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Term Paper HRM4550

You are required to write about current events that are relevant to human resources management.

Article Date Requirement: The selected article(s) should be published within four months of the due date.

Article Source: Potential sources include Harvard Business Review, The Wall Street Journal, Fortune, BusinessWeek, Money, HR Magazine, and Society for Human Resource Management (SHRM) website.

The content of this paper should include three parts:

1. Review of Important /Major Content offered in the Article(s):

Approximately one page in length. This page should be a well-written, concise, and complete synopsis of the important elements of the article (s).

2. Deep Look at the Relevance to Course:

Approximately two pages in length and fully cited. This should specifically describe the chapter(s), chapter topic(s), class discussion(s) and key concept(s) this current event article specifically pertains to and how the article(s) expands your understanding of the course content.

3. Reference Page:

Provide a full “References” page at end of the paper and check to assure those in-text citations coordinate to a reference – and that references coordinate with in-text citations utilized in the paper.

Note: The paper should be double-spaced, with 1- inch margins on all sides, no extra spacing between paragraphs, and use the Arial 12-point font.

Pay-for-Performance: Incentive Plans

In This Session:
We’ll look at how the goals and performances of individuals, teams/groups, and enterprise/organizations might be more effectively linked.
We’ll examine the underlying concepts that distinguish effective incentives from ineffective ones.
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Effective rewards acknowledge what the organization wants to reward. Ineffective rewards do not reward what is hoped for by the organization and, in fact, reward the very things the organization doesn’t want. Kerr’s article, The Folly of Rewarding A While Hoping for B, is a good launching point for discussion of this (next slide).
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Types of Incentive Plans

Introduction
Incentive plans can be grouped into three categories: individual incentive plans, group incentive plans, and enterprise incentive plans, as shown in Figure 10.1.
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Strategic Reasons for Incentive Plans
Variable pay – Tying pay to some measure of individual, group/team, or organizational performance
Variable pay programs consist of bonuses, incentives, or recognition for good work.
Variable pay is more flexible than fixed pay (salaries, hourly wages)
Variable pay not only motivates employees to do what the organization wants them to do, but it also ensures that employees feel the organization is fair and responsive to their individual contributions.

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Variable pay is more flexible than fixed pay (salaries, hourly wages), as variable pay is attached to fixed costs that allow flexibility to increase, decrease, or maintain future payments to employees as business conditions warrant.
Most HR managers see variable pay as strategic because it allows the organization to align its employees’ interests and outcomes with those of the organization.
Variable pay not only motivates employees to do what the organization wants them to do, but it also ensures that employees feel the organization is fair and responsive to their individual contributions.

Pay-for-Performance Philosophy

Section 10.1: Strategic Reasons for Incentive Plans
Figure 10.2 shows that incentive rewards are based entirely upon a pay-for-performance philosophy. Incentive pay plans establish a performance “threshold” (a baseline performance level) that an employee or group of employees must achieve to qualify for incentive payments.
By meshing compensation and organizational objectives, managers believe that employees will assume “ownership” of their jobs, thereby improving their effort and overall job performance.
Incentive pay is highly valued as a compensation strategy to attract and retain top-performing employees.
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Advantages of
Incentive Pay Programs

Section 10.1a: Incentive Plans as Links to Organizational Objectives
Figure 10.3 summarizes the major advantages of incentive pay programs as noted by researchers and HR professionals.
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Requirements for a
Successful Incentive Plan
For an incentive plan to succeed, employees must be able to see a clear connection between the incentive payments they receive and their job performance.
A successful incentive plan should:
Identify important organizational metrics that encourage employee behavior
Involve employees
Have simple and understandable payout formulas
Establish a clear link between performance and payout

Setting Performance Measures
When setting performance measures, as a manager, you will need to:
Be able to distinguish between individual contributions and those made by a group
Be able to avoid biases based on who you like and dislike, different personalities, and political agendas
Distinguish how much one group contributed over another group, even if the work they do is highly interdependent

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Management should guard against incentive payments being seen as an entitlement.
Instead, these payments should be viewed as a reward that must be earned through effort.
To achieve their full benefit, incentive plans must be carefully thought out, implemented, and maintained.
Three of the more important points are:
Poor performance must go unrewarded.
Annual salary budgets must be large enough to reward and reinforce exceptional performance.
The overhead costs associated with plan implementation and administration must be determined.

Individual Incentives
Necessary Conditions For Individual Incentive Plans
Individual performance must be identified
Individual competitiveness must be desired
Individualism must be stressed in the organizational culture
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Individual Incentive Plans – Piece-rate
Straight piece-rate:
Employees receive a certain rate for each unit produced
Differential piece-rate:
Pays employees one piece-rate wage for units produced up to a standard output and a higher piece-rate wage for units produced over the standard
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Managers often determine the quotas or standards by using time and motion studies. For example, assume that the standard quota for a worker is set at 300 units per day and the standard rate is
14 cents per unit. However, for all units over the standard, the employee receives 20 cents per unit. Under this system, the worker who produces 400 units in one day would get $62 (300 × 14¢) + (100 × 20¢). Many possible
combinations of straight and differential piece-rate systems can be used, depending on situational factors.
Piecework: The Drawbacks
Despite their advantages, piecework systems have a number of disadvantages that offset their usefulness.
They may not always be an effective motivator.
Piecework incentive systems can work against an organizational culture promoting creativity or problem-solving because these goals can infringe on an employee’s time and productivity and, therefore, total pay earned.
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Individual Incentive Plans – Standard Hour Plan
An incentive plan that sets rates based on the completion of a job in a predetermined standard time
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If employee finish the work in less than the expected time, their pay is still based on the standard time for the job multiplied by their hourly rate
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Individual Incentive Plans – Bonuses
Bonuses: One-time payment that does not become part of the employee’s base pay
Spot bonus: An unplanned bonus given to an employee for exceptionally good behavior
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Individual Incentive Plans – Merit Pay (slide 1 of 2)
Merit pay is normally an annual pay increase tied to performance
Becomes part of base pay once issued regardless of future performance
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Individual Incentive Plans – Merit Pay (slide 2 of 2)
Possible problems with merit pay plans:
Money available for merit increases may be inadequate to satisfactorily raise all employees’ base pay.
Managers may have no guidance in how to define and measure performance; there may be vagueness regarding merit award criteria.
Employees may not believe that their compensation is tied to effort and performance; they may be unable to differentiate merit pay and other types of pay increases.
Employees and their managers may hold different views of the factors that contribute to job success.
Merit pay plans may create feelings of pay inequity.

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Merit guidelines – Guidelines for awarding merit raises that are tied to performance objectives

Individual Incentive Plans – Awards and Recognition
Awards and Recognition
When giving awards, organizations should describe clearly how those receiving the awards were selected
Management professor named winner of ‘Golden Apple,’ CSUSB’s top teaching award

Sales Incentive Plans
Permits salespeople to be paid for performing various duties that are not reflected immediately in their sales volume
Straight salary plan
Receives a percentage of the value of the sales the person has made
Straight commission plan
Includes a straight salary and commission
Combination salary and commission plan
Pays a salary plus a bonus achieved by reaching targeted sales goals
Salary plus bonus plan
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Group/Team Incentive Plans – Team Compensation
Team incentive plans: All team members receive an incentive bonus payment when production or service standards are met or exceeded
Approaches in establishing team incentive payments
Set performance measures upon which incentive payments are based
Determine the size of the incentive bonus
Create a payout formula and should be explained to employees in detail
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The emphasis on cost reduction and productivity has led many organizations to implement a variety of group incentive plans.
Group plans enable employees to share in the benefits of improved efficiency realized by major organizational units or various individual work teams.
Group plans encourage a cooperative—rather than individualistic—spirit among all employees and reward them for their total contribution to the organization.
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Gainsharing Incentive Plans
Gainsharing plans – Programs under which both employees and the organization share financial gains according to a predetermined formula that reflects improved productivity and profitability
Scanlon plan – A bonus incentive using employee and management committees to gain cost-reduction improvements
Improshare – A gainsharing program under which bonuses are based on the overall productivity of the work team

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The philosophy behind the Scanlon plan is that employees should offer ideas and suggestions to improve productivity and, in turn, be rewarded for their constructive efforts.

Challenges with Group/team Incentives
Challenges with group/team incentives:
Rewards distributed in equal amounts to all members may be perceived as unfair
Free rider: Member of the group who contributes little
Group size: Individual efforts of employees have little effect on the total performance of the group in large groups
Complex payout formulas or insufficient payout rewards

Problems associated with team compensation:
The perception by individual team members that “their” efforts contribute little to team success or to the attainment of the incentive reward
The “free-rider” effect
Complex payout formulas or insufficient payout rewards
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Conditions for Effective Work Unit or Team Incentives

Enterprise/Organizational Incentive Plans
Enterprise incentive plans differ from individual and group incentive plans in that all organizational members participate in the plan’s compensation payout.
Common enterprise incentive plans include:
Profit sharing
Stock options
Employee stock ownership plans (ESOPs) – Stock plans in which an organization contributes shares of its stock to an established trust for the purpose of stock purchases by its employees

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Enterprise incentive plans reward employees on the basis of the success of the organization over an extended time period—normally a year, but the period can be longer.

Enterprise/Organizational Incentives: Profit Sharing Plans
Profit sharing – Any procedure by which an employer pays, or makes available to all regular employees, special current or deferred sums based on the organization’s profits
Profit sharing plans are intended to give employees the opportunity to increase their earnings by contributing to the growth of their organization’s profits.
Rather than just increasing rates of production, these contributions may be directed toward:
Improving product quality
Reducing operating costs
Improving work methods
Building goodwill

Enterprise/Organizational Incentives: Employee Stock Plans
Stock option plan: Gives employees the right to purchase a fixed number of shares of company stock at a specified price for a limited period of time
Employee stock ownership plan (ESOP): Gives employees significant stock ownership in their organizations
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Microsoft: “We have an employee stock purchase plan (the “Plan”) for all eligible employees. Shares of our common stock may be purchased by employees at three-month intervals at 90% of the fair market value on the last trading day of each three-month period. Employees may purchase shares having a value not exceeding 15% of their gross compensation during an offering period.”

Advantage and Disadvantage of Employee Stock Ownership Plans (ESOPs)
Advantage
Employers can provide retirement benefits for their employees at relatively low cost
ESOPs can increase employees’ pride of ownership in the organization, providing an incentive for them to increase productivity and help the organization prosper and grow.
Disadvantage
A major problem with privately held companies is their potential inability to pay back the stock of employees when they retire.
Retirement benefit tied to the firm’s future performance
Unlike traditional pension plans, ESOP contributions are not guaranteed by the federally established Pension Benefit Guaranty Corporation.
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Under an ESOP, employees do not actually buy shares; instead, the company contributes its own shares to the plan, contributes cash to buy its own stock, or, most commonly, has the plan borrow money to buy stock, with the company repaying the loan.
Advantages
Favorable tax treatment for ESOP earnings
Employees motivated by their ownership stake in the firm
Employees have a voice in important matters
Disadvantages
Wages and retirement benefit tied to the firm’s future performance
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Video Highlight
This video provides a brief profile of Publix Super Markets, which is the largest employee-owned company in the United States. A primary focus of the video is on the company’s employee stock ownership plan (ESOP).

“This Is the Largest Employee-Owned Company in the U.S.”

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Section 10.6c: Employee Stock Ownership Plans
VIDEO: This Is the Largest Employee-Owned Company in the U.S. (3:08)
This video provides a brief profile of Publix Super Markets, which is the largest employee-owned company in the United States. A primary focus of the video is on the company’s employee stock ownership plan (ESOP).

TOPICS/CONCEPTS: employee stock ownership plans, ESOP, enterprise incentive plans

**Levels of Variable Pay

Incentives for Professional Employees
Offering incentives to employees conducting more specified tasks does not work for employees whose work is ambiguous, complex, and requires creative thought.
For professional employees, where the task is complex and the solution is not easy to figure out, it is important to motivate employees to be more creative.

Things to Consider
When Managing Professionals

Section 10.7: Incentives for Professional Employees
Although pay is still important, employers should incentivize employees based more on overall performance over time, and it should not limit them to a set of certain tasks. In other words, incentives should be based around the impact of someone’s work and not just that a certain task was completed. Figure 10.8 shows that such rewards should provide (1) autonomy to the worker, (2) opportunity to master a skill, and (3) purpose (e.g., helping to build a better organization, curing cancer, alleviating poverty).
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The Executive Pay Package
Executive compensation plans consist of five basic components:
Base salary
Executive base salaries represent between 30 and 40 percent of total annual compensation.
Short-term incentives
Annual bonuses represent the main element of executive short-term incentives.
Long-term incentives
Stock options are the primary long-term incentive offered to executives.
Benefits
Perks
Perquisites – Special nonmonetary benefits given to executives

Design Issues for Performance-Based
Incentives and Rewards
To be effective, incentive and reward systems must:
Specify and measure performance.
Specify the level of aggregation for reward distribution in the organization’s hierarchy.
Specify the type of reward.
Gain employee acceptance.
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Legal Considerations
Discrimination:
Must apply same decision rules to all employees eligible for the reward or incentive.
Employees protected by Title VII and Equal Pay Act.
Taxes and accounting rules:
There may be some unanticipated or unplanned tax consequences for employees.
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Like any employment decision, employers must make sure that incentives and rewards are equitably administered. If a group of employees are eligible to receive a reward, the criteria must be applied equitably across all employees in that group. Note that the criteria must be applied equitably, not equally. This does not mean that all employees should receive the same reward; the process, however, must be applied fairly and the outcomes distributed fairly, based on the set of performance standards set and achieved.
In addition, depending on employers’ choices of the types of incentives and rewards they offer, there may be some unanticipated or unplanned tax consequences for employees. For example, with incentive stock options, tax is deferred as long-term capital gains (15 percent) when the stock is actually sold by the employee. For employees with non-qualified stock options, the spread (i.e., the difference between the price at which the employee bought the stock and the current market value) is viewed as income and is treated as compensation, which is taxed at a rate higher than 15 percent. If the instructor is knowledgeable in this area, they could offer other tax and accounting issues that employers and employees might consider as they decide the mix of rewards.
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Chapter 11
Managing Employee
Benefits
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Learning Outcomes
Explain how companies use benefits as a competitive advantage.
Specify three legally required benefits.
Discuss the trends in retirement plans and compare defined benefit and defined contribution plans.
Explain the importance of managing the costs of health benefits and identify some methods of doing so.
Describe the growth of financial, family-oriented, and time-off benefits and their importance to employees.

Benefits
Benefit: Tangible indirect rewards provided to an employee or group of employees for organizational membership
Includes retirement plans, paid time off, health insurance, life and disability insurance, and many more

Types of Benefits
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The Age Discrimination in Employment Act of 1967 Older Workers Benefits Protections Act (OWBPA) The OWBPA, which is part of the Age Discrimination in Employment Act (ADEA), safeguards older workers’ employee benefits from age discrimination. Among other things, this means that employers must take certain precautions when seeking a release from older workers that waives rights under the ADEA.

Military Leave of Absence
XYZ is committed to protecting the job rights of employees absent on military leave. In accordance with federal and state law, it is the Company’s policy that no employee or prospective employee will be subjected to any form of discrimination on the basis of that person’s membership in or obligation to perform service for any of the Uniformed Services of the United States. Specifically, no person will be denied employment, reemployment, promotion, or other benefit of employment on the basis of such membership. Furthermore, no person will be subjected to retaliation or adverse employment action because such person has exercised his or her rights under applicable law or this policy. If any employee believes that he or she has been subjected to discrimination in violation of this policy, the employee should immediately contact the Employee Benefits Representative responsible for the employee’s division, or the Representative’s supervisor if the Representative is unavailable or unable to be of assistance.
Bereavement leave is leave taken by an employee due to the death of another individual, usually a close relative. The time is usually taken by an employee to grieve the loss of a close family member, prepare for and attend a funeral, and/or attend to any other immediate post-death matters. Currently, there are no federal laws that require employers to provide employees either paid or unpaid leave. Also, only one state, Oregon, has passed a law requiring employers to provide bereavement leave (it took effect January 1, 2014). The other 49 states, plus the District of Columbia, do not require employers to provide employees either paid or unpaid bereavement leave.
Employers, at their discretion, may maintain bereavement leave policies or practices and, in certain circumstances, may be obligated to comply with their established policy or practice. Employers must comply with bereavement leave policies that are part of individual employment contracts or collective bargaining agreements.

Part-Time Employee Benefits
Most do not receive employee benefits except some paid time off

Flexible Benefits Plan
Employers offer both legally mandated and voluntary benefits
Flexible Benefits Plan (Cafeteria benefit plan)
Employees are given a budget and can purchase the bundle of benefits most important to them from the “menu” of options offered by the employer

Core vs. Non-core Benefits

Core Benefits (Traditional) Non-core Benefits (Voluntary – Elective)
Health Insurance Dental
Prescription Drugs Vision
Basic Life Insurance Supplement Life, Dependent Life
Vacation Long-term care insurance
Holidays Auto-homeowners insurance
Sick Pay Mortgage services/discounts
Disability On-site daycare
Tuition reimbursement
Yes, even Pet Insurance

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Typically, employees are offered a basic or core benefits package of life and health insurance, sick leave, and vacation.
Requiring a core set of benefits ensures that employees have a minimum level of coverage to protect against unforeseen financial hardships.
Employees are then given a certain amount of funds to purchase whatever other benefits they need through the plan.
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Administering Benefits
Self-service
Technology that allows employees to:
Enroll in and change their benefit choices
Track their benefit balances
Submit questions to HR staff members and external benefit providers
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Benefits Administration and Technology
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Third-party administrator (TPA): Vendor that provides enrollment, recordkeeping, and other administrative services to organizations
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Open enrollment: Time when employees can change their participation level in various benefit plans and switch between benefit options

Many organizations outsource benefits administration

Benefit Communication
When communicating benefit information, consider:
Timing and frequency
Communication methods
Providing rationale for significant changes to existing plans
Some companies provide a personal benefit statement, which translates benefits into dollar amounts
CSU Total Compensation Calculator

Legally Required Benefits-
Social Security Benefits
It includes:
Retirement benefits
Full retirement age: 67 (born 1960 and later)
Fully insured
Disability benefits
Disability has lasted or is expected to last for at least one year or to result in death.
Survivor’s benefits
The amount depends on the worker’s age at death and lifetime earning
Watch: Franklin Roosevelt Social Security

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Employees and employers share in the cost of Social Security through a tax on employees’ wages or salaries.
In 2019, you must earn $1,360 in covered earnings to get one Social Security or Medicare work credit and $5,440 to get the maximum four credits for the year.
Not all employees work in jobs covered by Social Security. Examples of some of these employees are: • Most federal employees hired before 1984 (since January 1, 1983, all federal employees have paid the Medicare hospital insurance part of the Social Security tax); • Railroad employees with more than 10 years of service; 6 • Employees of some state and local governments that chose not to participate in Social Security; or • Children younger than age 21 who do household chores for a parent (except a child age 18 or older who works in the parent’s business).
SSA looks at your income in the 35 highest-earning years of your career (capping the figures at the maximum taxable amount for each year and adjusting them for inflation). Then it takes the average of those 35 adjusted income figures and divides it by 12 to produce your “average indexed monthly earnings,” or AIME.
Your AIME is then plugged into a formula to determine your primary insurance amount — that is, the monthly benefit you’ll be eligible to receive at your full retirement age. As of 2017, a retiree’s primary insurance amount is determined by adding up the following:
90% of the first $885 in AIME
32% of AIME between $885 and $5,336
15% of AIME above $5,336
I’ll spare you the mathematics of calculating the highest possible Social Security benefit: At full retirement age, the maximum benefit is $2,687. However, since you can earn a delayed-retirement credit of 8% per year for waiting, until as late as age 70, people reaching this age now can get a maximum benefit of $3,547 per month.
The average monthly retirement benefit was recently $1,368. That amounts to $16,416 per year. If your earnings have been above average, you’ll collect more than that — but the overall maximum monthly Social Security benefit for those retiring at their full retirement age in 2017 is still just $2,687 — or about $32,000 for the whole year.
The earliest you can start receiving Social Security retirement benefits will remain age 62.

Legally Required Benefits- Medicare Benefits
Medicare – government-operated health insurance for Americans 65 and older
Taxed on both employer and employee
Social security tax is 6.2% (total of 12.4%)
Medicare tax is 1.45% (total of 2.9%)
Additional 0.9% Medicare tax for higher-income employees
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An additional Medicare tax of 0.9% for individuals who earn higher incomes was instituted in 2013; employers are expected to withhold this tax for compensation that exceeds $200,000 per year.

Rachel’s First Paycheck
FICA is a U.S. federal payroll tax. It stands for the Federal Insurance Contributions Act and is deducted from each paycheck.
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Legally Required Benefits- Workers’ Compensation Insurance
State-mandated insurance where employers purchase private or state-funded insurance to cover employees injured at work
Covers:
Injuries on the job, regardless of fault
Work-related illnesses
What is Workers Compensation Insurance?

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Rates based on the company’s frequency and severity of employee injuries
Workers’ compensation regulations require employers to provide cash benefits, medical care, and rehabilitation services to employees for injuries or illnesses that occur within the scope of their employment. In exchange, employees give up the right to pursue legal actions and awards.
Workers’ compensation programs are funded at the employer’s expense; workers cannot be required to make financial contributions for this coverage.
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Legally Required Benefits- Unemployment Insurance
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Funded by employers who pay combined federal and state tax
Tax varies based on organization’s unemployment experience: the more layoffs, the higher the rate
workers fired for misconduct or those not actively seeking employment are generally ineligible.
The minimum weekly benefit amount is $40 and the maximum weekly benefit amount is $450. For more information about how the Department calculates a UI claim, review, How Unemployment Benefits are Computed
(DE 8714AB), A Guide to Benefits and Employment Services
(DE 1275A), and the California Employer’s Guide
(DE 44).

Provides a minimum level of benefits for workers who are out of work

Each state operates its own system, so benefits differ by state

Companies pay an unemployment tax

Out-of-work and actively-looking employees can receive up to 26 weeks of pay at the rate of 50 to 80 percent of normal pay

Retirement Programs

The Three-Legged Stool of Retirement Income
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While traditional pension plans that provided a defined amount for retirement at a defined age were the norm for decades, since the early 1980s, fewer companies have provided these plans. Instead, employee-funded retirement accounts have become standard.
in 1979, of all private-sector employees, 62% of those who had retirement benefits were enrolled solely in pension plans, 16% were enrolled solely in defined contribution plans, and 22% were utilizing both programs. In comparison, by 2011, a mere 7% had pension plans, 69% had defined contribution plans, and a percentage similar to the one reported in 1979 participated in both programs.
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Retirement Programs
No law mandating retirement age in United States for most professions
Phased retirement: Program that allows its employees to gradually cut their hours before retiring

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Phased retirement programs allow employees to work part time and withdraw some retirement funds at the same time.
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Retirement Plan Concepts
Vesting: Benefit that cannot be taken away
No pension rights accrue if they have not been employed long enough to be vested except the funds they have contributed
Portability: Retirement plan feature that allows employees to move their retirement benefits from one employer to another
An example:
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Types of Retirement Plans
Employees are promised a pension amount based on age and years of service

Defined Benefit Plan
Employer and/or employee makes an annual payment to employee’s retirement account.
The actual amount of retirement benefits provided to an employee depends on the amount of the contributions as well as the gains or losses of the account.
Defined Contribution Plan
A defined benefit plan that defines the benefit in terms of a stated account balance.
Cash Balance Plan
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Defined-Benefit Pension Plans A “traditional” pension plan, in which the employer makes the contributions and the employee will get a defined amount each month upon retirement, is no longer the norm in the private sector. Through a defined-benefit plan, employees are promised a pension amount based on age and service. A defined-benefit plan gives employees greater assurance of benefits and greater predictability in the amount of benefits that will be available for retirement. Defined-benefit plans are often preferred by workers with longer service, as well as by small business owners
Defined-Contribution Pension Plans In a defined-contribution plan, the employer makes an annual payment to an employee’s pension account. The key to this plan is the contribution rate; employee retirement benefits depend on fixed contributions and employee earnings levels.
Some employers have changed traditional pension plans to hybrids based on ideas from both defined benefit and defined contribution plans. One such plan is a cash balance plan, a retirement program in which benefits are based on accumulated annual company contributions, expressed as a percentage of pay, plus interest credited each year. With these plans, retirement benefits accumulate at the same annual rate until an employee retires. Since cash balance plans spread funding across a worker’s entire career, these plans work better for mobile younger workers. The plans are gaining in popularity, especially among small businesses, which account for 84% of these plans.
A cash balance pension plan is a pension plan under which an employer credits a participant’s account with a set percentage of his or her yearly compensation plus interest charges. A cash balance pension plan is a defined-benefit plan. As such, the plan’s funding limits, funding requirements and investment risk are based on defined-benefit requirements: as changes in the portfolio do not affect the final benefits to be received by the participant upon retirement or termination, the company solely bears all ownership of profits and losses in the portfolio.
Although the cash balance pension plan is a defined-benefit plan, unlike the regular defined-benefit plan, the cash balance plan is maintained on an individual account basis, much like a defined-contribution plan. The cash balance plan acts similar to a defined-contribution plan also because changes in the value of the participant’s portfolio does not affect the yearly contribution.
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Common Defined Contribution Plans

401(k) plan: Plan allows for a percentage of an employee’s pay to be withheld and invested in a tax-deferred account

Profit-Sharing Plans: A profit-sharing plan accepts discretionary employer contributions.

Employee Stock Ownership Plans (ESOPs)

Comparison of Defined Benefit and Defined Contribution Retirement Plans
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Legal Regulation of Retirement Benefits
Employee Retirement Income Security Act (ERISA) in 1974
Requires plans to periodically provide participants with information about plan features, funding, and benefit accrual amounts
Retirement Benefits and Age Discrimination
Most employees cannot be forced to retire at a specific age
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Employee Retirement Income Security Act (ERISA) in 1974
Ensures that private pension plans and other plans governed by ERISA meet minimum standards
Requires plans to periodically provide participants with information about plan features, funding, and benefit accrual amounts
Retirement Benefits and Age Discrimination
According to a 1986 amendment to the Age Discrimination in Employment Act (ADEA), most employees cannot be forced to retire at a specific age
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Legal Regulation of Retirement Benefits (continued)
Older Workers Benefit Protection Act (OWBPA) in 1990
Requires equal treatment for older workers in early retirement or severance situations
Sets specific criteria that must be met if older workers are asked to sign waivers promising not to sue for age discrimination in exchange for severance benefits during layoffs
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Health Care Benefits

Health Care Benefits
Considered to be one of the most important benefits companies offer
Can cover medical, dental, prescription drug, and vision care expenses for employees and their dependents
Costs associated with health care coverage have increased considerably in the United States
Why Medical Bills In The US Are So Expensive

Understanding healthcare costs: The employer-sponsored insurance system

Key Provisions
of Patient Protection and Affordable Care Act

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Congress has attempted to repeal the ACA, but it is still the law of the land.
Original legislation required every individual to obtain health care coverage
This was eliminated in 2017 as part of the tax reform bill
26

Consolidated Omnibus Budget Reconciliation Act (COBRA)
Requires that most employers with 20 or more full-time and/or part-time employees offer extended health care coverage to certain groups
Understanding COBRA Health Insurance

Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Consolidated Omnibus Budget Reconciliation Act (COBRA) requires that most employers (except churches and the federal government) with 20 or more full-time and/or part-time employees (partial count based on hours needed to work for full-time status, or hours worked/full-time hours) offer extended health care coverage to certain groups, as follows:42 • Employees who voluntarily quit or are terminated • Widowed or divorced spouses and dependent children of former or current employees • Retirees and their spouses and dependent children whose health care coverage ends • Any child who is born or adopted by a covered employee • Other individuals involved in the plan such as independent contractors and agents/directors
27

The Health Insurance Portability and Accountability Act (HIPAA)
Care Legislation
Allows employees to switch their health insurance plans when they change employers, and to get new health coverage with the new company regardless of preexisting health conditions.
Require employers to:
Provide privacy notices to employees
Carefully store sensitive employee personal information
Not disclose employee health information without authorization
28

Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Requires employers to:
Provide privacy notices to employees
Not disclose of health information without authorization
Consider an entity that handles health information a business associate
Consider any disclosure of information a breach
28

Controlling Health Care Benefit Costs
Approaches used by employers:
Increasing deductibles and copayments
Deductible: Money paid by an insured individual before a health plan pays for medical expenses
Copayments: Portion of medical expenses paid by an insured individual for medical treatment
Instituting high-deductible plans
Offering consumer-driven health plans
Increasing employee contributions
29

Controlling Health Care Benefit Costs (continued)
Limiting family coverage; excluding spouses
Spousal exclusion provisions limit access to a company’s health plan when an employee’s spouse works for another company that offers health insurance
Managing prescription drug costs
Increasing health preventive and wellness efforts
Using managed care
30

Containing Medical Benefits Costs (continued)
Health Savings Accounts (HSA)
Individual employees can set aside pretax amounts for medical care into an HSA.
Unused amounts in an individual’s account can be rolled over annually for future health expenses.
Health Reimbursement Account (HRA)
Employer sets aside money in a health reimbursement account to help employees pay for qualified medical expenses.
31

Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
A type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. By using untaxed dollars in a Health Savings Account (HSA) to pay for deductibles, copayments, coinsurance, and some other expenses, you can lower your overall health care costs.
An HSA can be used only if you have a High Deductible Health Plan (HDHP) — generally any health plan (including a Marketplace plan) with a deductible of at least $1,350 for an individual or $2,700 for a family. When you view plans in the Marketplace, you can see if they’re “HSA-eligible.”
For 2018, you can contribute up to $3,450 for self-only HDHP coverage and up to $6,900 for family HDHP coverage. HSA funds roll over year to year if you don’t spend them. An HSA may earn interest, which is not taxable.
31

Containing Medical Benefits Costs (continued)
Flexible Spending Account (FSA)
Employees can divert some pretax income into flexible spending accounts to fund certain additional benefits.
At the end of the year or grace period, you lose any money left over in your FSA.
32

Managed Care
33
Managed care: Approaches that monitor and reduce medical costs through restrictions and market system alternatives
Most common forms of managed care:
Health maintenance organizations (HMO)
Preferred provider organizations (PPO)

Managed Care Plans
HMO VS. PPO
The difference between HMO and PPO plans includes the size of the plan network, ability to see specialists, plan costs, and coverage for out-of-network service.
https://abcmedicareplans.com/hmo-vs-ppo/
34

Employee Wellness Programs
Sponsored by employers
Designed to encourage employees to maintain and improve health and well-being by
Getting regular checkups
Eating properly
Exercising
Managing stress levels
35

Employee Assistance Programs
Provides diagnosis, counseling, and referral for advice or treatment related to alcohol or drug abuse, emotional difficulties, financial or family difficulties
Meet an Employee Assistance Program specialist

Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Services provided by employers to help workers cope with a wide variety of problems that interfere with the way they perform their jobs
36

Time-Off and Other Benefits
Time-Off and Other Benefits
Vacation and Holiday Pay
Family and Sick Leave
Leaves of Absence
Paid-Time-Off (PTO) Plans
Employee-Paid Group Benefits
37

Payment for Time Not Worked
Sabbaticals
Paid (or unpaid) time away from a job for 4 or more weeks employees take off to renew themselves before returning to work
Supplemental unemployment benefits (SUBs)
Plan that enables an employee who is laid off to draw weekly benefits from the employer
38

Family-Care Benefits
Family-Based Benefits
Adoption Benefits
Child-Care Assistance
Elder-Care Assistance

Family and Medical Leave Act (FMLA)
40
Enacted in 1993
Covers:
All federal, state, and private employers with 50 or more employees who live within 75 miles of the workplace
Employees who have worked at least 12 months and 1,250 hours in the previous year
Provides for unpaid leave

41
Family and Medical Leave Act (continued 1)
Leave provisions
Requires employers to allow eligible employees to take a maximum of 12 weeks of unpaid, job-protected leave during any 12-month period for the following situations:
Birth of a child and care for the newborn within one year of birth
Adoption or foster care placement of a child
Caring for a spouse, child, or parent with a serious health condition

42
Family and Medical Leave Act (continued 2)
Serious health condition of the employee
Illness or injury that requires inpatient care or continuing treatment by a health care provider for medical problems that exist beyond three days
Military family members who must handle the affairs for military members called to active duty
Twenty-six weeks leave to care for a military servicemember injured while on active duty

43
Guidelines Regarding FMLA Administration
Return to same or equivalent job
Continued health care benefits during leave
Intermittent leave permitted
Use of paid vacation and personal leave required
F M L A leave runs concurrently with other disability leave
No penalty under attendance policy
30-day notice from employee required
Fitness-for-duty test upon return permitted

44
Insurance Benefits
Common Types of Insurance Benefits
Life Insurance
Disability Insurance
Long-term care insurance

Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Legal insurance – Employees (or employers) pay a flat fee for a fixed number of hours of legal assistance each month
Life Insurance – Typical level of coverage is one and one-half or two times an employee’s annual salary
Disability Insurance – Provide continuing income protection for employees who become disabled and are unable to work
Long-term care insurance – Allow employees to purchase insurance to cover costs for long-term health care in a nursing home, assisted-living facility, or at a home

45
Other Benefits and Services
Credit unions
Serve financial needs of employees and attract potential employees
Educational assistance
Proactive employers view educational assistance programs
CSU as an example

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Chapter 13
Employees Rights and Discipline

Learning Outcomes
After studying this chapter, you should be able to
Explain the concepts of employee rights and employer responsibilities.
Identify and explain what the privacy rights of employees are.
Establish disciplinary policies and differentiate between the two approaches to disciplinary action.
Identify the different types of alternative dispute resolution methods.

Employee Rights
Guarantees of fair treatment that become rights when they are granted to employees by the courts, legislatures, or employers
Include rights of employees to:
Protest unfair disciplinary actions
Have access to their personal files
Challenge employer searches and monitoring
Be free from employer discipline for off-duty conduct
Federal and state courts view the privacy rights of employees as minimal
*

Employer Responsibilities
Employer is responsible to provide a safe workplace for employees while guaranteeing safe, quality goods and services to consumers
Employers have to exercise reasonable care while
Hiring
Training
Assignment of employees to jobs
*

Employee Rights vs. Employer Responsibilities
Employers failure to honor the rights of employees, can result in
Costly lawsuits
Damaging the organization’s reputation
Hurting employee morale
Failure to protect the safety and welfare of employees or consumer interests can invite litigation from both groups
*

Employment-at-Will

Employment-at-will relationship – The right of an employer to fire an employee without giving a reason and the right of an employee to quit when he or she chooses

The employment-at-will doctrine does not give managers and supervisors the unrestricted right of termination.

Psychological contract – Expectations of a fair exchange of employment obligations between an employee and employer

*
Psychological contract – Expectations of a fair exchange of employment obligations between an employee and employer

Example: In exchange for their talents and technical skills, workers expect employers to provide fair compensation, job training, and promotions.

Employment-at-Will
Employment-at-will relationship – The right of an employer to fire an employee without giving a reason and the right of an employee to quit when he or she chooses
The employment-at-will doctrine does not give managers and supervisors the unrestricted right of termination.

Federal and state laws and court decisions restrict termination decisions.

In unionized organizations, collective bargaining agreements limit automatic discharges.

Employment-at-Will(cont’d)
Three exceptions to the employment-at-will doctrine:

Violation of public policy

Implied contract

Implied covenant

Violation of public policy

Occurs when an employee is terminated for refusing to commit a crime; for reporting criminal activity to government authorities; for disclosing illegal, unethical, or unsafe practices of the employer; or for exercising employment rights

Implied contract

Occurs when employees are discharged despite the employer’s promise of job security or contrary to established termination procedures

Implied Contract

If an implied promise by an employer of a condition, such as job security, has been made, courts have generally prohibited the employer from terminating the employee without first exhausting the conditions of the contract.

Implied covenant

Occurs when an employer has acted with a lack of good faith and fair dealing

Job Protection Rights
Whistle-Blowing
Whistle-blowing – Complaints to governmental agencies by employees about their employers’ illegal or immoral acts or practices
*

Discharges
Wrongful Discharge
Wrongful discharge – A discharge, or termination, of an employee that is illegal
Constructive Discharge
Constructive discharge – An employee’s voluntary termination of his or her employment because of harsh, unreasonable employment conditions placed on the individual by the employer

Discharges and the WARN Act
The Worker Adjustment and Retraining Notification (WARN) Act requires organizations with more than 100 employees to give employees 60 days’ notice of any closure or layoff affecting 50 or more full-time employees.
*

Discharge as a Result of Retaliation

Title VII of the Civil Rights Act, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and other employment laws prohibit employers from retaliating against employees when they exercise their rights under these statutes.

Tips to Avoid Wrongful Employment Termination Lawsuits

Section 13.1c: Job Protection Rights

Figure 13.3 lists some suggestions that firms can follow in order to avoid wrongful employment termination lawsuits.

Explicit Contracts
Explicit Contracts
Explicit employment contracts are formal written (signed) agreements that grant to employees and employers agreed-upon employment benefits and privileges.
When an employee has an explicit contract, he or she cannot be dismissed at will.
*

Explicit contracts normally state the period of employment, terms and conditions of employment, and severance provisions.

Before hiring employees, employers sometimes impose certain restrictions, or provisions, in explicit contracts, such as nondisclosure of information agreements, which forbid employees from revealing proprietary information outside the company during or following their employment, and noncompete agreements, which prevent ex-employees from either becoming a competitor or working for a competitor for a designated period of time.

Explicit contracts are enforceable in court when either the employee or employer violates any provisions of the agreement.

The Balance of Employee Rights
to Privacy vs. Employers Wanting to Know

Section 13.1d: Privacy Rights

The right of privacy is the freedom from unwarranted government or business intrusion into one’s personal affairs. It involves the individual’s right to be given personal autonomy and to be left alone. Not surprisingly, employees strongly defend their right to workplace privacy. Meanwhile, employers defend their right to monitor employees’ activities when they directly affect a business, its productivity, workplace safety, and/or morale.

Privacy Rights

Substance Abuse and Drug Testing

Private employers generally have a right to require employees to submit to the tests.

Impairment Testing

Impairment testing – Also called fitness-for-duty or performance-based testing, it measures whether an employee is alert enough to work

*
Substance Abuse and Drug Testing

In the private sector, drug testing is largely regulated by individual states.

Federal regulations and laws restrict drug testing as well.

Barring state and federal laws that restrict or prohibit drug testing, however, private employers generally have a right to require employees to submit to the tests.

The exception is unionized workforces; drug testing for unionized employees must be negotiated by their unions.

Impairment Testing
Impairment testing – Also called fitness-for-duty or performance-based testing, it measures whether an employee is alert enough to work

Digital Surveillance (slide 1 of 4)
Camera Surveillance
In general, employers can train video cameras on their employees without significant legal concerns as long as they have a legitimate business reason for doing so and inform employees they are doing as much.

Phone Conversations and Text Communications

In general, employers have the right to monitor calls, texts, and direct messages sent from their telecommunications devices, provided they do so for compelling business reasons and employees have been informed that their communications will be monitored.
*

*
Phone Conversations and Text Communications

The Electronic Communications Privacy Act (ECPA) restricts employers from intercepting wire, oral, or electronic communications, unless employees are told not to make personal calls or send text messages from their business phones.

Digital Surveillance (slide 2 of 4)

Email, Internet, and Computer Use

Employers can monitor what their employees do online and fire or discipline them based on that information.
Companies can legally create electronic communication policies that limit employees’ Internet use.

Access to Personnel Files

A firm’s HR department is usually responsible for maintaining personnel files and safeguarding their flow to prevent, among other things, identity theft.
*

*
Email, Internet, and Computer Use

Until recently employers were allowed to monitor any and all email communications their employees sent from work computers, but court rulings have limited employers’ rights somewhat.

More and more companies are banning social media at work.

Access to Personnel Files

Legislation at the federal level and various state laws permit employees to inspect their own personnel files.

Video Highlight #1
This article and video look at how many companies are using new technology (such as apps) to track and monitor their employees.

“New Ways Your Boss Could Be Keeping Tabs on You”
*

Section 13.1e: Digital Surveillance

VIDEO: New Ways Your Boss Could Be Keeping Tabs on You (3:44)

This article and video looks at how many companies are using new technology (such as apps) to track and monitor their employees.

https://www.cbsnews.com/news/companies-use-technology-monitor-employees-at-outside-office/

TOPICS/CONCEPTS: employee privacy rights, employer surveillance, employee monitoring

Digital Surveillance (slide 3 of 4)

Searches

A firm that reserves the right to search employees under warranted circumstances should have a written plan as to the privacy employees can expect.

*
Searches
A firm that reserves the right to search employees under warranted circumstances should have a written plan as to the privacy employees can expect.

The search policy should be clearly outlined in a firm’s employee handbook.

When possible, searches should be conducted in private.

The employer should attempt to obtain the employee’s consent prior to the search.

The search should be conducted in a humane and discreet manner to avoid infliction of emotional distress.

The penalty for refusing to consent to a search should be specified.

Digital Surveillance (slide 4 of 4)

Off-Duty Employee Conduct

A number of states have passed laws that prohibit employees from disciplining or firing employees for activities they pursue offsite on their own time as long as they are legal.

Even when the activities are illegal, court rulings have suggested that the off-duty conduct may not, in some circumstances, be a lawful jurisdiction for employee discipline.

Off-Duty Employee Speech

Some organizations have policies that restrict employees from making disparaging remarks online about their firms or its supervisors.

*
Off-Duty Employee Conduct
A number of states have passed laws that prohibit employees from disciplining or firing employees for activities they pursue offsite on their own time as long as they are legal.

Even when the activities are illegal, court rulings have suggested that the conduct may not, in some circumstances, be a lawful jurisdiction for employee discipline.

Organizations that want to discipline employees for off-duty misconduct must establish a clear relationship between the misconduct and its negative effect on other employees or the organization.

Off-Duty Employee Speech
Some organizations have policies that restrict employees from making disparaging remarks online about their firms or its supervisors.

Video Highlight #2

After some public criticism, Starbucks says it’s considering changing its strict employee dress code, including its ban on visible tattoos. This video looks at how visible tattoos are becoming more accepted in today’s workplace.

“Starbucks Rethinking Visible Tattoo Ban for Employees”
*

*
Section 13.1e: Digital Surveillance

VIDEO: Starbucks Rethinking Visible Tattoo Ban for Employees (1:56)

TOPICS/CONCEPTS: body art, tattoos, discrimination, tattoos in the workplace, employee tattoos

The True Definition of Discipline

Section 13.2: Disciplinary Policies and Procedures

When managers are asked to define the word discipline, their most frequent response is that discipline means punishment.

However, in the context of management, discipline does not mean punishment. Rather, discipline is a tool used to correct the practices of employees to help them perform better so they conform to acceptable standards. Many organizations define discipline in their policy manuals as training that “corrects, molds, or perfects knowledge, attitudes, behavior, or conduct.”

Common Disciplinary Problems

Section 13.2: Disciplinary Policies and Procedures

Figure 13.10 lists the more common disciplinary problems identified by managers.

A Disciplinary Model

Section 13.2a: The Result of Inaction

Figure 13.11 presents a disciplinary model that illustrates the areas where provisions should be established. The model also shows the logical sequence in which disciplinary steps must be carried out to ensure enforceable decisions.

The Result of Inaction
Should discipline become necessary, the employee’s immediate supervisor is the logical person to apply the company’s disciplinary procedures and monitor the employee’s improvement, although the HR departments should develop and ensure disciplinary policy and action conform to current laws.
*

Setting an organization’s rules is the foundation for an effective disciplinary system.

These rules govern the type of behavior expected of employees.

The following suggestions can help HR managers and their firms when they are considering the rules the organization should adopt and how they should be implemented:

The rules must be reasonable and relate to the safe and efficient operation of the organization.

The rules as well as the consequences for breaking them should be written down and widely disseminated to all employees.

The rules should be clearly explained.

Employees should sign a document stating that they have read and understood the organizational rules.

The rules should be reviewed periodically.

Setting Organizational Rules
Setting an organization’s rules is the foundation for an effective disciplinary system.
These rules govern the type of behavior expected of employees.
*

*
The following suggestions can help HR managers and their firms when they are considering the rules the organization should adopt and how they should be implemented:
The rules must be reasonable and relate to the safe and efficient operation of the organization.
The rules as well as the consequences for breaking them should be written down and widely disseminated to all employees.
The rules should be clearly explained.
Employees should sign a document stating that they have read and understood the organizational rules.
The rules should be reviewed periodically.

Documenting Misconduct
Failure to record the misconduct of employees, can undermine a firm’s efforts to deal with the behavior
*

When a manager fails to record the misconduct of employees, it can undermine a firm’s

efforts to deal with the behavior. A manager’s records of employee misconduct are considered

business documents, and as such they are admissible evidence in arbitration

hearings, administrative proceedings, and courts of law.

To be complete, the documentation should include the following eight items:

The date, time, and location of the incident(s)
The behavior exhibited by the employee (the problem)
The consequences of that action or behavior on the employee’s overall work performance and/or the operation of the employee’s work unit
Prior discussion(s) with the employee about the problem
The disciplinary action to be taken and the improvements expected should be documented
The consequences of failing to make the improvements by a certain follow-up date
The employee’s reaction to the supervisor’s attempt to change his or her behavior
The names of witnesses to the incident (if applicable)

Investigating a
Disciplinary Problem
The Investigative Interview
Before any disciplinary action is initiated, an investigative interview should be conducted to make sure the employee is fully aware of the organization’s rules and that he or she has not followed them.
The employee must be given a full opportunity to explain his or her side of the issue.
*

The interview should concentrate on how the offense violated the performance and behavior standards expected.

Questions to Consider during Disciplinary Investigations

Section 13.2c: Investigating a Disciplinary Problem

Figure 13.12 lists seven questions to consider when investigating an employee offense. Attending to each question will help ensure a full and fair investigation while providing reliable information free from personal prejudice.

Approaches to
Disciplinary Action
Two approaches to disciplinary action:
1. Progressive discipline – The application of corrective measures by increasing degrees
Four steps:
Oral warning (or counseling)
Written warning
Suspension without pay
Discharge
2. Positive, or nonpunitive, discipline – A system of discipline that focuses on early correction of employee misconduct, with the employee taking total responsibility for correcting the problem
*

Discharging Employees
Because discharging a worker poses serious consequences for the employee—and possibly for the organization—it should be undertaken only after a deliberate and thoughtful review of the situation.
If an employee is fired, he or she may file a wrongful discharge suit claiming the termination was “without just or sufficient cause,” implying a lack of fair treatment by management.
*

“Just Cause” Discharge Guidelines

Section 13.2e: Discharging Employees

How does an employer know if it has just cause to terminate an employee? This question is not easily answered, but standards governing discharges do exist in the form of rules developed in the field of labor arbitration. These rules consist of a set of guidelines that are applied by arbitrators to determine if a firm had just cause for a termination. These guidelines are normally set forth in the form of questions, provided in Figure 13.13. A “no” answer to any of the seven questions in the figure generally means that just cause was not established and that the decision to terminate was arbitrary, capricious, or discriminatory.

Alternative Dispute
Resolution Procedures (slide 1 of 3)
Alternative dispute resolution (ADR) – A term applied to different employee complaint or dispute resolution methods that do not involve going to court

Step-Review Systems

Step-review system – A system for reviewing employee complaints and disputes by successively higher levels of management

*
Step-review system – A system for reviewing employee complaints and disputes by successively higher levels of management

In most step-review systems, the president, chief executive officer, vice president, or HR director acts as the final authority, and this person’s decision is not appealable.

Alternative Dispute
Resolution Procedures (slide 2 of 3)

Peer-Review Systems

Peer-review system – A system for reviewing employee complaints that utilizes a group composed of equal numbers of employee representatives and management appointees

Open-Door Policy

Open-door policy – A policy of settling grievances that identifies various levels of management above the immediate supervisor for employee contact

Ombudsman System

Ombudsman – A designated individual from whom employees may seek counsel for resolution of their complaints

*
Peer-Review Systems
Peer-review system – A system for reviewing employee complaints that utilizes a group composed of equal numbers of employee representatives and management appointees

A peer-review system functions as a jury because its members weigh evidence, consider arguments, and, after deliberation, vote independently to render a final decision.

Open-Door Policy
Open-door policy – A policy of settling grievances that identifies various levels of management above the immediate supervisor for employee contact
Ombudsman System
Ombudsman – A designated individual from whom employees may seek counsel for resolution of their complaints

Alternative Dispute
Resolution Procedures (slide 3 of 3)

Mediation

Mediation – The use of an impartial neutral to reach a compromise decision in employment disputes

Unlike an arbitrator, a mediator has no power or authority to force either side toward an agreement.

Arbitration

With arbitration, the employee and employer present their cases, or arguments, to an arbiter, who is typically a retired judge, who then makes a decision that the parties have agreed to be bound by.

*
Mediation
Mediation – The use of an impartial neutral to reach a compromise decision in employment disputes

Mediator – A third party in an employment dispute who meets with one party and then the other to suggest compromise solutions or to recommend concessions from each side that will lead to an agreement

Unlike an arbitrator, a mediator has no power or authority to force either side toward an agreement.
Arbitration
With arbitration, the employee and employer present their cases, or arguments, to an arbiter, who is typically a retired judge, who then makes a decision that the parties have agreed to be bound by.

Managerial Ethics
in Employee Relations
Ethics – A set of standards of conduct and moral judgments that help to determine right and wrong behavior
Many organizations have codes of ethics that govern how they deal with their employees and the public.
*

HR departments have been given a greater role in promoting ethics.

Many organizations have ethics committees and ethics ombudsmen to provide training in ethics to employees.

Goals of ethics training:

To avoid unethical behavior and adverse publicity

To gain a strategic advantage

To treat employees in a fair and equitable manner

*
*
*
*
Psychological contract – Expectations of a fair exchange of employment obligations between an employee and employer
Example: In exchange for their talents and technical skills, workers expect employers to provide fair compensation, job training, and promotions.
Employment-at-Will
Employment-at-will relationship – The right of an employer to fire an employee without giving a reason and the right of an employee to quit when he or she chooses
The employment-at-will doctrine does not give managers and supervisors the unrestricted right of termination.
Federal and state laws and court decisions restrict termination decisions.
In unionized organizations, collective bargaining agreements limit automatic discharges.
*
Violation of public policy
Occurs when an employee is terminated for refusing to commit a crime; for reporting criminal activity to government authorities; for disclosing illegal, unethical, or unsafe practices of the employer; or for exercising employment rights
Implied contract
Occurs when employees are discharged despite the employer’s promise of job security or contrary to established termination procedures
Implied Contract
If an implied promise by an employer of a condition, such as job security, has been made, courts have generally prohibited the employer from terminating the employee without first exhausting the conditions of the contract.
Implied covenant
Occurs when an employer has acted with a lack of good faith and fair dealing
*
*
Discharge as a Result of Retaliation
Title VII of the Civil Rights Act, the Age Discrimination in Employment Act, the Americans with Disabilities Act, and other employment laws prohibit employers from retaliating against employees when they exercise their rights under these statutes.
Section 13.1c: Job Protection Rights
Figure 13.3 lists some suggestions that firms can follow in order to avoid wrongful employment termination lawsuits.
*
*
Explicit contracts normally state the period of employment, terms and conditions of employment, and severance provisions.
Before hiring employees, employers sometimes impose certain restrictions, or provisions, in explicit contracts, such as nondisclosure of information agreements, which forbid employees from revealing proprietary information outside the company during or following their employment, and noncompete agreements, which prevent ex-employees from either becoming a competitor or working for a competitor for a designated period of time.
Explicit contracts are enforceable in court when either the employee or employer violates any provisions of the agreement.
Section 13.1d: Privacy Rights
The right of privacy is the freedom from unwarranted government or business intrusion into one’s personal affairs. It involves the individual’s right to be given personal autonomy and to be left alone. Not surprisingly, employees strongly defend their right to workplace privacy. Meanwhile, employers defend their right to monitor employees’ activities when they directly affect a business, its productivity, workplace safety, and/or morale.
*
*
Substance Abuse and Drug Testing
In the private sector, drug testing is largely regulated by individual states.
Federal regulations and laws restrict drug testing as well.
Barring state and federal laws that restrict or prohibit drug testing, however, private employers generally have a right to require employees to submit to the tests.
The exception is unionized workforces; drug testing for unionized employees must be negotiated by their unions.
Impairment Testing
Impairment testing – Also called fitness-for-duty or performance-based testing, it measures whether an employee is alert enough to work
*
Phone Conversations and Text Communications
The Electronic Communications Privacy Act (ECPA) restricts employers from intercepting wire, oral, or electronic communications, unless employees are told not to make personal calls or send text messages from their business phones.
*
Email, Internet, and Computer Use
Until recently employers were allowed to monitor any and all email communications their employees sent from work computers, but court rulings have limited employers’ rights somewhat.
More and more companies are banning social media at work.
Access to Personnel Files
Legislation at the federal level and various state laws permit employees to inspect their own personnel files.
*
Section 13.1e: Digital Surveillance
VIDEO: New Ways Your Boss Could Be Keeping Tabs on You (3:44)
This article and video looks at how many companies are using new technology (such as apps) to track and monitor their employees.
https://www.cbsnews.com/news/companies-use-technology-monitor-employees-at-outside-office/
TOPICS/CONCEPTS: employee privacy rights, employer surveillance, employee monitoring
*
Searches
A firm that reserves the right to search employees under warranted circumstances should have a written plan as to the privacy employees can expect.
The search policy should be clearly outlined in a firm’s employee handbook.
When possible, searches should be conducted in private.
The employer should attempt to obtain the employee’s consent prior to the search.
The search should be conducted in a humane and discreet manner to avoid infliction of emotional distress.
The penalty for refusing to consent to a search should be specified.
*
Off-Duty Employee Conduct
A number of states have passed laws that prohibit employees from disciplining or firing employees for activities they pursue offsite on their own time as long as they are legal.
Even when the activities are illegal, court rulings have suggested that the conduct may not, in some circumstances, be a lawful jurisdiction for employee discipline.
Organizations that want to discipline employees for off-duty misconduct must establish a clear relationship between the misconduct and its negative effect on other employees or the organization.
Off-Duty Employee Speech
Some organizations have policies that restrict employees from making disparaging remarks online about their firms or its supervisors.
*
Section 13.1e: Digital Surveillance
VIDEO: Starbucks Rethinking Visible Tattoo Ban for Employees (1:56)
After some public criticism, Starbucks says it’s considering changing its strict employee dress code, including its ban on visible tattoos. This video looks at how visible tattoos are becoming more accepted in today’s workplace.

TOPICS/CONCEPTS: body art, tattoos, discrimination, tattoos in the workplace, employee tattoos
Section 13.2: Disciplinary Policies and Procedures
When managers are asked to define the word discipline, their most frequent response is that discipline means punishment.
However, in the context of management, discipline does not mean punishment. Rather, discipline is a tool used to correct the practices of employees to help them perform better so they conform to acceptable standards. Many organizations define discipline in their policy manuals as training that “corrects, molds, or perfects knowledge, attitudes, behavior, or conduct.”
*
Section 13.2: Disciplinary Policies and Procedures
Figure 13.10 lists the more common disciplinary problems identified by managers.
*
Section 13.2a: The Result of Inaction
Figure 13.11 presents a disciplinary model that illustrates the areas where provisions should be established. The model also shows the logical sequence in which disciplinary steps must be carried out to ensure enforceable decisions.
*
*
Setting an organization’s rules is the foundation for an effective disciplinary system.
These rules govern the type of behavior expected of employees.
The following suggestions can help HR managers and their firms when they are considering the rules the organization should adopt and how they should be implemented:
The rules must be reasonable and relate to the safe and efficient operation of the organization.
The rules as well as the consequences for breaking them should be written down and widely disseminated to all employees.
The rules should be clearly explained.
Employees should sign a document stating that they have read and understood the organizational rules.
The rules should be reviewed periodically.
*
The following suggestions can help HR managers and their firms when they are considering the rules the organization should adopt and how they should be implemented:
The rules must be reasonable and relate to the safe and efficient operation of the organization.
The rules as well as the consequences for breaking them should be written down and widely disseminated to all employees.
The rules should be clearly explained.
Employees should sign a document stating that they have read and understood the organizational rules.
The rules should be reviewed periodically.
When a manager fails to record the misconduct of employees, it can undermine a firm’s
efforts to deal with the behavior. A manager’s records of employee misconduct are considered
business documents, and as such they are admissible evidence in arbitration
hearings, administrative proceedings, and courts of law.
To be complete, the documentation should include the following eight items:
The date, time, and location of the incident(s)
The behavior exhibited by the employee (the problem)
The consequences of that action or behavior on the employee’s overall work performance and/or the operation of the employee’s work unit
Prior discussion(s) with the employee about the problem
The disciplinary action to be taken and the improvements expected should be documented
The consequences of failing to make the improvements by a certain follow-up date
The employee’s reaction to the supervisor’s attempt to change his or her behavior
The names of witnesses to the incident (if applicable)
*
*
The interview should concentrate on how the offense violated the performance and behavior standards expected.
Section 13.2c: Investigating a Disciplinary Problem
Figure 13.12 lists seven questions to consider when investigating an employee offense. Attending to each question will help ensure a full and fair investigation while providing reliable information free from personal prejudice.
*
*
*
Section 13.2e: Discharging Employees
How does an employer know if it has just cause to terminate an employee? This question is not easily answered, but standards governing discharges do exist in the form of rules developed in the field of labor arbitration. These rules consist of a set of guidelines that are applied by arbitrators to determine if a firm had just cause for a termination. These guidelines are normally set forth in the form of questions, provided in Figure 13.13. A “no” answer to any of the seven questions in the figure generally means that just cause was not established and that the decision to terminate was arbitrary, capricious, or discriminatory.
*
*
Step-review system – A system for reviewing employee complaints and disputes by successively higher levels of management
In most step-review systems, the president, chief executive officer, vice president, or HR director acts as the final authority, and this person’s decision is not appealable.
*
Peer-Review Systems
Peer-review system – A system for reviewing employee complaints that utilizes a group composed of equal numbers of employee representatives and management appointees
A peer-review system functions as a jury because its members weigh evidence, consider arguments, and, after deliberation, vote independently to render a final decision.
Open-Door Policy
Open-door policy – A policy of settling grievances that identifies various levels of management above the immediate supervisor for employee contact
Ombudsman System
Ombudsman – A designated individual from whom employees may seek counsel for resolution of their complaints
*
Mediation
Mediation – The use of an impartial neutral to reach a compromise decision in employment disputes
Mediator – A third party in an employment dispute who meets with one party and then the other to suggest compromise solutions or to recommend concessions from each side that will lead to an agreement
Unlike an arbitrator, a mediator has no power or authority to force either side toward an agreement.
Arbitration
With arbitration, the employee and employer present their cases, or arguments, to an arbiter, who is typically a retired judge, who then makes a decision that the parties have agreed to be bound by.
*
HR departments have been given a greater role in promoting ethics.
Many organizations have ethics committees and ethics ombudsmen to provide training in ethics to employees.
Goals of ethics training:
To avoid unethical behavior and adverse publicity
To gain a strategic advantage
To treat employees in a fair and equitable manner

Chapter

2
Promoting Safety and Health

Learning Objectives
Summarize the general provisions of the Occupational Safety and Health Act (OSHA).
Describe the measures managers and employees can take to create a safe work environment.
Identify ways to control and eliminate various on-the-job health hazards.
Describe the programs organizations utilize to build better health among their workforces.
2

Occupational Safety and
Health Act
Enacted to ensure that the health and safety of workers is protected
To govern safety and health in the workplace, Congress passed the Occupational Safety and Health Act (OSHA) in 1970.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
National Institute for Occupational Safety and Health (NIOSH) develops safety standards
Occupational Safety and Health Review Commission (OSHRC) reviews OSHA actions
3

From http://safetycontrolstech.com/nonfatal-injury-illness-rate-falls-again/
4

Source: Based partly on
http://www.fit2wrk.com/_
forms/ARTICLE_Fit2wrk_
ClinicalEd_vol1-16 .
Costs of Accidents
5

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Figure 14-7: Examples of Direct, Indirect, and Immeasurable Costs of Accidents
5

OSHA Mission

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Section 12.1: Safety and Health: It’s the Law
As shown in Figure 12.3, the mission of OSHA is to “assure the safety and health of America’s workers by setting and enforcing standards; providing training, outreach, and education; establishing partnerships; and encouraging continual improvement in workplace safety and health.”
6

OSHA’s Coverage
OSHA covers all private sector employees and public employees in state and local governments.
Self-employed workers are not covered by the law.
Federal agencies are required to establish and maintain a safety and health program that is monitored by OSHA.
7

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7

OSHA Standards
One of the responsibilities of OSHA is to develop and enforce mandatory job safety and health standards.
To comply with OSHA, employers need to become familiar with those standards that are applicable to their establishments and to ensure that their employees use personal protective gear and equipment when required for safety.
Employers can be cited and fined if they do not comply with OSHA standards.
8

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These standards cover the workplace, machinery and equipment, materials, power sources, processing, protective clothing, first aid, and administrative requirements.
8

OSHA Enforcement Actions
and Results
OSHA is authorized to conduct workplace inspections, issue citations, and impose penalties on employers.
Workplace Inspections: Upon presenting appropriate credentials to the owner, operator, or agent in charge, an OSHA compliance officer is authorized to:
Inspect and investigate during regular working hours, and at other reasonable times, and within reasonable limits and in a reasonable manner, any such place of employment and all pertinent conditions, structures, machines, apparatus, devices, equipment and materials therein, and to question privately any such employer, owner, operator, agent, or employee
9

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
an OSHA compliance officer is authorized to:
Enter without delay and at reasonable times any factory, plant, establishment, construction site or other areas, workplace, or environment where work is performed by an employee of an employer
Citations tell the employer and employees which regulations and standards are alleged to have been violated and the amount of time allowed for their correction.
The employer must post a copy of each citation at or near the place the violation occurred for three days or until the violation is abated, whichever is longer.
OSHA citations may be issued immediately following the inspection or later by mail.

OSHA Citations and Penalties
10
Violation that has a direct relationship to job safety and health, but one unlikely to cause death or serious physical harm
Other than serious
Violation for which there is substantial probability that death or serious physical harm could result
Serious
Violation that the employer intentionally and knowingly commits
Willful

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10
Under the act, OSHA may cite the following violations and propose the following penalties:
Other-Than-Serious – A violation that has a direct relationship to job safety and health but one unlikely to cause death or serious physical harm
Serious – A violation for which there is substantial probability that death or serious physical harm could result and the employer knew, or should have known, of the hazard
Willful – A violation that the employer intentionally and knowingly commits or a violation that the employer commits with plain indifference to the law

Most Frequently
Violated OSHA Standards

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Section 12.1c: Enforcing OSHA Standards
Figure 12.5 shows the most frequently violated OSHA standards resulting from federal and state inspections.
11

Video Highlight
Follow an Oregon OSHA Health Compliance Officer as he conducts a routine inspection at a healthcare facility in this video.

“What to Expect During an Oregon OSHA Inspection”
12

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
12
Section 12.1c: Enforcing OSHA Standards
VIDEO: What to Expect During an Oregon OSHA Inspection(5:26)
Follow an Oregon OSHA Health Compliance Officer as he conducts a routine inspection at a healthcare facility in this video.

TOPICS/CONCEPTS: Occupational Safety and Health Act, OSHA, OSHA inspection, workplace inspection

OSHA Consultation Assistance
Onsite Consultation
OSHA provides free consultation services in which consultants from the state government or private contractors help employers identify hazardous conditions and determine corrective measures.
13

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13
Cooperative Programs
Voluntary, cooperative relationships among employers, employees, unions, and OSHA can be a useful alternative to traditional OSHA enforcement procedures.

Employers’ Responsibilities and Rights under OSHA
Employers are required to:
Provide a hazard-free workplace and comply applicable OSHA standards
Inform all their employees about the safety and health requirements of OSHA
Keep certain records and to compile and post an annual summary of work-related injuries and illnesses
Provide employees with protective equipment when necessary and ensure it is used
Provide their workers with safety training and be prepared to discipline employees for failing to comply with safety rules
Not discriminate against employees who exercise their rights under the act by filing complaints with OSHA
14

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14

Employees’ Responsibilities and Rights under OSHA
Employees are required to:
Comply with all applicable OSHA standards
Report hazardous conditions
Follow all employer safety and health rules and regulations, including those prescribing the use of protective equipment
Workers have a right to demand safe and healthy conditions on the job without fear of punishment.
They also have many rights that pertain to requesting and receiving information about safety and health conditions.
Right-to-know laws – Laws that require employers to advise employees about the hazardous chemicals they handle
15

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15

HR’s Role in Promoting a
Safe Work Environment
Coordinates the safety communication and training programs
Maintains safety records required by OSHA
Works closely with managers and supervisors in a cooperative effort to make the program a success
16

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16

Safety Management
Steps to reduce accidents:
Create a Culture of Safety
Organizational commitment to safety
Develop safety policies
Offer safety training
Compose safety committee
Enforce safety rules
Investigate and record accidents
17

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Organizational Commitment to Safety
Top management support is critical
Safety Policies, Discipline, and Recordkeeping
Frequent reinforcing of safe behavior is important
Safety Training and Communication
Training and communicating procedures reduces accidents
Effective Safety Committee
Key best practices:
Senior leaders must endorse and managers must actively assist
Safety advocates should be on committees
Management and employees should be represented
Inspection, Investigation, and Evaluation
Regular inspections should be performed
Research on prevention should be arranged
17

Step 1: Creating a Culture of Safety
Interviewing for safety and fitness-for-duty tests
Fitness-for-duty evaluations: Determine an employee’s physical, mental, and emotional fitness
The key role of the supervisor
Communicate to an employee the need to work safely
Proactive safety training programs
Safety and health training is legally required
18

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18

How Manager Commitment
to Safety Reduces Worker Accidents

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Section 12.2a: Creating a Culture of Safety
A study by the American Institute of Plant Engineers showed that there was a direct correlation between an increase in the commitment to safety by managers and a decrease in accidents.
19

Step 2: Enforcing Safety Rules
Ways to involve and engage employees in company safety programs
Jointly set safety standards with managers
Participate in safety training
Help design and implement special safety training programs
Establish safety incentives and rewards
Be involved in accident investigations
20

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20
Firms communicate specific safety rules and regulations in a variety of ways, including through supervisors, bulletin board notices, employee handbooks, and signs attached to equipment.
In addition to safety labels and signs, many companies prominently display in their workplaces the number of consecutive days they have operated without an injury.

Step 3: Investigating and
Recording Accidents (slide 1 of 2)
The supervisor and a member of the safety committee should investigate every accident, even those considered minor.
OSHA requirements mandate that employers with 11 or more employees maintain records of work-related occupational injuries and illnesses.
21

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21
Such an investigation may determine the factors contributing to the accident and reveal what corrections are needed to prevent it from happening again.

Step 3: Investigating and
Recording Accidents (slide 2 of 2)
OSHA also requires a Log of Work-Related Injuries and Illnesses (OSHA Form 300) to be maintained by the organization.
All recordable cases are to be entered in the log.
Recordable case – Any occupational death, illness, or injury to be recorded in the log (OSHA Form 300)
Recordable cases include the following:
Death
Days away from work
Restricted work or transfer to another job
Medical treatment beyond first aid
22

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22

Guide to Recording Cases
under the Occupational Safety and Health Act
23

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Categories of Injuries
Death
Injuries Causing Days Away from Work
Injuries or Illness Causing Job Transfer or Restricted Duty
Other Recordable Cases
23

Safety Hazards and Issues
(slide 1 of 2)
Fatigue
The regulations in certain industries limit the number of hours employees can work per shift.
Distracted Driving
Motor vehicle crashes are the leading cause of worker fatalities each year.
Workplace Violence
The National Institute for Occupational Safety and Health (NIOSH) defines workplace violence as “any physical assault, threatening behavior, or verbal abuse occurring in the work setting.”
24

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24

Safety Hazards and Issues
(slide 2 of 2)
OSHA requires companies to have emergency action plans to deal with incidents
Emergency action plans
Procedures for reporting an emergency, evacuating a facility, and accounting for employees after an evacuation
Crisis management teams
conduct initial risk assessment surveys
Develop emergency action plans and test them
Perform crisis intervention during emergency events
Mandate
Gather facts about threat and decide if organization should intervene
25

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25
Workplace Emergencies
A workplace emergency is an unforeseen situation that:
Threatens employees, customers, or the public
Disrupts or shuts down operations
Causes physical or environmental damage
In addition to workplace violence, they can include:
Acts of nature (floods, hurricanes, and tornadoes)
Fires and explosions
Toxic gas releases, chemical spills, and radiological accidents
Civil disturbances and terrorism
OSHA requires companies to have emergency action plans to deal with incidents such as these.
Emergency action plan – A plan an organization develops that contains step-by-step procedures for dealing with various emergency situations

Video Highlight
This video provides a look at workplace violence. Risk factors, occupations that are more prone to workplace violence, employer responsibilities, and ways to reduce workplace violence are discussed.

“Workplace Violence”
26

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
26
Section 12.2d: Safety Hazards and Issues
VIDEO: Workplace Violence (5:07)
This video provides a look at workplace violence. Risk factors, occupations that are more prone to workplace violence, employer responsibilities, and ways to reduce workplace violence are discussed.

TOPICS/CONCEPTS: workplace violence, safety hazards and issues

Health Hazards and Issues
Cumulative Trauma Disorders
Injuries involving tendons of the fingers, hands, and arms that become inflamed from repeated stresses and strains
Computer Workstation Issues
Chemical Hazards
All hazardous chemical containers must be labeled with the identify of the contents and must state any appropriate hazard warnings.
Material Safety Data Sheets (MSDSs) – Documents that contain vital information about hazardous substances
27

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27
Computer Workstation Issues
Visual difficulties
Muscular aches and pains
Job stress
Smoking and tobacco smoke
Bloodborne pathogens

Other Employee Health Concerns
Employee Health
Emotional/
Mental Health
Stress
Smoking
at Work
Employee Health
Emotional/
Mental Health
Stress
Smoking
at Work
28

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Building Better Physical and
Emotional Health among Employees (slide 1 of 2)
Job Stress and Burnout
Stress – Any adjustive demand caused by physical, mental, or emotional factors that requires coping behavior
Eustress – Positive stress that accompanies achievement and exhilaration
Distress – Harmful stress characterized by a loss of feelings of security and adequacy
Burnout – A severe stage of distress, manifesting itself in depression, frustration, and loss of productivity
29

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29
Job stressors include disagreements with managers or fellow employees, layoffs and organizational restructuring, and poor working conditions, among other things.

Stress Management Programs or Interventions
Educational Interventions are designed to inform the employee about:
The sources of stress
What stress feels like
How the individual can better cope with stress
Skill-acquisition interventions are designed to
Provide employees with ways to cope with stressors
Help keep the effects of stress in check
30

Issues Guiding SMIs
Look for specific issues with employees—instead of talking generally about “stress,” determine what specifically is going on with employees
Assessment—What evidence is there of a problem, and how widespread is it?
Specific and focused solutions
What will work in a particular organization?
Where should the intervention be targeted?
Strategic intervention
How does this intervention relate to other HR and organizational practices?
Do other things in the organization need to change first?
Evaluation and feedback
What will be evaluated?
How will this guide future actions?
30

Building Better Physical and
Emotional Health among Employees (slide 2 of 2)
Depression
Depression – A negative emotional state marked by feelings of low spirits, gloominess, sadness, and loss of pleasure in ordinary activities
Alcohol Abuse
It has been estimated that business and industry lose more than $20 billion each year because of alcoholism.
Drug Abuse
The abuse of drugs, both illegal and legal, can pose problems for both employers and employees.
31

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31
Depression
Depression – A negative emotional state marked by feelings of low spirits, gloominess, sadness, and loss of pleasure in ordinary activities
Alcohol Abuse
It has been estimated that business and industry lose more than $20 billion each year because of alcoholism.
Alcoholism is classified as a disability under the Americans with Disabilities Act (ADA).
Drug Abuse
The abuse of drugs, both illegal and legal, can pose problems for both employers and employees.
The ADA considers an individual with a serious, life-affecting drug problem to be disabled, provided the person is enrolled in a drug treatment program.

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