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Chapter 16 Selected Employment

Benefits and Protections

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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

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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

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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 = $$$

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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?

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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

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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

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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

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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

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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

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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 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

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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

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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

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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

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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

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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”

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Specific Standards Physical layout of the worksite

Training

Medical examinations

Setting standards

Voluntary compliance programs

Emergency temporary standards

Continual-training requirement

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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

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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

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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

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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

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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

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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

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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)

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

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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

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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