Human Resource Management Assignment 2

12

3 The Legal Environment and

Diversity Management

Case 3.1. Major Employment Laws: How Does an Increase in State Minimum Wage Impact an Organization? In any management position, you need a basic understanding of the major employ- ment laws. If you are the manager of a company, such as Walmart, you have to under- stand what is legal and what isn’t, or you may cost your employer money.

There are some laws that deal specifically with compensation issues. A major piece of legislation was the Equal Pay Act of 1963, which requires that women be paid equal to men if they are doing the same work. However, the oldest of the compensation laws is the Fair Labor Standards Act (FLSA) of 1938. The FLSA covers minimum wages, overtime issues, and child labor issues within the United States.

The federal minimum wage set by FLSA is currently $7.25 per hour. States cannot set a minimum wage that is lower than the federal standard, but they are free to estab- lish a higher one. The minimum rate in different states can be found at The National Conference of State Legislators.1

President Obama has made increasing the minimum wage a priority during his presidency. He believes that low minimum wages create “social inequality.” He has called for a minimum of at least $10.10 per hour.2 Even still, there is little doubt this increase will not be enough to help low-income people escape poverty. But it would be progress, and it would help low-income people earn more money.

Employees, especially in the fast food industry, have been holding rallies across the nation to increase the minimum wage. The rallying cry has been for $15.00 per hour for a minimum wage. This is a fight for everyone who is paid minimum wage, not just the fast-food industry.

For example, the city of Los Angeles voted in 2015 to increase its minimum wage from $9 per hour to $15 per hour by 2020. The minimum wage rate will

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Chapter 3 • The Legal Environment and Diversity Management 13

be $10 in California in 2016 and $13.00 in 2017.3 More large cities are expected to follow.

In New York, Governor Andrew Cuomo is siding with the minimum wage earners. Cuomo rallied against McDonald’s and Burger King, where pay is so low that employ- ees are forced to accept state assistance.4

Walmart has been at the center of the minimum wage rate for many years. Since Walmart is the largest physical retailer in the world, it should have expected its wage rate would be scrutinized by all the stakeholders of the organization.

In response, Walmart has increased its minimum salary to $9 per hour, which will bump up to $10 by February 2016. Around 500,000 employees will receive the hourly increase. It is hoped that the increases can help many Walmart employees who are on state assistance. Walmart didn’t decide to suddenly be kind to its employees. Since most states now have a rate higher than the federal minimum rate, Walmart made the change because it was going to legally have to pay its employees the higher rate in different states.

Human resources departments need to be prepared for the increase in minimum wages. HR needs to understand its own business situation and build a business model that will include higher minimum wages. Some companies, such as Costco, Ikea, and The Gap already pay their workers above the federal minimum wage.5

HR also has to be concerned about wage compression between hourly employees and supervisors. If the minimum rate rises high enough, the hourly workers could be paid as high as, or even higher than, their supervisors and managers. This could cause problems with employees, since they might rather be an hourly worker than of a salaried employee.

The success of the rallies, the increase in state and local wages, and the decision by large companies to increase their minimum wage is certainly positive news for the lives of many Americans. But it is most likely that employers are also going to decide to hire fewer employees since they will claim it is too expensive to hire the same number of minimum wage employees as they currently hire. Consequently, it is possi- ble that low-income, entry-level employees will have fewer job opportunities because employers will try to reduce the number of employees they hire.

Case Questions

1. What law(s) apply to this case?

2. Will Walmart employ fewer minimum wage employees to save money?

3. Will low-income employees need more education and skills?

4. Will more college-educated prospective employees be offered jobs at $15 per hour instead of a salaried position?

5. What is your view on the increase in the minimum wage? How has it affected yourself at your own job?

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Part I • 21st-Century Human Resource Management Strategic Planning and Legal Issues14

Case 3.2. Diversity and Inclusion: What’s the Difference?

Hilton Worldwide Named Top 50 Diversity Company Diversity and inclusion are important concepts in ensuring that all human beings

in your organization are treated equally. Companies have learned that their employ- ees should represent their customers. All companies sell their products and services to an increasingly diverse population. Thus, the employee makeup of the firm should also be diverse.

Diversity refers to all the ways we differ. Anything that makes us unique is part of diversity. Inclusion involves bringing together and harnessing these diverse forces and resources in a way that is beneficial.6 An organization needs to be aware of the diverse nature of their organization, then create programs to help include all the diverse groups to feel comfortable, wanted, and motivated to work for the company.

Diversity is important and needed because, as the white population continues to shrink and the minority population grows, selling your product to a variety of groups increases sales, revenues, and profits. Embracing diversity means you will create new business opportunities by having employees who look at the world from different perspectives.

Human resources needs to be fully trained and aware of all the laws related to the topic as applied in organizations. Thus, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age Discrimination Employment Act of 1967, and other laws need to be fully understood and implemented by HR employees. HR should be involved in training employees to foster diversity and to be accepting of ideas created by each group. HR can be the facilitator to help the organization stay within the laws of discrimination and, at the same time, help foster a better under- standing between employees from different backgrounds.

Hilton Worldwide was selected as DiversityInc’s Top 50 Companies for Diversity.7 Based upon DiversityInc’s research, the top 50 companies have 20 percent more Blacks, Latinos, and Asians in management, and 13 percent more women.

Here are some reasons that Hilton Worldwide was selected as an above average diversity company:

• “Diversity and inclusion are part of our DNA at Hilton,” said Christopher J. Nassetta, president and CEO of Hilton Worldwide. “Like our hotels, our work- force is global, and our success is driven by the passion and motivation of our teams. Our culture and diversity in all its forms around the world makes our organization strong and drives better results.”8

• Hilton Worldwide supports the LGBT community by participating in two of the nation’s largest Pride festivals.

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Chapter 3 • The Legal Environment and Diversity Management 15

• Hilton has a National Minority Supplier Development Council Board of Directors. Their goal is to help influence the development of Asian, Black, Hispanic, and Native American suppliers and supplier diversity best practices.

• Hilton Worldwide was ranked on the Hispanic Business 2012 Best Companies for Diversity list by Hispanic Business magazine. Hilton scored among the high- est in restaurants and resorts.

• Hilton Worldwide offers excellent employee resource groups, including a group for veterans and their spouses.

How does Hilton Worldwide do in passing the OUCH test? The OUCH test, although not a legal test, is a good theory and rule of thumb as to what makes a fair human resource decision. OUCH is an acronym for a decision that is objective, uniform in application, consistent in effect, and related to the job.9 The OUCH test should be used whenever considering any action that involves employees.

The “O” in OUCH means employment actions are made as objectively as possible. Objective means the HR decision is based on fact, cognitive knowledge, or quan- tifiable evidence in all cases. In comparison, employment actions should not be based on something that is subjective, such as your emotional state, your opinion, or how you feel in a certain situation.

The “U” in OUCH considers whether an employment action is being uniformly applied to all employment decisions. For example, if one candidate for a manage- ment position at Hilton has to take a written test as part of the job process, then you also need to have all the applicants for the position complete the written test, under the same conditions, to the best of your ability.

The “C” in OUCH considers whether the employment actions taken have signifi- cantly different effects on one or more protected groups than it has on majority group. Title VII of the Civil Rights Act of 1964 prohibits employment discrimination based on race, color, religion, sex, or national origin. Managers have to be careful they don’t affect a protected group disproportionately with an employment action. It is important for managers to show consistency in their employment actions.

The “H” in OUCH determines whether the employment action directly relates to the primary aspects of the job in question. If the job of a manager at the Hilton does not include serving coffee to employees in the morning, then the manager cannot be hired or fired for not serving coffee.

On all accounts, a company like Hilton Worldwide, that is thought of as a Best Company for Diversity, passes the OUCH test. Hilton has done an excellent job of including all sorts of diverse groups (such as veterans and their spouses, Asian, His- panic, and Black employees and suppliers, and the LGBT community) in its diversity and inclusion programs.

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Part I • 21st-Century Human Resource Management Strategic Planning and Legal Issues16

Case Questions

1. What laws do you think might apply in this case?

2. What is the difference between diversity and inclusion?

3. What is the role of human resources in fostering diversity?

4. Does Hilton Worldwide pass the OUCH test?

5. Discuss different groups of people/ employees that would be considered diverse.

Notes

1. National Conference of State Legislators, retrieved November 27, 2015, http://www.ncsl .org/research/labor-and-employment/state-minimum-wage-chart.aspx.

2. Sahadi, Jeanne, “Will a Higher Minimum Wage Really Reduce Income Inequality?” CNN Money, January 15, 2014.

3. Wattles, Jackie, “Los Angeles Is Now Largest City in America With $15 Minimum,” CNN Money, June 14, 2015.

4. Bredderman, Will, “At Minimum Wage Rally, Cuomo Attacks Term ‘Income Inequality,’” June 11, 2015, http://observer.com/2015/06/at-minimum-wage-rally-cuomo-attacks-term- income-inequality/.

5. Patton, Carol, “Employers Embracing Wage Hike,” Human Resource Executive Online, October 13, 2014.

6. Jordan, T. Hudson, “Moving From Diversity to Inclusion,” Diversity Journal.com, March 22, 2011.

7. “Hilton Worldwide Named One of DiversityInc’s 2015 Top 50 Companies for Diversity: Hilton Also Named a Top 10 Company for Supplier Diversity,” Hilton Worldwide.com, April 24, 2015.

8. http://news.hiltonworldwide.com/index.cfm/newsroom/category/topic/732. 9. Hendon, John, “The Ouch Test: A Tool for Managing Your Employees,” Ask the HR Department.

com, 2013.

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