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Human Resources Legal Issues


The following is a list of the major laws impacting Human Resources Management.

Equal Employment Opportunity Laws

  • Title VII of the Civil Rights Act of 1964 prohibits private employers, state and local governments, and education institutions, and companies with 15 or more employees from discriminating against their employees and job applicants on the basis of race, religion, color, sex and national origin. The Federal government, private and public employment agencies, and labor organizations, also must abide by the law. Most discrimination lawsuits allege a violation of this law. This law is enforced by a federal agency, the Equal Employment Opportunity Commission (EEOC).
  • The Civil Rights Act of 1991 expands the ability of victims of discrimination to collect awards for compensatory and punitive damages, including emotional harm and future losses. Punitive damages may be awarded to victims of intentional discrimination. Plaintiffs are allowed jury trials.
  • The Americans with Disabilities Act (ADA) became effective in 1992. The law "prohibits employment discrimination against qualified individuals with disabilities. A qualified individual with a disability is defined as an individual with a disability who meets the skill, education, experience and other job-related requirements of a position held or desired, and who, with or without a reasonable accommodation can perform the essential functions of the job."
  • The Rehabilitation Act prohibits companies from discriminating against individuals with a disability and requires the establishment of an affirmative action plan for individuals with a disability. Affirmative Action plan hiring goals are not required.
  • The Vietnam Era Veterans' Readjustment Assistance Act of 1974 provides veteran re-employment rights and requires that an Affirmative Action plan be written for veterans. Affirmative Action plan hiring goals are not required.
  • Executive Order 11246 was signed by President Johnson in 1964. It created Affirmative Action. Executive Order 11246 applies to "federal contractors and subcontractors having a contract or contracts with an executive branch agency or department exceeding $10,000 during any 12-month period. Federal contractors with 50 or more employees and at least one covered contract for $50,000 or more are also required to prepare written affirmative action plans for their establishments. Affirmative action plans must be updated at least annually." Companies are required to establish female and minority hiring goals and to demonstrate that a "good faith" effort is being made to attract and retain females and minorities, especially into positions that they have not traditionally held. Consulting firms are available to write Affirmative Action Plans. The cost is generally a few thousand dollars per year, depending on the size of the organization. Software packages are also available to help write an Affirmative Action Plan.
  • The Equal Pay Act of 1963 "prohibits sex discrimination in the payment of wages to men and women performing substantially equal work under similar working conditions in the same establishment."
  • The Age Discrimination in Employment Act (ADEA) "prohibits private employers having 20 or more employees from discriminating against their employees and job applicants who are at least 40 years old on the basis of age."
  • Harassment law is based on court interpretation of the Civil Rights Act of 1964. The first regulations were written by the EEOC in 1980. Harassment occurs if an individual perceives to have been harassed, even if the alleged harasser did not intend to harass. Harassment includes "verbal or physical conduct which results in a hostile or intimidating work environment that interferes with work performance or otherwise adversely affects employment opportunities." Examples of harassment may include jokes, name calling, derogatory comments, and offensive pictures. The law states that if the company knew, could have known, or should have known of the harassment, and if the harassment unreasonably interfered with the individual's work performance or created an intimidating, hostile or offensive work environment, then the company is liable.
  • State Equal Employment Laws typically provide the same anti-discrimination protections as federal laws, plus some additional. For example in the state of California, it is illegal to discriminate in employment on the basis of marital status and sexual orientation.

Enforcement Agencies

  • The Equal Employment Opportunity Commission (EEOC), which is a part of the Department of Justice, is the main enforcement agency of Equal Employment Opportunity Laws. The process to file a complaint is simple. Employees (or applicants, etc.) who allege discrimination go to the local EEOC office to file a complaint. An EEOC representative works with the employee to formulate a charge. The charge is sent to the Employer, requesting a response within a specified time period. Refer to the section below on responding to a discrimination complaint.
  • The Office of Federal Contract Compliance Programs (OFCCP) is a branch of the Department of Labor, and is responsible for auditing Affirmative Action Plans. The most common type of audit is called a "compliance review." Compliance reviews are conducted to determine if adverse indicators are present that suggest employment discrimination exists. A detailed review of the Affirmative Action Plan is conducted. Generally, if the percentage of females and minorities within any job group inside the company is less than the percentage of females and minorities in the labor market with the required skills, then the OFCCP will consider this to be an "adverse indicator." Next they will determine if adequate "good faith" measures are being taken. Failure to comply with Affirmative Action Requirements can ultimately lead to the loss of government contracts and individual or class action lawsuits. More information on Affirmative Action Plans is shown above. .
  • State Human Rights Commission offices will also process discrimination complaints. In the state of California the agency that handles discrimination complaints is the Department of Fair Employment and Housing (DFEH). Complaints filed with a state agency are coordinated with the EEOC and vice versa, to avoid duplicate handling.

Responding to a Discrimination Complaint

Usually an employer will have an advanced indication that a formal discrimination complaint is being filed with a government enforcement agency. That's because employees usually try resolve the complaint inside the company before filing. In fact, it helps the employee's case if he/she can demonstrate that they tried to resolve it internally. Therefore the best way to respond to a discrimination complaint is to start early, when the employee first brings forth the complaint, which is usually long before a formal complaint is filed. Investigate the complaint thoroughly. Interview all the parties involved including witnesses. Bring the conclusions of the investigation to the complainant. If the result of the investigation supports the employees complaint, then try to reconcile the problem: give them the promotion that was denied them due to discrimination, discipline a discriminating or harassing manager or employee, move the harassing party, inform the employees that harassment is unacceptable, remove the offending posters, etc. Often the result of the investigation will not be clear. If so, inform the complaining party that the results were inconclusive. Perhaps a mutually agreeable accommodation can be reached. Perhaps the employee who complained can be counseled on things he/she can do differently (e.g. complete your degree to qualify for the next promotion). Above all, document every step of the process as a defense against a possible lawsuit. If you receive a formal complaint from a government enforcement agency, contact a lawyer who specializes in employment law.

Laws Affecting Benefits and Pay

  • The Employee Retirement and Income Security Act of 1974 (ERISA) governs qualified benefit plans including health and retirement plans. ERISA requires that benefit plans be made available to all eligible employees equally and on a non-discriminatory basis. ERISA also requires that the financial performance of the plan be reported to employees on an annual basis (Summary Annual Report), and that specific information on the plan be distributed to employees (Summary Plan Description). In return for complying with ERISA, companies can deduct the cost of qualified plans from their taxable income. A reputable insurance broker or plan administrator can assist establishing a plan, making necessary filings with the Internal Revenue Service (IRS) and completing the Summary Plan Description and Summary Annual Reports.
  • The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) requires employers with more than 20 employees and their insurance companies to provide covered employees and family members, the opportunity for a temporary extension of health insurance benefits when the coverage is lost due to certain "qualifying events." The employee or family member must pay the cost of continuing the insurance coverage, which cannot exceed 2% of the employer or insurance company cost. "Qualifying events" include: employee's loss of employment (for reasons other than gross misconduct), reduction in hours of employment, divorce, or a child ceasing to be a "dependent" under the health plan. The company must provide the employee with a notice of their health insurance continuation rights. A reputable insurance company or broker can provide help in complying with the COBRA requirements.
  • The Fair Labor Standards Act (FLSA) requires that covered employees be paid 50% more than their base hourly rate for the time worked in excess of 40 hours in a week. Certain employees are "exempt" from the FLSA. Exempt employees include managers, professionals (whose position requires advanced education, discretion and independent judgment), administrative employees (who independently establish company policy or practices and do not directly work on the company products), sales people, certain computer employees, and teachers. Exempt employees must be paid on a salary basis. That means they must be paid the same rate regardless of the number of hours they work (with some exceptions). Determining which jobs are exempt from the FLSA is difficult, because the definitions are subject to interpretation. To avoid non-compliance with the FLSA, error on the side of defining positions as "non-exempt" from the FLSA. That can be difficult because most employees prefer to be in an "exempt" position, perhaps because of perceived status or because the requirement to track hours is removed. Some states have their own overtime pay requirements (e.g. California) which can exceed the requirements of the FLSA.
  • State Regulations deal with all aspects of pay including when paychecks must be issued and overtime pay requirements. The Chamber of Commerce is a good source of information on state regulations.

Other Employment Laws

  • The Immigration Reform and Control Act (IRCA) is intended to eliminate the employment of "illegal aliens." All new employees are required to complete form I9 (available from the local Immigration and Naturalization Office (INS)). The employee must provide documented proof of their eligibility to work in the United States. The employer has the obligation to review the documents supplied by the new employee and attest to their eligibility. The forms must be kept on file. It's advisable to keep the forms in a separate file to facilitate government audits. The Office of Federal Contract Compliance audits I9 forms, typically when conducting an Affirmative Action Compliance Review.
  • The Family and Medical Leave Act of 1993 (FMLA) provides eligible employees with up to 12 weeks of leave within a 12 month period for 1) the birth, adoption, or foster care placement of the employee's child; 2) the employee's serious health condition; or, 3) the serious health condition of the employee's spouse, son, daughter, or parent. Typically a doctor's certification is required. Health benefits must be provided to the employee taking leave at the same cost as regular employees. Employees who elect a family leave are entitled to return to the same or equivalent job.
  • Posting Requirements are established by State and Federal law. Employers are obligated to post on company premises, in a visible location, information on employees' rights and obligations. Some private companies and the Chamber of Commerce have done a nice job of consolidating the required information for posting onto a few posters. It's a good idea to read these posters to be aware of your obligations as the employer. The Department of Labor's web site lists Federal Posting Requirements and most states publish posting requirements (See State of California posting requirements).
  • Reporting Obligations. Companies with at least 100 employees or companies with 50 or more employees and government contracts of $50,000 or more, must submit an EEO-1 report annually to the Joint Reporting Committee (EEOC and OFCCP). The EEO-1 report lists the number of employees by race and sex for each EEO Job Category. Companies with Federal contracts or subcontracts of $100,000 or more must submit a Vets-100A report by September 30 of each year. For federal contracts initiating before 2003, the veteran reporting rules are different. The forms can be submitted electronically via the Internet. The Vets-100 report lists the number employees and recently hired employees by veteran status. Annual qualified benefit plan reporting is outlined above.
  • The Occupational Safety and Health Act (OSHA) requires the Department of Labor to create safety and health standards in the workplace. All private employers who engage in interstate commerce must comply. OSHA inspectors issue citations for violations. The Department of Labor can seek an injunction to stop unsafe practices. The Hazard Communications Act requires employers to establish a training and information program for personnel who work with hazardous chemicals, to label containers and areas where "reactive materials" are stored or used, and to maintain files of OSHA Materials Safety Data Sheets (MSDS) in work areas where reactive materials are used. The Toxic Substances Control Act was passed in 1976 requiring the Environmental Protection Agency (EPA) to regulate chemicals that present an "unreasonable" risk of harm to human health or the environment. The EPA has imposed various reporting, record keeping, and training requirements. The state of California requires organizations to create an Injury and Illness Prevention Program which includes a training and communication system, a process for identification and evaluation of workplace hazards, periodic inspections, procedures for investigating occupational injuries and illnesses, procedures for correcting unsafe or unhealthy conditions, and record keeping.

    Federal OSHA standards are grouped into four major categories: general industry (29 CFR 1910); construction (29 CFR 1926); maritime (shipyards, marine terminals, longshoring--29 CFR 1915-19); and agriculture (29 CFR 1928). While some standards are specific to just one category, others apply across industries. Among the standards with similar requirements for all sectors of industry are those that address access to medical and exposure records, personal protective equipment, and hazard communication.
    • Access to Medical and Exposure Records: This regulation requires the employer to grant the employee access to any medical records the employer maintains with respect to that employee, including any records about the employee's exposure to toxic substances.
    • Personal Protective Equipment: This standard, which is defined separately for each segment of industry except agriculture, requires employers to provide employees with personal equipment designed to protect them against certain hazards. This equipment can range from protective helmets to prevent head injuries in construction and cargo handling work, to eye protection, hearing protection, hard-toed shoes, special goggles for welders, and gauntlets for iron workers.
    • Hazard Communication: This standard requires manufacturers and importers of hazardous materials to conduct hazard evaluations of the products they manufacture or import. If a product is found to be hazardous under the terms of the standard, the manufacturer or importer must so indicate on containers of the material, and the first shipment of the material to a new customer must include a material safety data sheet (MSDS). Employers must use these MSDSs to train their employees to recognize and avoid the hazards presented by the materials. Also see the Department of Labor's Basic OSHA Provisions and Requirements.
  • National Labor Relations Act applies primarily to unionized workplaces and deals with union organizing, collective bargaining, strikes and lockouts. However, the law also applies to non-union settings, providing protection to non-union workers "to engage in protected, concerted activities for their mutual aid and protection." The action of employees approaching their management as a group (or one employee speaking on behalf of a group of employees), to discuss pay, hours of work, or working conditions, is protected. No adverse action (e.g. discharge, demotion, or punitive measures) can be taken against the employee(s) for raising such an issue.
  • Workers Compensation provides benefits to employees injured on the job, including medical benefits, disability benefits for lost wages (typically two thirds of wages up to a specific limit - $1010.50 per week in California as of 2012), death benefits for dependents, and in some circumstances, job retraining necessitated by the work related injury. Workers compensation premiums are paid by the employer. The amount of the premium depends on the mix of positions held by the employees (e.g. administrative, manufacturing, field service, etc.). Both the employee and employer must promptly report injuries by completing and submitting a Workers Compensation form. Information on reporting work related injuries or illnesses must be posted on company bulletin boards.

Payroll

Payroll is a highly regulated and thankless function. It takes considerable knowledge and effort to issue paychecks correctly and on time. Yet employees expect their paychecks to be completed correctly and delivered on-time. If not, the company can have serious morale and legal problems. Regulations affecting payroll include the Fair Labor Standards Act which regulates overtime pay requirements, the IRS which regulates income tax withholding (determining what types of compensation and which individuals are subject to withholding can be challenging), and other federal and state laws which regulate state income tax withholding, workers compensation premiums, and unemployment insurance. Payroll record keeping is also critical for, among other reasons, the issuance of W2 forms at the end of the year.

Outsourcing payroll is an excellent solution to the legal compliance issues. The payroll services can provide assistance in complying with the law and in most cases fulfilling legal requirements, such as issuing W2's and filing periodic reports. There are a number of payroll services from which to choose, including ADP, Ceridian, and Pro-Business.

The Virtual HR Department - Detailed HR Process Instructions

"The Virtual HR Department" provides detailed step-by-step instructions on how those with HR responsibilities can perform virtually every major task in Human Resources. Here are procedures related to the topics on this page: