Answer questions

© 2014 by McGraw-Hill Education.  This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.  This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 

Chapter 17

© 2014 by McGraw-Hill Education.  This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.  This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 

© 2014 by McGraw-Hill Education.  This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.  This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 

Learning Objectives

• Government as part of the employment relationship
• Fair labor standards act of 1938
• Living wage
• Employee or independent contractor?
• Prevailing wage laws
• Pay discrimination: What is it?

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Learning Objectives

• The equal pay act
• Title VII of the Civil Rights Act of 1964 and related laws
• Executive order 11246
• Pay discrimination and dissimilar jobs
• Earnings gap
• Comparable worth
• Compliance: A proactive approach

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Government: Part of the Employment Relationship

• Government role in compensation decisions, ensures:
• Fair procedures for pay determination
• Safety nets for the unemployed and disadvantaged
• Employees are protected from exploitation

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Effect of Government Decisions on the Labor Market

• Demand - Government indirectly affects labor demand through:
• Its purchases and financial policy decisions
• Supply - Labor supply is affected through:
• Legislation
• Immigration policy and how rigorously it is enforced

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U.S. Federal Pay Regulations

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U.S. Federal Pay Regulations

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U.S. Federal Pay Regulations

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U.S. Federal Pay Regulations

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Fair Labor Standards Act (1938)

• Covers all employees of companies engaged in interstate commerce
• Major provisions
• Minimum wage
• Hours of work
• Overtime pay
• Employee status
• Exempt
• Nonexempt
• Child labor

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Minimum Wage

• Provides an income floor for workers in society’s least productive jobs
• Higher rate prevails if:
• State and federal legislation cover same job
• Risks of increasing minimum wage
• Reduced employment opportunities for low waged workers

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Minimum Wage

• Factors to be considered in evaluating the effectiveness of the minimum wage law:
• Whether the gains through higher wages are greater than the losses of jobs and/or hours
• Whether wage gains go primarily to workers from low income families

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Overtime and Hours of Work

• Overtime provision of the FLSA requires payment at:
• One-and-a-half times the standard for working more than 40 hours per week
• Factors that encourage employers to pay overtime premium rates
• Increasingly skilled workforce with higher training costs per employee
• Higher benefits costs, the bulk of which are fixed per employee

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Exhibit 17.4 - Fact Sheet #17A: Exemption for Executive, Administrative, Professional, Computer & Outside Sales Employees Under the Fair Labor Standards Act

Source: Excerpts from U.S. Department of Labor, Employment Standards Administration, Wage and Hour Division, http://www.dol.gov/esa/whd/regs/compliance/fairpay/, June 20, 2009.

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Exhibit 17.4 - Fact Sheet #17A: Exemption for Executive, Administrative, Professional, Computer & Outside Sales Employees Under the Fair Labor Standards Act

Source: Excerpts from U.S. Department of Labor, Employment Standards Administration, Wage and Hour Division, http://www.dol.gov/esa/whd/regs/compliance/fairpay/, June 20, 2009.

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© 2014 by McGraw-Hill Education.  This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.  This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 

Exhibit 17.4 - Fact Sheet #17A: Exemption for Executive, Administrative, Professional, Computer & Outside Sales Employees Under the Fair Labor Standards Act

Source: Excerpts from U.S. Department of Labor, Employment Standards Administration, Wage and Hour Division, http://www.dol.gov/esa/whd/regs/

compliance/fairpay/, June 20, 2009.

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© 2014 by McGraw-Hill Education.  This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.  This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part. 

Exhibit 17.4 - Fact Sheet #17A: Exemption for Executive, Administrative, Professional, Computer & Outside Sales Employees Under the Fair Labor Standards Act

Source: Excerpts from U.S. Department of Labor, Employment Standards Administration, Wage and Hour Division, http://www.dol.gov/esa/whd/regs/compliance/fairpay/, June 20, 2009.

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Exhibit 17.4 - Fact Sheet #17A: Exemption for Executive, Administrative, Professional, Computer & Outside Sales Employees Under the Fair Labor Standards Act

Source: Excerpts from U.S. Department of Labor, Employment Standards Administration, Wage and Hour Division, http://www.dol.gov/esa/whd/regs/compliance/fairpay/, June 20, 2009.

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Overtime and Hours of Work

• OSHA (Occupational Safety and Health Administration) legislation
• Specifies the number of breaks that must be provided in an eight-hour workday
• Portal-to-Portal Act
• Time spent on activities before beginning the principal activity is generally not compensable

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Overtime and Hours of Work

• The Worker Economic Opportunity Act
• Allows stock options and bonuses to be exempt from inclusion in overtime pay calculations
• Compensatory time off
• Would give employees and employers the option of trading overtime pay for time off

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Child Labor

• FLSA restricts hours and conditions of employment for minors
• Persons under 18 cannot work in hazardous jobs
• Persons under 16 cannot be employed in jobs involving interstate commerce

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Living Wage

• Minimum wage tailored to living costs in an area
• Amount may be twice the federal minimum wage
• Intend to reduce any cost savings a municipality might receive from outsourcing

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Employee or Independent Contractor?

• Regulations that help classify a worker as an employee or independent contractor
• Tax law enforced by the Internal Revenue Service (IRS)
• Employee Retirement Income Security Act (ERISA) enforced by the department of labor

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Employee or Independent Contractor: Internal Revenue Service Tests

• Behavioral control - Whether the business has a right to control how a task is done, includes:
• Instructions that the business gives to the worker
• Training that the business gives to the worker
• Financial control
• The extent to which the worker has unreimbursed business expenses
• The extent of the worker’s investment
• The extent to which the worker makes his or her services available to the relevant market

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Employee or Independent Contractor: Internal Revenue Service Tests

• How the business pays the worker
• The extent to which the worker can realize a profit or loss
• Type of relationship
• Written contracts describing the relationship
• Whether or not the business provides the worker with employee-type benefits
• The permanency of the relationship
• The extent to which services performed by the worker are a key aspect of the business

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Prevailing Wage Laws

• Set pay for work done to produce goods and services contracted by the federal government
• Government-defined prevailing wage
• Minimum wage that must be paid for work done on covered government projects or purchases
• Prevent contractors from using their size to drive down wages

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Prevailing Wage Laws

• Contain prevailing-wage provisions
• Davis-Bacon Act
• Walsh-Healey Public Contracts Act
• Service Contract Act
• National Foundation for the Arts and Humanities Act

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Pay Discrimination: What is it?

• Types of discrimination
• Access discrimination: Denial of particular jobs, promotions, or training opportunities to qualified women or minorities
• Valuation discrimination: Looks at the pay women and men receive for the jobs they perform
• Pay equity
• Known as gender pay equity
• Equal pay for work of comparable worth

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The Equal Pay Act (1963)

• Prohibits wage discrimination on the basis of gender
• Differences in pay between men and women doing equal work are legal if based on:
• Seniority
• Merit or quality of performance
• Quality or quantity of production
• Some factor other than sex
• Requires that jobs be equal and not identical

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Equal Pay Act (1963)

• Skill - Experience, training, education, and ability as measured by the
• Performance requirements of a particular job
• Effort
• Degree of effort (not type of effort) actually expended in the performance of a job
• Can be mental or physical

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Equal Pay Act (1963)

• Responsibility - Degree of accountability required in the performance of a job
• Working conditions
• Physical surroundings and hazards of a job, dimensions such as:
• Inside versus outside work, heat, cold, and poor ventilation
• To support a claim of unequal work:
• The effort/skill/responsibility must be substantially greater in one of the jobs

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Equal Pay Act (1963)

• Tasks involving the extra effort/ skill/ responsibility must :
• Consume a significant amount of time
• Have a value commensurate with the questioned pay differential

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Equal Pay Act (1963)

• Factors other than sex
• Shift differentials
• Temporary assignments
• Bona fide training programs
• Differences based on ability, training, or experience
• Other reasons of “business necessity”
• Reverse discrimination
• Discrimination against men

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Title VII of the Civil Rights Act (1964)

• Prohibits discrimination on the basis of:
• Sex, race, color, religion, or national origin in any employment condition
• Age Discrimination in Employment Act
• Prohibits discrimination on the basis of age
• Americans with Disabilities Act (ADA)
• Prohibits discrimination on the basis of disability

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Theories of Discrimination

• Disparate treatment
• Disparate or unequal treatment applies different standards to different employees
• Disparate impact
• Practices that have a differential effect on members of protected groups
• Are illegal, unless the differences are work-related

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Executive Order 11246

• Prohibits discrimination on the basis of race, color, religion, sex, or national origin
• Requires covered government contractors to file affirmative action plans
• Utilization analysis compares the contractor’s workforce to the available external workforce
• Goals and timetables are developed for achieving affirmative action
• Action steps are developed for achieving these goals and timetables

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Pay Discrimination and Dissimilar Jobs

• Supreme court determined pay differences for dissimilar jobs may reflect discrimination
• Proof of discrimination
• Use of market data
• Jobs of comparable worth

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Exhibit 17.11 - Sources of Earnings Gaps

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Comparable Worth

• For jobs that require comparable skill, effort, and responsibility:
• The pay must be comparable, no matter how dissimilar the job content may be
• To establish a comparable worth plan:
• Adopt a single job evaluation plan for all jobs within a unit
• All jobs with equal job evaluation results should be paid the same

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Comparable Worth

• Identify general representation (percentage male and female employees) in each job group
• Wage-to-job evaluation point ratio should be:
• Based on the wages paid for male-dominated jobs

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Comparable Worth

• Union developments
• Amount of union support for comparable worth is related to:
• Its effects on the union’s membership
• Tradeoffs between higher wages and fewer jobs make :
• Unions in industries facing stiff international competition reluctant to aggressively support comparable worth

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Proactive Approach to Compliance

• Steps to undertake the effort towards compliance:
• Join professional associations to:
• Stay informed on emerging issues
• Act in concert to inform and influence public and legislative opinion
• Review compensation practices and their results

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