Legislation And Compensation

1. Legislation And Compensation Historical Development • Early written records document laws that regulated hours worked, compensation, and taxation. • Religion, the natural environment, and custom were the primary forces that gave substance to these laws.

2. Early Wage and Hour Controls • Daylight Hours • Seasons • Climate / Weather • Holy Days • Social Hierarchy

3. Historical Development 14th Century • Rising commercial revolution led to wage negotiations by European craft workers. • They not only set wage rates that transcended national borders but they also established definitive work rules.

4. Historical Development 16th Century • Widespread trade competition helped create a shift in production methodology that in turn increased competitive pressure on non-farm wages. • This led to a significant decline in the standard of living and eventually caused the English parliament to pass a minimum wage law in 1562.

5. Historical Development 17th and 18th Centuries • The cottage industries created in the 16th century moved from rural homes into the towns and cities. • Wage rates in this new environment were extremely low.

6. Historical Development 17th and 18th Centuries The Industrial Revolution began in England during the last half of the 18th century. Pay was extremely low, hours were long, and working conditions were deplorable.

7. Historical Development 17th and 18th Centuries The Industrial Revolution came to the United States in the first half of the 19th century and working conditions similar to those experienced in Europe were common in America.

8. Historical Developments 19th Century • Legislative efforts began to remedy some of the ill effects of the Industrial Revolution. • Laws were being introduced to regulate hours worked and to improve working conditions. • These efforts to ameliorate the plight of workers were met with substantial resistance.

9. Historical Development 19th Century • The U S was experiencing a major economic and technological transition that was going to require an equally dynamic shift in our collective view of private verses public interests, business ethics, social responsible, human rights, and the role of government. • The conventional wisdom of the power elite of the period were not unlike those in control today.....They wanted to preserve the status quo.

10. Historical Development 19th Century • However the force of change created by the new industrial environment was too overwhelming and a new social and economic order began to emerge. • There was a veritable explosion of legislation in the 20th century impacting the rights of workers.

11. Key Legislation Impacting Compensation • Significant Categories • Wage and Hour • Pension and Welfare • Tax Treatment • Anti-discrimination in Employment • Wage and Price Controls

12. Wage and Hour Legislation Historical Development • 1840 - by executive order, a 10 hour workday for workers on government contracts. • 12 hour workday was the norm for industrial workers up through 1866 and remained a common practice for many workers well into the 1920's.

13. Wage and Hour Legislation • 1912 - Massachusetts passed the first minimum wage law in the United States. It covered women and children • 1913 - Henry Ford introduced the 8 hour workday in his assembly plants

14. Wage and Hour Legislation • 1926 - Railway Labor Act Granted collective bargaining rights to railway and airline employees and became the first legal exception to the "employment-at-will" doctrine. • 1931 - Davis-Bacon Act First national minimum wage act requiring construction contractors and their subcontractors receiving federal funds in excess of $2,000 to pay at least the prevailing wage in their area.

15. Wage and Hour Legislation • 1935 - National Labor Relations Act Granted collective bargaining right to most U. S. workers and further breached the "employment-at-will" doctrine. Bargaining was permitted over wages, hours, and working conditions.

16. Wage and Hour Legislation • 1936 - Walsh-Healy Public Contracts Act Set prevailing wage standard for all government let contracts in excess of $10,000 and additionally required time-and-a-half to be paid for work exceeding8 hours a day and 40 hours in a work week. The 8 hour a day provision was dropped in 1986.

17. Wage and Hour Legislation • 1938 - Fair Labor Standard Act (FLSA) This act and its amendments is the definitive wage and hour law of the United States. Established overtime pay for all hours worked in excess of 40 in a work week. (1.5 x rate)

18. Wage and Hour Legislation • 1938 - Fair Labor Standard Act (FLSA) Established a minimum wage ($5.15) Established minimum hiring ages (14,16,18) Established and identified exceptions and exemptions for each key provision of the act.

19. Wage and Hour Legislation • 1938 - Fair Labor Standard Act (FSLA) Most states have "minimum wage" laws and they are used in some cases to cover workers who fall through the federal cracks. State laws cannot preempt federal law.

20. Employee Pension and Welfare Legislation • 1911 - Workers Compensation Laws Each of the 50 states has its own WC laws and administrative agencies. These laws are designed to: • Provide no-fault income and medical protection • Provide a single remedy

21. Workers Compensation Laws Underlying Premise • Relieve Public Burden • Eliminate Court Litigation Costs • Encourage Employer Safety • Provide Insight Into Cause Of Accidents

22. Workers Compensation Laws Who Pays ? Workers compensation plans are in large part insured by private carriers while others are self-insured or covered through state funds. In most cases the employer pays.

23. Employee Pension and Welfare Legislation • 1935 - Social Security Act This act was established to provide American workers with protection from total economic destitution in the event of termination of employment beyond their control.

24. Social Security Act • Basically a retirement program…. It also established: • Federal Old-Age, Survivors, Disability, and Health Insurance • Federal and State Unemployment Insurance Compensation System • Medicaid and Medicare Programs

25. Employee Pension and Welfare Legislation • 1974 - Employment Retirement Income Security Act (ERISA) Passed to protect pension plans from failure and obsolete assumptions, this law established: • Fiduciary Responsibilities • Reporting and Disclosure • Employee Participation and Coverage • Vesting • Funding • Limitations on Benefits

26. ERISA • Additionally, the act established: The Pension Benefit Guaranty Corporation (PBGC) to administer single-employer and multi-employer insurance plans to ensure that covered employees receive their basic pension benefits. The corporation provides insurance protection for employer liability upon termination of a pension plan.

27. Employee Pension and Welfare Legislation • 1980 - Multi-Employer Pension Plan Amendment Act • 1984 - Retirement Equity Act (REA) • 1988 - Worker Adjustment and Retaining Notification Act • 1996 - Health Insurance Portability and Accountability Act

28. Antidiscrimination In Employment Legislation • Of all the different kinds of legislation enacted in the last 60 years, laws barring discrimination in employment practices have placed the most pressure on personnel and compensation professionals.

29. Antidiscrimination In Employment Legislation • These laws have forced organizations to revise how they describe their jobs, define employment qualifications, recognize and reward performance, and administer compensation and benefit programs.

30. Antidiscrimination In Employment Legislation • 1963 - Equal Pay Act The first federal antidiscrimination law relating directly to women. It is an amendment to the fair labor standards act and specifically prohibits employers from paying unequal wages for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions.

31. Equal Pay Act • Under this act employers can establish different wage rates on the following basis: • Seniority • Merit • Quantity and Quality of Output • A Differential Based on Anything but Sex.

32. Antidiscrimination In Employment Legislation • 1964 - Civil Rights Act - Title VII Also known as the Equal Employment Opportunity Act of 1964 and continues to have an impact on the hiring, training, compensation, promotion, and termination practices of organizations. The act applies to employee discrimination based on race, color, religion, national origin, and sex.

33. Civil Rights Act - 1964 • The act established the Equal Employment Opportunity Commission (EEOC) to enforce requirements of Title VII. • Violations of this act can and frequently do involve punitive damages. • Additionally, the act provides for and establishes remedial actions (affirmative action) and identifies specific job classifications they monitor in connection with this activity.

34. Antidiscrimination In Employment Legislation • 1965/67 - Executive Orders 124 and 11375 These orders ban discrimination on the same basis as the civil rights act by any employer with a government contract of more than $10,000. These orders are enforced by the OFCCP who also require Affirmative Action plans from all employers with 50 or more employees and contracts of $50,000.

35. Antidiscrimination in Employment Legislation • 1972/1978/1986 - Age Discrimination in Employment Act (s) This act prohibits discrimination in hiring individuals between 40 and 65 years of age. An amendment to this act in 1978 prohibited forced retirement of any employee under 70 years of age, and a 1986 amendment abolished mandatory retirement at any age. Exceptions were noted.

36. Antidiscrimination In Employment Legislation • 1978 - Pregnancy Discrimination Act An amendment to the civil rights act, it prohibits employers from excluding from employment opportunities (disability insurance, medical benefits, leave, accrual of seniority) any applicant or employee because of pregnancy or related conditions.

37. Antidiscrimination In Employment Legislation • 1992 - Americans with Disabilities Act (ADA) Gives civil rights protection to individuals with disabilities similar to those provided to individuals on the basis of race, sex, national origin, age, and religion. It guarantees equal opportunities to qualified disabled individuals with regard to employment, public accommodations, transportation, telecommunications, and state and local government service.

38. Tax Treatment Legislation Tax law, and IRS policies and regulations, can be very effective in determining the kinds and features of compensation plans an organization offers to its employees and the manner in which it funds and operates these plans.

39. Tax Treatment Legislation When meeting IRS qualificationrequirements, employers can deduct contributions to a plan as business-related costs, and the employee can defer the employer-made payment as earned income until actual receipt of the contribution (as well as any gains the contribution may have earned).

40. Tax Treatment Legislation • 1861 - Tax Revenue Act First income tax legislation - passed to assist in financing the civil war - repealed in 1872. • 1913 - Sixteenth Amendment Granted congress the right to levy and collect taxes on income from whatever source.

41. Tax Treatment Legislation • 1913/38 - Tax Law and Amendments 1 percent tax on income between $3,000 and $20,000. • Corporate deductions for reasonable levels of compensation. • Tax exemptions granted to profit-sharing and bonus plans. • Separate capital gains tax rate established. • Corporations required to submit names and salary amounts of all executives earning more than $75,000 per year.

42. TAX TREATMENT LEGISLATION • 1939/50 - Internal Revenue Code Adapted • Existing tax laws were codified, making it possible to amend existing laws and eliminating the requirement to rewrite them. • Standard deductions were adopted. • Split income joint returns began for married couples.

43. Tax Treatment Legislation • 1954/64 - Repealed Internal Revenue Code of 1939 and Replaced it with Present Tax Laws. • Established self-employment retirement plan funding regulations. • Maximum marginal tax rates reduced to 70 %

44. Tax Treatment Legislation • 1969/Present - Tax Reform and Legislative Treatment Impacting Compensation • Tax rates on income and capital gains during this term were in a continuous state of flux - dropping substantially in the 70's and 80's and rising again in the late 80's and early 90's.

45. 1969/Present Tax Reform • Provisions established for taxing income set aside for retirement purposes. • Employee stock ownership plan" introduced. • Eliminated "sick-pay" as a tax-deductible, employer-sponsored disability benefit.

46. 1969/Present Tax Reform • 401-k plans established • Cobra was enacted • Employers were encouraged to extend benefits to rank-and-file employees through plan qualification standards that tied its tax exemption status to a non-discrimination test.