R8.4 – Employer-Employee Laws Flashcards
Federal Insurance Contribution Act (FICA)
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
Employer-Employee Laws
- Federal Insurance Contribution Act (FICA)
- Unemployment Compensation (FUTA)
- Workers’ Compensation
- Employment discrimination
– Title VII of the Civil Rights Act of 1964
– Equal Pay Act
– Age Discrimination
– Americans with Disabilities Act - Occupation, Safety Health Act (OSHA)
- Fair Labor Standards Act (FLSA)
- National Labor Relations Act (NLRA)
- Employee Retirement Income Security Act (ERISA)
- Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)
FICA Funding Mechanism
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
Federal Unemployment Tax Act (FUTA)
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.
FUTA Funding Mechanism
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
Workers’ Compensation
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.
Workers’ Compensation – Funding Mechanism
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.
Workers’ Compensation – Benefits
– Loss of income (% of wages) – Disability – Loss of limbs – Prosthetic devices – Medical services – Burial costs – Survivors’ benefits
Workers’ Compensation – Exemptions
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
Employment Discrimination
- Title VII of the Civil Rights Act of 1964
- Equal Pay Act
- Age Discrimination
- Americans with Disabilities Act
Title VII of the Civil Rights Act of 1964
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
Title VII of the Civil Rights Act of 1964 – Defenses and Remedies
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
Equal Pay Act
Prohibits paying unequal wages based on sex
Age Discrimination Act
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
Age Discrimination Act – Defenses and Remedies
Defenses
– Bonafide occupational qualification
– Bonafide seniority system
– Employee terminated for cause
Unintended discrimination not a defense
Remedies
– Injunction vs. further discrimination
– Back pay
American with Disabilities Act
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.
Occupational Safety and Health Act (OSHA)
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.
Occupational Safety and Health Act (OSHA) – Penalties
$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
Fair Labor Standards Act (FLSA)
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
Fair Labor Standards Act – Child labor provisions
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.
Fair Labor Standards Act – Exceptions
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.
National Labor Relations Act (NLRA)
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
Employee Retirement Income Security Act (ERISA)
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
Consolidated Omnibus Budget Reconciliation Act (COBRA)
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
