chapter three contextual influences on compensation practice (laws)
TRANSCRIPT
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Chapter Three
Contextual Influences on Compensation Practice (Laws)
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Exhibit 3-1
Employers’, Employees’, and Government’s Goals
Employers
Employees (and Unions)Government
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Laws Affecting Compensation Levels of Laws
» Federal, State, Local
Federal Laws: Income continuity, safety, work hours:
» FLSA, Social Security Act, Portal-to-Portal Act, Work Hours and Safety Standards Act, Local Area Wage
Pay discrimination» Equal Pay, Title VII of Civil Rights Act of 1964, ADEA (and
OWBPA), Executive Orders, Accommodating disabilities and family needs
» Pregnancy Discrimination Act, ADA, FMLA Prevailing wage laws
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Income continuity, safety, work hours: Fair Labor
Standards Act
Income continuity, safety, work hours: Fair Labor
Standards Act Minimum wage Hours of work (overtime provisions) Also: Child labor laws, Equal pay laws*
Covered and not-covered companies Exempt vs. non-exempt positions
» Most positions are non-exempt» Executives, administrative, professionals, and
some others are exempt
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Exhibit 3-2
Differences Between Annual Minimum Wage Earnings and Annual Poverty Thresholds for
Selected Years
YEARFED. MINIMUM
HOURLY WAGE
ANNUAL MINIMUMWAGE EARNINGS(hourly min. wage
x 40 hr/week x52 weeks)
AA
ANNUAL POVERTYTHRESHOLD
(family of three)BB
DIFFERENCEA - BA - B
198019861989199019921994
$3.10$3.35$3.35$3.80$4.25$4.25
$6,448$6,968$6,968$7,904$8,840$8,840
$6,565$8,737$9,885
$10,419$11,186$11,542
-$ 117-$1,769-$2,917-$2,515-$2,346-$2,702
Source: US Dept. of Commerce, Statistical abstracts of the US, 115th ed. (Washington, DC: US Government Printing Office, 1995).
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Exhibit 3-10
Average Weekly Earnings by Industry Group,
1980 to 1994
Construction
Manufacturing
Transportation, public utilities
Wholesale trade
Mining
Finance, insurance, real estate
Service
Retail trade
1980
$397
$368
$351
$267
$235
$210
$191
$147
1985
$520
$464
$450
$351
$299
$289
$257
$175
1990
$603
$526
$505
$411
$345
$357
$319
$194
1993
$647
$552
$540
$448
$374
$406
$351
$210
1994
$666
$570
$554
$460
$385
$424
$360
$216
Source: U.S. Dept. of Commerce, Statistical abstracts of the United States, 115th ed. (Washington, D.C.: U.S. Government Printing Office, 1995).
INDUSTRY
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Exhibit 3-5
Compensable Activities That Precede and Follow Primary Work Activities
The time spent on the activity was for the employee’s benefit. The employer controlled the amount of time spent. The time involved is categorized as “suffered and permitted,”
meaning that the employer knew the employee was working on incidental tasks either before or after the scheduled tour of duty.
The time spent was requested by the employer. The time spent is an integral part of the employee’s principal
duties. The employer has a union contract with employees providing
such compensation, or, as a matter of custom or practice, the employer has compensated the activities in the past.
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Exhibit 3-4
FLSA Exemption Criteria for Executive, Administrative, and Professional
Employees (1 of 3)
Executive Employees» Primary duties include managing the organization» Regularly supervise the work of two or more full-
time employees» Authority to hire, promote, and discharge
employees» Regularly use discretion as part of typical work
duties» Devote at least 80 percent of work time to fulfilling
the previous activities
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Exhibit 3-4
FLSA Exemption Criteria for Executive, Administrative, and Professional
Employees (2 of 3)
Administrative Employees» Perform nonmanual work directly related to
management operations» Regularly use discretion beyond clerical duties» Perform specialized or technical work, or perform
special assignments with only general supervision» Devote at least 80 percent of work time to fulfilling
the previous activities
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Exhibit 3-4
FLSA Exemption Criteria for Executive, Administrative, and Professional
Employees (3 of 3)
Professional Employees» Primary work requires advanced knowledge in a
field of science or learning, including work that requires regular use of discretion and independent judgment, or
» Primary work requires inventiveness, imagination, or talent in a recognized field or artistic endeavor
Source: 29 Code of Federal Regulations, Sec. 541.3 29; Sec. 541.1.
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Exhibit 3-3
Six Defining Factors of Trainee for the FLSA
The training, even though it includes actual operation of the employers’ facilities, is similar to that which would be provided in a vocational school.
The training is for the benefit of the trainee. The trainee does not displace regular employees but works under closer
supervision. The employer providing the training gains no immediate advantage from
the trainees’ activities; on occasion, the employer’s operation may in fact be hindered.
The trainee is not guaranteed a job at the completion of the training. The employer and the trainee understand that the employer is not
obligated to pay wages during the training period.
Source: J.E. Kalet, Primer on wage and hour laws (Washington, DC: Bureau of National Affairs, 1987).
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Pay DiscriminationPay Discrimination
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Equal Pay Act 1963 - Equal Jobs
Equal Pay Act 1963 - Equal Jobs
“Equal pay for equal work:” Equal pay for men and women performing substantially equal work.» Skill: Experience, training, education, ability» Effort: Mental or physical, amount (not type)» Responsibility: Accountability» Working conditions: Physical surroundings and
hazards--inside/outside, heat, cold, poor ventilation» Skill/effort/responsibility must be substantially greater,
tasks must consume a significant amount of time for all employees, must have a value commensurate with pay differential
» Based on job contents, not title or job description
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Exhibit 3-6
U.S. Department of Labor Definitions of Compensable Factors
Source: U.S. Department of Labor, Equal pay for equal work under the Fair Labor Standards Act (Washington, D.C.: U.S. Government Printing Office, December 31, 1971).
FactorFactor
Skill
Effort
Responsibility
Workingconditions
DefinitionDefinition
Experience, training, education, and ability as measured by the performance requirements of a job
The amount of mental or physical effort expended in the performance of a job
The degree of accountability required in the performance of a job
The physical surroundings and hazards of a job, including dimensions such as inside versus outside work, heat, cold, and poor ventilation
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EPA’s Affirmative DefensesEPA’s Affirmative Defenses
Pay differences in equal jobs are allowable due to:» Seniority» Merit» Quality or quantity of production» Any factor other than sex: Shift differentials, temporary
assignments, bona fide training programs, differences based on ability, training, or experience, others (justified business reason).
» Reverse discrimination may occur if a new pay system is designed and not equally applied to all employees, but not if a one-time adjustment is made for past problems
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Title VII of CRA of 1964 (&) --
Equal or Unequal Jobs
Title VII of CRA of 1964 (&) --
Equal or Unequal Jobs Companies with 15+ employees, employment
agencies and labor unions. Not U.S. gvt. Prohibits discrimination based on race, creed
(religion), color, national origin, sex, or pregnancy in any employment condition: hiring, firing, promotion, transfer, compensation, admission to training.
Disparate Treatment: Treating people differently (less favorably) openly or covertly based on protected class (characteristic).
Disparate Impact: Treating people equally, but the practices have a differential effect, unless justified or work-related
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Disparate TreatmentDisparate Treatment
Direct discrimination Different standards for different people. Prejudiced actions Intent to discriminate inferred by behavior. Can justify actions by absence of
discriminatory intent and reasonable business judgment.
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Disparate ImpactDisparate Impact
Indirect discrimination Same standards have differing consequences. Neutral, color-blind actions Discrimination shown by statistics; intent need not
be present. Can justify pay differences through business
necessity.
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Gender Pay Gap Begins Early
Gender Pay Gap Begins Early
Weekly allowance of children 12-underWeekly allowance of children 12-under
$7.66$7.66 $8.87$8.87
Average weekly wageAverage weekly wage
MenMenWomenWomen
$504$504$379$379
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Pay Differences by Race and Sex
Pay Differences by Race and Sex
0
100
200
300
400
500
600
White Black Hispanic
Men
Women
Average Average Weekly Weekly Earnings Earnings Full- Full-time time Workers Workers 19901990
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The Pay Gap - “Male Dom”The Pay Gap - “Male Dom”
0100200300400500600700800900
MenWomen
Weekly Weekly Earnings Earnings 19901990
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Pay Gap “Female Dom”Pay Gap “Female Dom”
0
100
200
300
400
500
600
700
Reg Nurse Elem Tchr Gen Office Sew Mach
Men
Women
Weekly Weekly Earnings Earnings 19901990
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Management JobsManagement Jobs
0100200300400500600700800900
1000
Men
Women
Weekly Weekly Earnings Earnings 19891989
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MBA’s - Top Business Schools
MBA’s - Top Business Schools
0100002000030000400005000060000700008000090000
Men
Women
Annual Annual Earnings Earnings 19901990
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Bachelor’s Degree Salary Offers
Bachelor’s Degree Salary Offers
0
5000
10000
15000
20000
25000
30000
Men
Women
Marketing Marketing Job Job Offers--Offers--Annual Annual SalariesSalaries19921992
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Income by Years of Schooling
Income by Years of Schooling
0
10000
20000
30000
40000
50000
60000
Men
Women
Annual Annual Earnings Earnings 19901990
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Income by Education, Race, Sex
Income by Education, Race, Sex
0
5
10
15
20
25
30
35
40
Some HS HS grad 4yr Coll
W men
W women
B men
B women
H men
H women
Annual Annual Earnings Earnings 1990 1990
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Changes in Pay GapChanges in Pay Gap
0
20
40
60
80
100
120
1960 1970 1980 1982 1984 1986 1988 1990
White M Black M Hisp M
White W Black W Hisp W
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Explanations for the Pay Gap--Structural Characteristics
Explanations for the Pay Gap--Structural Characteristics
Earnings differ among occupations, jobs differ in value, substantial labor force segregation by sex, women disproportionally in jobs that are lower valued and paid. Accounts for 10-40% of gap.
Occupations: Clerical vs craft Jobs: Selling: apparel vs boats Glass Ceiling: Job level varies Industries: Service vs. manufacturing Firms: Large vs small Union Membership: Jobs/firms/industries
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Explanations for the Pay Gap--Individual Characteristics
Explanations for the Pay Gap--Individual Characteristics
Relate pay differences to differences believed to affect a person’s productivity on the job, that make a person valuable to an employer. Accounts for 0-44%.
Experience: 31%, “return on” Seniority (tenure): 40%, “return on” Education: 2%, “return on” Behaviors, other qualifications
Together structural and individual explanations account for 30-60% of the wage gap, leaving 40-70% unexplained.
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Age Discrimination in Employment Act of 1967
(ADEA) Covers private employers with 20+
employees, labor unions with 25+ employees, and employment agencies
EEOC enforces this act Protects workers age 40 and older from
illegal discrimination in employment practices» Including pay and benefits» Limits to early retirement--must be voluntary
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Accommodating Disabilities and Family needs
Pregnancy Discrimination Act of 1978» Must not treat pregnancy less favorably than
other medical conditions, must treat pregnancy and childbirth as other causes of disability
» Leave: must allow credit for previous service, accrued retirement benefits accumulated seniority
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Accommodating Disabilities and Family Needs, cont’d
Americans with Disabilities Act of 1990 (ADA)» Mental or physical disabilities» Reasonable Accommodation
Family and Medical Leave Act of 1993» Job protection in cases of family or medial
emergency» 12 weeks of unpaid leave
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Other Influences Labor unions
» National Labor Relations Act (NLRA)– Equality of bargaining power between employees
and employers
» Compensation issues in collective bargaining– COLA– Spillover effect– Concessionary bargaining
Market Influences» Industry effects, capital-intensity