Compensation & Benefits (17)

enforces laws through agencies and its other bodies

Token compliance

earnings compared to foreign workers

immigration policy affects labor demand

Walsh-Healey

requires that mechanics and laborers on public construction projects be paid the "prevailing wage" in an area

Sarbanes-Oxley

prohibition of hazardous work

exempts stock options from the calculation of overtime

Lilly Ledbetter Fair Pay

Clawbacks

The percent of women and men earning minimum wage is approximately equal.

Clerical

engage in semi-routine activities

The employee must be compensated on a salary or fee basis at a rate not less than $455 per week.

Commission sales

Occupational Safety and Health

The Portal-to-Portal Act

Worker Economic Opportunity Act

give employers and employees the option of trading overtime pay for time off

The ILO finds that on a global basis child labor is increasing.

sub-Saharan Africa.

a higher proportion of new hires were female

The extent of the worker's satisfaction.

was passed in response to conditions on projects such as the construction of the Hoover Dam during the Depression

access

Some factor other than sex.

skill

factors other than sex

Men and women may be paid differently if customers prefer one sex over the other

was amended in 1990 to include the Older Workers Benefit Protection Act

disparate impact

Executive Order 11246

OFCCP.

SSEG

courts continue to uphold use of market data to justify differences

job evaluation

traditional pay patterns

Overall, the gender gap has decreased

Personality and cultural differences

work/occupation and work-related behaviors

Female employment is more heavily concentrated in large than small firms

Base the wage-to-job evaluation point ratio on wages paid for female-dominated jobs.

Collective bargaining

True

False

False

False

True

False

True

True

False

False

True

True

True

False

False

True

True

True

False

True

True

False

True

False

True

True

False

False

True

True

False

False

True

False

True

True

False

In the United States, there are three branches of federal government and each plays a role in the legal and regulatory framework in which employers work toward compliance objectives. The legislative branch (Congress) passes laws (or statutes). The executive branch, headed by the President, enforces laws through agencies and its other bodies, and the judicial branch interprets laws and considers their constitutionality. Over time, the legislative branch may change existing laws or pass new ones. The way that the judicial branch interprets laws can also change.

The Securities Exchange Act Of 1934 Created the Securities and Exchange Commission (SEC). Currently, the SEC requires companies that have more than $10 million in assets and whose securities are publicly traded and held by more than 500 owners to periodically report information, which is available to the public. This includes disclosure of compensation received by the CEO, CFO, and three other highest paid executives.

The Fair Labor Standards Act of 1938 (FLSA) covers all employees (with some exceptions) of companies engaged in interstate commerce or in the production of goods for interstate commerce. In spite of its age, this law remains a cornerstone of pay regulation in the United States. The FLSA's major provisions are:

1. Minimum wage

2. Hours of work

3. Child labor

An additional provision requires that records be kept of employees, their hours worked, and their pay.

To qualify for the executive employee exemption, all of the following tests must be met:

• The employee must be compensated on a salary basis (as defined in the regulations) at a rate not less than $455 per week;

• The employee's primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;

• The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and

• The employee must have the authority to hire or fire other employees, or the employee's suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.

The law recognizes two types of discrimination: access discrimination and valuation discrimination. The charges of discrimination and reverse discrimination that most often make the news involve access discrimination: the denial of particular jobs, promotions, or training opportunities to qualified women or minorities.A second legally recognized interpretation of discrimination is valuation discrimination, which looks at the pay women and minorities receive for the jobs they perform. This is the more salient definition for our purposes. The Equal Pay Act makes it clear that it is discriminatory to pay women less than males when they are performing equal work. This definition of pay discrimination hinges on the standard of equal pay for equal work. Many believe that this definition of valuation discrimination does not go far enough. They believe that valuation discrimination can also occur when men and women hold entirely different jobs.

The Department of Labor provides these definitions of the four factors.

1. Skill: Experience, training, education, and ability as measured by the performance requirements of a particular job.

2. Effort: Mental or physical—the degree of effort (not type of effort) actually expended in the performance of a job.

3. Responsibility: The degree of accountability required in the performance of a job.

4. Working conditions: The physical surroundings and hazards of a job, including dimensions such as inside versus outside work, heat, cold, and poor ventilation.

Guidelines to clarify these definitions have evolved through court decisions. For an employer to support a claim of unequal work, the following conditions must be met:

1. The effort/skill/responsibility must be substantially greater in one of the jobs compared.

2. The tasks involving the extra effort/skill/responsibility must consume a significant amount of time for all employees whose additional wages are in question.

3. The extra effort/skill/responsibility must have a value commensurate with the questioned pay differential (as determined by the employer's own evaluation).

Time of day (e.g., working a night shift) does not constitute dissimilar working conditions. However, if a differential for working at night is paid, it must be separated from the base wage for the job.

Court cases have established two theories of discrimination behavior under Title VII: (1) disparate treatment and (2) disparate impact.

Disparate Treatment: Disparate or unequal treatment applies different standards to different employees: For example, asking women but not men if they plan to have children. In Japan, for example, women college students continue to report that recruiters ask them different questions than are asked of male college students. The mere fact of unequal treatment may be taken as evidence of the employer's intention to discriminate under U.S. law.Disparate Impact: Practices that have a differential effect on members of protected groups are illegal, unless the differences are work-related. Under disparate impact, whether or not the employer intended to discriminate is irrelevant. A personnel decision can, on its face, seem neutral, but if its results are unequal, the employer must demonstrate that the decision is work-related. The two standards of discrimination—disparate treatment versus disparate impact—remain difficult to apply to pay issues, since pay differences are legal for dissimilar work. It is still not clear what constitutes pay discrimination in dissimilar jobs in the United States.

Some of the more important sources, of earnings gaps include the following:

• Work/occupation differences

• Work-related behavior

• Labor market conditions

• Firm/industry differences

• Union differences

• Discrimination

Considerable research has examined the factors which are the central sources of the wage differences between men and women and the racial/ethnic groups. The issue, especially any proposed remedies, continues to generate research and debate. The primary sources contributing to the gender gap differ from the primary sources for the race/ethnic gaps. It appears that differences in the work/occupation and differences in work-related behaviors are central to understanding the remaining gender wage gaps. In contrast, differences in qualifications, especially educational levels and work-related experience as well as differences in occupations, are important sources of the gaps for both blacks and Hispanics compared to white men.

Establishing a comparable-worth plan typically involves the following four basic steps:

1. Adopt a single "gender neutral" point job evaluation plan for all jobs within a unit. If employees are unionized, separate plans have been prepared for each bargaining unit and take precedence over previous agreements. The key to a comparable-worth system is a single job evaluation plan for jobs with dissimilar content.

2. All jobs with equal job evaluation results should be paid the same. Although each factor in the job evaluation may not be equal, if the total points are equal, the wage rates must also be equal.

3. Identify the percentages of male and female employees in each job group. A job group is defined as a group of positions with similar duties and responsibilities that require similar qualifications, are filled by similar recruiting procedures, and are paid under the same pay schedule. Typically, a female-dominated job group is defined as having 60 percent or more female incumbents; a male-dominated job group has 70 percent or more male incumbents.

4. The wage-to-job evaluation point ratio should be based on the wages paid for male-dominated jobs since they are presumed to be the best estimate of nondiscriminatory wages.

Compliance with laws and regulations can be a constraint and/or an opportunity for a compensation manager. The regulatory environment certainly constrains the decisions that can be made. Once laws are passed and regulations published, employers must comply. But a proactive compensation manager can influence the nature of regulations and their interpretation. Astute professionals must be aware of legislative and judicial currents to protect both employers' and employees' interests and to ensure that compensation practices conform to judicial interpretation.

A compensation manager can best undertake these efforts in the following ways. First, join professional associations to stay informed on emerging issues and to act in concert to inform and influence public and legislative opinion. Second, constantly review compensation practices and their results. The fair treatment of all employees is the goal of a good pay system, and that is the same goal of legislation. When interpretations of what is fair treatment differ, informed public discussion is required. Such discussion cannot occur without the input of informed managers.