Chapter 16

Chapter 16 Selected Employment Benefits and Protections

McGraw-Hill/Irwin

Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives  List the matters regulated by the Fair Labor Standards Act  Discuss the requirements of the minimum wage laws and to whom they apply  Explain the Family Medical Leave Act, including to whom it applies and under what circumstances

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Learning Objectives  Explain contributory negligence, assumption of risk, and the fellow servant rule, and their roles in the regulation of safety in the workplace, and determine how OSHA impacted this regulatory environment  Set forth what OSHA requires of employers to create a safer workplace and how it is enforced

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Learning Objectives  Describe the reporting responsibilities of employers under the OSHA 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

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Show me the Money!  Fair Labor Standards Act (FLSA)  Law to regulate pay and hours worked passed in 1938  Set standards for minimum wage  Prohibits pay differentials based solely on gender  Regulates child labor, wages and hours

 Requires records on wages and hours  Violations

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Show me the Money!  FLSA is administered by the U.S. Department of Labor’s Wage and Hour Division  States also have wage and hour provisions administered by comparable state agencies

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Covered Employees  Two types of coverage in FLSA  Individual coverage  Enterprise coverage

 The law applies to both part-time and full-time employees  Federal, state and local employees are covered

 The law also covers domestic service workers  There are exemptions 16-7

Minimum Wages  The minimum wage law was established after Wall Street Crash of 1929  FLSA – employers must pay employees a certain minimum hourly wage  State wage laws may have higher minimums than the federal law

 Fair Minimum Wage Act of 2007  Tipped employees – piece-rate vs. hourly rate

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Minimum Wages  Not everyone is covered under the statute  Primary exemptions  New FLSA overtime regulations  Businesses required to review their pay levels and jobs  Employees earning up to $23,660 per year ($455/week) are automatically entitled to overtime pay

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Minimum Wages  Executive employees are exempt if they  Manage two or more employees  Have firing, hiring and promotion authority

 Employees who earn at least $100,000 per year and perform some executive, professional, or administrative job duties are automatically exempt from overtime provisions  Back wages

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Overtime Provisions  The FLSA  Sets standards for the hours constituting a normal workweek for wage purposes  Sets wage rates for hours worked over and above the normal week

 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

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Retaliation and Child Labor Laws  Retaliation is prohibited  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

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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 75mile radius  Employers can require medical confirmation of an illness  Leave is unpaid

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Occupational Safety and Health Act: Safety at Work  Each year  5,700 Americans die from workplace injuries  50,000 die from illnesses caused by workplace exposure  4.7 million suffer nonfatal workplace injuries

 According to OSHA  OSH Act has helped cut workplace fatalities by more than 60 percent and injury/illness by 40 percent since its enactment 16-14

General Provisions  OSHA requires that an employer provide a safe workplace Employer’s defense

Explanation

Contributory negligence

Negligence action 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

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General Provisions  No-Fault: Workers injured on the job are entitled to recover for their injuries without having to prove who is at fault  injured workers are limited in their financial recovery

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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 fee of hazards

 OSHA creates certain specific regulatory standards of safety

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General Provisions  OSHA conducts routine inspections in certain high-risk industries  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

 Employees must be informed of their OSHA rights by their employer

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Procedure for Enforcement  Responsibility for enforcing the acts rests with OSHA under the auspices of the Department of Labor  Occupational Safety and Health Review Commission  Willful violation  Increase in fines  Definition of “willful”

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Specific Regulations  Physical layout of the worksite  Training  Medical examinations  Setting standards  Voluntary compliance programs

 Emergency temporary standards  Continual-training requirement 16-20

General Duty Clause  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

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Other Provisions  Intentional Acts  Compensatory and punitive damages

 Violence in the workplace  “Zero tolerance” policy

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Other Provisions  Bullying  Legal liability and higher worker compensation costs if left uncontrolled

 Retaliation  OSH Act – Prohibits retaliation against whistleblowers

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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)  Protects pension benefits of workers  Government entities, churches, non U.S. residents, or independent contractors not covered

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ERISA  Covers welfare plans and retirement or pension plans  Applies to employee benefit plans  Welfare plan  Retirement or pension plans

 Establishes requirements for managing and administering pension and welfare plans

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ERISA Key Terms

Explanation

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

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Fiduciary Duty  Fiduciary: Someone who has discretionary authority over the investment or management of plan assets on behalf of others

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Fiduciary Duty

Fiduciary requirements

Loyalty Exclusive purpose

Prudence Diversification Compliance with plan documents

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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

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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

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COBRA and HIPAA  Consolidated Omnibus Budget Reconciliation Act (COBRA)  Applies to group health plan (20≥ employees)

 Health Insurance Portability and Accountability Act (HIPAA)  promote standardization and efficiency in the health care industry  HIPAA privacy rules  General obligations of covered entities 16-31

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 - asserted under the Age Discrimination in Employment Act (ADEA)

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