Please click here to access the new HRM Failures case associated with this chapter. HRM
Failures features real-life situations in which an HR conflict ended up in court. Each case
includes a discussion questions and possible answers for easy use in the classroom. HRM
Failures are not included in the text so that you can provide your students with additional
real-life content that helps engrain chapter concepts.
Chapter Summary
The legal environment is one of the critical environmental factors that affects the management of
people. This chapter first describes the U.S. legal system, including the legislative bodies,
regulatory agencies, and judicial bodies whose decisions affect the legality of HRM practices.
Major laws and executive orders, particularly those pertaining to elements of discrimination, are
then reviewed. Three theories of discrimination are presented along with court case examples.
Next, sexual harassment and the Americans with Disabilities Act are discussed. Finally, the
chapter reviews what policies and practices employers may develop regarding employee safety.
Learning Objectives
After studying this chapter, the student should be able to:
1. Identify the three branches of government and the role each plays in influencing the legal
environment of human resource management.
2. List the major federal laws that require equal employment opportunity and the protections
provided by each of these laws.
3. Discuss the roles, responsibilities, and requirements of the federal agencies responsible
for enforcing equal employment opportunity laws.
4. Identify the three theories of discrimination under Title VII of the Civil Rights Act and
apply these theories to different discrimination situations.
5. Discuss the legal issues involved with preferential treatment programs.
6. Identify behavior that constitutes sexual harassment and list things that an organization
can do to eliminate or minimize it.
7. Identify the major provisions of the Occupational Safety and Health Act (1970) and the
rights of employees that are guaranteed by this act.
Extended Chapter Outline
Note: Key terms appear in boldface and are listed in the “Chapter Vocabulary” section.
Opening Vignette:
Wal-Mart’s Legal Problems
One of the largest discrimination lawsuits in the history of U.S. employment law is making its
way through the court system. In March of 2011, the Supreme Court heard arguments whether or
not the plaintiffs in a suit, which alleges that Wal-Mart discouraged the promotion of women
store employees to managerial positions, (Dukes vs. Wal-Mart) can file a class action suit
representing all women who had worked at Wal-Mart. Wal-Mart contends, however, that the
alleged victims, who worked in 170 job classifications across 3400 stores do not have enough in
common to qualify as a single class action.
Discussion Question
1. If you were a female employee at Wal-Mart, what would your reaction be to the question
about whether or not you could be included in a class action lawsuit against the
company?
Student responses, of course, can vary. Look for evidence that students understand what
I. Introduction
A. Understanding the legal environment of business, particularly the
II. The Legal System in the United States
A. The U.S. Constitution sets forth the foundation of our system. It affects HRM in
two ways:
1. It delineates a citizen’s constitutional rights, on which the government cannot
2. The Constitution established three major governing bodies: the legislative,
B. The legislative branch of the federal government consists of the House of
Representatives and the Senate. These bodies enact laws that govern many HR
activities.
Example: Congress enacted Title VII of the Civil Rights Act, which ensured
minority groups’ equal opportunity in a number of areas.
C. The executive branch consists of the president of the United States and the
regulatory agencies the president oversees.
1. The president can propose bills to Congress, which, if passed, become law.
2. The president has veto power over bills passed by Congress.
3. Regulatory agencies, under the authority of the president, have
4. The president can issue executive orders that regulate the activities of
5. The president can influence the Supreme Court through the arguments of
6. The president appoints all judges in the federal judicial system, subject to
legislative branch approval. (The current president has the opportunity to
D. The judicial branch consists of the federal court system, which is made up of three
levels.
1. The first level consists of the U.S. district courts and quasi-judicial
administrative agencies.
Example: The National Labor Relations Board hears cases regarding
disputes between unions and management.
Competing Through Globalization:
I-Working Conditions
Hon Hai Precision Industry Co., also known as Foxconn, is a major supplier of components to
Apple for their various i-products (i-pods, i-phones, etc.). Hon Hai had 14 of its employees
either attempt to or successfully commit suicide by jumping from company buildings. The
reason for these events was attributed to long working hours. While the rate of suicide in this
instance was not different from the rate among China’s general population, the company’s initial
response was a bit out of line – they installed nets to catch would-be jumpers. Eventually, audits
revealed that the company was in violation of Apple’s workplace standards and policies as well
as China’s employment laws.
Eventually, the company made changes to the working conditions and provided employees with
higher wages, a cap on overtime hours, mental health counseling services, recreational facilities,
and training courses. These changes have resulted in drastic cost increases and decreases in
profit margin. This case illustrates some of the challenges companies face through globalization.
Discussion Question
1. Explain why multinational companies need to be mindful of treatment of employees in
other regains of the world. Do you think that monitoring the HR practices of suppliers is
justified?
Student responses might vary, but responses generally should include the observation that
what is normally acceptable and/or legal in other countries might not line up with what is
III. Equal employment opportunity refers to the government’s attempt to ensure that all
individuals have an equal chance for employment, regardless of race, color, religion, sex,
or national origin (see Table 3.1 in the text for a summary of EEO laws).
A. Constitutional Amendments
1. The Thirteenth Amendment of the Constitution abolished slavery in the
United States.
2. The Fourteenth Amendment forbids the state to take life, liberty, or
property without due process of law and prevents the states from denying
the equal protections of the law. This has been applied recently in a
reverse discrimination case, Bakke v. California Board of Regents. The
court ruled in favor of Bakke; a white applicant to the University of
California at Davis medical school. A quota system had precluded Bakke
from being considered for 16 spaces held specifically for members of
racial minority groups.
B. Congressional Legislation
1. The Reconstruction Civil Rights Acts (1866 and 1871) granted all
persons the same property rights as white citizens, as well as other rights
such as that of entering into and enforcing contracts. Courts have
interpreted one section of these laws as granting individuals the right to
make and enforce employment contracts.
2. The Equal Pay Act of 1963 requires that men and women in the same
organization who are doing equal work must be paid equally. If pay
differences are a function of merit, seniority, and so forth, then the
differences are allowable.
3. Title VII of the Civil Rights Act of 1964 is the major piece of legislation
regulating EEO in the United States. Title VII makes it illegal for an
employer to “fail or refuse to hire or discharge any individual, or
otherwise discriminate against them, with respect to his compensation,
terms, conditions, or privileges of employment because of the individual’s
race, color, religion, sex, or national origin.”
4. The Age Discrimination in Employment Act (ADEA) of
1967 prohibits discrimination against employees over the age of 40. (See
Figure 3.1 in text).
5. The Vocational Rehabilitation Act of 1973 covers federal
contractors and requires them to engage in affirmative action for disabled
individuals.
6. The Vietnam Era Veteran’s Readjustment Act of 1974
requires federal contractors to take affirmative action toward employing
Vietnam veterans.
7. Pregnancy Discrimination Act: An amendment to Title VII
of the Civil Rights Act, it makes illegal discrimination on the basis of
pregnancy, childbirth, or related medical conditions as a form of unlawful
sex discrimination.
8. The Civil Rights Act of 1991 amends Title VII of the 1964
Civil Rights Act, the Americans with Disabilities Act, and the ADEA.
This act was written in response to five 1989 Supreme Court cases. The
CRA allows compensatory and punitive damages when discrimination has
been intentional or reckless, although damage limits are imposed. (See
Table 3.2 in the text)
9. The Americans with Disabilities Act (ADA) of 1990
protects individuals with disabilities from being discriminated against in
the workplace by prohibiting discrimination in all employment practices.
It requires that “reasonable accommodations” be made as long as they do
not present an “undue burden” upon the employer.
B. Executive Orders are directives issued and amended unilaterally by the president.
Two affect HRM practice:
1. Executive Order 11246 prohibits government contractors from
discrimination based on race, color, religion, sex, and national origin.
Affirmative action must be taken.
2. Executive Order 11478 requires the federal government to base all its
employment policies on merit and fitness and specifies that race, color,
sex, religion, and national origin should not be considered.
IV. Enforcement of Equal Employment Opportunity
A. The Equal Employment Opportunity Commission (EEOC) is
a division of the Department of Justice responsible for enforcing most of the LEO
laws. Following, its three major responsibilities are detailed:
1. Investigation and Resolution—After the filing of a
complaint, the EEOC has 60 days to investigate. Dismissal or
reconciliation are the two possible outcomes. The complainant may sue in
federal court if not satisfied.
2. Information Gathering—EEOC monitors hiring practices by
reviewing EEO-1 reports filed annually by firms.
3. Issuance of Guidelines—EEOC determines and issues guidelines that help
employers comply with the law.
Example: The Uniform Guidelines on Employee Selection Procedures were
issued jointly by EEOC, Departments of Labor and Justice, and the U.S. Civil
Service Commission.
B. The Office of Federal Contract Compliance Procedures (OFCCP) is responsible
for enforcing executive orders that cover companies that have federal government
contracts. Businesses with more than $10,000 in contracts must have affirmative
action plans. The three components are listed below:
1. Utilization analysis is a comparison of the race, sex, and ethnic
composition of the employer’s work force with that of the available labor
supply (by job group).
2. The goals and timetables are the part of a written affirmative action plan
that specifies the percentage of women and minorities that an employer
seeks to have in each job group and the date by which that percentage is to
be attained.
3. Action steps are the written affirmative plan that specifies what an
employer plans to do to reduce underutilization of protected groups.
4. The OFCCP annually audits government contractors to ensure compliance.
Debarment (canceling or suspending contracts) is the strongest
enforcement penalty.
V. Types of Discrimination—Legal scholars have identified three theories of discrimination.
(See Table 3.3 in the text)
A. Disparate Treatment exists when individuals in similar situations are treated
differently and when the different treatment is based upon the individual’s race,
color, religion, sex, national origin, age, or disability status.
1. The plaintiff has the burden of proof and must show that the plaintiff
belongs to a protected group, the plaintiff applied for and was qualified for
the job, the plaintiff was rejected, and the position remained open or was
filled by someone with similar qualifications.
2. The defendant’s rebuttal – Once the plaintiff has made a prima facie case
for discrimination, the burden shifts to the defendant to produce some
nondiscriminatory reason for not hiring the plaintiff, as listed below:
a. Better qualifications.
b. Bona fide occupational qualifications (BFOQ)—A characteristic
that is necessary, rather than preferred, for a job.
3. If the defendant provides a legitimate, nondiscriminatory reason for its
employment decision, the burden shifts back to the plaintiff (statistical
evidence of a pattern may be used here).
a. McDonnell Douglas Corp. v. Green delineated the four criteria for
a prima facie case of discrimination.
4. In a mixed-motive case the defendant acknowledges that some
discriminatory motive existed but argues that the same hiring decision
would have been reached even without the discriminatory motive. An
example is the Hopkins v. Price Waterhouse case. Gender stereotypes and
performance were both claimed as reasons for denial of partnership.
B. Disparate impact occurs when a facially neutral employment practice
disproportionately excludes a protected group from employment opportunities
(facially neutral means that it lacks obvious discriminatory content yet affects one
group to a greater extent than other groups). The Supreme Court inferred
disparate impact in Griggs v. Duke Power.
1. The burden of proof rests on the plaintiff to establish a prima facie case by
showing that the questionable employment practice disproportionately
affects a protected group relative to a majority group.
a. The four-fifths rule says that a test has disparate impact if the
hiring rate for the minority group is less than four-fifths (80
percent) of the hiring rate for the majority group.
b. The standard deviation rule uses actual probability distributions
to determine adverse impact. This analysis uses the difference
between the expected hiring rates for minority groups and the
actual hiring rate to determine whether the difference between
these two values is greater than would occur by chance.
c. The Wards Cove Packing Co. v. Antonio case involved a statistical
analysis of utilization rates in cannery and noncannery jobs (pay
rates for the types of jobs were quite different). CRA 1991
requires that once the prima facie case has been met, the burden of
proof falls on the defendant.
2. The defendant’s rebuttal must show that the employment practice is a
“business necessity.” This can be accomplished by showing that the
practice bears a relationship to some legitimate employer goal.
3. If the employer shows that the employment practice is the result of some
business necessity, the plaintiff’s last resort is to argue that other
employment practices could sufficiently meet the employer’s goal without
adverse impact. Under such circumstances, the defendant can be found
guilty.
a. In Griggs v. Duke Power, it was shown that the employer required
either a high school diploma or passing scores on two nationally
developed tests. However, the company had not studied the
relationship of these selection devices to ability to do the job.
Employees already on the job without high school degrees were
performing satisfactorily. Thus, Duke Power lost the case.
C. Reasonable Accommodation—places a special obligation on an employer to
affirmatively do something to accommodate an individual’s disability or religion.
1. Religion and Accommodation—Individuals who hold strong religious
beliefs find that some of the observations and practices of their religion
come into contact with work duties. (See Figure 3.2 in the text)
2. Disability and Accommodation—Employers are not only to refrain from
discrimination (ADA) but they are also obligated to take affirmative steps
to accommodate individuals who are protected under the act.