LABOR

1. Advanced Business Law (BPP433/85) LABOR 2007 Winter Quarter Week 4 Instructor: David Oliveiri

2. Learning Objectives • Just What is Labor? • What Legal Rules Apply to the Employment of Labor Resources? • Managerial Implications -- Constraints, Risks, Opportunities

3. SALLY SMITH “AskSimon” • Assembles Capital • Opens Accounts • Borrows ANN TOM • Customers • Suppliers • Creditors • “Bystanders” • “Colleagues” • Spreadsheets • Phone • Manual • Hourly Wage • Sales Force Consulting • % New Business

4. Common Labor “Issues” • Hiring / Not Hiring • Managing • Firing • Buying / Selling Businesses

5. Some Basic Economic Considerations of Labor Resources • Notion of Control Pervasive • Joint Economic Enterprise (Association) vs. Hired Inputs • Relationships • Bargaining, Dealing • Public Policy Perspectives

6. Bargaining Elements in Adding Others Deal Points of Sally, Tom, Ann • Risk of Loss – Who Bears? • Return – What? • Control – How Much? • Duration – How Long? COST (INCLUDING LIABILITY) IMPACTS

7. The Question of Structured Labor Relationships • Structured Relationships – Intended and By Default • Pros – Greater Definition/Predictability • Cons – Transactions Costs/Compliance Costs

8. The Sources of Structured Employment Relationships • Contracts, Statutes, Regulations • Examples – • Negotiated Contracts (Including Collective Union Contracts) • Implied Contracts (Employee Manuals, Employment-at-Will Erosion, …) • Federal Employment Statutes, Regulations (Discrimination Laws, …) • State Employment Statutes, Regulations, Court Decisions (Workers Compensation, Employment of Minors, …) ST – Q4

9. Statutes, Regulations Adding Structure to Relationships – Categories • Specific Terms of Employment Relationship • Employer Discrimination • Protection of Employees in Workplace • Employee Privacy

10. Employment Relationship Terms – Unions and Collective Contracts • National Labor Relations Act Established Right to Unionize and Bargain Collectively – Federally Protected Right! • Prohibits “Closed Shops” (Agreements Requiring Employers to Hire Only Union Members • Allows “Union Shops” (Nonunion New Hires Allowed, But Employee Must Join Union) • National Labor Relations Board – Administers In 2005 – 12.5% of Wage and Salary Workers Unionized – 36.5% of Government Workers, 7.8% of Private Industry Workers. Source: US Department of Labor

11. Unfair Labor Practices – Inhibit Free Labor Market Unfair Employer Practices Unfair Union Practices • • Interfering with right to unionize Coercing an employee to join the union • • Refusing to bargain in good faith Refusing to bargain in good faith Causing an employer to discriminate • • Discriminating against union members against a nonunion employee • • Featherbedding Dominating the union • Picketing an employer to require • Discriminating against an employee recognition of an uncertified union • Engaging in secondary activity • Levying excessive or discriminatory dues ST-Q2 S&R43 (P6,7)

12. Further Federal Regulation of Terms of Employment Relationships • Fair Labor Standards Act - Regulates Child Labor Outside Agriculture • Worker Adjustment and Retraining Notification Act - Requires 60 Days' Advance Notice of Plant Closing or Mass Layoff • Family and Medical Leave Act of 1993 - Grants Employee Leave for Serious Health Conditions/ Certain Other Events • Minimum Wage Laws

13. State Regulation of Employment-at-Will Relationship • General Common Law Rule–Employment for Other than Definite Term is Terminable-at-Will by Either Party • Judicial Limitations - Based on: • Contract Law (E.G. Employee Manuals) • Tort Law (E.G. Wrongful Termination) • Public Policy (E.G. “Good Will” Termination)

14. Protected Prohibited Conduct Defenses Remedies Characteristics Seniority Merit Quality or quantity measures Any factor other than sex Wages Sex Back pay Injunction Liquidated damages Attorney’s fees Equal Pay Act Race Color Sex Religion National origin Terms, conditions, or privileges of Employment, Including Sexual Harassment (Hostile Work Environment) Title VII of the Seniority Ability test BFOQ (except for race) Business necessity (disparate impact only) Civil Rights (15+ Employees) Federal Employment Discrimination Laws Back pay Injunction Reinstatement Compensatory and Punitive damages for intentional discrimination • Unlimited for race •Limited for all others Attorney’s fees

15. Protected Prohibited Conduct Defenses Remedies Characteristics Terms, conditions, or privileges of employment Age Back pay Injunction Reinstatement Liquidated damages for willful violation Attorney’s fees Age Discrim. in Employment Act (40-Local; 20-Interstate) Seniority BFOQ Any other reasonable act Disability Americans with Disabilities Act (15+ Employees) Back pay Injunction Reinstatement Compensatory and punitive damages for intentional discrimination (limited) Attorney’s fees Terms, conditions, or privileges of employment Undue hardship Job-related criteria and business necessity Risk to public health and safety Federal Employment Discrimination Laws (cont.) Back Problems, Drug/Alcohol Addiction, Mental Disabilities, Obesity, HIV, …

16. Discrimination Charges Filed in 2004 with EEOC Category Number of Charges Race 27,696 Sex 24,249 National Origin 8,361 Religion 2,466 Retaliation 22,740 Age 17,837 Disability 15,346 Equal Pay 1,011 Source: EEOC National Database, Jan. 2005

17. Equal Employment Opportunity Commission – EEOC • Violation Formula: Protected Class + Employment Action + Qualified + Denied Something + Discrimination Intent • Intent Supported By: • Disparate Treatment • Disparate Impact of Neutral Practice • Defenses: Valid Test, Seniority, BFOQ, Statistical Evidence (Regression/Dummy Variable = Protected Characteristic) ST – Q1 (S&R43—P14, 2) Physical Exams, Genetic Testing?

18. State and Federal Regulation of Employee Protection • FEDERAL: • Occupational Safety and Health Act– Mandates Safe and Healthful Work Environment • Social Security - Economic Assistance to Disabled/Retired Employees and Dependents • STATE: • Workers' Compensation - Awarded to Employees Injured During Employment • Unemployment Compensation - Awarded to Workers Who Lost Their Jobs and Cannot Find Employment Temporary Workers Pressing Gillette For Benefits at Massachusetts Packaging Plants – New York Times 11/8/05

19. State and Federal Regulation of Employee Privacy ST – Q5 • Drug and Alcohol Testing - Some States Prohibit Tests or Prescribe Scientific and Procedural Safeguards • Lie Detector Tests - Federal Statute Limiting Tests to Narrow Circumstances • Employee Surveillance ST – Q6 ST – Q7

20. TEMPS, CONTRACTORS, AGENTS/EMPLOYEES, MANAGERS, OFFICERS, … Management Perspectives • Decisions in Hiring – Type of Relationship (Control, Risk, Structure) • Post-Hiring Management – Environment, Training, Developing, Promoting, Firing, … • Buying or Selling Businesses

21. Law and Competitive Advantage* • Understand the Law – BPP 432, 433, Counsel; When do I have a legal issue? • React to Specific Legal Problems(Flight or Fight) – 20% of CEO time! • Prevent Similar Legal Problems • Redefine Legal Concerns as Business Concerns • Current Prevalent Litigation Areas – Workers’ Compensation, Wrongful Discharge, Sexual Harassment Source: Siedel, Using the Law for Competitive Advantage (2002, Jossey-Bass)

22. Law and Competitive Advantage – Workers’ Compensation • Direct Costs – Insurance Premiums ($5B (1970’s) to $21B (1980’s) to $70B (1990’s) • Indirect Costs – Lost Productivity (5.9 Million Workplace Injuries and Illnesses in 1998). Source: Siedel, Using the Law for Competitive Advantage (2002, Jossey-Bass)

23. Law and Competitive Advantage – Wrongful Discharge • Direct Costs – Most Companies Sued by >= 1 Employee in Every 12Month Period • Indirect Costs –Limitation on Staffing Flexibility Source: Siedel, Using the Law for Competitive Advantage (2002, Jossey-Bass)

24. Ambiguous Performance Reviews • For someone who has engaged in criminal activity: “He’s a man of many convictions.” • For someone who is untrustworthy: “Her true ability is deceiving.” • For someone who is unqualified: “I most enthusiastically recommend this person with no qualification whatsoever.” • For someone who is lazy: “In my opinion, you will be very fortunate to get this person to work for you.” Source: “Art of Lying,” Wall Street Journal, 3/22/94, p.1, quoting Robert J. Thornton, The Lexicon of Intentionally Ambiguous Recommendations (LIAR).

25. Law and Competitive Advantage – Sexual Harassment • Direct Costs–Most Companies Sued by >= 1 Employee in Every 12 Month Period • Indirect Costs–Limitation on Staffing Flexibility, Morale Harassment Law In US Is Strict, Foreigners Find “A sexual harassment lawsuit against Toyota Motor Corp…. American laws and customs relating to workplace sexual harassment are in many cases stricter than those abroad…” Wall Street Journal, 5/15/06 Source: Siedel, Using the Law for Competitive Advantage (2002, Jossey-Bass)

26. Bottom Lines; Q&A • Labor => Relationships • Labor Relationships = f ( Bargaining, Public Policy) = Increasingly “Structured” • Sources of Structure = Contracts, Statutes, Regulations, Court Decisions • Management Perspectives – Hiring Decisions, Management of Labor Relationships, Termination of Relationships, Buying and Selling Businesses • Management Opportunity – Comparative Advantage