Employment law and compliance concerns the legal framework within which organizations must operate in their treatment of employees. Employers must comply with a myriad of federal and state laws and regulations. Laws and regulations exist covering a wide range of human resource practices, including recruiting, hiring, performance appraisal, compensation, health and safety, and labor relations.
The discussion that follows identifies and summarizes the major federal laws that comprise employment law.
Exhibit 1 provides a summary of some of the more important federal employment laws. The exhibit is divided into four sections: anti-discrimination law, compensation law, health and safety law, and labor relations law. The sections that follow provide additional information on each of these areas, with special emphasis on anti-discrimination laws, which probably have the greatest impact on employers.
Without a doubt, the most important anti-discrimination law is Title VII of the Civil Rights Act of 1964. Title VII was initially motivated by the U.S. government's desire to end workplace discrimination against African Americans, which was brought to national attention by the civil rights movement of the 1950s and 1960s. However, by the time the law was passed and signed into law in 1964, it had become a comprehensive workplace anti-discrimination law.
Title VII prohibits workplace discrimination on the basis of race, color, religion, national origin, and sex. Affected organizations must not discrimination in any employment decision or in regard to any term or condition of employment. Title VII applies to all U.S. organizations with fifteen or more employees, as well as labor unions and public sector employers. Only a few U.S. employers with more than fifteen employees are exempt from Title VII.
Title VII was amended in 1972 by the Equal Employment Opportunity Act. This law strengthened the enforcement of Title VII, which up to that time had been largely ineffective in changing workplace practices. The Equal Employment Opportunity Commission, a quasi-independent federal government agency, is in charge of enforcing Title VII, as well as many other anti-discrimination laws.
|Anti-Discrimination Laws||Major Provisions|
|Title VII of the Civil Rights Act 1964||Prohibits employment discrimination based on race, color, religion, national origin, and sex.|
|Age Discrimination in Employment Act 1967||Prohibits employment discrimination against applicants or employees aged 40 and older.|
|Americans with Disabilities Act 1990||Prohibits employment discrimination against qualified applicants or employees with a physical or mental disability.|
|Civil Rights Act 1991||Codifies the "adverse impact" theory of discrimination. Clarifies and strengthens rules for enforcement of the anti-discrimination provisions in Title VII.|
|Fair Labor Standards Act 1938||Requires employers to pay a federal minimum wage to non-exempt workers. Requires employers to pay overtime pay to non-exempt workers.|
|Equal Pay Act 1963||Requires employers to pay men and women equally for doing substantially the same work, unless differences in pay are based on merit, quantity or quality of production, or any other factor other than sex.|
|Wagner Act 1935||Establishes the National Labor Relation Board. Lays out the framework for union organizing activities. Identifies and bans unfair management practices in regard to unionization.|
|Taft Hartley Act 1947||Identifies and bans unfair labor union practices in regard to union organizing efforts. Bans the closed shop and allows states to pass "right-to-work" laws that give workers the right to refuse to join a union. Allows the president to temporarily stop strikes that imperil the national interest.|
|Health and Safety Laws|
|Occupational Safety and Health Act||Establishes general safety standards and standards for specific industries. Requires employers to record and report accidents that occur in the workplace. Lays out rules for federal workplace inspections and penalties for violations of the act.|
Employees alleging workplace discrimination that falls under the purview of the EEOC must report the alleged discrimination to the EEOC or one of the state-level fair employment offices that exist in every state. The EEOC has the right to investigate claims of discrimination or to initiate investigations itself. Many times the EEOC will attempt to work out a solution with the affected organization, which may or may not involve an admission of guilt by the employer. If conciliation fails, the EEOC also has the right to bring class-action discrimination lawsuits against organizations on behalf of a "class" of employees who have allegedly suffered from discrimination.
If the EEOC's investigation does not reveal a strong case of discrimination, the agency can still issue a "right-to-sue" letter to a plaintiff, which gives that person the right to bring their charges of discrimination against an employer to state or federal court, whichever is appropriate in a given case. Some claims of discrimination filed with the EEOC do not have merit and the EEOC often issues findings to that effect—but such findings still do not prevent the individual plaintiff from filing his or her own lawsuit against an employer.
For many years, most discrimination claims filed under Title VII were race discrimination cases. However, with the advent of sexual harassment law-suits in the late 1970s and 1980s, sex discrimination cases became quite common, as well. Sexual harassment has become such a major employment law issue that it deserves special attention, which is provided in the next section.
Sexual harassment at the workplace is a long-standing problem, affecting working women, as well as many men. Sexual harassment came to light during the mid-1970s and has since gained a great deal of national attention. The growing attention to the topic stems from a number of well-publicized cases in the 1990s—the Clarence Thomas hearings, the 1991 Tailhook Convention where several women were severely harassed by naval pilots, and the accusations made by Arkansas state employee Paula Jones about then-governor Bill Clinton.
Sexual harassment is a form of sex discrimination and therefore violates Title VII of the Civil Rights Act. The number of sexual harassment complaints filed with the Equal Employment Opportunity Commission (EEOC) has increased at an alarming rate; it rose from about 6,000 in 1991 to more than double this number in 2004. The majority of these complaints involve claims of unwanted physical contact, offensive language, sexual propositions, and socialization or date requests.
An employer should establish a written sexual harassment policy. The policy should specify grievance procedures by which employees can bring claims of harassment to management's attention. These procedures should provide employees with opportunities to bypass their supervisor if the supervisor is the one being accused. The company should also provide supervisory training that focuses on the legal definition of sexual harassment.
In addition to holding formal training sessions, top management should also meet with employees to emphasize management's strong commitment to keep the workplace free of harassment. The employer should also have investigative guidelines that maintain employee confidentiality. The EEOC recommends that a committee that consists of both men and women should investigate sexual harassment claims. Committee members should receive investigative training.
The federal government added to employment law in 1967 by passing the Age Discrimination in Employment Act. This law prohibited discrimination in employment decisions on the basis of age, provided the person affected was between 40 and 70 years old. Initially, the law allowed mandatory retirement policies, but was later amended to remove the upper limit on age initially imposed by the law. Thus, as it stands today, the ADEA prohibits discrimination against applicants or employees who are aged 40 and older, with no upper age limit.
For many years, age discrimination suits have been more difficult to prove against organizations because the person alleging discrimination had to show that the employer had a specific intent to discriminate on the basis of age, that there was no other explanation for the employment decision other than age, and that there was a specific employer policy or procedures that was discriminatory. In short, the person had to prove what is called "disparate treatment" under employment law.
However, a 2005 Supreme Court decision involving public workers in the city of Jackson, Mississippi, appears to have changed the interpretation of the law. Although the ramifications of this case remain to be fully determined, and will probably depend on its use in future court rulings, it appears that those alleging age discrimination can now proceed under what is called the "disparate impact" theory of discrimination. This means that the person or persons alleging age discrimination would not have to prove discriminatory intent. Instead, the person would only have to show that some action by the employer had a disproportionately negative effect on workers 40 and older. Once this was done, the employer would have the burden to show that the discriminatory action was job-related or consistent with business necessity. If this ruling's interpretation stands, it will probably increase the number of age discrimination cases filed against employers in the U.S.
The Americans with Disabilities Act of 1990 (ADA) prohibits discrimination in any employment decision against qualified applicants or employees with a disability. It also requires employers to reasonably accommodate the disabilities of applicants and employees. The ADA applies to the same set of companies covered by Title VII.
Three definitions are key to understanding the ADA. First, is the definition of disability, which is any physical or mental impairment that prevents the person from engaging in a major life activity. Covered disabilities include both physical and mental impairments. The extent of the disabilities covered is one of the more controversial aspects of the law. Some conditions are specifically excluded from coverage, including pyromania and kleptomania.
A second key definition is that of qualification. Under the ADA, a person with a disability is qualified for a job if he or she can perform the essential functions of the job with or without accommodation. This means that the person does not have to be able to do every single duty of the job, if they are very minor, but that he or she must be able to perform the major responsibilities of the job.
A third important definition under the law is reasonable accommodation. A reasonable accommodation is one that does not cause an undue hardship on the employer. Undue hardship would be determined on a case-by-case basis, and consider the cost and inconvenience to the employer of accommodating the disability.
The ADA has resulted in many disability discrimination complaints with the EEOC, as well as many law-suits against employers. Although the law, like most, has had unintended consequences, its net effect appears to have been a positive one, as it seems to have increased opportunities for qualified, disabled workers.
In the late 1980s, the Supreme Court decided several employment discrimination cases that made it more difficult for employees to prove discrimination cases in court. Concerned about these cases, the U.S. Congress addressed several issues by passing the 1991 Civil Rights Act.
The law did several major things. First, it codified the "disparate impact" theory of discrimination, which means that employees alleging discrimination can sometimes more easily prove a discrimination case. Second, the law allowed plaintiffs to have jury trials under some circumstances, instead of "bench" trials decided by a federal judge. Juries tend to be sympathetic to plaintiffs, particularly those suing large corporations, so this was a major victory for employees. Third, the law extended Title VII of the Civil Rights Act to certain types of organizations that had not been covered before (for example, the law extended the reach of Title VII to the federal government, which prior to passage had been exempt). Finally, the law banned the "race norming" of employment test scores.
The most important compensation law is the Fair Labor Standards Act (FLSA), passed in 1938. This law provides the basic framework within which millions of U.S. workers are paid. These workers are called "non-exempt" workers. These workers are those that, by virtue of the type of jobs they hold, must be paid in accordance with the FLSA. Exempt workers, who are not covered by the law, are primarily executive, managerial, professional, and highly-paid technical workers.
One important provision of the law is the federal minimum wage provision. Non-exempt workers must be paid a basic minimum wage, which has periodically been raised to higher levels. Non-exempt workers must also be paid overtime for hours worked in excess of a standard workweek, which in most industries is 40 hours per week.
A final provision of the act does not involve compensation directly, but the employment of minors. The law prevents the employment of minors in almost all jobs before the age of fourteen, and places fairly stringent restrictions on the employment of children between the ages of fourteen and eighteen.
The Equal Pay Act was passed in 1963 as an amendment to the FLSA. The Equal Pay Act requires a single employer to pay men and women equally for doing "substantially" the same job for the employer. An employer is allowed to pay men and women differently if the difference is based on merit, quantity of production, quality of production, or any other factor other than gender. Thus, the law does not mean that men and women doing the same work can't be paid differently, only that the difference must not be based on the sex of the worker.
The Wagner Act, otherwise known as the National Labor Relations Act, provides the basic framework within which labor union and management interact in the United States. The law was passed in 1935. It guarantees workers' basic right to organize. It created the National Labor Relations Board to oversee union-management relations. It provided for an election process for unionization efforts in U.S. businesses. It prohibited five major "unfair labor practices" on the part of U.S. employers.
In 1947, the U.S. Congress enacted the Taft-Hartley Act by overriding President Harry Truman's veto. Whereas the Wagner Act is "pro-labor" in its effect, the Taft-Hartley Act is most decidedly "pro-business" in its provisions.
The Taft-Hartley Act banned the union security arrangement known as the closed shop. In a closed shop, individuals must belong to the appropriate union before they can be hired by a company. This arrangement is now banned in all but a handful of situations.
Taft-Hartley also gave the states the right to pass what are called "right-to-work" laws, which create "open shops." An open shop exists when no individual can be compelled to join a union before or after they are hired, even if the employer's workforce is organized. Labor unions detest open shops, as they make it difficult for unionization efforts to succeed. Twenty-two states are "right-to-work" states; most in the South and Southwest.
Taft-Hartley also laid out several "unfair practices" of labor unions and banned them. Finally, the act gave the U.S. president authority to issue an injunction temporarily stopping a strike, if the strike is deemed to be causing a threat to national security or creating an emergency detrimental to the national interest.
The primary law relating to the health and safety of U.S. workers is the Occupational Safety and Health Act, passed in 1970. This law is controversial because it imposes very complex and detailed safety standards on thousands of U.S. businesses. The Occupational Safety and Health Administration (OSHA) was created to administer and enforce the law.
OSHA has general safety standards for almost all employers and specific standards for certain industries. It has workplace inspectors who have the right to, with a search warrant, inspect the conditions in almost any business in the United States. OSHA has the right to respond to employee complaints of unsafe conditions and in fact, the highest priority for OSHA inspections are those situations that pose an imminent threat to the health and safety of workers.
OSHA has the power to impose penalties on employers who violate its provisions. The severity of the penalties will vary based on the seriousness of the violation, a first or repeat offense, the cooperation of the business, and the size of the business. Although many U.S. companies do not like dealing with OSHA, it does appear that the law and its enforcement has resulted in improvements in the health and safety conditions in U.S. businesses.
The Family and Medical Leave Act (FMLA) of 1993 requires all employers with fifty or more employees to grant workers up to twelve weeks of unpaid leave per year for the care of a newborn child, an ill family member, or their own illness. Employees may take the leave all at once or in increments.
While it helps employees, the FMLA can be quite costly to employers when they must replace workers on leave. Because women are more likely to use these leaves, companies that employ a majority of women are especially hard-hit. Consider the case of Sibley Memorial Hospital of Washington, D.C.: The hospital ran into difficulty when trying to replace an employee on leave. Because she worked in an extremely specialized position, the hospital could not find a replacement locally. In addition to paying the on-leave employee's medical benefits, Sibley had to pay for the replacement worker's round-trip airfare, weekly housing, car rental, and salary. At the end of the original employee's leave, she informed the hospital that she would not be returning to work.
The FMLA protects employers from this type of problem in two ways: (1) it allows employers to exempt workers with highest earnings, and (2) it requires employees to reimburse the employer for insurance premiums paid during the leave if they are able to return to work, yet choose not to do so. While Sibley Memorial Hospital was not able to utilize the first protection (the employee's salary was not among the top 10 percent), it was reimbursed for its insurance payments.
Privacy has become one of the most important workplace issues of the twenty-first century. Privacy concerns surface at the work-place when organizations attempt to collect and/or disseminate information about employees in ways that intrude upon their privacy. Privacy issues also surface when employee behavior is constrained by certain workplace rules and policies, denying employees the right to be "let alone," or to do as they please.
Employees may justifiably lodge an invasion of a privacy claim if the information collected by an employer is irrelevant to the employer's business needs. A company should have a clear business reason for each piece of information collected and maintained on an individual. For example, a company should not collect information about an employee's spouse unless that information is needed for benefits administration or some other useful purpose.
As a general rule, information pertaining to such personal issues as home ownership, previous marriages, sexual orientation, parents' occupations, and previous arrest records are usually of no concern to employers, and efforts to collect such information could pose legal threats to the company.
Should employees have access to data kept on them? According to the Privacy Act of 1974, public-sector employees must be given access to any information in their files. Specifically, the act states that employees have the right to:
While the Privacy Act does not cover private-sector employees, most companies do allow employees to access to their own records as a good employee-relations gesture. Prohibiting employees from seeing their own files may create doubts and suspicions regarding the company's good faith efforts to create business-relevant personnel files.
The release of information maintained by government agencies is regulated by the Freedom of Information Act of 1966. The purpose of the act is to make most government records available to the public. Specifically, the act states that any individual may gain access to these records with proper authorization.
The act makes exceptions for personnel files and medical information. However, the public may still be given access to this information if its right to know outweighs the individual's right to privacy. In the private sector, legal constraints in this area stem from the common law of defamation. When releasing information about an employee, the employer must ensure that the information is given in good faith, no malice is intended, and the receiving party has a legitimate reason for the information.
Lawrence S. Kleiman
Revised by Tim Barnett
Bennett-Alexander, Dawn, and Laura Pincus. Employment Law for Business. Boston, MA: Irwin McGraw-Hill, 1998.
Kleiman, Lawrence S. Human Resource Management: A Tool for Competitive Advantage. Cincinnati, OH: South-Western College Publishing, 2000.
U.S. Equal Employment Opportunity Commission (EEOC). Available from http://www.eeoc.gov.
Wolkinson, Benjamin W., and Richard N. Block. Employment Law: The Workplace Rights of Employees and Employers. Cambridge, MA: Blackwell, 1996.