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.
16-1
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
16-2
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
16-3
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 = $$$
16-4
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?
16-5
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
16-6
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
16-7
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
16-8
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
16-9
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
16-10
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
 May need to be rationalized with similar state law coverage
 Scenario 2
16-11
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
16-12
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
16-13
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
16-14
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
16-15
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”
16-16
Specific Standards
 Physical layout of the worksite
 Training
 Medical examinations
 Setting standards
 Voluntary compliance programs
 Emergency temporary standards
 Continual-training requirement
16-17
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
16-18
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
16-19
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
16-20
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
16-21
ERISA Terminology
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
16-22
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
16-23
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
16-24
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
16-25
‘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
16-26
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
16-27
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
16-28