CHAPTER 3 Ensuring Fair Treatment and Legal Compliance
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Chapter 3
ENSURING FAIR TREATMENT AND LEGAL
COMPLIANCE
Opening Case: Managing Human Resources at Wal-Mart
Tom Coughlin, chief of Wal-Mart’s U.S. stores, found himself explaining in court
how he tried to encourage store managers to bring more women and minorities
up to higher levels in the company. A female employee named Stephanie Odle
had filed a complaint with the Equal Employment Opportunity Commission
(EEOC) claiming that she was fired for protesting how she was treated when she
asked for a raise. She learned that her pay was $10,000 less than that of a male
fellow assistant manager. At the time, Odle didn’t know that throughout Wal-Mart,
female assistant managers earned $16,402 less per year on average than male
assistant managers. Betty Dukes, an African American, after being promoted to
the position of customer service manager, was denied the training that many
younger men were offered. When she complained to the company, she was
demoted back to her old job. Within two years of Dukes’ initial compliant to the
company, testimony from at least 100 other Wal-Mart employees in California
was used as the basis for a class action lawsuit. Today, more than 1.6 million
women are part of the lawsuit, making it the largest discrimination case in U.S.
history. If Wal-Mart loses, it could cost the company as much as $11 billion. One
issue is pay and another is promotions.
CHAPTER OUTLINE
I. THE STRATEGIC IMPORTANCE OF FAIRNESS AND LEGAL
COMPLIANCE
Effective business organizations address the concerns of many stakeholders,
including society and employees. They go beyond mere compliance with
A. Society’s Concerns about Fairness
Society at large is very concerned about fairness to employees as a
desirable ideal. This can be a major challenge for employers, due to the
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complexity of the many connotations of just what “fairness” is and the fact
that it changes rapidly and often. What is “fairness,” anyway? If we do
not get our way are we being treated unfairly? Should the law and the
courts decide what is fair and what is not? Affirmative action laws are one
B. Concerns of the Labor Force
Employees communicate their concerns directly and indirectly. They
choose whom to work for and where they wish to stay. They may organize
C. Customers Win When Employers Treat Employees Fairly
Fairness is also good for business because, generally, when employees
are treated better, they treat their customers better, also.
D. The HR Triad
The HR Triad feature summarizes the roles and responsibilities of HR
professionals, line managers, and other employees in ensuring the fair
II. WHAT FAIRNESS MEANS TO EMPLOYEES
See the two vignettes in the text describing the situations in which Michelle
Chang (A Missed Promotion) and Bill Markham (An Unexpected Layoff) found
themselves. Research has revealed at least two important features that
affect people’s perception of fairness: outcomes and procedures used to
arrive at these outcomes.
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A. Distributive Justice
We often perceive fairness by comparing our outcomes to those of other
people. Did we get as big a raise or as good a deal as someone else?
How did we make out as an individual? This is a typical American
Teaching Note:
Distributive Justice is closely tied to the concept of equity. Emphasize to
students that the comparison is a ratio: Your inputs/your outcome
compared to the inputs/outcomes of a relevant other.
B. Procedural Justice
Was the process that led to the actual outcome fair? See Exhibit 3.1 for
the conditions that need to be met for procedural justice to prevail.
Teaching Note: The most important aspect of procedural justice is voice—
the extent to which employees affected by a decision can present relevant
information about the decision to others.
C. Interactional Justice
This refers to how an employee feels that he/she is treated by their bosses
and other members of management in the implementation of policies and
procedures. Employee perceptions of interactional justice are enhanced
by managers who are sensitive to employee concerns and treat them
politely and respectfully.
D. Reactions to Unjust Treatment
The most common employee reactions to unjust treatment include:
2. Stay and simply accept the situation.
4. Talk to others in the organization.
6. Tell your friends.
CHAPTER 3 Ensuring Fair Treatment and Legal Compliance
III. LEGAL MEANS TO ENSURE FAIR TREATMENT
Employers use a variety of policies and procedures in an attempt to treat
employees fairly. Although some of these are mandated by law, others reflect
an employers desire to go beyond just satisfying the minimum requirements
in terms of treating employees fairly. Other chapters will explore specific
Teaching Note: Failure to comply with employment laws may result in
monetary fines, imprisonment, or court orders that constrain future
activities.
A. Federal Laws
Exhibit 3.3 provides a summary of the major federal employment laws.
1. Title VII of the Civil Rights Act
Title VII of the Civil Rights Act of 1964 is one of the most significant
Teaching Note: The Civil Rights Act does not prohibit discrimination based
on sexual orientation. It is up to the individual states to provide that
protection.
2. Age Discrimination in Employment Act.
This act protects people 40 years of age or older from all forms of
3. Americans with Disabilities Act
The Americans with Disabilities Act of 1990 (ADA) prohibits private
employers, state and local governments, employment agencies, and
labor unions from discriminating against qualified individuals with
disabilities. Persons are disabled if they
• have a physical or mental impairment that substantially limits
B. State Laws
State laws must be consistent with federal laws, but they do not need to
be the same. Three major differences that are commonly found between
state and federal laws are:
➢ State laws often cover companies that are not covered by
C. Executive Orders
Specific rules issued by the President of the United States that apply to
D. Administrative Agencies
Enforcement of both federal and state statutes is often delegated to an
administrative agency. These agencies monitor compliance, investigate
complaints, gather data, conduct inspections, issue citations, and do
whatever may be necessary to ensure the will of the legislative body is
CHAPTER 3 Ensuring Fair Treatment and Legal Compliance
E. International Operations
Some nations do not follow the “employment–at will” rule that tends to
prevail in the United States. The employment-at-will rule is a common law
principle that refers to the traditional right of an employer to terminate
IV. SETTLING DISPUTES
A. Company Grievance Procedures
These procedures encourage employees to voice their concerns to the
company instead of the courts. They provide employees with a formal
mechanism for employees to seek constructive resolutions without
litigation. These types of procedures have long existed in unionized firms,
and are also used in many non-unionized companies. These procedures
tend to improve employee loyalty and commitment.
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B. Mediation and Arbitration
When disputes cannot be resolved through this internal process,
companies may try to use alternative dispute resolution before sending a
case to the courts. Alternative Dispute Resolution (ADR) avoids litigation
altogether and often is seen as a gesture of good will on the part of the
contesting parties. ADR typically takes the form of either mediation or
arbitration.
1. Mediation
Mediation is the more popular form of ADR. It is flexible. All the parties
2. Arbitration
Arbitration may be binding (the parties must accept arbitrator’s
decision) or nonbinding (a process may lead to a trial). Many
C. Using the Courts to Settle Disputes
1. Monetary Damages
If a person’s legal right has been violated and if an injury has been
suffered as a result of that violation the defendant may be ordered to
Teaching Note: In most cases, it is difficult to recover the costs of bringing
the lawsuit, i.e., legal fees, etc. It is also extremely rare to recover for “pain
and suffering” as a result of an employment lawsuit; damages are usually
restricted to actual money lost, e.g., the difference in wages between what
you would have earned and what you earned as a result of the
discrimination.
2. Settlement Agreements
Out-of-court settlements between the contesting parties avoid long and
often costly court proceedings. There is usually no admission of
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Teaching Note: Approximately 90% of all cases never reach trial because
they are settled out of court.
V. DIVERSITY AND INCLUSION INITIATIVES FOR ENSURING FAIR
TREATMENT
A. Who is Covered by Diversity Initiatives?
Originally designed for minorities and women, broadened diversity
initiatives now encompass many other employee groups who may not be
covered by legal statutes.
Teaching Note: The accounting firm of Deloitte and Touche became
serious about diversity initiatives in the early 1990’s when its employment
numbers revealed that only 5% of the company’s partners were women and
turnover for women was 30%. The numbers changed when it made
changes aimed at making the firm more “women friendly.”
B. A Culture of Inclusion
What is needed is a corporate culture in which all employees respect each
other and in which decisions are based on merit, not personal
C. Evaluating the Effectiveness of Diversity and Inclusion Initiatives
The most effective initiatives are those that have clear objectives and
D. Economic Benefits of Diversity
There is scant research evidence of the economic benefits of a diverse
workforce and positive organizational culture. Whether supported by
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Teaching Note: Morgan Stanley settled a class action suit of over $1 billion
for women who sued over the lack of opportunities in upper echelons of
the firm.
VI. PROTECTING EMPLOYEES FROM HARASSMENT
Harassment includes both the daily interactions among coworkers and how
the consequences of those interactions can make employees feel.
A. What is Harassment?
Harassment is conduct that creates a hostile, intimidating, or offensive
work environment; unreasonably interferes with the individual’s work; or
B. Reactions to Being Harassed
Harassment victims may lash out against the perpetrator, blame
Teaching Note: Over 90% of the Fortune 500 companies have dealt with
sexual harassment complaints, and 25% have been sued repeatedly.
VII. FAIRNESS MUST BE RECIPROCATED
Fairness is a two-sided coin. Just as employers have responsibilities
toward employees, employees have responsibilities toward employers.
CHAPTER 3 Ensuring Fair Treatment and Legal Compliance
VIII. CURRENT ISSUES
A. Electronic Monitoring of Employees
This issue deals with the implantation of electronic monitoring devices into
the bodies of employees. Rapid increases in technology have made it
easier for employers to monitor employees, but the law has not caught up
with the changes in monitoring capability.
B. Privacy in the Global Context
The Bill of Rights does not guarantee the right to privacy, that is, the right
to keep information about ourselves to ourselves, to private sector
Teaching Note: For a lively discussion, ask your students to debate the
use of the Internet at work for personal business. What are the pros and
cons? How does this differ from using the telephone for personal use? Do
they believe Internet communications should be monitored? If so, what
restrictions would they place on the employees? The employer?
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QUESTIONS FOR DISCUSSION AND REFLECTIVE THINKING
1. Describe an incident when you felt you (or someone you know) were
treated unfairly. Did the incident occur due to a lack of procedural,
distributive, and/or interactional justice?
Answers will vary and may be very personal.
2. Describe some of the key regulatory agencies as well as the
employment laws that they administer and enforce.
Three of the major regulatory agencies and the laws that they administer and
3. Some people feel there are simply too many laws and regulations
governing how companies may manage their employees. These people
believe everyone would be better off if we let the free market work
without so much government interference. Other people believe that
employees are not sufficiently protected against unfair treatment by
employers. They believe employers would treat employees poorly if our
laws didn’t forbid them from doing so. Which position do you most
agree with? Explain why.
Arguments for less government interference:
➢ Companies don’t want to risk bad reputations through negative
publicity.
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4. Suppose a coworker harassed you. Would you prefer to resolve it using
mediation, arbitration or the court system? Would your answer change
if the harasser were your boss? Why, or why not?
Generally, it would advisable to start with mediation as the focus of this
5. Review Exhibit 3.8 which lists affinity groups at Microsoft. If you were a
Microsoft employee, would you join one of these groups? If yes, which
one? If no, why not?
6. Technology is making it possible to more closely monitor the behavior
of employees. What are the pros and cons of allowing employers to use
electronic devices to collect information about their employees’
behaviors, at work, while on business trips, and at home?
CASE STUDY: UNITED WAY AND THE BOY SCOUTS OF
AMERICA
DISCUSSION QUESTIONS:
1. In your opinion, does Larry Norvell face an ethical challenge? Or can he
simply handle this situation as a business decision and focus on the
bottom line? Explain.
This question asks for an opinion and opinions will vary. Much depends on
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2. If you were Larry Norvell, how would you prepare for your meeting with
the United Way board to discuss the issue of whether to continue
providing funds to the Boy Scouts? Identify the three key points that
you would make and your rationale for each point.
Probably there will be some sarcastic responses to the part about how Larry
should prepare for the meeting but hopefully some will make some serious
3. If you were a board member, what would your position be on the
question of whether the UWCW should continue to provide funds to the
local Boy Scouts? Would you be in favor of, or against, providing United
Way funds? Explain your thinking.
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VIDEO CASE STUDY: HR FOCUS PLANNING AND RETENTION
Instructors: The following video case can be found on the companion DVD. The
video can be used in class as an introductory activity or a post-lecture activity, as
well as an online assignment for those students using CourseMate.
DISCUSSION QUESTIONS:
1. Andrea Herran is an HR consultant. Can such a person help a firm in an
industry in which the consultant has never had any experience?
2. Andrea pointed out how organizational effectiveness can be improved
through better communication. What examples do you have of an
organization (whether employment, family, school) that could benefit
from her advice?
Answers will vary.
3. How can time management help improve satisfaction for both
management and the employee?
4. Andrea pointed to the need to determine whether the skills of
employees match the needs of the job. If HR did a proper job of
selecting employees, why wouldn’t the skills match the job? What
should be done if there is not a proper match?