HRM 6302 Unit V DB

HRM 6302, Employment Law 1

Course Learning Outcomes for Unit V Upon completion of this unit, students should be able to:

1. Discuss the legal significance of the employer-employee relationship. 1.1 Explain the regulation of wages and hours under the Fair Labor Standards Act (FLSA). 1.2 Assess the legal issues surrounding FLSA that employers face.

4. Characterize conduct that violates federal anti-discrimination laws in employment.

4.1 Determine the elements of a prima facie case of pay discrimination under the Equal Pay Act. Required Unit Resources Chapter 11: Wages, Hours, and Pay Equity, pp. 417–456 Unit Lesson In a 2013 survey by the Society for Human Resource Management (SHRM as cited in Miller, 2014), 60 percent of employees rated pay as “very important” and 36 percent rated it as “important.” These ratings made pay the top contributor to overall job satisfaction, surpassing job security. While pay may not always take the top spot in survey results such as the SHRM survey, pay is usually much higher among the leadership of an organization, and the significance and sometimes disparity of pay in the employer-employee relationship cannot be refuted (Miller, 2014). Employees rely on compensation to support themselves and their families. Employers have an interest in holding expenses down, including pay, but must pay what the market requires for talent that drives the organization’s success. Employees want equitable pay relative to their coworkers and commensurate with their skills. Employers must navigate complex legal regulation of wages and hours, as individual states become more active in adding regulations and requirements to existing federal law. As pay and compensation is an issue that affects every worker in an organization, human resources must play a key role in setting policy and insuring practices are fair and compliant. At the federal level alone, there are five laws that address compensation and equal pay. Title VII of the Civil Rights Act of 1964 prohibits discrimination based on race, color, national origin, gender, and religion in pay and pay-related terms of employment, including promotion and job placement. The first bill signed into law by President Obama was the Lilly Ledbetter Fair Pay Act of 2009. It addressed the situation where the discriminatory act that caused an employee in a protected category to be paid less than a similarly situated coworker but was unaware of the disparity until it was too late to sue. This law

UNIT V STUDY GUIDE Wages and Hours

President Obama signs into law the Lilly Ledbetter Act on January 29, 2009.

HRM 6302, Employment Law 2

UNIT x STUDY GUIDE Title

provides that each paycheck of discriminatory wages is a violation of Title VII. Title VII addresses wage discrimination based on any protected status. However, as women have grown to comprise almost half of the U.S. workforce, equal pay as a gender issue has garnered a great deal of attention. Despite the passage in 1963 of the third federal law addressing pay, and specifically pay for women relative to men, women on average earn 79 cents of every dollar earned by men (U.S. Equal Employment Opportunity Commission [EEOC], 2016). The Equal Pay Act requires that employers pay men and women equally in the same establishment when they perform jobs that require the same skill, effort, and responsibility, and when the job is performed under similar working conditions. Employers can defend pay differences by proving that pay differences are seniority-based, established with a merit or incentive system, or a factor other than sex, such as education or training relevant to the job (EEOC, 1997). Equal Pay Act cases tend to be hard to prove, often because of the broad range of factors that can be a factor other than sex. Often, employers chalk up salary differentials to negotiation skills. However, in a federal appeals court case, the court held that an employer is not allowed to satisfy its obligation of proving a wage disparity was based on a factor other than sex by showing that the male negotiated a higher salary (Drum v. Leeson Electric Corp., 2009). A female human resource manager was promoted into another position and her male replacement negotiated a salary $20,000 more than the female had been paid. The court held that the employer had not justified the difference in the two employees’ pay. The court also rejected the employer’s argument that the replacement was hired under a new salary structure that was tied to market rates, while the female employee had been hired under an earlier policy that set pay at slightly below market. Employers should therefore be cautious in allowing negotiation to create a salary disparity unless there are also skills, experience, or some other objective factor not related to sex that justify a difference. Further, if a higher rate of pay for a successor is desired, the employer should consider making salary adjustments for employees in the same position. As part of the efforts to investigate and identify potential pay discrimination, EEOC has adopted a new EEO-1 Report requiring employers with more than 100 employees to submit pay information. In addition, employers must report hours worked by employees in each job category and pay band. Actual hours worked must be reported for nonexempt employees, and for exempt employees, who generally do not track their hours, employers may use 40 hours per week for full-time and 20 hours per week for part-time employees, or provide actual hours if the hours are tracked (EEO-1 Joint Reporting Committee, n.d.). The other federal laws that address pay discrimination are the National Labor Relations Act (NLRA) and Executive Orders (EO) applicable to federal contractors. The NLRA prohibits employers from taking adverse action against non-supervisory employees for discussing their wages or other working conditions with coworkers, even if there is no union involved. The issues under this law are discussed in another unit. For federal contractors, EO 11246 mirrors Title VII by prohibiting pay and other discriminations by federal contractors and subcontractors. The Obama Administration increased regulation of federal contractors through EO 13665, which became effective in January 2016, prohibiting firing or discriminating against employees and applicants who ask about, discuss, or disclose their own pay or that of another employee or applicant. Additionally, EO 13673 requires that effective January 2017, federal contractors must provide a “paycheck transparency” notice to all workers on a weekly basis specifying the hours and overtime hours worked for nonexempt employees, rate of pay, gross pay, and itemized additions to or deductions from gross pay (Executive Order No. 13665, 2014). The action in the pay equity area has by no means been limited to the federal government. Several states have enacted tough laws on fair pay that go beyond the Equal Pay Act, and more states are expected to follow. California, New York, Maryland, and Massachusetts led the way with new laws that broaden the definition of jobs that are regarded as comparable for purposes of comparing the pay of males and females. The standard used is substantially similar as opposed to the substantially equal standard under the Equal Pay Act. Employers must continue to work to ensure that pay remains a positive term of employment and not subject to challenge by federal or state agencies or the employer’s workers. HR professionals must review pay practices, identify any issues, and correct areas of pay disparity. Pay in some areas may need to be adjusted upward to rectify areas of inequality. These costs will be lower than the legal and public relations costs of being sued for pay discrimination.

HRM 6302, Employment Law 3

UNIT x STUDY GUIDE Title

The federal Fair Labor Standards Act also regulates wages and hours. This is an area especially fraught with risk for employers; wage and hour cases are the most active types of litigation in the area of employment law. According to Vehling (2016), litigation in this area has exploded since 2000, and the number of cases have increased every year to a high of almost 9,000 filings in 2015. Issues that fuel this explosion in litigation include minimum-wage rate hikes passed by many states and municipalities, issues related to independent contractor classification, and joint employer issues. There are many hot areas in the wage and hour realm, and one of those is the use of unpaid interns. The DOL uses a restrictive six-factor test to determine if the intern is appropriately unpaid. Appellate courts have recently rejected this test in favor of a primary beneficiary test, which applies flexible factors to determine the primary beneficiary of the interns’ work – the organization or the individual. Key factors that an employer should consider in designing an intern program include a duration that is not excessive in terms of the period of beneficial learning and the displacement of paid employees by the intern so that interns are not doing work that would otherwise be done by paid workers. Perhaps the most significant development in the wage and hour area in decades was derailed in 2016 after a federal judge issued a preliminary injunction just days before new regulations were initially set to become effective on December 1, 2016. The new rules were set to make more than 4 million exempt employees eligible for overtime pay. Under existing rules, employees who make up to $23,660 annually and engage in work that is exempt under the administrative, professional, or executive exemptions do not have to be paid overtime. The new rules would have required that an employee must make at least $47,476 per year and perform exempt work to avoid having to be paid overtime pay. Further, the $47,476 amount was to increase every three years to keep pace with inflation. However, a federal court prevented the regulation from going into effect and put the future of the regulation into question when it ruled that the “significant increase to the salary level creates essentially a de facto salary-only test” (State of Nevada, et al v. United States Department of Labor, et al, 2016, p. 14). In that case, the court held that “Congress did not intend salary to categorically exclude an employee with EAP [executive, administrative, and professional] duties from the exemption” (p. 14). This regulation, or another version of this regulation, may still be considered and implemented in the future. In the busy areas of employment law that relate to pay and hours worked, HR professionals must stay updated on recent developments, ahead of regulators, and in tune with the needs and goals of applicants and workers.

References Boghosian, J. (2009, January 29). Lilly Ledbetter Fair Pay Act signing [Photograph]. The White House:

President Barack Obama. https://obamawhitehouse.archives.gov/photos-and-video/photos/lilly- ledbetter-fair-pay-act-signing

Drum v. Leeson Elec. Corp., 565 F.3d 1071 (8th Cir. 2009). EEO-1 Joint Reporting Committee. (n.d.). Standard Form 100, Rev/ March 2018, Employer information report

EEO-1 instruction booklet. https://www.eeoc.gov/employers/eeo1survey/2017survey-instructions.cfm Executive Order No. 13665, 79 Fed. Reg. 20749 (Apr. 11, 2014). Miller, S. (2014, May 12). Why pay is driving employee satisfaction. Society for Human Resource

Management. https://www.shrm.org/resourcesandtools/hr-topics/compensation/pages/pay-drives- satisfaction.aspx

State of Nevada, et al v. United States Department of Labor State of Nevada, et al v. United States

Department of Labor, Civil Action No. 4:16-CV-00731 (E.D. Tex. 2016). U.S. Equal Employment Opportunity Commission. (1997, January 15). Facts about equal pay and

compensation discrimination. https://www.eeoc.gov/eeoc/publications/fs-epa.cfm

HRM 6302, Employment Law 4

UNIT x STUDY GUIDE Title

U.S. Equal Employment Opportunity Commission. (2016, March 16). Written testimony of Lisa M. Maatz Vice President of Government Relations American Association of University Women. https://www.eeoc.gov/eeoc/meetings/3-16-16/maatz.cfm

Vehling, A. (2016, January 12). FLSA class actions to hit record high in 2016. Law360.

http://www.law360.com/articles/745603/flsa-class-actions-to-hit-record-high-in-2016 Suggested Unit Resources In order to access the following resources, click the links below. The following PowerPoint presentation supplements the textbook chapter reading and is provided for further knowledge and review of the unit materials. Chapter 11 presentation (PowerPoint) or Chapter 11 presentation (PDF) Learning Activities (Nongraded) Nongraded Learning Activities are provided to aid students in their course of study. You do not have to submit them. If you have questions, contact your instructor for further guidance and information. At the end of each chapter of your textbook, scenario-driven questions provide legal issues and realistic situations that relate to employment law. Exploring these questions allows you the opportunity to further your understanding of the concepts in each chapter and prepares you for similar situations you may encounter in your workplace.

• Review the Chapter 11 questions in your textbook on pages 458–459.

HRM 6302, Employment Law 1

Course Learning Outcomes for Unit V Upon completion of this unit, students should be able to:

1. Discuss the legal significance of the employer-employee relationship. 1.1 Explain the regulation of wages and hours under the Fair Labor Standards Act (FLSA). 1.2 Assess the legal issues surrounding FLSA that employers face.

4. Characterize conduct that violates federal anti-discrimination laws in employment.

4.1 Determine the elements of a prima facie case of pay discrimination under the Equal Pay Act. Required Unit Resources Chapter 11: Wages, Hours, and Pay Equity, pp. 417–456 Unit Lesson In a 2013 survey by the Society for Human Resource Management (SHRM as cited in Miller, 2014), 60 percent of employees rated pay as “very important” and 36 percent rated it as “important.” These ratings made pay the top contributor to overall job satisfaction, surpassing job security. While pay may not always take the top spot in survey results such as the SHRM survey, pay is usually much higher among the leadership of an organization, and the significance and sometimes disparity of pay in the employer-employee relationship cannot be refuted (Miller, 2014). Employees rely on compensation to support themselves and their families. Employers have an interest in holding expenses down, including pay, but must pay what the market requires for talent that drives the organization’s success. Employees want equitable pay relative to their coworkers and commensurate with their skills. Employers must navigate complex legal regulation of wages and hours, as individual states become more active in adding regulations and requirements to existing federal law. As pay and compensation is an issue that affects every worker in an organization, human resources must play a key role in setting policy and insuring practices are fair and compliant. At the federal level alone, there are five laws that address compensation and equal pay. Title VII of the Civil Rights Act of 1964 prohibits discrimination based on race, color, national origin, gender, and religion in pay and pay-related terms of employment, including promotion and job placement. The first bill signed into law by President Obama was the Lilly Ledbetter Fair Pay Act of 2009. It addressed the situation where the discriminatory act that caused an employee in a protected category to be paid less than a similarly situated coworker but was unaware of the disparity until it was too late to sue. This law

UNIT V STUDY GUIDE Wages and Hours

President Obama signs into law the Lilly Ledbetter Act on January 29, 2009.

HRM 6302, Employment Law 2

UNIT x STUDY GUIDE Title

provides that each paycheck of discriminatory wages is a violation of Title VII. Title VII addresses wage discrimination based on any protected status. However, as women have grown to comprise almost half of the U.S. workforce, equal pay as a gender issue has garnered a great deal of attention. Despite the passage in 1963 of the third federal law addressing pay, and specifically pay for women relative to men, women on average earn 79 cents of every dollar earned by men (U.S. Equal Employment Opportunity Commission [EEOC], 2016). The Equal Pay Act requires that employers pay men and women equally in the same establishment when they perform jobs that require the same skill, effort, and responsibility, and when the job is performed under similar working conditions. Employers can defend pay differences by proving that pay differences are seniority-based, established with a merit or incentive system, or a factor other than sex, such as education or training relevant to the job (EEOC, 1997). Equal Pay Act cases tend to be hard to prove, often because of the broad range of factors that can be a factor other than sex. Often, employers chalk up salary differentials to negotiation skills. However, in a federal appeals court case, the court held that an employer is not allowed to satisfy its obligation of proving a wage disparity was based on a factor other than sex by showing that the male negotiated a higher salary (Drum v. Leeson Electric Corp., 2009). A female human resource manager was promoted into another position and her male replacement negotiated a salary $20,000 more than the female had been paid. The court held that the employer had not justified the difference in the two employees’ pay. The court also rejected the employer’s argument that the replacement was hired under a new salary structure that was tied to market rates, while the female employee had been hired under an earlier policy that set pay at slightly below market. Employers should therefore be cautious in allowing negotiation to create a salary disparity unless there are also skills, experience, or some other objective factor not related to sex that justify a difference. Further, if a higher rate of pay for a successor is desired, the employer should consider making salary adjustments for employees in the same position. As part of the efforts to investigate and identify potential pay discrimination, EEOC has adopted a new EEO-1 Report requiring employers with more than 100 employees to submit pay information. In addition, employers must report hours worked by employees in each job category and pay band. Actual hours worked must be reported for nonexempt employees, and for exempt employees, who generally do not track their hours, employers may use 40 hours per week for full-time and 20 hours per week for part-time employees, or provide actual hours if the hours are tracked (EEO-1 Joint Reporting Committee, n.d.). The other federal laws that address pay discrimination are the National Labor Relations Act (NLRA) and Executive Orders (EO) applicable to federal contractors. The NLRA prohibits employers from taking adverse action against non-supervisory employees for discussing their wages or other working conditions with coworkers, even if there is no union involved. The issues under this law are discussed in another unit. For federal contractors, EO 11246 mirrors Title VII by prohibiting pay and other discriminations by federal contractors and subcontractors. The Obama Administration increased regulation of federal contractors through EO 13665, which became effective in January 2016, prohibiting firing or discriminating against employees and applicants who ask about, discuss, or disclose their own pay or that of another employee or applicant. Additionally, EO 13673 requires that effective January 2017, federal contractors must provide a “paycheck transparency” notice to all workers on a weekly basis specifying the hours and overtime hours worked for nonexempt employees, rate of pay, gross pay, and itemized additions to or deductions from gross pay (Executive Order No. 13665, 2014). The action in the pay equity area has by no means been limited to the federal government. Several states have enacted tough laws on fair pay that go beyond the Equal Pay Act, and more states are expected to follow. California, New York, Maryland, and Massachusetts led the way with new laws that broaden the definition of jobs that are regarded as comparable for purposes of comparing the pay of males and females. The standard used is substantially similar as opposed to the substantially equal standard under the Equal Pay Act. Employers must continue to work to ensure that pay remains a positive term of employment and not subject to challenge by federal or state agencies or the employer’s workers. HR professionals must review pay practices, identify any issues, and correct areas of pay disparity. Pay in some areas may need to be adjusted upward to rectify areas of inequality. These costs will be lower than the legal and public relations costs of being sued for pay discrimination.

HRM 6302, Employment Law 3

UNIT x STUDY GUIDE Title

The federal Fair Labor Standards Act also regulates wages and hours. This is an area especially fraught with risk for employers; wage and hour cases are the most active types of litigation in the area of employment law. According to Vehling (2016), litigation in this area has exploded since 2000, and the number of cases have increased every year to a high of almost 9,000 filings in 2015. Issues that fuel this explosion in litigation include minimum-wage rate hikes passed by many states and municipalities, issues related to independent contractor classification, and joint employer issues. There are many hot areas in the wage and hour realm, and one of those is the use of unpaid interns. The DOL uses a restrictive six-factor test to determine if the intern is appropriately unpaid. Appellate courts have recently rejected this test in favor of a primary beneficiary test, which applies flexible factors to determine the primary beneficiary of the interns’ work – the organization or the individual. Key factors that an employer should consider in designing an intern program include a duration that is not excessive in terms of the period of beneficial learning and the displacement of paid employees by the intern so that interns are not doing work that would otherwise be done by paid workers. Perhaps the most significant development in the wage and hour area in decades was derailed in 2016 after a federal judge issued a preliminary injunction just days before new regulations were initially set to become effective on December 1, 2016. The new rules were set to make more than 4 million exempt employees eligible for overtime pay. Under existing rules, employees who make up to $23,660 annually and engage in work that is exempt under the administrative, professional, or executive exemptions do not have to be paid overtime. The new rules would have required that an employee must make at least $47,476 per year and perform exempt work to avoid having to be paid overtime pay. Further, the $47,476 amount was to increase every three years to keep pace with inflation. However, a federal court prevented the regulation from going into effect and put the future of the regulation into question when it ruled that the “significant increase to the salary level creates essentially a de facto salary-only test” (State of Nevada, et al v. United States Department of Labor, et al, 2016, p. 14). In that case, the court held that “Congress did not intend salary to categorically exclude an employee with EAP [executive, administrative, and professional] duties from the exemption” (p. 14). This regulation, or another version of this regulation, may still be considered and implemented in the future. In the busy areas of employment law that relate to pay and hours worked, HR professionals must stay updated on recent developments, ahead of regulators, and in tune with the needs and goals of applicants and workers.

References Boghosian, J. (2009, January 29). Lilly Ledbetter Fair Pay Act signing [Photograph]. The White House:

President Barack Obama. https://obamawhitehouse.archives.gov/photos-and-video/photos/lilly- ledbetter-fair-pay-act-signing

Drum v. Leeson Elec. Corp., 565 F.3d 1071 (8th Cir. 2009). EEO-1 Joint Reporting Committee. (n.d.). Standard Form 100, Rev/ March 2018, Employer information report

EEO-1 instruction booklet. https://www.eeoc.gov/employers/eeo1survey/2017survey-instructions.cfm Executive Order No. 13665, 79 Fed. Reg. 20749 (Apr. 11, 2014). Miller, S. (2014, May 12). Why pay is driving employee satisfaction. Society for Human Resource

Management. https://www.shrm.org/resourcesandtools/hr-topics/compensation/pages/pay-drives- satisfaction.aspx

State of Nevada, et al v. United States Department of Labor State of Nevada, et al v. United States

Department of Labor, Civil Action No. 4:16-CV-00731 (E.D. Tex. 2016). U.S. Equal Employment Opportunity Commission. (1997, January 15). Facts about equal pay and

compensation discrimination. https://www.eeoc.gov/eeoc/publications/fs-epa.cfm

HRM 6302, Employment Law 4

UNIT x STUDY GUIDE Title

U.S. Equal Employment Opportunity Commission. (2016, March 16). Written testimony of Lisa M. Maatz Vice President of Government Relations American Association of University Women. https://www.eeoc.gov/eeoc/meetings/3-16-16/maatz.cfm

Vehling, A. (2016, January 12). FLSA class actions to hit record high in 2016. Law360.

http://www.law360.com/articles/745603/flsa-class-actions-to-hit-record-high-in-2016 Suggested Unit Resources In order to access the following resources, click the links below. The following PowerPoint presentation supplements the textbook chapter reading and is provided for further knowledge and review of the unit materials. Chapter 11 presentation (PowerPoint) or Chapter 11 presentation (PDF) Learning Activities (Nongraded) Nongraded Learning Activities are provided to aid students in their course of study. You do not have to submit them. If you have questions, contact your instructor for further guidance and information. At the end of each chapter of your textbook, scenario-driven questions provide legal issues and realistic situations that relate to employment law. Exploring these questions allows you the opportunity to further your understanding of the concepts in each chapter and prepares you for similar situations you may encounter in your workplace.

• Review the Chapter 11 questions in your textbook on pages 458–459.