KIM WOODS HERE YOU GO..... CHAPTER 2

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2 The

LEGAL TheThe

ENVIRONMENT

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For years, former RadioShack store manager Omar Belazi enthu- siastically logged 65-hour workweeks, stayed late to clean the store’s restrooms and vacuum the floor, and worked all weekend just to help meet the store’s sales goals. Regardless of the hours he worked, however, he received the same monthly salary. Belazi gradually grew tired of the long hours, extra work, and stress and left RadioShack.

He eventually became part of a class-action lawsuit against RadioShack that included 1,300 current and former California store managers. Their contention was that they were managers in title only. More specifically, the lawsuit argued that all true manage- ment decisions were made at higher levels in the organization, leaving those with the title of store manager little more than sales workers. But because they had a managerial title and were paid

salaries, the company did not have to pay them overtime. The law- suit was settled when RadioShack agreed to pay $29.9 million to the plaintiffs.

At the heart of the argument was a decades-old law that man- dates overtime payments for hourly operating workers who work more than 40 hours a week but which allows firms to pay sala- ries to professionals regardless of how many hours they work. The Fair Labor Standards Act specifically exempts those in executive, administrative, or professional jobs from overtime payments. But because so many jobs have shifted from manufacturing settings to service settings, and because the nature of so many jobs has changed, the lines between different kinds of work have blurred.

And whether intentional or not, many firms now routinely use general titles such as manager, administrator, and analyst

LEARNING OBJECTIVES After studying this chapter, you should be able to:

LO1 Describe the legal context of human resource management

LO2 Identify key laws that prohibit discrimination in the workplace and discuss equal employment opportunity

LO3 Discuss legal issues in compensation, labor relations, and other areas in human resource management

LO4 Discuss the importance to an organization of evaluating its legal compliance ©

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“ It gets to be very stressful, very tiring. You just get up and go to RadioShack and go home and go to sleep.”—Omar Belazi, former RadioShack employee

MANAGERS IN NAME ONLY?

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24 Part 1: An Overview of Human Resource Management

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but assign employees with those titles tasks that do not always fit the title. For instance, Mr. Belazi was not specifically directed to work extra on weekends or to clean the restrooms. But if an hourly worker had been hired, that person’s time would have been charged against the store’s weekly labor budget. If he didn’t maximize the labor hours he and his employees devoted to selling, then his store’s sales would drop and he would be reprimanded.1

THINK IT OVER 1. From a management perspective, what are the key issues in

this case? 2. How might you respond if your employer (current or future)

directly or indirectly required you to work extra hours with no additional compensation?

Like every other organization today, RadioShack must adhere to the laws and regulations that govern its employ- ment practices. In general, organizations try to follow such laws and regulations for several reasons. One is an inherent commitment in most organizations to ethical and socially responsible behavior. Another is to avoid the direct costs and bad publicity that might result from lawsuits brought against the organization if those laws and regulations are broken. But as the opening case illustrates, these laws and regulations are sometimes ambiguous and open to different interpretations. As we will see, failure to follow the law, even because of a well-intentioned misunderstanding, can be enormously costly to an organization.

As we noted in Chapter 1, the proliferation of laws and regulations affecting employment practices in the 1960s and 1970s was a key reason for the emergence of human resource management (HRM) as a vital organizational function. Managing within the complex legal environment t h a t affects human resource (HR) practices requires a full understanding of that legal environment and the ability to ensure that oth- ers within the organization also understand it.2 This chapter is devoted to help- ing you understand the legal environment of human resource management. First, we establish the legal context of HRM and then focus on perhaps the most important area of this legal context—equal employment opportu- nity—and review several key court cases that have estab- lished the law in this area. Subsequent sections introduce legal issues in compensation and labor relations. Various emerging legal issues are also introduced and discussed. Finally, we summarize how many of today’s organizations evaluate their legal compliance.

LEARNING OBJECTIVE 1

THE LEGAL CONTEXT OF HUMAN RESOURCE MANAGEMENT The legal context of human resource management is shaped by different forces. The catalyst for modifying or

enhancing the legal context may be legislative initiative, social change, or judicial rulings. Governmental bodies pass laws that affect human resource practices, for exam- ple, and the courts interpret those laws as they apply to specific circumstances and situations. Thus, the regulatory environment itself is quite complex and affects different areas within the HRM process.3

The Regulatory Environment of Human Resource Management The legal and regulatory environment of human resource management in the United States emerges as a result of a

three-step process. First is the actual creation of new regulation. This reg- ulation can come in the form of new laws or statutes passed by national, state, or local government bodies; however, most start at the national

level. State and local regu- lations are more likely to extend or modify national regulations than create new ones. In addition, as we will

see later, the president of the United States can also create

regulations that apply to spe- cific situations. Finally, court deci-

sions, especially decisions by the Supreme Court of the United States, set precedence and so also play a major role in establishing the regulatory environment.

There are also numerous instances where court deci- sions have narrowed definitions of some laws and have reduced the ability of plaintiffs to bring charges under other laws. As a result, in some cases, activists have called for new laws to reestablish the original intent of a law that has been altered by various court decisions. Indeed, for instance, the Civil Rights Act of 1991 was passed to reestablish certain provisions of the original Civil Rights Act passed in 1964 (we discuss these laws later).

The second step in the regulation process is the enforcement of these regulations. Occasionally, the laws themselves provide for enforcement through the creation of special agencies or other forms of regulatory groups. (We will discuss one important agency, the Equal Employment Opportunity Commission, later in the chapter.) In other situations, enforcement might be assigned to an existing

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Chapter 2: The Legal Environment 25

Protection from discrimi- nation in performance

appraisal, subsequent job placements, training and

development opportunities, career and promotion opportunities, and all

other dimensions of work in the organization

Current employees

Prospective employees

Protection from discrimination in

selection, initial job placement, and initial

compensation

EXHIBIT 2.1 Legal Regulation of Human Resource Management

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agency such as the Department of Labor. The court sys- tem also interprets laws that the government passes and provides another vehicle for enforcement. To be effective, an enforcing agency must have an appropriate degree of power. The ability to levy fines or bring lawsuits against firms that violate the law are among the most powerful tools provided to the various agencies charged with enforc- ing HR regulations.

The third step in the regulation process is the actual practice and implementation of those regulations in orga- nizations. In other words, organizations and managers must implement and follow the guidelines that the gov- ernment has passed and that the courts and regulatory agencies attempt to enforce. In many cases, following regu- lations is a logical and straightforward process. In some cases, however, a regulation may be unintentionally ambig- uous or be interpreted by the courts in different ways over time. Regardless of the clarity of the regulation, the actual

process of implementing and demonstrating adherence to it may take an extended period of time. Thus, organiza- tions are sometimes put in the difficult position of figur- ing out how to follow a particular regulation or needing an extended period to fully comply.

LEARNING OBJECTIVE 2

EQUAL EMPLOYMENT OPPORTUNITY Regulations exist in almost every aspect of the employment relationship. As illustrated in Exhibit 2.1, equal employment opportunity intended to protect individuals from illegal discrimination is the most fundamental and far-reaching area of the legal regulation of human resource manage- ment. Indeed, in one way or another, almost every law and statute governing employment relationships is essentially

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26 Part 1: An Overview of Human Resource Management26

Illegal discrimination results from behaviors or actions by

an organization or managers within an organization

that cause members of a protected class to be unfairly

diff erentiated from others.

Disparate treatment discrimination

exists when individuals in similar situations are treated

diff erently based on the individual’s race, color, religion,

sex, national origin, age, or disability status.

The Reconstruction Civil Rights Acts of 1866 and 1871 further extended protection offered to people under

the Thirteenth and Fourteenth Amendments.

attempting to ensure equal employment opportunity. Such opportunity, however, has been interpreted to include protection that goes beyond ensuring that a person has a fair chance at being hired for a job for which the person is qualified. As also illustrated in Exhibit 2.1, this protection extends to preventing illegal discrimination against current employees with regard to performance appraisal, pay, pro- motion opportunities, and various other dimensions of the employment relationship. In addition, several related legal issues warrant separate discussion as well.

Some managers assume that the legal regulation of HRM is a relatively recent phenomenon. In reality, how- ever, concerns about equal opportunity can be traced back to the Thirteenth Amendment passed in 1865 to abolish slavery and the Fourteenth Amendment passed in 1868 to provide equal protection for all citizens of the United States. The Reconstruction Civil Rights Acts of 1866 and 1871 further extended protection offered to people under the Thirteenth and Fourteenth Amendments, and together with those amendments, these laws still form the basis for present-day federal court actions that involve the payment of compensatory and punitive damages.4

Discrimination and Equal Employment Opportunity The basic goal of all equal employment opportunity regu- lation is to protect people from unfair or inappropriate discrimination in the workplace.5 However, most laws passed to eliminate discrimination do not explicitly define the term itself. It is also instructive to note that discrimi- nation per se is not illegal. Organizations routinely “dis- criminate” between effective and ineffective employees in how they are treated. As long as the basis for this discrimi- nation is purely job-related, however, such an action is legal

and appropriate when based on performance or seniority and applied objectively and consistently. Problems arise, though, when differentia- tion between people is not job related; the resulting dis- crimination is illegal. Vari- ous court decisions and basic inferences about the lan- guage of various laws suggest that illegal discrimination is the result of behaviors or actions by an organization

or managers within an organization that cause members of a protected class to be unfairly differentiated from others. (We discuss protected classes later in this chapter.)

Although numerous laws deal with different aspects of equal employment opportunity, the Civil Rights Act of 1964 clearly signaled the beginning of a new legislative era in American business. The act grew out of the growing atmo- sphere of protest for equal rights in the early 1960s and contains several sections called titles that deal with different areas of application of the Civil Rights Act. Our discus- sion will focus on Title VII, which deals with work settings under the heading of Equal Employment Opportunity.

Title VII of the Civil Rights Act of 1964 The most significant single piece of legislation specifically affecting the legal context for human resource management to date has been Title VII of the Civil Rights Act of 1964. Congress passed the Civil Rights Act and President Lyndon Johnson signed it into law in 1964 as a way to ensure that equal oppor- tunities would be available to everyone. Title VII of the act states that it is illegal for an employer to fail or refuse to hire,

to discharge any individual, or to discriminate in any other way against any individual with respect to any aspect of the employment relationship on the basis of that individu- al’s race, color, religious beliefs, sex, or national origin.

The law applies to all components of the employment relationship, including compensation, employment terms, working conditions, and various other privileges of employ- ment. Title VII applies to all organizations with fifteen or more employees working 20 or more weeks a year and that are involved in interstate commerce. In addition, it also applies to state and local governments, employment agencies, and labor organizations. Title VII also created the Equal Employment Opportunity Commission (EEOC) to enforce the various provisions of the law (we discuss the EEOC later in this chap- ter). Under Title VII, as interpreted by the courts, several types of illegal discrimination are outlawed. These types are discussed next and are illustrated in Exhibit 2.2.

Disparate Treatment Disparate treatment discrimina- tion exists when individuals in similar situations are treated differently and when the differential treatment is based on the individual’s race, color, religion, sex, national origin, age, or disability status. For example, if two people with the same qualifications for the job apply for a promotion and the organization uses one individual’s religious beliefs or gender to decide which employee to promote, then the

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Chapter 2: The Legal Environment 27

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Under Title VII of the Civil Rights Act, it is illegal for an employer to fail or refuse to hire or to discharge any individual or to in any other way discriminate

against any individual with respect to any aspect of the employment relationship on the basis of that individual’s

race, color, religious beliefs, sex, or national origin.

27

A bona fi de occupational qualifi cation (BFOQ) states that a condition like race, sex, or other personal characteristic legitimately aff ects a person’s ability to perform the job, and therefore can be used as a legal requirement for selection.

A business necessity is a practice that is important for the safe and effi cient operation of the business.

President Lyndon Johnson President Lyndon Johnson signed the Civil Rights Act signed the Civil Rights Act into law on July 2, 1964.into law on July 2, 1964.

individual not promoted is a victim of disparate treatment discrimination. To prove discrimination in this situation, an individual filing a charge must demonstrate that there was a discriminatory motive; that is, the individual must

prove that the organization considered the individual’s protected class status when making the decision.

One circumstance in which organizations can legiti- mately treat members of different groups differently is when there exists a bona fide occupational qualification (BFOQ) for performing a particular job. This means that some per- sonal characteristic such as age legitimately affects a per- son’s ability to perform the job. For example, a producer casting a new play or movie can legally refuse to hire an older person to play a role that is expressly written for a young person. Few legitimate BFOQs exist, however. For example, a restaurant cannot hire only young and attractive

people as servers based on the argument that their custom- ers prefer young and attractive servers. In fact, customer or client preference can never be the basis of a BFOQ. As we shall see, this situation can become quite complex.

To claim a BFOQ exception, the organization must be able to demonstrate that hiring on the basis of the char- acteristic in question (e.g., age) is a business necessity; that is, the organization must be able to prove that the prac- tice is important for the safe and efficient operation of the business. But what if customers at a casino would prefer female card dealers or if customers at an automobile deal- ership prefer male salespeople? These customers might go elsewhere if these preferences were not satisfied, and those decisions could surely hurt the business involved. In gen- eral, neither case would qualify as a BFOQ, but reality is rarely this simple.

The case of Diaz v. Pan American World Airways, for example, was filed after Celio Diaz (a male) applied for the job of flight attendant with Pan American Air- lines (Pan Am).6 He was rejected because Pan Am had a policy of hiring only women for this position (as did many airlines in 1971). Diaz filed suit for discrimination, but Pan Am argued that gender was a BFOQ for the job of flight attendant. This argument was based on Pan Am’s own experience with male and female flight attendants and on the fact that Pan Am’s customers overwhelmingly preferred to be served by female attendants. A lower court accepted the airlines’ argument that “an airline cabin repre- sents a unique [and stressful] environment in which an air carrier is required to take account of the special psychologi- cal needs of its passengers. Those needs are better attended to by females.”7 The appeals court reversed that deci- sion, however, citing that Pan Am’s data on the rela- tive effectiveness of male and female flight attendants was not compelling and that customer preference was not relevant because no evidence existed that hir- ing male flight attendants would substantially affect the business performance of

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28 Part 1: An Overview of Human Resource Management28

Disparate impact discrimination occurs when

an apparently neutral employment practice

disproportionately excludes a protected group from

employment opportunities.

The four-fi fths rule suggests that disparate impact exists if a selection criterion (such

as a test score) results in a selection rate for a protected

class that is less than four- fi fths (80 percent) of that for

the majority group. © D

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Forms of illegal

discrimination

Retaliation

Disparate impact

Disparate treatment

Pattern or practice

EXHIBIT 2.2 Forms of Illegal Discrimination

the airlines. But while this ruling may seem clear, Asian res- taurants are routinely allowed to hire only Asian American waiters because they add to the authenticity of the dining experience and are therefore deemed a business necessity.

Disparate Impact A second form of discrimination is disparate impact discrimination that occurs when an appar- ently neutral employment practice disproportionately excludes a protected group from employment opportunities. This argument is the most common for charges of discrimi- nation brought under the Civil Rights Act. For example, suppose a restaurant determined that, for health reasons, no one who had hair long enough to cover his or her ears would be hired to handle food. Although this practice would be applied to all applicants and would certainly result in some long-haired males not being hired, it would have a much greater impact on female applicants because they are more likely to have longer hair. As a result, even though all appli- cants would be treated the same, this practice would result in the rejection of many more female applicants. This situa- tion would be an example of disparate impact discrimination because the organization, even with no direct intention of discriminating against women, is using a particular employ- ment practice that results in discrimination against women. In this situation, intent to discrimi- nate is irrelevant (and the proper solution is to have all employees wear hairnets).

One of the first instances in which disparate impact was defined involved a landmark legal case, Griggs v. Duke Power. Following passage of Title VII, Duke Power initi- ated a new selection system that required new employees to have either a high school education or a minimum cut- off score on two specific per- sonality tests. Griggs, a black male, filed a lawsuit against Duke Power after he was denied employment based on these criteria. His argument

was that neither criterion was a necessary qualification for performing the work he was seeking. After his attorneys dem- onstrated that those criteria disproportionately affected blacks and that the company had no documentation to support the validity of the criteria, the courts ruled that the firm had to change its selection criteria on the basis of disparate impact.8

The important criterion in this situation is that the consequences of the employment practice are discrimina- tory, and thus the practice in question has disparate (some- times referred to as adverse) impact. In fact, if a plaintiff can establish what is called a prima facie case of discrimination, the company is considered to be at fault unless it can dem- onstrate another legal basis for the decision.9 This finding doesn’t mean that the company automatically loses the case, but it does mean that the burden of proof rests with the company to defend itself rather than with the plaintiff trying to prove discrimination. Therefore, it is extremely important to understand how one establishes a prima facie case.

Several avenues can be used to establish a prima facie case, but the most common approach relies on the so-called four-fifths rule. Specifically, the courts have ruled that disparate impact exists if a selection criterion (such as a test

score) results in a selec- tion rate for a protected

class that is less than four-fifths

(80 percent) than that for the majority

group. For example, assume that an organization is considering 100 white applicants and 100 Hispanic applicants for the same job. If an employment test used to select among these applicants results in 60 white applicants (60 percent) being hired, but only 30 Hispanic applicants (30 percent) being hired, then disparate impact is likely to be ruled because Hispanics are being hired at a rate that is less than four-fifths than that of whites. At this point, the organization using the test would be required to prove that its differential selection rate of whites versus Hispanics could be justified (the basis for this justification will be explained below).

But demonstrating that an organization’s policies have violated the four-fifths rule can sometimes be com- plicated. In the case of Ward’s Cove Packing v. Antonio, the defendant, a salmon cannery in Alaska, had two distinct types of jobs for which people were hired.10 Cannery jobs

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Chapter 2: The Legal Environment 2929

Geographical comparisons involve comparing the characteristics of the potential pool of qualifi ed applicants for a job (focusing on characteristics such as race, ethnicity, and gender) with those same characteristics of the present employees in the job.

The McDonnell-Douglas test is used as the basis for establishing a prima facie case of disparate impact discrimination.

Pattern or practice discrimination is similar to disparate treatment but occurs on a classwide basis.©

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were seen as skilled (administrative and engineering) while noncannery jobs were viewed as unskilled. The plaintiff’s attorneys argued that because the noncannery jobs were predominantly filled by Filipino and Native Alaskans and the cannery jobs were held predominantly by whites, the company had violated the four-fifths rule and had there- fore established a prima facie case for disparate impact. The defendant did not dispute the statistics but argued that the policies in place did not lead to apparent dis- parate impact and therefore there was no prima facie case. The Supreme Court agreed with the defendant, ruling that the statistical proof alone was not sufficient for establishing a prima facie case. Therefore, the bur- den of proof did not shift to the defendant but rested with the employee involved. Ward’s Cove won the case. In addition to illustrating the problems with establishing a violation of the four-fifths rule, the Ward’s Cove case was also widely seen as dealing a major blow to the enforcement of the Civil Rights Act of 1964— a topic to which we will return shortly.

A plaintiff might be able to demonstrate disparate impact by relying on so-called geographical comparisons. These involve comparing the characteristics of the potential pool of qualified applicants for a job (focusing on character- istics such as race, ethnicity, and gender) with those same characteristics of current employees in the job. Thus, if the potential pool of qualified applicants in the labor market for the job of bank teller is 50 percent African American, then a bank hiring from that market should have approximately 50 percent African American tellers. Failure to achieve this degree of representation is considered a basis for a prima facie case of disparate impact discrimination. This compari- son requires a clear understanding of the labor market from which the organization typically recruits employees for this job because different jobs within the same organization might draw on different “relevant” labor markets with different char- acteristics. For instance, a university might rely on a national labor market for new faculty members, a regional labor mar- ket for professional staff employees, and a local labor market for custodial and food-service employees. It is also important to note that the definition of the “potential pool of qualified applicants” draws heavily on census data for the area.

Finally, the McDonnell-Douglas test, named for a Supreme Court ruling in McDonnell-Douglas v. Green, is another basis for establishing a prima facie case.11 Four steps are part of the McDonnell-Douglas test:

1. The applicant is a member of a protected class (see below).

2. The applicant was qualified for the job for which he or she applied.

3. The individual was turned down for the job. 4. The company continued to seek other applicants with

the same qualifications.

Pattern or Practice Discrimination The third kind of discrimination that can be identified is pattern or practice discrimination. This form of disparate treatment

occurs on a classwide or systemic basis. Although an indi- vidual can bring charges of practice discrimination, the question is whether the organization engages in a pattern or practice of discrimination against all members of a pro- tected class instead of against one particular member. Title VII of the 1964 Civil Rights Act gives the attorney gen- eral of the United States express powers to bring lawsuits against organizations thought to be guilty of pattern or practice discrimination. Specifically, Section 707 of Title VII states that such a lawsuit can be brought if there is reasonable cause to believe that an employer is engaging in pattern or practice discrimination. A good example of pat- tern or practice discrimination allegedly occurred several years ago at Shoney’s, a popular family-oriented restaurant chain with operations and locations throughout the South. A former assistant manager at the firm alleged that she was told by her supervisor to use a pencil to color in the “o” in the Shoney’s logo printed on its employment application blanks for all African American applicants. The presumed intent of this coding scheme was to eliminate all those applicants from further consideration.12

To demonstrate pattern or practice discrimination, the plaintiff must prove that the organization intended to discriminate against a par- ticular class of individuals. A critical issue in practice or pattern discrimination lawsuits is the definition of a statistical comparison group or a definition of the relevant labor market. A labor market consists of workers who have the skills needed to perform the work and who are within a reasonable commuting dis- tance from the organization. The definition of labor mar- ket is a major issue in resolv- ing lawsuits brought under pattern or practice discrimi- nation suits.

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30 Part 1: An Overview of Human Resource Management30

A protected class consists of all individuals who share

one or more common characteristic as indicated by

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Retaliation A final form of illegal discrimination that has been occasionally identified in some reorganizations is retaliation for “participation and opposition.” Title VII states that it is illegal for employers to retaliate against employees for either opposing a perceived illegal employ- ment practice or participating in a proceeding that is related to an alleged illegal employment practice. If an employee’s behavior fits the legal definition of participation or opposi- tion and the organization takes some measure against that particular employee—such as a reprimand, demotion, or termination—then the employee can file a lawsuit against the organization under Title VII.

Employer Defense Our discussion so far has focused on the types of illegal discrimination and the ways in which a plaintiff can establish a case of discrimination. As noted ear- lier, however, once a prima facie case has been estab- lished, the burden of proof shifts to the defendant; that is, the defendant has to provide evidence for non- discriminatory bases for the decisions made. Therefore, it is critical to understand that just because a prima facie case has been estab- lished, the defendant (typi- cally the company) will not necessarily be found liable. The company can defend itself by providing evidence that the selection decision (or employment decision of any type) was based on criteria that are job related. In other words, the defendant (usually an organization) must be able to prove that decisions were made so that the persons most likely to be selected (or promoted or to receive a pay raise) are those who are most likely to perform best on the job (or who have already performed best on the job). This situation is also referred to as validation of the practice in question. In Chap- ter 7, we will discuss how one validates a selection technique and therefore establishes that it is job related. Many of these issues are also based on the court ruling in the Albermarle Paper Company case, which is also discussed in Chapter 7.

Protected Classes in the Workforce Now we turn our attention to what the term protected classes means in practice. Many of the discriminatory prac- tices described earlier stemmed from stereotypes, beliefs,

or prejudice about classes of individuals. For example, common stereotypes at one time were that African American employees were less dependable than white

employees, that women were less suited to certain types of work than were men, and that disabled individuals could not be productive employees. Based on these stereotypes, many organizations routinely discriminated against African Americans, women, and disabled people. Although such blatant discrimination is rare today, that does not mean that discrimination at work has disappeared. Instead, as we shall see, it has found new targets and, in many cases, a much more subtle approach.

To combat this past discrimination, various laws have been passed to protect different classes or categories of indi- viduals. Although it varies from law to law, a protected class consists of all individuals who share one or more common characteristics as indicated by that law. The most common characteristics used to define protected classes include race, color, religion, gender, age, national origin, disability status,

and status as a military vet- eran. As we will see, some laws pertain to several protected classes, while others pertain to a single protected class. Class defi- nition generally involves first specifying the basis of distinction and then specifying which degree or category of that dis- tinction is protected. For example, a law may pro- hibit discrimination on the basis of gender—a basis of distinction—and then define the protected class as females. This distinc-

tion does not mean that an organization can discriminate against men, of course, and in some cases men could even be considered members of a protected class. But the law was almost certainly passed on the assumption that most gender-based discrimination has been directed against women and thus it is women who need to be protected in the future.

At the same time, an important issue is to what extent an organization can give preferential treatment to members of a protected class. Although exceptions can be made in certain circumstances, by and large the intent of most equal employment opportunity legislation is to provide fair and equitable treatment for everyone, as opposed to stipulating preferential treatment for members of a protected class.13

This interpretation becomes a bit complicated, though, and can result in charges of reverse discrimination, our next topic.

Affirmative Action and Reverse Discrimination When charges of illegal discrimination have been sup- ported, courts sometimes impose remedies that try to reverse the effects of past discrimination. Most frequently,

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Chapter 2: The Legal Environment 3131

Affi rmative action represents a set of steps, taken by an organization, to actively seek qualifi ed applicants from groups underrepresented in the workforce.

A utilization analysis is a comparison of the racial, sex, and ethnic composition of the employer’s workforce compared to that of the available labor supply.

“Affirmative action is an

effort to develop a systematic approach to

open the doors of education, employment, and business development opportunities to qualified

individuals who happen to be members of

groups that have experienced

long-standing and persistent

discrimination.” —Bill Clinton,

Forty-second U.S. president, 1993–2001

these remedies have taken the form of some type of affirma- tive action. (As we shall see below, some organizations are also required to file affirmative action plans even without charges of illegal discrimination.) Affirmative action refers to positive steps taken by an organization to seek quali- fied employees from under- represented groups in the workforce. When affirma- tive action is part of a rem- edy in a discrimination case, the plan takes on additional urgency and the steps are somewhat clearer. Three elements make up any affir- mative action program.

The first element is called the utilization analysis and is a comparison of the racial, sex, and ethnic com- position of the employer’s workforce compared to that of the available labor supply. For each group of jobs, the organization needs to identify the percentage of its workforce with that characteristic (i.e., African American, female, etc.) and identify the percentage of workers in the relevant labor market with that characteristic. If the per- centage in the employer’s workforce is considerably less than the percentage in the external labor supply, then that minority group is characterized as being underutilized. Much of this analysis takes place as part of the discrimination case, if one is involved, and the affected groups are defined by the specifics of the case.

The second part of an affirmative action plan is the development of goals and timetables for achieving bal- ance in the workforce concerning those characteristics, especially where underutilization exists. Goals and time- tables generally specify the percentage of protected classes of employees that the organization seeks to have in each group and the targeted date by which that percentage should be attained, but these are much more flexible than quotas, which are illegal (except in rare cases when these have been imposed by courts). The idea underlying goals and timetables is that if no discriminatory hiring practices

exist, then underutilization should be eliminated over time.

The third part of the affirmative action program is the development of a list of action steps. These steps specify

what the organization will do to work toward attaining its goals to

reduce underutilization. Common action steps include increased

communication of job open- ings to underrepresented

groups, recruiting at schools that predominantly cater to a particular protected class, participating in pro- grams designed to improve employment opportunities for underemployed groups, and taking all steps to remove inappropriate barri- ers to employment. In some cases, this third part might also include preferential hiring; that is, given two equally qualified applicants for a job, the organization would be required to hire the member of the under- represented group in every case until its goals and tar- gets are met.

In the late 1990s, the courts began to impose many more restrictions on what was acceptable (or required) in the way of pref- erential hiring and quotas. We will discuss representa- tive relevant court decisions shortly, but the impetus for some of these decisions was the concern that affirma- tive action could in some cases appear to be a form of reverse discrimination, or

a practice that has a dispa- rate impact on members of nonprotected classes. Thus, charges of reverse discrimi- nation typically stem from the belief by white males that they have suffered because of preferential treat- ment given to other groups.

The two most famous court cases in this area help

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32 Part 1: An Overview of Human Resource Management

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to illustrate how complicated this issue can be. In one case, Allan Bakke, a white male, applied to medical school at the University of California Davis but was denied admission.14 At issue was the fact that the university had set aside 16 of its 100 seats for an incoming class for minority students to promote diversity and affirmative action at the school. Bakke’s attorneys argued that he was not necessarily more qualified than those admitted for the 84 “white” openings, but that he was more qualified than those admitted to the 16 openings set aside for minorities. Because the school had imposed this system on its own (to correct past injustice), the Court ruled that this “set-aside” program constituted reverse discrimination because it clearly favored one race over another and ruled in favor of Bakke.

In another case, Brian Weber, also a white male, applied for a temporary training program that would lead to a higher-paying skilled job at a Kaiser Aluminum facility.15 He was not admitted into the program; he then sued because he claimed that African American appli- cants with less seniority were admitted into the program strictly because of their race. In fact, Kaiser and United Steelworkers had agreed to a contract whereby 50 per- cent of the openings for these programs would be reserved for African Americans in an attempt to address the fact that African Americans had been systematically excluded from these programs in the past. The Supreme Court f o u n d in favor of Kaiser and the union, acknowledging that a collective-bargaining agreement such as this one was binding and was a reasonable means of addressing past discrimination.

Given these two legal decisions, one might question the current status of reverse-discrimination cases. In fact, it is by no means clear. Within the space of a few years, the Supreme Court:

■ ruled against an organization giving preferential treat- ment to minority workers during a layoff ;16

■ ruled in support of temporary preferential hiring and promotion practices as part of a settlement of a lawsuit ;17

■ ruled in support of the establishment of quotas as a remedy for past discrimination;18 and

■ ruled that any form of affirmative action is inherently discriminatory and could be used only as a temporary measure.19

It would appear that the future of affirmative action is unclear, suggesting that the courts will be leaning more toward interpretations in line with reverse discrimination in the future.

Indeed, the concept of affirmative action is increas- ingly being called into question. In 1996, for instance, a circuit court judge ruled that a goal of increasing student diversity at the University of Texas was not sufficient

grounds for giving preference to racial minorities in terms of admission or financial aid.20 In 1998, California voters ratified a proposition called the California Civil Rights Ini- tiative, which outlawed any preferential treatment on the basis of race, gender, color, ethnicity, or national origin for all public employment, education, and contracting activi- ties. However, in 2003 the Supreme Court ruled that the University of Michigan could use diversity as one of several factors in making its admissions decisions, although it dis- allowed explicit rules that awarded extra points to under- represented groups in the student population.

In a more recent case (Ricci v. Stefano, 2009), the Supreme Court ruled that the city of New

Haven, Connecti- cut, violated the rights of a group of white firefight- ers when they

decided to discard the results of a recent promo-

tion exam that was shown to have disparate impact.

The city developed and validated this test and

administered

it to group of candidates. Based on the test scores and corresponding job openings, no non-white firefighters would be promoted. This caused the city to throw out the results of the test and to order a new exam. The white firefighters subsequently sued the city for reverse discrimi- nation. The city of New Haven argued that the test did not really measure what was needed to be successful as a lieutenant, but the Supreme Court, in a 5–4 decision, ruled that if the city did not believe the test measured the right thing it should not have been used and that the decision to throw out the results was simply a reaction to “racial statistics.”

Sexual Harassment at Work One final area of coverage for the Civil Rights Act that is critical to the human resource manager is sexual harass- ment. This area is particularly important in this context because much of the litigation and the organization’s liabil- ity in these cases depend on the initial responses to charges of sexual harassment, and these responses are typically the responsibility of someone in human resources. Sexual harassment is defined by the EEOC as unwelcome sexual advances in the work environment. If the conduct is indeed unwelcome and occurs with sufficient frequency to create an abusive work environment, the employer is responsible for changing the environment by warning, reprimanding, or perhaps firing the harasser.21

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Chapter 2: The Legal Environment 33

HHRR iinn tthhee 2211stst CCeennttuuryry In July 2005, Justice Sandra Day O’Connor (most of whose decisions would be considered moderate) announced her retirement. President George W. Bush announced that his choice to replace O’Connor was John Roberts, a conservative judge with a great deal of judicial experience. But then Chief Justice William Rehnquist died after a long battle with cancer in early September 2005. President Bush subsequently switched his nomination of John Roberts to replace Rehnquist as chief justice, and Roberts was confirmed as chief justice in late September 2005. President Bush next announced his choice of Samuel Alito, another conservative judge, to fill the remaining opening; Alito was subsequently confirmed in early 2006. These appointments resulted in a clear shift to the political right in the nature of Supreme Court decisions. More recently, though, President Barack Obama had the opportunity to make his first appointment to the Supreme Court. His choice was Sonia Sotomayor, a judge with a relatively liberal track record. She promises to bring a new perspective to the court, and it will be interesting to see how much influence she has in upcoming decisions.

Regardless, discussions of affirmative action have also become linked to a discussion of a “new racism” by both sides of the debate. Many conservatives, for instance, were arguing that

affirmative action was itself a form of racism in which people were classified according to their race and stereotyped because of that classification. Individuals opposed to affirmative action argued that it made more sense for organizations to deal with everyone on the basis of individual ability and potential. They also claimed

that affirmative action condemned African Americans to second-class status because of the assumption that they could not get ahead on their own.

Advocates of affirmative action also started to invoke charges of racism in arguing their case. These individuals suggested that the conservatives arguing against affirmative action were guilty of a new form of racism. Specifically, they argued that opponents of affirmative action were calling for decisions based on merit—and that those decisions would open the door to the same types of discrimination that had occurred in the past. These arguments are certain to continue with no clear answer likely to emerge.

THINK IT OVER 1. What is your position on reverse discrimination? 2. Do you think it appropriate that Supreme Court appointments

have substantial influence on policy?

33

Quid pro quo harassment is sexual harassment in which the harasser off ers to exchange something of value for sexual favors.

A hostile work environment is one that produces sexual harassment because of a climate or culture that is punitive toward people of a diff erent gender.©

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“Welcome sexual harassment is an oxymoron.”

—Richard Posner, Judge on the U.S. Seventh Circuit

Court of Appeals, Chicago

The courts have ruled that there are two types of sex- ual harassment and have defined both types. One type of sexual harassment is quid pro quo harassment. In this case, the harasser offers to exchange something of value for sexual favors. For example, a male supervisor might tell or imply to a female subordinate that he will recommend her for promotion or provide her with a salary increase, but only if she sleeps with him. Although this type of situation definitely occurs, organiza- tions generally have no prob- lem in understanding that it is illegal and in knowing how to respond.

But a more subtle (and probably more common) type of sexual harassment is the creation of a hostile work environment, and this situa- tion is not always so easy to define. For example, a group of

male employees who continually make off-color jokes and lewd comments and perhaps decorate the work environ- ment with inappropriate photographs may create a hos- tile work environment for a female colleague to the point where she is uncomfortable working in that job setting. Most experts would agree that this situation constitutes sexual harassment. But what if an employee has an inap- propriate magazine in a desk drawer and a co-worker sees it

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The Equal Pay Act of 1963 requires that organizations

provide men and women who are doing equal work the same pay.

only when she (or he) happens to walk by when the drawer is open?

In Meritor Savings Bank v. Vinson, the Supreme Court noted that a hostile work environment constitutes sexual harassment, even if the employee did not suffer any eco- nomic penalties or was not threatened with any such pen- alties.22 In Harris v. Forklift Systems, the Court ruled that the plaintiff did not have to suffer substantial mental dis- tress to receive a jury settlement.23 Hence, it is criti- cal that organizations monitor the situation and be alert for these instances because, as noted, it is the organization’s responsibil- ity for dealing with this sort of problem.24

Therefore, the human resource manager must play a major role in investigating any hint of sexual harassment in the organization. The manager can- not simply wait for an employee to complain. Although the Court had ruled in the case of Scott v. Sears Roebuck25 that the employer was not liable for the sexual harassment because the plaintiff did not complain to supervisors, the ruling in the Meritor case makes it much more difficult for the organization to avoid liability by claiming ignorance (although this liability is not automatic). This responsibility is further complicated by the fact that, although most sexual harassment cases involve men harassing women, there are, of course, many other situations of sexual harassment that can be identi- fied. Females can harass men, and in the case of Oncale v. Sundowner the Supreme Court ruled unanimously that a male oil rigger who claimed to be harassed by his co- workers and supervisor on an offshore oil rig was indeed the victim of sexual harassment.26 Several recent cases involving same-sex harassment have focused new atten- tion on this form of sexual harassment.27 Regardless of the pattern, however, the same rules apply: Sexual harass- ment is illegal, and it is the organization’s responsibility to control it.

Other Equal Employment Opportunity Legislation In addition to the Civil Rights Act of 1964, a large body of supporting legal regulation has also been created in an effort to provide equal employment opportunity for vari- ous protected classes of individuals. Although the 1964 act is probably the best known and most influential piece of legislation in this area, a new civil rights act was passed in 1991 and numerous other laws deal with different aspects of equal employment or are concerned with specific areas of work; these are discussed in this section. Some of them

apply only to federal contractors, and these are discussed separately, while others apply more widely. We will discuss each one briefly here and again in the chapters where they are most relevant.

The Equal Pay Act of 1963 The Equal Pay Act of 1963 requires that organizations provide the same pay to men and women who are doing equal work. The law defines

equality in terms of skill, responsibil- ity, effort, and working condi-

tions. Thus, an organization cannot pay a man more than

it pays a woman for the same job on the grounds that, say, the

male employee needs the money more because he has a bigger fam-

ily to support. Similarly, organiza- tions cannot circumvent the law by using

different job titles for essentially the same work: If the work is essentially the same, then the pay should be the same as well. The law does allow for pay differ-

ences when there are legitimate, job-related reasons for pay differences such as difference in seniority or merit.28

The Age Discrimination and Employment Act The Age Discrimination and Employment Act (ADEA) was passed in 1967 and amended in 1986. The ADEA prohibits discrimination against employees 40 years of age and older. The ADEA is similar to Title VII of the 1964 Civil Rights Act in terms of both its major provisions and the procedures that are followed in pursu- ing a case of discrimination. Like Title VII, enforcement of the ADEA is the responsibility of the Equal Employment Opportunity Commission.

The ADEA was felt to be necessary because of a dis- quieting trend in some organizations in the early 1960s. Specifically, these firms were beginning to discriminate against older employees when they had to lay people off or otherwise scale back their workforce. By targeting older workers—who tended to have higher pay because of their

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Chapter 2: The Legal Environment 35

The Age Discrimination and Employment Act (or ADEA) prohibits discrimination against

employees age forty and older.

The Civil Rights Act of 1991 makes it easier for

individuals who feel they have been discriminated

against to take legal action against organizations and provides for the

payment of compensatory and punitive damages in cases of discrimination

under Title VII.

seniority and experience with the firm—companies were substantially cutting their labor costs. In addition, there was some feeling that organizations were also discriminat- ing against older workers in their hiring decisions. The specific concern here was that organizations would not hire people in their forties or fifties because (1) they would have

to pay those individuals more based on their experience and salary history and (2) they would have a shorter poten- tial career with the organization. Consequently, some orga- nizations were found guilty of giving preferential treatment to younger workers over older workers. These concerns have been raised again as firms deal with the economic downturn by reducing the size of their workforce. It is vital that firms that are downsizing be aware of the implications of this legislation and ensure that their efforts are not dif- ferentially affecting older workers.

Mandatory retirement ages is the other area in which the ADEA has generated a fair amount of controversy. The Supreme Court has indicated that an agency or an organization may require mandatory retirement at a given age only if an organization could demonstrate the inabil- ity of persons beyond a certain age to perform a given job safely. But, in several decisions, the Court has indicated that it will interpret this BFOQ exception very narrowly. In fact, in Johnson v. Mayor and City of Baltimore, the Court ruled that not even a federal statute requiring firefighters to retire at age 55 would qualify as an exception to the law.29

As the workforce continues to age, the number of age-discrimination complaints seems to be growing rap- idly.30 Statistics released by the EEOC, for instance, indi- cate that age-discrimination complaints increased from 19,000 in 2007 to more than 24,000 in 2008; they are now almost as common as race-discrimination complaints (the most common type of complaint filed with the EEOC). Thus, it is interesting to note that the Supreme Court recently ruled that in age-discrimination cases it is up to the worker to prove that age was the decisive factor in a decision made by the employer—even if there is evi- dence that age played some role in the decision (Gross v. FBL Financial Services 08-441, in June 2009). By making it more difficult to file these so-called mixed motive cases in ADEA charges, the Court has essentially made it much more difficult to demonstrate age discrimination. Leaders in Congress soon began working on a revised ADEA to deal with this issue, but that new legislation is a long way from becoming law.

The Pregnancy Discrimination Act of 1979 As its name suggests, the Pregnancy Discrimination Act of 1979 was passed to protect pregnant women from discrimination in the workplace. The law requires that the pregnant woman be treated like any other employee in the workplace. Therefore, the act specifies that a woman

cannot be refused a job or promotion, fired, or otherwise discriminated against simply because she is preg- nant (or has had an abortion). She also cannot be forced to leave employment with the organization as long as she is physically able to work. Finally, the Pregnancy Discrimina- tion Act also specifies that if other employees have the right to return to their jobs after a leave, then this benefit must also be accorded to pregnant women. Several years ago, actress Hunter Tylo won a $5 million judgment against the producers of her television show, Melrose Place, after they used her pregnancy as a basis for writing her out of the show.31

The Civil Rights Act of 1991 The Civil Rights Act of 1991 was passed as a direct amendment of Title VII of the Civil Rights Act of 1964. During the 25 years fol- lowing the passage of the original act, the U.S. Supreme Court handed down several rulings that helped define how the Civil Rights Act would be administered. But in the course of its 1989 Supreme Court session, several decisions

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36 Part 1: An Overview of Human Resource Management

The Americans with Disabilities Act of 1990 (or ADA) prohibits discrimination based on disability and all aspects of the

employment relationship such as job application procedures, hiring, fi ring, promotion, compensation, and training, as well as other employment activities such as advertising, recruiting, tenure, layoffs, and leave and fringe benefi ts.

were handed down that many people felt seriously limited the viability of the Civil Rights Act of 1964.32 In response to this development, the Civil Rights Act of 1991 was passed essentially to restore the force of the original act. Although some new aspects of the law were introduced as part of the Civil Rights Act of 1991, the primary purpose of this new law was to make it easier for individuals who feel they have been discriminated against to take legal action against organizations. As a result, this law also reinforced the idea that a firm must remain within the limits of the law when engaging in various human resource management practices.

Specifically, the Civil Rights Act of 1991 prohibits dis- crimination on the job and makes it easier for the burden of proof to shift to employers (to demonstrate that they did not discriminate). It also reinforces the illegality of making hiring, firing, or promotion decisions on the basis of race, gender, color, religion, or national origin; it also includes the Glass Ceiling Act, which established a commission to investigate practices that limited the access of protected class members (especially women) to the top levels of management in organizations. For the first time, the act provides the potential payment of compensatory and puni- tive damages in cases of discrimination under Title VII. Although the law limited the amount of punitive damages that could be paid to no more than nine times the amount

of compensatory damages, it also allowed juries rather than federal judges to hear these cases.

This law also makes it possible for employees of U.S. companies working in foreign countries to bring suit against those companies for violation of the Civil Rights Act. The only exception to this provision is the situation in which a country has laws that specifically contradict some aspect of the Civil Rights Act. For example, Muslim coun- tries often have laws limiting the rights of women. Foreign companies with operations in such countries would almost certainly be required to abide by local laws. As a result, a female employee of a U.S. company working in such a set- ting would not be directly protected under the Civil Rights Act. However, her employer would still need to inform her fully of the kinds of discriminatory practices she might face as a result of transferring to the foreign site and then ensure that when this particular foreign assignment was

completed, her career opportunities would not have been compromised in any way.33

The Americans with Disabilities Act of 1990 The Americans with Disabilities Act of 1990 (ADA) is another piece of equal employment legislation that has greatly affected human resource management. The ADA was passed in response to growing criticisms and concerns about employment opportunities denied to people with various disabilities. For example, one survey found that of 12.2 million Americans not working because of disabilities, 8.2 million would have preferred to work. Similarly, another survey found that almost 80 percent of all managers surveyed found the overall performance of their disabled workers to be good to excellent. In response to these trends and pressures, the ADA was passed to pro- tect individuals with disabilities from being discriminated against in the workplace.34

Specifically, the ADA prohibits discrimination based on disability in all aspects of the employment relation- ship such as job application procedures, hiring, firing, promotion, compensation, and training, as well as other employment activities such as advertising, recruiting, ten- ure, layoffs, leave, and benefits. In addition, the ADA also requires that organizations make reasonable accommoda-

tions for disabled employees as long as they do not pose an undue burden on the organization. The act initially went into effect in 1992 and covered employers with twenty-five or more employees. It was expanded in July 1994 to cover employers with fifteen or more employees.

The ADA defines a disability as (1) a mental or physi- cal impairment that limits one or more major life activities, (2) a record of having such an impairment, or (3) being regarded as having such an impairment. Clearly included within the domain of the ADA are individuals with dis- abilities such as blindness, deafness, paralysis, and similar disabilities. In addition, the ADA covers employees with cancer, a history of mental illness, or a history of heart dis- ease. Finally, the act also covers employees regarded as hav- ing a disability, such as individuals who are disfigured or who for some other reason an employer feels will prompt a negative reaction from others. In addition, the ADA covers

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Chapter 2: The Legal Environment 37

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The ADA Amendments Act (or ADAAA) of 2008 broadens the protection offered to persons with disabilities at work by

defi ning certain disabilities as “presumptive,” thus negating several court cases that had ruled certain persons having disabilities as not qualifying for coverage under the ADA.

mental and psychological disorders such as mental retarda- tion, emotional or mental illness (including depression), and learning disabilities.

On the other hand, individuals with substance-abuse problems, obesity, and similar non–work-related charac- teristics may not be covered by the ADA.35 But because

the ADA defines disabilities in terms of limitations on life activities, myriad cases continue to be filed. For example, in recent years workers have attempted to claim protec- tion under the ADA on the basis of ailments ranging from alcoholism to dental problems! These activities have led some critics to question whether the ADA is being abused by workers rather than protecting their rights.36

In fact, the definition of a disability and what consti- tutes a “reasonable accommodation” pose the greatest poten- tial problems for the HR manager. Individuals who are confined to wheelchairs, visually impaired, or have similar physical disabilities are usually quite easy to identify, but many employees may suffer from “invisible” disabilities that might include physical problems (e.g., someone needing dialysis) as well as psychological prob- lems (e.g., acute anxiety) and learning disabili- ties (e.g., dyslexia). It is not always obvious who among a group of employees is actually eligible for protection under the ADA.37

One area of coverage where the courts and the EEOC (the agency charged with the administration of the ADA) have taken a fairly clear position deals with AIDS and HIV in the workplace. Both AIDS and HIV are consid- ered disabilities under the ADA, and employers cannot legally require an HIV test or any other medical exami- nation as a condition for making an offer of employment. In addition, organi- zations must maintain confidentiality of all medical records, they should strive to edu- cate co-workers about AIDS, and they must accommodate or try to accom- modate AIDS victims.

In addition, the reasonable accommodation stipulation adds considerable complexity to the job of

human resource manager and other executives in organi- zations. Clearly, for example, organizations must provide ramps and wide hallways to accommodate individuals con- fined to a wheelchair.

At the same time, however, providing accommo- dations for other disabilities may be more complex. If

an applicant for a job takes an employment test, fails the test (and so is not offered employment), and then indicates that he or she has a learning disability (for example) that makes it difficult to take paper-and-pen- cil tests, the applicant probably can demand an accom- modation. Specifically, the organization would likely be required either to find a different way to administer the test or provide the applicant with additional time to take the test a second time before making a final deci- sion. Likewise, an existing employee diagnosed with a psychological disorder may be able to request on-site psychological support.

Recently, another issue involved with granting accom- modations has been identified.38 The nature of many accommodations granted to employees is such that other employees who are not disabled and not requesting an accommodation are unlikely to be envious or resentful about the accommodation. But this is not the case for all requested accommodations. For example, a woman claimed

that having every Friday off was the only accommoda- tion that would help to reduce her stress at work.39

What if the organization granted her that accom- modation? Surely other employees would wonder

why they could not have Fridays off, especially since stress is not typically a visible disability.

This situation would lead to resent- ment and potentially to other prob- lems. Therefore, although the ADA

does not consider co-worker reactions as relevant to determining whether or not

an accommodation is reasonable, the knowl- edgeable human resource manager will at

least think about how others might react to an accommodation when try- ing to deal with the legal requests of

employees with disabilities. But a series of court decisions have

worked to actually narrow the protection

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38 Part 1: An Overview of Human Resource Management

The Family and Medical Leave Act of 1993 requires employers having more than fi fty employees to provide

as many as 12 weeks unpaid leave for employees after the birth or adoption of a child; to care for a seriously ill child,

spouse, or parent; or if the employee is seriously ill.

offered by the ADA.40 For example, in 1999 the U.S. Supreme Court ruled that individuals who can correct or overcome their disabilities through medication or other means are not protected by the ADA. Similarly, in 1999 (Sutton v. United Airlines), the Court ruled that a person suffering from heart disease who was taking medication to control that heart disease was not covered by the ADA. In 2002, in Toyota Motor Manufacturing Company, Ken- tucky Inc, v. Williams, the Court ruled that, for persons to be disabled, they had to have conditions that precluded

them from doing activities central to one’s daily life. Thus, they ruled that Ella Williams was not disabled, even though her carpal tunnel syndrome and tendinitis pre- vented her from performing the assembly-line job she was transferred to because she was able to attend to her per- sonal hygiene.

In an attempt to return to the original intent of the ADA, in September 2008, President Bush signed into law the new Americans with Disabilities Amendments Act (ADAAA). In June 2009, the EEOC finally voted on a set of guidelines to be used with the new law. The new guidelines broaden the definition of disability for the ADA, countering recent court decisions that have tended to narrow the definition of disability for cases brought for- ward (which was the original impetus for the law). For example, the changes would include specifying major life activities to include walking, seeing, bending, reading, and concentrating. The new guidelines also include a list of presumptive disabilities that will always meet the defini- tion of disability under the AADA, including blindness, deafness, cancer, multiple sclerosis, limb loss, and HIV and AIDS. Also, under the new guidelines, persons will be “regarded as having a disability” if they can show that they have been discriminated against because of real or perceived disabilities.

The Family and Medical Leave Act of 1993 The Family and Medical Leave Act of 1993 was passed in part to remedy weaknesses in the Pregnancy Discrimination Act of 1979. The law requires employers with more than fifty employees to provide as many as 12 weeks of unpaid leave for employees (1) after the birth or adoption of a child; (2) to care for a seriously ill child, spouse, or parent; or (3) if the employee is seriously ill. The organization must also

provide the employee with the same or comparable job on the employee’s return.41

The law also requires the organization to pay the health-care coverage of the employee during the leave. However, the employer can require the employee to reim- burse these health-care premiums if the employee fails to return to work after the absence. Organizations are also allowed to exclude certain key employees from cover- age (specifically defined as the highest paid 10 percent), on the grounds that granting leave to these individuals

would grant serious economic harm to the organization. The law also does not apply to employees who have not worked an average of 25 hours a week in the previous 12 months.42 The FMLA was also amended in 2009 with the passage of the Supporting Military Families Act, which mandates emergency leave for all covered active-duty members.

Regulations for Federal Contractors In addi- tion to the various laws described above, numerous other regulations apply only to federal contractors. Note, how- ever, that the definition of a federal contractor is quite broad. For instance, all banks (that participate in the U.S. Federal Reserve system) and most universities (that have federal research grants or that accept federal loans for their students) would qualify as federal contractors.

Executive Order 11246 was issued by President Lyndon Johnson, who believed that Title VII of the 1964 Civil Rights Act was not comprehensive enough. This order prohibits discrimination based on race, color, reli- gion, sex, or national origin for organizations that are fed- eral contractors and subcontractors, and it requires written affirmative action plans from those organizations with con- tracts greater than $50,000.

Executive Order 11478 was issued by President Richard Nixon and required the federal government to base all of its own employment policies on merit and fitness and specifies that race, color, sex, religion, and national origin should not be considered. The executive order also extends to all contractors and subcontractors doing $10,000 or more worth of business with the federal government. These executive orders are enforced by the Office of Federal Contract Compliance Procedures (OFCCP), which is dis- cussed later.

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Chapter 2: The Legal Environment 39

Executive Order 11478 requires the federal

government to base all of its own employment policies on merit and

fi tness and specifi es that race, color, sex, religion,

and national origin should not be considered.

The Vocational Rehabilitation Act of 1973 requires that executive agencies and subcontractors and contractors of the federal government receiving

more than $2,500 a year from the government engage in affi rmative action for disabled individuals.

The Vocational Rehabilitation Act of 1973 requires that executive agencies and subcontractors and con- tractors of the federal government receiving more than $2,500 a year from the government engage in affirmative action for disabled individuals. This act is administered by the Department of Labor. Finally, the Vietnam Era Veterans’ Readjustment Act of 1974 requires that federal contractors and subcontractors take affirma- tive action toward employing Vietnam-era veterans. Viet- nam-era veterans are specifically defined as those serving as members of the U.S. armed forces between August 5, 1964, and May 7, 1975. This act is enforced through the OFCCP.

Enforcing Equal Employment Opportunity The enforcement of equal opportunity legislation gen- erally is handled by two agencies. As noted earlier, one agency is the Equal Employment Opportunity Commission, and the other is the Office of Federal Con- tract Compliance Procedures. The EEOC is a division of the Department of Justice. It was created by Title VII of the 1964 Civil Rights Act and today is given spe- cific responsibility for enforcing Title VII, the Equal Pay Act, and the Americans with Disabilities Act. The EEOC has three major functions: (1) investigating and resolving complaints about alleged discrimination, (2) gathering information regarding employment patterns and trends in U.S. businesses, and (3) issuing information about new employment guidelines as they become relevant.

The first function is illustrated in Exhibit 2.3, which depicts the basic steps that an individual who thinks she has been discriminated against in a promotion decision

60-day period, then the individual has the right to sue in a federal court.

If the EEOC believes that discrimination has occurred, then its representative will first try to negotiate a reconcili- ation between the two parties without taking the case to court. Occasionally, the EEOC may enter into a consent decree with the discriminating organization. This consent decree is essentially an agreement between the EEOC and the organization stipulating that the organization will cease certain discriminatory practices and perhaps implement new affirmative action procedures to rectify its history of discrimination.

On the other hand, if the EEOC cannot reach an agreement with the organization, then two courses of action may be pursued. First, the EEOC can issue a

might follow to get her complaint addressed. In general, if an individual believes that she or he has been discriminated against, the first step in reaching a resolution is to file a complaint with the EEOC or a corresponding state agency. The individual has 180 days from the date of the incident to file the complaint. The EEOC will dismiss out of hand almost all complaints that exceed the 180-day time frame for filing. After the complaint has been filed, the EEOC assumes responsibility for investigating the claim itself. The EEOC can take as many as 60 days to investigate a complaint. If the EEOC either finds that the complaint is not valid or does not complete the investigation within a

right-to-sue letter to the victim; the letter simply certi- fies that the agency has investigated the complaint and found potential validity in the victim’s allegations. Essen- tially, that course of action involves the EEOC giving its blessings to the individual to file suit on his or her own behalf. Alternatively, in certain limited cases, the EEOC itself may assist the victim in bringing suit in federal court. In either event, however, the lawsuit must be filed in federal court within 300 days of the alleged discriminatory act. The courts strictly follow this guideline, and many valid complaints have lost standing in court because law- suits were not filed on time. As already noted, the EEOC

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40 Part 1: An Overview of Human Resource Management

has recently become backlogged with complaints stemming primarily from the passage of the newer civil rights act. One recent court case that involved the implementation of a discriminatory seniority system was settled in such a way that it helped provide the grounds for amending Title VII to provide exceptions to the 300-day deadline for filing a lawsuit. In recent years, the EEOC has been working to better prioritize its caseload, giving the highest priority to cases that appear to have the potential for widespread or classwide effects.43

The second important function of the EEOC is to monitor the hiring practices of organizations. Every year, all organizations that employ 100 or more individuals must file a report with the EEOC that summarizes the number of

women and minorities that the organization employs in nine different job categories. The EEOC tracks these reports to identify potential patterns of discrimination that it can then potentially address through class-action lawsuits.

The third function of the EEOC is to develop and issue guidelines that help organizations determine whether their decisions are violations of the law enforced by the EEOC. These guidelines themselves are not laws, but the courts have generally given them great weight when hear- ing employment-discrimination cases. One of the most important set of guidelines is the uniform guidelines on employee-selection procedures developed jointly by the EEOC, U.S. Department of Labor, U.S. Department of Justice, and U.S. Civil Service Commission. These

EEOC litigates case in federal court

Agreement is carried out and case is dropped

Agency states that there is probable cause to believe

that employer violated Title VII EEO agency drops case

Agency seeks conciliation agreement acceptable to all

parties (out-of-court-settlement)

Yes

No Yes

Case dropped

No Yes

Does Claim Have Merit?

No

Is Case Important and is Agency Likely to Win?

Does Conciliation Succeed?

Mary can file a private lawsuit against employer

EXHIBIT 2.3 Investigating and Resolving a Discrimination Complaint MARY SMITH believes she has been discriminated against at work. She was passed over for a promotion to supervisor, and believes it was because she was a woman, rather than because she was unqualified. Specifically, all candidates for promotion must be approved by their immediate supervisor, and most of these supervisors are older white men who have been heard to say that women should not be promoted. In fact, almost no women have been promoted to supervisor in this organization. What can Mary do?

STEP 1: Mary files a complaint with her local or state EEO agency. STEP 2: Local/state EEO agency agrees to investigate Mary’s claim on behalf of EEOC, and

the agency contacts Mary’s employer to determine whether the claim has any merit.

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Chapter 2: The Legal Environment 41

guidelines summarize how organizations should develop and administer selection systems to avoid violating Title VII. The EEOC also frequently uses the Federal Register to issue new guidelines and opinions regarding employment practices that result from newly passed laws.44 This was the case discussed earlier relating to the new ADAAA.45

The other agency primarily charged with monitoring equal employment opportunity legislation is the Office of Federal Contract Compliance Procedures. The OFCCP is responsible for enforcing the executive orders that cover companies doing business with the federal government. Recall from our earlier discussion that businesses with con- tracts of more than $50,000 cannot discriminate based on race, color, religious beliefs, national origin, or gender, and they must have a written affirmative action plan on file.46

The OFCCP conducts yearly audits of government contractors to ensure that they have been actively pursuing their affirmative action goals. These audits involve exam- ining a company’s affirmative action plan and conducting

on-site visits to determine how individual employees perceive the company’s affirmative action policies. If the OFCCP finds that its contractors or subcontractors are not complying with the relevant executive orders, then it may notify the EEOC, advise the Department of Justice to institute criminal proceedings, or request that the labor secretary cancel or suspend contracts with that organi- zation. This latter step is the OFCCP’s most important weapon because it has a clear and immediate effect on an organization’s revenue stream.

The EEOC and the OFCCP are the two primary regulatory agencies for enforcing equal employment leg- islation, but it is important to recognize that other agen- cies and components of our government system also come into play. The Departments of Labor and Justice, for example, are both heavily involved in the enforcement of equal employment opportunity legislation. The U.S. Civil Service Commission is also actively involved for govern- ment organizations where civil-service jobs exist. The

Mary

Yes No

Company

Does the Current System of Promotion Result in Fewer Qualified

Women Being Promoted?

Mary wins case and may well be entitled to damages

Mary loses case

Defendant argues that Mary was not promoted for a

non-discriminatory reason

Mary argues that this reason is a pretext and that the real reason was discrimination

Who Has the More Compelling Arguments

and Evidence?

Mary loses case

Prima facie case established; burden of proof shifts to

defendant who must state legitimate non-discriminatory

reasons for decision

Prima facie case not established; Mary must prove some type of

intent to discriminate

EXHIBIT 2.3 (Continued) Once the case goes to court, and assuming that Mary and EEOC believe they have a case of disparate impact, the process goes through several more crucial steps.

STEP 1: Mary tries to establish a prima facie case of discrimination.

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The Fair Labor Standards Act (FLSA) established

a minimum hourly wage for jobs.

U.S. judicial systems reflected by our courts also play an important role in enforcing all human resource manage- ment legislation.

LEARNING OBJECTIVE 3

OTHER AREAS OF HUMAN RESOURCE REGULATION As noted earlier, most employment regu- lations are designed to provide equal employment opportunity, but some leg- islation goes beyond that and really deals more substantively with other issues. We will only touch on these different areas of legislation here and then discuss them in more detail when we discuss the content area involved. So, for example, we begin with a discussion of legislation dealing with compensation and benefits and then discuss these laws in more detail in Chapter 9.

Legal Perspectives on Compensation and Benefits The most basic and yet far-reaching law dealing with compensation at work is the Fair Labor Standards Act. The Fair Labor Standards Act (FLSA), passed in 1938, established a minimum hourly wage for jobs. The rationale for this legislation was to ensure that everyone who works would receive an income sufficient to meet basic needs. The first minimum wage was $0.25 an hour but, as shown in Table 2.1, the minimum wage has been raised many times in the decades since as the law has been amended. The most recent change came in 2007, when then President Bush signed into a law a staged increase that brought the minimum wage to $7.25 an hour as of July 2009.47 States are also allowed to pass laws that pro- vide a minimum wage rate higher than the federal level. For example, in 2010, both Connecticut and Illinois set minimum wages of $8.25.

The FSLA also established, for the first time, the workweek in the United States as 40 hours per week. It further specified that all full-time employees must be paid

at a rate of one and a half times their normal hourly rate for each hour of work beyond 40 hours in a week. Note,

however, that the law makes no provision for daily work time. Thus, a normal

workday might be considered 8 hours, but an employer is actually free to schedule, say, 10 or 12 hours in a single day without paying overtime

as long as the weekly total does not exceed 40 hours. The FLSA

also includes child labor provisions, which

provide protec- tion for persons

18 years of age and younger. These protec-

tions include keeping minors

from working on extremely danger-

ous jobs and limit- ing the number of

hours that persons younger than sixteen can

work. Another important piece of

legislation that affects compensation is the Employee Retirement Income

Security Act of 1974 (ERISA). This law was passed to protect employee investments in their

pensions and to ensure that employees would be able to receive at least some pension benefits at the time of

retirement or even termination. ERISA does not mean that an employee must receive a pension; it is meant only to protect any pension benefits to which the employee is entitled. (This topic will be discussed in somewhat more detail in Chapter 9.) ERISA was passed in part because some organizations had abused their pension plans in their efforts to control costs or to channel money inappropriately to other uses within the organization and in part because of corruption.

Two other emerging legal perspectives on compensa- tion and benefits involve minimum benefits coverage and executive compensation. Recent publicity about the poor benefits Walmart provides some of its employees, for exam- ple, led the Maryland General Assembly to pass a bill requir- ing employers with more than 10,000 workers to spend at least 8 percent of their payroll on benefits or else pay into a fund for the uninsured. At the time the bill was passed (in early 2006) Walmart was the only company to be affected. Moreover, several other states are exploring similar legisla- tion. On another front, the Securities and Exchange Com- mission (SEC) is also developing new guidelines that will require companies to divulge more complete and detailed information about their executive-compensation packages.48

One of the major agenda items first tackled by Presi- dent Obama was health care. Congress worked through- out 2009 in an attempt to pass legislation that would call for major reforms of health care in the United States.

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Chapter 2: The Legal Environment 43

TABLE 2.1  Minimum Wage Histroy Eff ective Date Minimum Wage ($)

1938 0.25

1939 0.30

1945 0.40

1950 0.75

1956 1.00

1961 1.15

1963 1.25

1967 1.40

1968 1.60

1974 2.00

1975 2.10

1976 2.30

1978 2.65

1979 2.90

1980 3.10

1981 3.35

1990 3.80

1991 4.25

1996 4.75

1997 5.15

2007 5.85

2008 6.55

2009 7.25

The Employee Retirement Income Security Act of 1974 (ERISA) guarantees a basic minimum benefi t that employees could expect to be paid at retirement.

The Health Care reform Bill passed in 2010 focused on benefits for employees who were not already covered by employer programs. The notion that employers who did

not provide health care coverage would be required to pay a fine was part of the “Affordable Care for America Act”49

proposed by the Democrats in 2009. The final Bill did not

include the much-debated “public option” and both parties agree that there will continue to be modifications to and chal- lenges to the new health care bill in the coming years, and it may take quite some time before all the implications of this legislation are clear. We will discuss these regulations again in Chapter 9.

Legal Perspectives on Labor Relations The National Labor Relations Act, or Wagner Act, was passed in 1935 in an effort to control and legislate collec- tive bargaining between organizations and labor unions. Before 1935, the legal system in the United States was generally considered hostile to labor unions. The Wag- ner Act was passed in an effort to provide some sense of balance in the power relationship between organizations and unions. The Wagner Act describes the process through which labor unions can be formed and the requirements faced by organizations in dealing with those labor unions. The Wagner Act served to triple union membership in the United States and granted labor unions significant power in their relationships with organizations.

Following a series of crippling strikes, however, the U.S. government concluded that the Wagner Act had actu- ally shifted too much power to labor unions. As a result, businesses had been placed at a significant disadvantage. To correct this imbalance, Congress subsequently passed the Labor Management Relations Act (Taft-Hartley Act) in 1947 and the Landrum-Griffin Act in 1959. Both of these acts regulate union actions and their internal affairs in a way that puts them on an equal footing with management and organizations. The Taft-Hartley Act also created the National Labor Relations Board (NLRB), which was charged with enforcement of the act.

Although the basic issues of unionization and col- lective bargaining have become pretty well established, some legal issues have emerged in this area. The Taft-Hartley Act guarantees these rights but also guaran- tees that these unions should be independent. This issue has come up in two fairly recent cases. More important for the future, in both these cases, the company involved was setting up autonomous work teams that were empowered to make certain decisions about employees. In Electromation

v. NLRB,50 the NLRB ruled that the company’s “action committees,” which were formed to deal with employee working conditions and were staffed by employees, actually

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44 Part 1: An Overview of Human Resource Management

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President Barrack Obama achieved his goal of health care reform with the passage of new health care legislation in 2010.

The Labor Management Relations Act (or Taft-Hartley Act) curtailed and limited union powers and regulates union actions and their internal affairs in a way that puts them on equal footing with management and organizations.

constituted a threat to the union already in place in the company. These action committees, which the NLRB ruled were dominated by management, were seen as an alternative way to deal with problems concerning work- ing conditions and could allow the company to circumvent the union and the collective-bargaining process. As such, the company was found in violation of the Taft Hartley Act. In a similar case, E.I. Du Pont de Nemours v. NLRB,51 the board ruled that Du Pont’s safety committees were

essentially employer-dominated labor organizations and thus were in violation of the Taft Hartley Act.

Recently, a new amendment was proposed for the Taft-Hartley Act. We will discuss this proposed change, along with these other labor relations laws, in Chap- ter 11. It is worth noting that the Employee Free Choice Act, also known as the Union Relief Act of 2009, would change the way in which unions become certified as bar- gaining agents in companies, eliminating the secret ballot

vote that now exists. Although the law has not yet been passed, it has generated considerable support as well as opposition. President Obama is said to support the new law.52

Employee Safety and Health Employees also have the right to work in safe and healthy environments, and these rights continue to be important in

organizations. The Occupational Safety and Health Act of 1970 (OSHA) is the single most comprehensive piece of legislation regarding worker safety and health in organiza- tions. OSHA granted the federal government the power to establish and enforce occupational safety and health standards for all places of employment directly affecting interstate commerce. The Department of Labor was given power to apply OSHA standards and enforce its provi- sions. The Department of Health was given responsibility

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Chapter 2: The Legal Environment 45

The Landrum-Griffi n Act focused on eliminating various unethical, illegal, and undemocratic

practices within unions themselves

The Occupational Safety and Health Act of 1970 (or OSHA) grants the federal government the power

to establish and enforce occupational safety and health standards for all places of employment

directly affecting interstate commerce.

for conducting research to determine the criteria for spe- cific operations or occupations and for training employers to comply with the act itself. OSHA also makes provisions through which individual states can substitute their own

safety and health standards for those suggested by the fed- eral government.

The basic premise of OSHA (also known as the gen- eral duty clause) is that each employer has an obligation to furnish each employee with a place of employment that is free from hazards that can cause death or physical harm. OSHA is generally enforced through inspections of the workplace by OSHA inspectors, and fines can be imposed on violators. We will deal with these issues in more detail in Chapter 12.

Drugs in the Workplace The Drug-Free Workplace Act of 1988 was passed to reduce the use of illegal drugs in the workplace. This law applies primarily to government employees and federal contractors, but it also extends to organizations regulated by the Department of Transportation and the Nuclear Regulatory Commission. Thus, long-haul truck drivers and workers at most nuclear reactors are subject to these regulations. The actual regulations themselves are aimed at establishing a drug-free workplace and include the require- ment, in some cases, for regular drug testing.

Concerns over the problems of drug use at work have also led many other companies not covered by this law to establish drug-testing programs of their own. In fact, drug testing is becoming quite widespread, even though there is little hard evidence addressing the effectiveness of these programs.53 The issue for the current discussion is whether these testing programs constitute an invasion of employee privacy. Many opponents of drug-testing programs argue that drug testing is clearly appropriate in cases in which there is some “reasonable” basis for suspected drug use, but not otherwise. Others argue that organizations that test for drug use often do not test for alcohol use which, although not illegal, can cause problems on the job. Of course, what makes the privacy issues here even more salient is the method generally used to test for drugs on the job. Urinaly- sis (by far the most common method) is extremely invasive and has been known to result in a fair number of false-pos- itive tests (i.e., employees are incorrectly identified as drug

users). As a result, several alternatives have begun to appear in organizations, including testing an employee’s indi- vidual hairs.54 Perhaps these new technologies will reduce some of the concerns over drug testing while providing

employers the protection they deserve from drug use on the job.

Plant Closings and Employee Rights The Worker Adjustment and Retraining Notification (WARN) Act of 1988 stipulates that an organization with at least 100 employees must provide notice at least 60 days in advance of plans to close a facility or lay off 50 or more employees. The penalty for failing to comply is equal to 1 day’s pay (plus benefits) for each employee for each day that notice should have been given. An organiza- tion that closes a plant without any warning and lays off 1,000 employees would be liable for 60 days of pay and

benefits for those 1,000 employees, which could translate into a substantial amount of money. The act also provides for warnings about pending reductions in work hours but generally applies only to private employers. There are exceptions to the WARN requirements; those exceptions are related to unforeseeable business circumstances such as a strike at a major employer or a government-enforced

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46 Part 1: An Overview of Human Resource Management

OSHA provides detailed specifications for the safety equipment this steel worker is wearing (the gloves, goggles, and helmet), the distance he should maintain from the vat, and the procedures he should use to carry out the key elements of this job.

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The Worker Adjustment and Retraining Notifi cation (WARN) Act of 1988 stipulates that an organization employing at least 100 employees must provide notice at least 60 days in advance

of plans to close a facility or lay off 50 or more employees.

shutdown.55 The events of September 11, 2001, represent one such exception to this law.

Privacy Issues at Work In recent years, issues of privacy have become more impor- tant to Americans, so it is not surprising that privacy at

work has also become more important. The history of legislation dealing with privacy at work, however, actually goes back several years. The Privacy Act of 1974 applies directly to federal employees only, but it has served as the impetus for several state laws. Basically, this legislation allows employees to review their personnel files periodi- cally to ensure that the information contained in them is accurate. Before this privacy legislation, managers could place almost any information they pleased in a personnel file, certain that only other managers could see those files.

But the larger concerns with privacy these days relate to potential invasions of employee privacy by organiza- tions. For example, organizations generally reserve the right to monitor the e-mail correspondence of employees. Presumably, employees should be using company e-mail only for company business, so this practice may not be a problem, but it does mean that employees who receive

unsolicited e-mails from suspect vendors (such as porno- graphic Web sites) may also have that information shared with their employers.

Late in 2009, Congress passed a law dealing with a different type of privacy. The Genetic Information Non- discrimination Act (GINA) prohibits employers from collecting any genetic information about their employees, including information about family history of disease. This would mean that such information could not be obtained even during a medical examination, although there is

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Chapter 2: The Legal Environment 47

The Genetic Information Nondiscrimination Act (GINA) of 2009 prohibits employers from obtaining

genetic information about employees.

some recognition that such information could be obtained “inadvertently” in some cases. One of the more interest- ing challenges posed by this new legislation is that some information about family medical history is often collected

as part of determining whether or not a person requires an accommodation under the ADA. Such practices are now illegal, and it is not clear what effect this will have on the enforcement of the ADA.

The PATRIOT Act was passed shortly after the ter- rorist attacks on September 11, 2001, to help the United States more effectively battle terrorism worldwide. Many of the act’s provisions expand the rights of the government or law enforcement agencies to collect information about and pursue potential terrorists. Some major provisions include those that allow law enforcement agencies to use surveillance to gather information related to a full range of terrorist crimes; those that allow law enforcement agencies to carry out investigations of potential terrorists without having to inform the targets of those investigations; and those that allow law enforcement agencies to obtain search warrants any place a terrorist activity might occur.

LEARNING OBJECTIVE 4

EVALUATING LEGAL COMPLIANCE Given the clear and obvious importance as well as the complexities associated with the legal environment of

human resource management, it is critically important that organizations comply with the laws and regula- tions that govern human resource management practices to the best of their ability. The assurance of compli-

ance can best be done through a three-step process. The first step is to ensure that managers clearly understand the laws that govern every aspect of human resource management. In other words, all managers must under- stand and be intimately familiar with the various laws that restrict and govern their behavior vis-à-vis their employees.

Second, managers should rely on their own legal and human resource staff to answer questions and review pro- cedures periodically. Almost all larger organizations have a legal staff consisting of professionals trained in vari- ous areas of the legal environment of business. A human resource manager or other manager with a legal question regarding a particular employment issue or practice is well advised to consult the firm’s attorney about the legality of that particular action.

And third, organizations may also find it useful to engage occasionally in external legal audits of their human resource management procedures. This audit might involve contracting with an outside law firm to review the organi- zation’s HRM systems and practices to ensure that they comply with all appropriate laws and regulations. Such an external audit will, of course, be expensive and somewhat intrusive into the organization’s daily routine. When prop- erly conducted, however, external audits can keep an orga- nization out of trouble.

What role can a popular television show possibly play in a major sexual harassment lawsuit? As it turns out, a pretty big one! The show in question is Seinfeld, one of the most popular sit-coms in television history. The event that sparked the lawsuit took place in the corporate headquarters of Miller Brewing Company and involved Jerold MacKenzie, a 55-year-old executive with 19 years at Miller, and Patricia Best, his secretary.

The incident occurred several years ago. The Seinfeld episode in question involved a story in which the show’s main character, Jerry

Seinfeld, meets and starts dating a woman whose first name he can- not recall. But he does recall that it rhymes with a part of the female anatomy. He subsequently spends the rest of the episode men- tally running through different possible names for the woman. She dumps him when she realizes that he doesn’t know her name. After she leaves, he finally remembers that her name is Delores.

Mr. MacKenzie apparently found the show to be especially funny. On the day after the show aired, he made a point of bring- ing it up for discussion with his secretary. Ms. Best indicated that

SEINFELD AND SEXUAL HARASSMENT

Chapter 2: The Legal Environment 47

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48 Part 1: An Overview of Human Resource Management

she had not seen the show. As he began to describe the show for her, she indicated to him that she didn’t want to discuss it. Mr. MacKenzie persisted, however, and continued to push her into discussing it with him. When he couldn’t bring himself to say the name of the female body part, however, he made a photocopy of a dictionary page containing the word and gave it to Ms. Best.

Ms. Best became quite upset and reported to Miller B r e w i n g C o m p a n y ’ s H R department that Mr. MacKen- zie had sexually harassed her. She also indicated that he had harassed her on earlier occa- sions. A few days later, Mr. MacKenzie was summoned to a meeting with a group of Miller attorneys and a senior HR manager. He was asked about the Seinfeld incident, and he acknowledged that it had happened as Ms. Best had reported. He also indicated that he saw their discussion simply as office conversation and that Ms. Best had not seemed to be bothered or upset at the time of the conversation.

The next day, Mr. MacKenzie was visited by another senior corporate executive; this executive indicated that he (MacKenzie) was being terminated for unacceptable management perfor- mance. The incident with Ms. Best was identified as a major part of the final decision to terminate MacKenzie’s employment with Miller, but he was also told that it was part of a pattern of poor decisions that had already attracted the attention of senior

managers. Mr. MacKenzie indicated surprise but left with little argument or discussion.

As time passed, however, Mr. MacKenzie gradually began to feel that he had been mistreated. He eventually reached the point where he felt compelled to take some action. After con-

sulting with his attorney, he filed a lawsuit against Miller Brewing Company, the execu- tive who had made the deci- sion to terminate him, and Ms. Best. Among his charges were wrongful discharge and libel. After hearing both sides of the case, a jury of ten women and two men decided that he was right. Indeed, they so strongly believed that Mr. MacKenzie was a victim rather than a sexual harasser that they awarded unusually large judgments, including punitive damages, of $24.5 million against Miller Brewing Company, $1.5 million against Ms. Best (this amount was later dropped due to a legal

technicality), and slightly more than $600,000 against the execu- tive who had terminated him.56

THINK IT OVER 1. Do you think Mr. MacKenzie’s actions constituted sexual

harassment? Why or why not? 2. Do you think Miller Brewing Company’s termination of

Mr. MacKenzie was justified? Why or why not? 3. What is your opinion of the jury’s decision? ©

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■ Rip out the chapter review card located at the end of the book.

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