R8.4 – Employer-Employee Laws

Question 0

Federal Insurance Contribution Act (FICA)

Answer 0

FICA provides workers and dependents benefits in case of death, disability or retirement.

All workers participate including self-employed earning more than $400 in profits

FICA is funded by taxing income earned from labor

Question 1

Employer-Employee Laws

Answer 1

1. Federal Insurance Contribution Act (FICA)
2. Unemployment Compensation (FUTA)
3. Workers’ Compensation
4. Employment discrimination
   – Title VII of the Civil Rights Act of 1964
   – Equal Pay Act
   – Age Discrimination
   – Americans with Disabilities Act
5. Occupation, Safety Health Act (OSHA)
6. Fair Labor Standards Act (FLSA)
7. National Labor Relations Act (NLRA)
8. Employee Retirement Income Security Act (ERISA)
9. Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)

Question 2

FICA Funding Mechanism

Answer 2

Funded by both employers and employees
– Employee contribution = tax of 4.2 %of gross wages up to $113,700 + Medicare contributions of 1.45% of entire wages
– Employers match employees FICA contribution

Employers withhold employee’s contribution and pay it along with their contribution to government

Employer’s contribution deductible as business expense

Employee’s contribution is not deductible by the employee

Self-employed pay both employer and employees FICA contribution, then deduct half (employee part) for AGI

Question 3

Federal Unemployment Tax Act (FUTA)

Answer 3

State-run system with federal guidelines

Applies to employer with quarterly payrolls of $1,500+ or who employ at least one person for 20 weeks in a year

Self employed persons do not participate

Available to those unemployed through no fault of their own.

Question 4

FUTA Funding Mechanism

Answer 4

Unemployment taxes are payroll taxes assessed against employer only

Tax = 6% on first $7,000 per year of compensation for each employee

Employer’s payment deductible as ordinary business expense

Not deductible for employee

Question 5

Workers’ Compensation

Answer 5

Workers’ compensation is a state-run program providing benefits for work-related injuries.

Employers are strictly liable for work related injuries.
– Employee’s negligence irrelevant
– Employee’s fighting, intoxication, or self-inflicted injury bars recovery

Workers may not to sue the employer, but can sue third parties.

Question 6

Workers’ Compensation – Funding Mechanism

Answer 6

Employer pays for workers’ compensation by purchasing insurance from state or private carrier

In most states, coverage is compulsory

In states where coverage not mandatory, if employer doesn’t participate in workers’ compensation he gives up the common-law defenses of contributory negligence, assumption of risk, and the fellow-servant doctrine.

Question 7

Workers’ Compensation – Benefits

Answer 7

– Loss of income (% of wages)
– Disability
– Loss of limbs
– Prosthetic devices
– Medical services
– Burial costs
– Survivors’ benefits

Question 8

Workers’ Compensation – Exemptions

Answer 8

The following employees are not covered by workers’ compensation
– agricultural workers
– domestic workers
– casual workers e.g. Temporary office workers
– public employees
– independent contractors
Note: directors are treated as independent contractors

Question 9

Employment Discrimination

Answer 9

1. Title VII of the Civil Rights Act of 1964
2. Equal Pay Act
3. Age Discrimination
4. Americans with Disabilities Act

Question 10

Title VII of the Civil Rights Act of 1964

Answer 10

Prohibits discrimination on the basis of race, sex, religion, color or national origin.

Enforced by Equal Employment Opportunity Commission (EEOC)
– Complaints under Title VII are heard by the EEOC not the courts

Applies to all employers with 15+ employees

Question 11

Title VII of the Civil Rights Act of 1964 – Defenses and Remedies

Answer 11

Defenses
– Bona fide seniority system
– Merit, including professionally developed ability tests
– Bona fide occupational qualifications
– Employee terminated for cause

Remedies
– Injunction prohibiting further discrimination
– Recovery of up to 2 years’ back pay

Question 12

Equal Pay Act

Answer 12

Prohibits paying unequal wages based on sex

Question 13

Age Discrimination Act

Answer 13

Prohibits discrimination in hiring, firing, or compensation of workers on the basis of age

Act protects workers aged 40+ years

Applies to employers with 20+ workers

Question 14

Age Discrimination Act – Defenses and Remedies

Answer 14

Defenses
– Bonafide occupational qualification
– Bonafide seniority system
– Employee terminated for cause

Unintended discrimination not a defense

Remedies
– Injunction vs. further discrimination
– Back pay

Question 15

American with Disabilities Act

Answer 15

Requires employers not to discriminate against qualified job applicants and employees who have disabilities or who become disabled

Applies to employers with 15+ employees

Gives all individuals access to buildings open to the public, mass transportation, telecommunications services, and government services.

Employers need to make reasonable accommodations for the needs of disable employers and customers.

Question 16

Occupational Safety and Health Act (OSHA)

Answer 16

OSHA applies to all businesses affecting interstate commerce

OSHA can
– Set safety standards
– Conduct worksite inspections without notice or a search warrant.
– Examine employers’ records
– Questions employees without advance notice or a search warrant

Employers with 11+ employees must keep log for 5 years that records employees’ job related injuries and illnesses.

Employers must file annual report on injuries and illnesses.

Question 17

Occupational Safety and Health Act (OSHA) – Penalties

Answer 17

$1,000 fine per day

$10,000 per willful or repeated violation

Violation resulting in death – up to $10,000 fine and up to 6 months in jail

Question 18

Fair Labor Standards Act (FLSA)

Answer 18

Sets federal minimum wage

Sets overtime rate: 1.5 times the hourly rate

Equal pay provisions

Restrictions for child labor

Allowable pay bases = hourly, weekly, or monthly

Question 19

Fair Labor Standards Act – Child labor provisions

Answer 19

Regulates employment of children outside of agriculture

Prohibits employment of those under 14 except as newspaper deliveries and child actors.

Limits the hours and times 14- and 15-year-olds can work

Prohibits hazardous work by those under 18.

Question 20

Fair Labor Standards Act – Exceptions

Answer 20

Newspaper deliverers exempt from minimum wage, overtime pay, equal pay, and child labor provision

Cab drivers exempt from overtime provisions

White-collar employees earning $455+ per week exempt from minimum wage and overtime provisions

Nonmanagement blue-collar workers, police officers, firefighters, paramedics, and other first responders are never exempt form FLSA no matter how much they earn.

Question 21

National Labor Relations Act (NLRA)

Answer 21

Also known as the Wagner Act

Gives workers right to bargain collectively for wages and other terms of employments

NLRA prohibits employers from
– Interfering in employee attempt to unionize and bargain collectively
– Discriminating based on labor union membership
– Discriminate against employee for filing charges of testifying about the employer’s violation of the act
– Refusing to bargain collectively with employees

Question 22

Employee Retirement Income Security Act (ERISA)

Answer 22

Does not require employers to have retirement plans or require contributions to existing plans, it just lays out rules for management and participation in retirement plans if offered.

Sets standards for funding and investing and imposes fiduciary duties on plan managers.

Requires that employees and beneficiaries receive basic information regarding the plan

Establishes vesting requirement
– Employee’s right to their own contributions vest immediately
– Employee’s right to employer’s contributions vest after specified number of years of employment

Question 23

Consolidated Omnibus Budget Reconciliation Act (COBRA)

Answer 23

Allows certain individuals to continue same group health insurance they had through employer after employment ends by paying 102% of cost of insurance

Applies to employers with 20+ employees

Coverage period = 18 months post-employment