16 December 2013

Employment Law

Chapter 5

Employment Law
Employment laws establish basic rules for the “free market” relationship between employer and employees. For example, anti-discrimination laws limit an employer’s right to hire and fire “at will.” Minimum wage laws establish wage floors prohibiting employers from offering less than the allowed amount. Opponents say employment laws violate individuals’ right to make whatever bargains they choose; supporters say they protect the weaker party in the labor market. This chapter briefly addresses three types of employment law in the United States.

Employment at Will
“Employment at will” has been the basic principle of American employment law since the 1880s.[i] It says that either party can enter or leave an employment relationship at any time and for any reason. Thus, an employer can fire an employee “for good reason, bad reason, or no reason at all,” and a worker can quit at any time and for any reason. Workers have struggled for more than 100 years to narrow employers’ right to hire and fire for “bad reason or no reason at all” and have won two major legal tools:
1. The National Labor Relations Act of 1935 (NLRA), the Wagner Act, was workers’ first major victory against “employment at will.” It says an employer commits a “wrongful termination” when he fires a worker for joining a union or participating in a “concerted activity” such as organizing a union or striking. The fired worker must be restored to employment and given his/her back pay.  Other Wagner Act provisions are discussed in Chapter VI. 

2. Beginning in the 1960s, workers won passage of national and state anti-discrimination laws. These laws prohibit employers from firing or refusing to hire a worker because of the worker’s membership in a “protected class,” i.e., people historically discriminated against because of race, color, religion, sex, national origin, age, or handicap status. The laws include Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, and the Family and Medical Leave Act of 1993.

The government established the Equal Employment Opportunity Commission (EEOC) in 1965 to enforce anti-discrimination laws. The EEOC files class action lawsuits (lawsuits brought by one party on behalf of a group of individuals with the same grievance) on behalf of employees. It also pursues selected individual discrimination charges.
Enforcement of both the Wagner Act and the anti-discrimination laws has been inadequate, especially in the last 30 years. The employer penalties for violating the NLRA are too weak to deter most employers who are determined to remain union-free. And, the EEOC is terribly underfunded, with only 2,385 people on its national staff in 2010.

These laws also allow individual workers to sue their employers for discrimination.  However, this is a difficult path. Only 6% of those who file employment discrimination lawsuits in federal court go to trial, and of these, only one in three win.[ii]

Hours and Wages

The second key area of employment law concerns hours and wages of workers. The Fair Labor Standards Act (FLSA) of 1938 (as amended) is the basic law for these matters. It covers hours and overtime, minimum wage, and child labor. 40 hours per week is the standard workweek, with additional hours (overtime) paid at 1.5 times the regular rate. There is no daily or weekly limit on work hours. (However, the FLSA does not cover executive, administrative, professional and outside sales workers – at least 20% of the workforce.) It also sets a single national minimum wage, $7.25/hour in 2012. States may set higher minimum wage rates, and many do. The FSLA establishes 16 as the minimum age to work, with certain exceptions.

As with the laws concerning “employment at will,” funding for enforcement of the minimum wage, overtime, and child labor law is minimal, as are the penalties for violations. The National Employment Law Project, a highly respected organization, has concluded, “The result is massive and growing wage theft.”

Wage theft – shortchanging workers of the wages they are owed – is becoming a defining trend of the 21st century labor market. It takes many forms… being paid less than the minimum wage or other agreed upon wage, working ‘off-the-clock’ without pay, getting less than time-and-a half for overtime hours, having tips stolen, being misclassified as an “independent contractor” instead of an employee, having illegal deductions taken out of paychecks, or… not being paid at all.

Far from being incidental or rare, wage theft takes place in industries that span the economy... retail, restaurant and grocery stores… home health care and domestic work… manufacturing, construction and wholesalers… janitorial and security… dry cleaning and laundry, car washes, and beauty and nail salons.[iii]

A pioneering, nationally acclaimed study of 4,307 low-wage workers in New York City, Chicago, and Los Angeles in 2008 found:

26% of workers surveyed were not paid the applicable minimum wage, 76% were not paid overtime in the preceding week and 57% did not receive pay stubs in violation of state laws requiring employer to provide workers with written documentation of wages, rates of pay, and hours worked. Seventy percent of workers who came in early or stayed late after their regular shift suffered from “off-the-clock” violations by not being compensated for all hours worked… Thirty percent of the tipped workers surveyed were not paid the tipped worker minimum wage, and 12 percent of tipped workers had their tips stolen by their employer or supervisor. Twenty percent of all the workers surveyed reported that they had made a complaint to their employer or attempted to organize a union, and of these workers, 43% experienced one or more forms of illegal retaliation by their employer or supervisor, such as firing or suspending workers, threatening to call immigration authorities, or cutting pay.[iv]

Retirement and Medical Care

The third major area of employment law deals with retirement and medical care. The Social Security Act (1935, as amended) established a portable national pension plan funded by equal employer and employee tax payments. These go into a single national fund that pays the retirement benefits of current retirees. Full retirement payments begin at age 66 (67 for workers born after 1960) and are based on earnings and years of employment. In 2010, half of elderly couples received at least half of their income from Social Security. The median Social Security income was $15,701; median total income for the elderly (including private pensions and earnings) was $25,757.[v]

Medicare (1965) established government health insurance for those aged 65+ and youth with disabilities. As of 2012, there is no national health insurance plan for adults and children. “Obamacare” is the informal name for a 2011 law which will penalize employers that do not offer health insurance.[vi] It will also penalize uninsured adults who have not purchased health insurance (poor people will receive government insurance called Medicaid). The Supreme Court has not yet ruled on the law’s constitutionality.

Discussion Questions

In a capitalist country, what responsibilities should government have for the general welfare? Should it set a minimum wage? Pay for health care? Pensions?

[i] Ronald B. Standler, History of At-Will Employment Law in the USA, 2000; http://www.rbs2.com/atwill.htm.
[ii] Journal of Empirical Legal Studies, June 2010, “Individual Justice or Collective Legal Mobilization? Employment Discrimination Litigation in the Post Civil Rights United States,” Laura Beth Nielsen, Robert L. Nelson and Ryan Lancaster.
[iii] National Employment Law Project, “Winning Wage Justice: A Summary of Research on Wage and Hour Violations in the United States,” January 2012.
[iv] Ibid. Study is in Annette Bernhardt, Ruth Milkman, Nik Theodore et al., Broken Laws, Unprotected Workers: Violations of Employment and Labor Laws in America’s Cities, 2009.
[v] “Income of the Aged Chartbook, 2010,” http://www.ssa.gov/policy/docs/chartbooks/income_aged/2010/.
[vi] “Health Care Reform Bill Summary,” http://www.cbsnews.com/8301-503544_162-20000846-503544.html.


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