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16-1
Chapter 16 Selected Employment
Benefits and Protections
Copyright 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
16-2
Learning Objectives (1) List the matters regulated by the Fair Labor
Standards Act
Understand minimum wage and overtime laws, their exemptions and the relationship to states
Explain the Family Medical Leave Act, to whom it applies and under what circumstances
Explain the legal background of workplace safety, and determine how OSHA has altered this regulatory environment
16-3
Learning Objectives (2)
Recognize the interplay of the OSHA General Duty clause, specific standards and defenses.
Describe the reporting responsibilities of employers under the OSH Act
Explain the purposes of ERISA and identify who and what type of entities are covered
Describe the minimum ERISA standards for employee benefit plans
Understand the roles of COBRA and HIPAA
16-4
Show me the Money! (1)
Full circle: worker classification still crucial Case: Reich v. Circle C Investments, Inc.
Fair Labor Standards Act (FLSA) Law to regulate pay and hours worked passed in
1938, part of New Deal
Set standards for minimum wage and overtime pay, regulates child labor, wages and hours
Requires recordkeeping on wages and hours
Violations are big business: small increments x many hours x many employees in class actions = $$$
16-5
Show me the Money! (2)
FLSA administered by the U.S. Department of Labor, Wage and Hour Division Sets floor for min. wage and OT rules – states may
exceed, but not undercut its provisions Wide variation among states’ coverage
Anti-Retaliation Provision Case: Mullins v. NYC Police Department
States also have wage and hour provisions administered by comparable state agencies) Your state?
16-6
Covered Employees Two types of coverage in FLSA
Individual coverage
Enterprise coverage
FLSA applies to part-time and full-time employees
Federal, state and local employees are covered
The law also covers domestic service workers
Internships pay issue: 6 criteria
Exemptions, generally
16-7
Minimum Wages Minimum wage laws established to protect
workers in unbalanced economy (esp. after Wall Street Crash of 1929)
FLSA – employers must pay employees a certain minimum hourly wage $7.25 since 2009, proposal to raise to $9.00
Since 1990: MW up 21%; Cost of Living up 67%
Tipped employees or piece-rate vs. hourly rate
16-8
Minimum Wages and Overtime Exemptions: general and specific
FLSA overtime regulations (circa 2004) Businesses required to review their pay levels and
jobs
Employees earning up to $23,660 per year ($455/week) automatically entitled to overtime pay
Employees who earn at least $100,000 per year and perform some executive, professional, or administrative job duties are automatically exempt from overtime provisions
Analysis in-between $23,600 and $100,000
16-9
Overtime Provisions The FLSA provisions:
Intended in-part to encourage Depression-era hiring
Sets standards for the hours constituting a normal workweek for wage purposes
Sets wage rates for hours worked over and above the normal week
Scenario 1
If an employee works over 40 hours, he or she must be paid time and a half for the time worked in excess of 40 hours
16-10
Child Labor Laws FLSA sets minimum age standards for allowing
children to work Most cannot work before age 16
Age 18 the minimum for hazardous jobs
Certain jobs allowed for children 14-16 that do not interfere with their health, education, or well-being
State child labor laws override federal law CA: https://www.dir.ca.gov/dlse/ChildLaborLawPamphlet.pdf
Permits, wages, hours, jobs by age, incl. entertainment industry
16-11
Family and Medical Leave Act Enacted primarily in response to job retention
after having a child General provisions
Guarantee job after leave for a birth, an adoption, or care of sick children, spouses, or parents
Applies to employers with 50 or more employees within a 75-mile radius
Employers can require medical confirmation of an illness
Leave is unpaid
May need to be rationalized with similar state law coverage
Scenario 2
16-12
Occupational Safety and Health Act: Safety at Work
Statistics 4,383 Americans died from workplace injuries in 2012
3 million suffered nonfatal workplace injuries
Workers Comp payments: $1 Billion/Week
According to OSHA: OSH Act has helped cut workplace fatalities and
injury/illnesses by roughly 2/3 in much larger (but different) American economy
Note: Multi-employer worksite coverage: Scenario 3
16-13
Defenses to Worker Injury Claims Former defenses made recovery difficult. Led to
creation of workers comp laws at state level.
Employer’s defense
Explanation
Contributory negligence
Negligence defense based on the injured party’s failure to exercise reasonable care
for her or his own safety
Assumption of risk Injured party voluntarily exposed herself or himself to a known danger created by
the other party’s negligence
Fellow servant rule Injury occurred on the job and was caused by the negligence of another
employee
16-14
OSH Act General Provisions Section 5(a)
The employer must comply with all the safety and health standards dictated by the Department of Labor
The employer must furnish a workplace free of hazards (General Duty Clause)
OSHA creates specific regulatory standards of safety for thousands of workplace conditions
General Duty Clause fills-in the gaps between specific standards
16-15
Enforcement procedures (1)
Responsibility for enforcing the acts rests with OSHA under the auspices of the Department of Labor
OSHA conducts routine inspections in certain high-risk industries, based on reporting stats
Penalties and “abatement orders” are assessed in connection with an inspection officer’s report
Employers covered by the Act must maintain records for OSHA compliance
16-16
Enforcement Procedures (2)
Employees must be informed of their OSHA rights by their employer
Occupational Safety and Health Review Commission
Willful violation Increase in fines
Definition of “willful”
16-17
Specific Standards Physical layout of the worksite
Training
Medical examinations
Setting standards
Voluntary compliance programs
Emergency temporary standards
Continual-training requirement
16-18
General Duty Clause, Defenses Employer requirement – A place of employment
free from recognized hazards that cause or are likely to cause death or serious physical harm to the employee
Instances when employer is not held responsible Recklessness
Safety requirement is not economically feasible
‘Greater hazard’ defense
16-19
Other Provisions Intentional Acts
Compensatory and punitive damages
Workplace Violence: “Zero tolerance” policy
Bullying (contrast harassment) Legal liability and higher worker compensation costs if
left uncontrolled
Retaliation OSH Act – Prohibits retaliation against whistleblowers
16-20
ERISA: Will It Be There When I Retire?
Many firms offer employees retirement plans, health care, and other employee benefits
Employee Retirement Income Security Act (ERISA) 1973 Protects pension benefits of workers
Government entities, churches, non U.S. residents, or independent contractors not covered
Passed in response to looting of benefits funds
16-21
ERISA Covers employee benefits (welfare) plans and
retirement or pension plans
Eligibility requirements for employee benefit plans Welfare plans (not all benefits covered)
Retirement or pension plans (non-qualified plans)
Establishes requirements for managing and administering pension and welfare plans Case: Varity Corp. v. Howe
16-22
ERISA TerminologyKey
TermsExplanation
Employee benefit plan
Contractual obligation by which an employer or an employee organization agrees to provide retirement benefits or welfare benefits to employees and their
dependents and beneficiaries
Retirement or pension
plan
Provides for compensation at retirement or deferral of income to periods beyond termination of
employment
Defined contribution
Retirement plan where the benefit payable to a participant are based on the amount of contributions
and earnings on such contributions
Defined benefit
Retirement plan where the benefit payable to a participant is defined up front by a formula, the
funding of which is determined actuarially
16-23
Fiduciary Duty of Administrators Fiduciary: Someone who has discretionary
authority over the investment or management of plan assets on behalf of others
Fiduciary requirements
Loyalty
Exclusive purpose
Prudence
Diversification
Compliance with plan documents
16-24
Reporting and Disclosure Required information
Summary plan description (SPD)
Annual report with the DOL
ERISA was amended by the Pension Protection Act (PPA) of 2006
Eligibility and Vesting Rules Benefit plans – 100 percent non-forfeitable after three
years of employment
16-25
Funding Requirements for Defined Benefit Plans
Minimum standards Accruals of benefits based on service in each year
Amortization of any prior service or actuarial gains or losses on investment over a set period of years
Pension Benefit Guarantee Corporation (PBGC)
ERISA litigation Fiduciary liability
The Worker, Retiree, and Employer Recovery Act
16-26
‘COBRA’ and ‘HIPAA’ Consolidated Omnibus Budget Reconciliation Act
COBRA Applies to group health plan (20≥ employees)
18 mos. coverage post-termination at ‘retail’ rates
Health Insurance Portability and Accountability Act
promote standardization and efficiency in the health care industry
HIPAA privacy rules
General obligations of covered entities
16-27
Enforcement of ERISA Employers have the right to reduce or modify
employee benefits Unless it is prohibited by contractual obligations
Similarly situated participants must be treated alike
ERISA claims – may be asserted under the Age Discrimination in Employment Act (ADEA) Case: Central Laborers’ Pension Fund v. Heinz
16-28
Management Tips Inadequately administered wage-and-hour
systems are costly: ensure proper classification, hours recording, break times, exemptions treatment
Be certain to extend FMLA and state leaves to covered workers
Worker safety: give priority to prevention
Monitor compliance with ERISA regulations, including COBRA and HIPAA