by private sector employers and unions. The National Labor Relations Act forbids employers from interfering with, restraining, or coercing employees in the exercise of rights relating to organizing, forming, joining or assisting a labor organization for collective bargaining purposes, or from working together to improve terms and conditions of employment, or refraining from any such activity. Similarly, labor organizations may not restrain or coerce employees in the exercise of these rights1. Collective bargaining takes place when negotiations occur between an employer and a group of employees, typically through a third party, to determine the terms and conditions of employment.

USERRA

The Uniformed Service Employment and Reemployment Rights Act provides enhanced rights and protections for voluntary and involuntary active military duty. Employers must grant an unpaid leave of absence for up to five years and reinstate veterans to the position they would have held if employment had not been interrupted. Full-time and part-time permanent positions are covered whereas temporary positions are excluded. Circumstances permitting, advance notice for leave (verbal or written) should be provided but is not required. Exempt employees who take military leave and work for the employer in the same week must be paid for the entire week. Benefit continuation is similar to the rights under COBRA. Health coverage is reinstated as if they had never left without waiting periods. Military leave should not be considered a "break in service". The Act requires that veterans receive any change in position or benefits to which they would have been entitled had they remained continuously employed. If an employer's vacation policy is based on seniority, the employer must count the years of military leave as if they were years of actual employment to determine how many weeks of vacation returning veterans would then receive. If promotion was likely, veterans should be reinstated in the promoted position or in a position of like seniority, status, and pay for which they are qualified. If veterans cannot be qualified for the job they would have held and their inability to qualify is not related to a service-incurred or aggravated disability, they should be reemployed in any position of lower status and pay for which they are qualified, but with full seniority. Veterans must provide notice of their intent to return to work within specified time frames depending on the military leave duration as defined in the Act. The returning veteran must be "promptly reemployed." The Act protects returning veterans from discharge without cause for a period of time after reemployment depending on their length of military leave. The Uniformed Service Employment and Reemployment Rights Act exemptions include that reemployment may be "unreasonable or impossible" because the employer's circumstances have changed, a disabled veteran's reemployment is an undue hardship because of the disability, or he was dishonorably discharged.

Walsh-Healy Public Contracts Act

The Walsh-Healy Public Contracts Act of 1936 applies to employers that are a party to federal contracts for materials, supplies, and equipment in excess of $15,000. Walsh-Healy requires these employers that are awarded government contracts to pay: prevailing wages in the industry as determined by the secretary of labor overtime at 1.5 times the regular hourly rate for all hours in excess of 8 in a day or 40 in a workweek, whichever is greater

Case 1

The first case involved nurses employed by the city of Denver. The nurses charged that they were being discriminated against in pay because of their gender. They showed that they were paid a lower wage than parking-meter repairers, tree trimmers, and sign painters. The nurses argued that these pay differentials didn't reflect any differences in type or value of work but were due to society's tendency to compensate women less for their work than men. The nurses based their case on the Equal Pay Act and the Civil Rights Act. The nurses' challenge based on the Equal Pay Act was overruled because the jobs compared were different. However, based on the prima facie facts, the court decided that the Civil Rights Act could apply because jobs dominated by women were paid less than jobs dominated by men, even though the jobs were of equal or comparable worth. It also agreed that such discrimination could in fact lead to a violation of a comparable-worth criterion of fairness. Ultimately, the court ruled against the nurses by citing the market (rather than comparable worth) as the proper standard.

Disparate treatment

The first, disparate treatment looks at treating groups or individuals differently on the basis of "protected groups." For example, not hiring a woman for a sales job on the basis that she is a woman.

INTRODUCTION

The legal environment of United States compensation and benefits programs is dictated by: federal, state, and more recently, local legislation regulations imposed by the executive branches of these governing bodies case law for some developing legal concepts It's difficult to encapsulate this environment briefly, but in essence the "rules" state that: Compensation must not be too low or (in some circumstances) too high. These limits are governed by the Fair Labor Standards Act, or FLSA, and Maximum Reasonable Compensation or Intermediate Sanctions legislation as defined by the Internal Revenue Service. Compensation decisions should be managed by the employer. Certain groups, based on race, color, religion, national origin, age (40 and older), sex (including pregnancy, gender identity, and sexual orientation), disability or genetic information, and veteran status, are protected in the interest of fairness. All must be paid when due. Delaying payment of compensation earned is a Department of Labor (DOL) violation. Federal and state legislative bodies have not labeled the laws, regulations, and cases according to categories of compensation. Nor have they limited them to compensation alone. As a general guiding principal, practitioners should confirm whether for each of the laws or regulations covered in this course, a corresponding state or local statute exists. They tend to be more "generous" to the employee and will supersede the Federal requirements.

Pay Equity

There have been groundbreaking changes to equal pay laws as states and other localities aggressively take action to improve pay equity through enforcement of state and city equal pay laws. One common theme is that the new laws typically focus on pay inequality between the sexes and/or gender identity. Although each law is different and should be reviewed for compliance separately, pay equity is normally measured via: • Assessment of employee pay in the same geographic region, country, locality, and/or organization• Equal or substantially similar work typically measured based on:SkillEffortResponsibilityWorking Conditions• Pay differences derived from a:Seniority SystemMerit SystemQuantity or quality of production measurement systemBona fide factor other than sex such as:EducationTrainingExperienceEtc. Some pay equity laws also include a salary history ban during the recruiting process. An attorney should be consulted prior to conducting a pay equity audit. Some of the large law firms are also maintaining an up-to-date guide to Pay Equity Laws across the United States for reference.

Civil Rights Act

Title VII of the Civil Rights Act of 1964 makes it illegal to discriminate against a person based on race, color, religion, national origin, or sex. The Civil Rights Act of 1991 empowered individuals to claim punitive and compensatory damages. Punitive damage exposure can be managed with improved employment practices and ensuring that objective criteria are used in making employment related decisions. At its passage, Congress enacted maximum limits to these damages.

Vesting

Under ERISA, an employee gains ownership of accrued pension rights through a period of employment. These ownership rights are obtained even if the employee leaves the organization prior to retirement. The process of acquiring ownership through employment time is called vesting.

Taxation of benefits

Under the present U.S. Internal Revenue Service code, certain employee benefits are not taxed, and the employer can take a deduction for qualified benefits, such as medical, dental, and 401K plans. Tax treatment of non-executive broad-based benefit programs will generally have preferential treatment when administered on a pre-tax basis.

Unemployment Insurance

Unemployment insurance is a state-administered program that operates under general requirements set out by OASDHI. It exists to provide partial income replacement when a worker loses a job through no fault of his own. Unemployment insurance is funded by a tax levied by states on employers. In a few states, employees also contribute to unemployment insurance. The employer's tax depends on benefit levels in the state and the employer's record. Depending on the employer's record or experience rating, the employer's tax is adjusted up or down from the standard tax. States vary somewhat in the way they compute the experience rating; but in all states, the greater the number of successful unemployment insurance filers, the higher the tax. Employers should contact the local State Tax agencies in each of the states where they have operating sites to get instruction forms and requirements. (http://workforcesecurity.doleta.gov/unemploy/agencies.asp) If workers lose jobs through circumstances beyond their control, they are eligible to draw unemployment insurance as long as they are: able to work available for work actively seeking work and willing to take a suitable job Workers cannot collect unemployment insurance if their jobs ended because they: quit without good cause or were discharged for cause In almost all states, workers may receive unemployment insurance if they are unemployed because of a labor dispute in which they are participating. Employees can learn about the state-specific eligibility requirements for unemployment benefits from the local state administration offices. (https://www.servicelocator.org/OWSLinks.asp). Both workers and employers have the right to appeal unemployment insurance eligibility decisions. Employers concerned with their experience ratings challenge claims they deem inappropriate and carefully document discharges.

Workers' Compensation

Workers' Compensation is a no-fault insurance plan used to pay for workplace injuries. The coverage, benefits, and costs vary from state to state, and no national standards have been established to date. A national agency that works closely with workers' compensation administrators is the Occupational Safety and Health Agency or OSHA. Depending on the incidences reported and on-going compliance, OSHA representatives may make on-site visits to inspect health and safety conditions of the work environment. States choose different ways to administer Workers' Compensation. For example: employer self-insurance may be permitted a state insurance fund may be used and private insurance carriers may be acceptable