Dynamic business law 4e kubasek 4e CH42

Chapter 42
Employment and Labor Law

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Overview
• LO42-1: What are wage and hour laws?
• LO42-2: What are the rights of employees and obligations of employers
under the Family and Medical Leave Act?
• LO42-3: What is FUTA?
• LO42-4: What are the rules regarding workers' compensation?
• LO42-5: What is COBRA?
• LO42-6: What is ERISA?
• LO42-7: What is OSHA?
• LO42-8: What does it mean to be an "at-will" employee?
• LO42-9: What are the rights of employees and obligations of employers
with regard to privacy in the workplace?
• LO42-10: What are the rights and responsibilities of employers when
hiring foreign workers?
• LO42-11: What are the three major pieces of labor law legislation?

42-2


Chapter 42 Hypothetical Case 1
• Bob Gerald is a loading dock worker for American Beauty Supplies, Inc. Gerald's
supervisor, Candice Futterman, is suspicious that Gerald is a drug user. Although the
company does not have a dress code for its loading dock employees, Gerald's attire
has given Futterman what she believes to be cause for concern. Today, for example,
Gerald is wearing a T-shirt of his favorite 1960s rock-and-roll band, The Appreciative

Deceased. The T-shirt has a picture of The Appreciative Deceased's mascot, the PoohBah Man, along with the words "Keep on Tokin'." He is also wearing a peace sign
necklace, tattered blue jeans, and sandals. Add to his attire Gerald's long, curly hair
and his disheveled beard, and Futterman believes her subordinate is a human tribute
to the free-love generation.
Futterman has decided to give Gerald a drug test to determine whether her charge is
under the influence of illicit substances. Futterman believes she has reasonable
suspicion to do so based on Gerald's appearance, and the fact that courts have
generally upheld the right of employers to drug test employees.
• Based on these circumstances, does Candice Futterman have the legal right to require
that Bob Gerald submit to a drug test?

42-3


Chapter 42 Hypothetical Case 2
• As this chapter indicates, the Fair Labor Standards Act (FLSA) requires
that a minimum wage of a specified amount be paid to all employees in
covered industries. The FLSA covers all employers engaged in interstate
commerce or the production of goods for interstate commerce. The
minimum wage is periodically raised by the United States Congress to
compensate for increases in the cost of living caused by inflation. The
most recent increase took effect on July 24, 2009, when the federal
minimum wage increased from $6.55 to $7.25 per hour.
When the Fair Labor Standards was initially enacted in 1938, the
minimum wage was 25 cents per hour. Since 1938, it has been increased
22 separate times. However, because there have been some extended
periods between these adjustments while inflation has generally
increased, the real value—or purchasing power—of the minimum wage
has decreased substantially over time.

42-4


Chapter 42 Hypothetical Case 2
(cont'd)
• For more information regarding the eroding purchasing power
of the minimum wage, see the following website:
Inflation and the Real Minimum Wage: A Fact Sheet.
• Should the federal government continue to require a
mandatory minimum wage, or should it instead allow the free
market to dictate wages, even though that might result in
many workers receiving less than the current minimum wage
of $7.25 per hour? Does the government have an ethical
obligation to ensure a livable wage for all workers? Does the
business community have a corresponding ethical obligation?
42-5


Wage and Hour Laws
• Wage and hour laws: Federal and state
laws that impose minimum wage and hour
requirements for employees
• Fair Labor Standards Act (FLSA): Covers all
employers engaged in interstate commerce
• Requires that a minimum wage of specified
amount be paid to all covered employees
• Specified amount periodically raised by
Congress

42-6

Family and Medical Leave Act
(FMLA)
• Family and Medical Leave Act (FMLA): Federal act requiring
that certain employers establish a policy that provides all
eligible employees with up to 12 weeks of leave during any
12-month period for several family-related occurrences
•
•
•
•

Birth or adoption of child
Foster child
Care of seriously ill spouse, parent, or child
Serious health condition that renders employee unable to
perform any essential functions of job

• After leave, employee returned to same or similar position
• Does not require employee to be paid, does require
continuation of health benefits

42-7


Federal Unemployment Tax Act
(FUTA)
• Created state system that provides
unemployment compensation to qualified

employees who lose their jobs
• Funded by states through tax on
employers
• Three states require minimal employee
contributions
42-8


Workers' Compensation Laws
• State laws that provide financial compensation
to employees or their dependents when covered
employee injured/killed on the job
• To recover workers' compensation benefits,
injured party must demonstrate:
• He/she is an employee
• Both employer and employee are covered by state
workers' compensation program
• Injury occurred on the job
42-9


Consolidated Omnibus Budget
Reconciliation Act (COBRA)
• Ensures that when employees lose their jobs or have
their hours reduced to level at which they are not
eligible to receive medical, dental, or optical benefits
from their employer, employees have right to
continue receiving benefits under employer's policy
for up to 18 months by paying the premiums for the
policy

• COBRA does not apply if:
• Employee fired for gross misconduct
• Employer decides to eliminate benefits for all current
employees

4210


Employee Retirement Income
Security Act (ERISA)
• Federal law that sets minimum standards for most
voluntarily-established pension and health plans in
private industry to provide protection for individuals
enrolled in these plans
• Under ERISA, employers must provide pension/health
plan participants:
• Plan information (features and funding)
• Assurances of fiduciary responsibility of those in charge
of managing and controlling plan assets
• Grievance and appeals process for participants to receive
benefits from plan
• Right to sue for benefits and breaches of fiduciary duty

4211


Occupational Safety and
Health Act of 1970 (OSHA)
• Requires every employer to "furnish to each of his
employees . . . employment . . . free from

recognized hazards that are likely to cause death
or serious physical harm"
• The Occupational Safety and Health
Administration is responsible for setting safety
standards under OSHA
• The Occupational Safety and Health
Administration is also responsible for enforcing the
Act through inspections and levying of fines
against violators

4212


Employment-at-Will Doctrine
• Permits employer to fire employee for any
reason or no reason at all
• Exceptions:
• Implied contract
• Violation of public policy
• Implied covenant of good faith and fair dealing

• In states that have adopted any of these three
exceptions, employees may be able to sue for
wrongful discharge

4213


Employee Privacy in the Workplace
• Employer privacy policies should cover matters such as employer

surveillance policies, control of access to medical and personnel records,
drug testing, and e-mail policies
• Omnibus Crime Control and Safe Streets Act of 1968
• Employers cannot listen to private telephone conversations of employees or
disclose the content of those conversations
• Employers may ban personal calls and monitor calls for compliance,
provided that they discontinue listening to any conversation once they
determine it is personal
• Violators may be subject to fines of up to $10,000

• Electronic Communications Privacy Act (ECPA) of 1986
• Employees' privacy rights extend to electronic forms of communication,
including e-mail and cellular phones
• ECPA outlaws intentional interception of electronic communications and the
intentional disclosure/use of information obtained through such
interception

4214


Employer Rights and
Responsibilities: Foreign Workers
• Immigration Reform and Control Act (1986): Requires
employers to verify identity and eligibility of employees to
work in the United States
• Immigration Customs and Enforcement (ICE): Federal agency
responsible for immigration worksite enforcement
• Employers required to:
• Confirm work authorization
• Retain documentation for three years from the date of hire or

one year after the employee is no longer employed

• Failure to comply results in criminal and civil sanctions
4215


Labor Law
• Wagner Act of 1935: Enacted to encourage formation of labor unions
and provide for collective bargaining
• Collective bargaining: Negotiations between employer and group of
employees to determine conditions of employment

• Taft-Hartley Act of 1947 (Labor Management Relations Act): Designed
to limit some of the powers unions had acquired under Wagner Act
• Note: Taft-Hartley Act was an amendment to Wagner Act; collectively
referred to as National Labor Relations Act

• Landrum-Griffin Act of 1959
•
•
•
•

Governs internal operations of labor unions
Requires certain financial disclosures by unions
Establishes civil and criminal penalties for financial abuses by union officials
"Labor's Bill of Rights" (contained in Landrum-Griffin Act) designed to
protect employees from their own unions

4216

Labor Law (cont'd)
• National Labor Relations Board (NLRB)
• Created by Wagner Act
• Administrative agency formed to interpret and enforce
National Labor Relations Act
• Primary functions of NLRB include:
• Monitoring conduct of employer and union during an
election to determine whether workers want to be
represented by a union
• Preventing and remedying unfair labor practices by
employers/unions
• Establishing rules to interpret the National Labor
Relations Act

4217


Good Faith Requirements of
National Labor Relations Act
• Both employer and employee bargaining unit
representative must:
• Meet at reasonable times and confer in good faith
• Sign a written agreement if one is reached
• When intent on terminating/modifying existing
contract, give 60 days' notice to other party, with offer
to confer over proposals, and give 30 days' notice to
federal/state mediation services in event of pending
dispute over new agreement

• Neither strike nor engage in lockout during 60-day
notice

4218


Strikes, Pickets, and Boycotts
• Strike: Temporary, concerted withdrawal
of labor
• Picket: Designed to inform public (usually
through public demonstration and/or
speech) of labor dispute
• Boycott: Refusal to deal with, purchase
goods from, or work for a business
4219


Chapter 42 Hypothetical Case 3
• James Cuthbert, J.D, one year removed from law school and practicing at the St. Louis firm Gibson,
Smith, and McGwire, PLLC, is on the fast track for partnership. Cuthbert was a prized hire for
Gibson, Smith, and McGwire; his imposing physical presence, disarming smile, and ambition
enough for an entire courtroom of first-year attorneys, lead most to believe that Cuthbert will be
offered a partnership in four years, far sooner than the standard seven years.
Summer came, and the Gibson firm made plans to field its best-ever recreational softball team.
The firm team competes annually in the Bar Association of Greater St. Louis Softball League.
Attorneys participating in the league compete just as vigorously on the field as they do in the
courtroom, and law firms strive to earn bragging rights associated with a league championship.
A senior partner at the firm, Tom Hackman, has recruited Cuthbert to play first base for the team.
Cuthbert was at first reluctant to play, but he eventually agreed, realizing that impressing the
partnership could happen on the playing field as well as the courtroom.

The Gibson team excels, powering its way to the Bar Association softball championship game
against an impressive foe, the Micah A. Mayo Personal Injury Law Firm. In the bottom of the ninth
inning of a tied championship game, with no one on base and two outs, Cuthbert comes to bat.

4220


Chapter 42 Hypothetical Case 3
(cont'd)
• He swings for the fence and drives the softball to within five feet of a home run. As he
reaches third base, Hackman (the team's third-base coach) signals Cuthbert to stay,
but he heads for home instead; glory is only 90 feet away, an inside-the-park home
run would only add to his legend, and extra innings come with no guarantees.
Playing catcher for the Mayo firm is Albert Flaherty, an imposing figure himself; at six
feet, five inches tall and 230 pounds, Flaherty is determined to use his height, weight,
and mass to save the game for his employer.
Cuthbert and Flaherty collide, a cloud of dust surrounds home plate, and a sickening
crack and scream are heard by all in attendance. Cuthbert's right leg is severely
broken, and he is out. Reasonable minds might differ in terms of which hurts worse.
The Gibson firm loses after 10 innings, and the biggest question back at the office is,
"What would have happened if Cuthbert had stayed on third?" Cuthbert is
hospitalized; his medical bills and days out of work are accumulating.
• Is Gibson, Smith, and McGwire, PLLC legally liable for Cuthbert's injury? Is the firm
ethically liable for Cuthbert's injury?

4221


Chapter 42 Hypothetical Case 4
• Flaherty's Flowers, a landscaping business owned by Charles

Flaherty, has long been a friend to Charleston, South Carolina's,
immigrant community. Flaherty has always welcomed new
immigrants willing to put in a hard day's work at his business, and he
has always paid them a fair wage.
But Flaherty has not been diligent about paperwork, and now he
may be in trouble. An agent from the Immigration Customs and
Enforcement agency has come to his office demanding evidence that
all of his employees are legally able to work in the United States.
• What documents should Flaherty be able to provide? What will
Flaherty face if he's unable to come up with the documents?

4222