Reading: Lesson 3 - Employment Law

12.3.A - Employment Law

1. REGULATING EMPLOYMENT CONDITIONS

1. State and the federal governments have passed many laws to protect employees, improve their health and safety, and provide minimum employee benefits. The U.S. government has a number of acts, or regulations, that govern labor practices. These acts are enforced through the U.S. Department of Labor (DOL), which has a mission to foster, promote, and develop the welfare of wage earners, job seekers, and retirees in the United States; improve working conditions; advance opportunities for profitable employment; and assure work-related benefits and rights. The DOL must enforce over 180 different acts. These laws impact about 10 million employers and 125 million workers. HR departments are responsible for understanding the laws and ensuring that businesses comply with their requirements. Failure to comply with these acts can result in fines or civil and criminal actions. The information below summarizes the major categories of laws the DOL uses to regulate employment relationships.
   
2. The primary federal law regulating wages paid and hours worked by employees is the Fair Labor Standards Act. The Fair Labor Standards Act (FLSA) prescribes standards for wages and overtime pay. FLSA affects most private and some public employers. It requires employers to pay covered employees at least the federal minimum wage and overtime pay of one-and-one-half times the regular rate of pay. Most managers and other salaried employees are exempt from FLSA regulations. Also, businesses that are not involved in interstate commerce but conduct all their activities within one state may not be covered. However, most states have their own minimum-wage laws. The FLSA also regulates the employment of young people. For regulated businesses, restrictions apply to the occupations and hours worked for anyone under age 18.
   
3. The Occupational Safety and Health Act created the Occupational Safety and Health Administration (OSHA) to ensure safe and healthful working conditions for working men and women by setting and enforcing standards and by providing training, outreach, education, and assistance. OSHA, part of the Department of Labor, regulates safety and health conditions in most businesses. Employers have a duty to provide their employees with a workplace free from unsafe working conditions and other hazards. The act allows the government to set specific health and safety standards for businesses. Workplace inspections and investigations are key to enforcement.
   
4. The Figure below summarizes the principal federal acts by category that are enforced by the DOL. States have their own Departments of Labor. These state agencies are charged with enforcing labor acts specific to that state. In some cases states are also responsible for enforcing federal DOL acts and regulations. 
   

   
   
   
   

2. RETIREMENT, EMPLOYEE BENEFITS, AND EQUAL OPPORTUNITY

1. The federal and state governments have a series of regulations that impact employee retirement and benefits and ensure equal opportunity. Some of these regulations are federal and affect all workers. Others are state regulations, but may be required by federal statute. 
   
2. Social Security is a social insurance program funded through payroll contributions. The formal title of the program is the Federal Old- Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund (OASDI). The largest component of OASDI is the payment of retirement benefits. Throughout a person’s life, contributions are made by both the employer and employee. The Social Security Administration keeps track of the contributions. Upon retirement, the person can begin to receive payments from the account. The amount of the monthly benefit depends on the earnings record and the age at which benefits begin. A worker who becomes totally disabled, regardless of his or her age, can also receive benefits under the Social Security law. There are also provisions for payments to survivors after the death of a person who has made contributions. Even when established in 1935, Social Security was not planned to provide the entire income for retirees. However, according to the Social Security Administration it is the primary source of income for most retired Americans. As of 2015, the average annual social security payment to an individual retiree was slightly less than $15,500. Medicare is health insurance for people 65 or older and for people under 65 with certain disabilities. There are three parts to Medicare coverage—hospital insurance, medical insurance, and prescription drug coverage. As with Social Security, the costs of Medicare are covered by payroll taxes. Employers and employees share those costs at rates established by Congress. Self-employed people pay the entire amount of the payroll tax.
   
3. In 2010, the Affordable Care Act (ACA) was signed into law. The law put in place comprehensive health insurance reforms that were designed to do the following:
   
   • increase access to affordable care by expanding coverage and requiring that individuals have health insurance
   • offer new consumer protections by requiring insurance companies to expand coverage to include individuals with preexisting conditions and preventing insurance companies from pulling coverage from individuals
   • improve quality and lower costs by providing free preventive care for some tests and putting in place measures to prevent health care fraud
   
   Businesses with more than 50 employees are now required to offer insurance to their employees or pay a fine. Individuals must have health insurance either through their employer, through a state or federal insurance exchange, or through federal or state supplemental insurance such as Medicare.
   
4. All states have workers’ compensation laws. Workers’ compensation requires employers to provide insurance for the death, injury, or illness of employees that results from their work. Some states maintain the insurance programs, but many offer coverage through private insurance companies. Unemployment insurance is a state-managed program that provides temporary income to individuals who have been laid off from their jobs. Specific requirements must be met in terms of the length of employment and steps taken to regain employment. Employers make contributions to the state unemployment fund based on the number of employees and their employment history.
   
5. Reducing discrimination and increasing employment opportunities is good for business and good for society as a whole. Government plays a role in equal opportunity for employment by passing laws that protect workers and guide employers. Significant laws related to equal employment are listed and described in the Figure below. 
   

   
   

6. In recent years, many businesses have taken positive steps to correct discrimination in employment. Those steps include the development of written plans for fair employment practices, a review of recruitment and selection procedures, improved access to job training to qualify employees for promotion who may have been excluded in the past, diversity training for all managers and employees, and improved performance evaluation procedures that reduce bias. Companies that have taken a sincere and active interest in improving the diversity of their workforce and eliminating discrimination have found that diversity improves decision making by bringing a rich array of ideas and perspectives to company planning and problem solving. Two of the most effective strategies for reducing discrimination and increasing opportunities for promotion and advancement in an organization are the use of self-directed work teams and cross-training. When diverse work teams are formed, each team member has the opportunity to develop personal skills, interact with others, and assume leadership positions. Cross-training allows each person to broaden his or her skills and demonstrate increased value to the organization. In each case, employees gets opportunities to work with others, develop new skills, and demonstrate their abilities to coworkers and managers.