legal environment

Copyright Atomic Dog Publishing, 2007
Chapter 2
Understanding the Legal and
Environmental Context of HRM

Chapter Outline
• 2-1 Legal Issues in the Workplace
• 2-2 Environmental Issues in the Workplace

2-1 Legal Issues in the Workplace
• HRM laws address a variety of issues.
 Some pertain to specific employment practices such
as:
- The administration of polygraph tests
- The need to offer medical or family-based leaves
 Others deal with broader issues such as:
- Employment discrimination
- Safety
- Privacy
- Employees’ rights to due process

2-1a Equal Employment Opportunity
• Passed by Congress beginning in the 1960s
• Designed to eradicate employment discrimination
based on race, color, sex, religion, national origin,
age, and disability
 These categories are referred to as protected
classifications.
• Protected groups are sub-categories of people within
each protected classification.

(cont.)
• Civil Rights Act of 1964 (Title VII)
 Prohibits discrimination that is based on race, color,
religion, national origin, and sex
 Covers organizations that employ 15 or more workers
for at least 20 weeks during the year
 Covers the greatest number of classifications
 Victim is entitled to relief in the form of legal costs and
back pay

(cont.)
• Civil Rights Act of 1991
 Amendment to Civil Rights Act of 1964
 Expands the list of remedies
 An employer may now be charged with punitive and
compensatory damages
 “Cap” for these damages ranges from $50,000 to
$300,000, depending on the size of the company
 Mixed-motive decisions in which an employment
decision is based partly on a “legitimate” motive and
partly on a discriminatory one are unlawful

(cont.)
• Pregnancy Discrimination Act of 1978
 Amends Civil Rights Act of 1964 by specifically
including discrimination against women based on
pregnancy, childbirth, or related medical conditions.
 Employees who are unable to perform their jobs
because of a pregnancy-related condition must be
treated in the same manner as employees who are
temporarily disabled for other reasons.

(cont.)
• Immigration Reform and Control Act of 1986
 Prohibits discrimination based on national origin and
citizenship
- The law states that employers of four or more
employees cannot discriminate in the selection of any
individual (other than an illegal alien) because of that
person’s national origin or citizenship status.
 Makes it unlawful to knowingly hire an unauthorized
alien

(cont.)
• Age Discrimination in Employment Act of 1967
 Intended to protect “older workers” from age
discrimination
- Workers ages 40 and above
 Applies to nearly all employers of 20 or more
employees, promotes the employment of older
persons based on their ability, rather than age
 Protects only “older” individuals from discrimination;
people under 40 are not protected
 Prohibits employers from giving preference to
individuals within the 40 or older group

(cont.)
• Americans with Disabilities Act of 1990 (Title I)
 “Provides a clear and comprehensive national
mandate for the elimination of discrimination against
individuals with disabilities.”
- Applies to nearly all organizations with 15 or more
employees
 Individual is considered disabled if a physical or
mental impairment “substantially limits” one or more
major life activities
 To win a complaint, an individual must establish that,
with accommodation, he or she is qualified to perform
the essential functions of the job in question.
 Employer must provide reasonable accommodation
unless it would impose an “undue hardship.”
- Would require significant difficulty to effect or significant
expense on the part of the employer

(cont.)
• Courts recognize two different types of
discrimination:
 Intentional
- Disparate treatment: Treating people unfairly based on
their membership in a protected group
 Unintentional
- Disparate impact: Any practice without business
justification that has unequal consequences for people
of different protected groups

(cont.)
• Discrimination and the courts
 Courts first require that the plaintiff establish a prima
facie case of discrimination.
- Prima facie is a Latin phrase meaning “first
appearance.”
 To establish a prima facie case, the plaintiff must
present evidence that makes the employer’s actions
appear discriminatory.
 When a plaintiff establishes a prima facie case, The
burden then shifts to the employer to rebut the case by
presenting evidence that justifies the fairness of its
actions.

(cont.)
• Establishing a Prima Facie Case of Intentional
Discrimination
 Restricted company policy
- Plaintiff proves that the company has a formal policy that
restricts the selection of a protected group.
 Discriminatory remarks
- Plaintiff must produce evidence that certain biased
remarks were made by the employer regarding the
protected group.

(cont.)
 McDonnell-Douglas Test
- Requires the plaintiff to show that he or she:
1. Belongs to the protected group in question
2. Has applied for and is qualified for the job for which
the employer was seeking applicants
3. Was rejected
4. After rejection, the position remained open or was
filled by someone who was not a member of that
protected group.

(cont.)
• Establishing a Prima Facie Case of Unintentional
Discrimination
 The four-fifths rule
- Helps the courts determine whether between-group
differences in hiring rates are large enough to be
important
- Calculated by comparing the hiring rate of the
“disadvantaged” protected group with the rate of the
“advantaged” group
- A prima facie case of discrimination is established when
the hiring rate of the former group is less than four-fifths
of the latter group.

(cont.)
• Rebutting a Prima Facie Case of Intentional
Discrimination
 Restricted company policy
- When the employer has a policy that excludes an entire
protected group, its only viable option is the use of a
BFOQ defense.
- The term BFOQ refers to “bona fide occupational
qualification.”
- The employer argues that it purposely discriminated
against all members of a group for one of the following
four reasons:
1. All or nearly all
2. Authenticity
3. Propriety
4. Safety

(cont.)
 Discriminatory remarks
- Considered strong evidence of bias
- If a plaintiff can prove that such remarks have been
made, the employer will lose the case unless it can
successfully argue that the remarks were not very
derogatory.
- Employer can also try to argue that the person who
made the remarks had no influence on the hiring
decision.

(cont.)
 The McDonnell-Douglas Test
- Employer’s burden is to present evidence showing that
its employment decision was based on legitimate,
nondiscriminatory reasons.
- The plaintiff could still win the case if they can prove that
the reason offered by the employer was merely a pretext
or an excuse; the “real” reason for the action was
discrimination.

(cont.)
• Rebutting a Prima Facie Case of Unintentional
Discrimination
 The four-fifths rule
- A firm must demonstrate that the procedure in question
is a business necessity.
- CRA of 1991: When several selection devices are used,
only those causing the disparate impact must be
justified.
- The lone exception to this rule occurs when the
“elements of a respondent’s decision-making process
are not capable of separation for analysis, the decision-
making process may be analyzed as one employment
practice.”

2-1b Affirmative Action
• What is it?
 “The aim of affirmative action is to remedy past and
current discrimination.”
• Is it legally mandated?
 Only in some cases
 Mandatory for all federal government contractors
(Executive Order 11246, issued by Lyndon Johnson)
 When court ordered as part of a settlement in a
discrimination case
• Most firms are under no obligation to implement AA
programs.

2-1b Affirmative Action (cont.)
• Firms voluntarily implementing affirmative action
believe that they can:
 Attract and retain a larger and better pool of applicants
 Create a more diverse workforce
 Avoid discrimination lawsuits
 Improve the firm’s reputation within the community and
its consumer base.

• How Is affirmative action implemented?
 Consists of two primary steps:
- Conduct a utilization analysis
- Develop an affirmative action plan

 Utilization analysis
- A statistical procedure that compares the percentage of
each protected group for each job category within the
organization to that in the available labor market
- If the organizational percentage is less than the labor
market percentage, the group is classified as being
“underutilized.”

 Affirmative action plans
- Targets the underutilized protected groups
- An AAP is a written statement that specifies how the
organization plans to increase the utilization of targeted
groups.
- The AAP consists of three elements:
1. Goals
2. Timetables
3. Action steps

• The affirmative action program must be designed to
remedy underutilization and must be temporary,
flexible, and reasonable.
• Preferential treatment—when is it legal?
 Serves a remedial purpose
 Necessary to meet goals and timetables targeted in
AAP
 Must consider more than protected group status
 Temporary in nature
 Numerical hiring goals must be “reasonable”
 Must not “unjustly burden” the rights of non-minorities
 Applicant must meet minimum qualifications for job

2-2 Environmental Issues in the
Workplace
• Cultural diversity
• The changing nature of work
• Mergers and takeovers
• Corporate downsizing

2-2a Cultural Diversity in the Workplace
• Diversity training
 Attempts to make employees aware of their biases
regarding minority groups and teaches them ways to
overcome those biases
• Breaking the “glass ceiling”
• Meeting the needs of older employees
• Implementing work and family programs
 Telecommuting
 Flextime
 Job sharing

2-2b The Changing Nature of Work
• How work has changed
 Technological changes
 Shift in the type of work being performed—from
manufacturing to service
• How the changing nature of work impacts HRM
practices
 Changes signal the need for training programs to
provide employees with the skills needed to move into
more technical and/or service-oriented jobs.
 More workers experience difficulty learning advanced
skills because of deficiencies in their basic skills.
 Such individuals must overcome these deficiencies
before they can master the more advanced skills.

2-2c Mergers and Takeovers
• Occurrence of a merger or takeover can create a
variety of problems for an organization.
 Individuals who had been loyal, longtime employees
learned that their jobs were no longer safe.
 Merger trend has resulted in:
- Increased voluntary turnover
- Rise in organizational conflict
 HRM practices that help restore employee loyalty and
organizational commitment are thus becoming
increasingly important.

2-2d Corporate Downsizing
• The process of reducing the workforce size, called
downsizing, usually takes the form of massive
layoffs.
• Why so many companies are downsizing
 Triggered by three factors:
1. Decline or crisis in the firm
2. Advent of technological advances
3. Organizational restructuring, in which the structure of a
firm is modified to become less hierarchical by cutting
out the “layer” of middle management

2-2d Corporate Downsizing (cont.)
• Problems associated with downsizing efforts
 Downsizing often creates as many problems as it
solves.
 Poor employee morale
- Employees begin to worry about job security after
seeing their colleagues leave the organization.
- Economic benefits expected by the organization often
fail to materialize.

• Deciding when and how to downsize
 Alternatives to layoffs should be considered.
- Delay any pay increases
- Shift some health costs to employees
- Freeze hiring
- Restrict overtime
- Retrain or redeploy employees
- Switch to part-time employees
- Switch to job sharing
- Switch to consultants
- Use unpaid vacations, sabbaticals, and days off
- Use a shorter workweek
- Use across-the-board pay reductions
- Implement early retirement programs

 When a massive layoff is the only viable option, the
firm must manage this workforce reduction very
carefully.
 One of management’s most difficult tasks is to
reestablish morale and motivation following layoffs.
- Draft a new corporate mission statement that conveys
the organization’s new vision and goals in an optimistic
way.
- To help employees who have lost their jobs, employers
can provide services such as:
• Outplacement
• Relocation assistance
• Personal and family counseling

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