believed the
Universal Declaration of Human Rights of 1948 "may well become the international Magna Carta of all". Based on the President's call for a
Second Bill of Rights in 1944, articles 22–24 elevated rights to "social security", "just and favourable conditions of work", and the "right to rest and leisure" to be as important as the "right to own property".
Contracts between employees and employers (mostly
corporations) usually begin an employment relationship, but are often not enough for a decent livelihood. Because individuals
lack bargaining power, especially against wealthy corporations, labor law creates legal rights that override arbitrary market outcomes. Historically, the law faithfully enforced property rights and
freedom of contract on any terms, whether or not this was inefficient, exploitative and unjust. In the early 20th century, as more people favored the introduction of democratically determined
economic and social rights over rights of property and contract, state and federal governments introduced law reform. First, the
Fair Labor Standards Act of 1938 created a minimum wage (now $7.25 at federal level, higher in 28 states) and
overtime pay of one and a half times. Second, the
Family and Medical Leave Act of 1993 creates very limited rights to take unpaid leave. In practice, good employment contracts improve on these minimums. Third, while there is no right to an
occupational pension or other benefits, the
Employee Retirement Income Security Act of 1974 ensures employers guarantee those benefits if they are promised. Fourth, the
Occupational Safety and Health Act 1970 demands a safe system of work, backed by professional inspectors. Individual states are often empowered to go beyond the federal minimum, and function as
laboratories of democracy in social and economic rights, where they have not been constrained by the
US Supreme Court.
Scope of protection Common law, state and federal statutes usually confer labor rights on "employees", but not people who are autonomous and have sufficient
bargaining power to be "independent contractors". In 1994, the
Dunlop Commission on the Future of Worker-Management Relations: Final Report recommended a unified definition of an employee under all federal labor laws, to reduce litigation, but this was not implemented. As it stands, Supreme Court cases have stated various general principles, which will apply according to the context and purpose of the statute in question. In
NLRB v. Hearst Publications, Inc., newsboys who sold newspapers in Los Angeles claimed that they were "employees", so that they had a right to collectively bargain under the
National Labor Relations Act of 1935. The newspaper corporations argued the newsboys were "independent contractors", and they were under no duty to bargain in
good faith. The Supreme Court held the newsboys were employees, and common law tests of employment, particularly the summary in the
Restatement of the Law of Agency, Second §220, were no longer appropriate. They were not "independent contractors" because of the degree of control employers had. But the
National Labor Relations Board could decide itself who was covered if it had "a reasonable basis in law." Congress reacted, first, by explicitly amending the
NLRA §2(1) so that independent contractors were exempt from the law while, second, disapproving that the common law was irrelevant. At the same time, the Supreme Court decided
United States v. Silk, holding that "economic reality" must be taken into account when deciding who is an employee under the Social Security Act of 1935. This meant a group of coal loaders were employees, having regard to their economic position, including their
lack of bargaining power, the degree of discretion and control, and the risk they assumed compared to the coal businesses they worked for. By contrast, the Supreme Court found truckers who owned their own trucks, and provided services to a carrier company, were independent contractors. Thus, it is now accepted that multiple factors of traditional common law tests may not be replaced if a statute gives no further definition of "employee" (as is usual, e.g., the
Fair Labor Standards Act of 1938,
Employee Retirement Income Security Act of 1974,
Family and Medical Leave Act of 1993). Alongside the purpose of labor legislation to mitigate inequality of bargaining power and redress the economic reality of a worker's position, the multiple factors found in the
Restatement of Agency must be considered, though none is necessarily decisive. " in
L.A. were held in the leading case,
NLRB v. Hearst Publications, Inc., to be employees with labor rights, not independent contractors, on account of their
unequal bargaining power.
Common law agency tests of who is an "employee" take account of an employer's control, if the employee is in a distinct business, degree of direction, skill, who supplies tools, length of employment, method of payment, the regular business of the employer, what the parties believe, and whether the employer has a business. Some statutes also make specific exclusions that reflect the common law, such as for independent contractors, and others make additional exceptions. In particular, the
National Labor Relations Act of 1935 §2(11) exempts supervisors with "authority, in the interest of the employer", to exercise discretion over other employees' jobs and terms. This was originally a narrow exception. Controversially, in
NLRB v. Yeshiva University, a 5 to 4 majority of the Supreme Court held that full time professors in a
university were excluded from collective bargaining rights, on the theory that they exercised "managerial" discretion in academic matters. The dissenting judges pointed out that management was actually in the hands of university administration, not professors. In
NLRB v. Kentucky River Community Care, Inc., the Supreme Court held, again 5 to 4, that six registered nurses who exercised supervisory status over others fell into the "professional" exemption.
Stevens J, for the dissent, argued that if "the 'supervisor' is construed too broadly", without regard to the Act's purpose, protection "is effectively nullified". Similarly, under the
Fair Labor Standards Act of 1938, in
Christopher v. SmithKline Beecham Corp., the Supreme Court held 5 to 4 that a traveling medical salesman for
GSK of four years was an "outside salesman", and so could not claim overtime. People working unlawfully are often regarded as covered, so as not to encourage employers to exploit vulnerable employees. For instance in
Lemmerman v. A.T. Williams Oil Co., under the North Carolina Workers' Compensation Act an eight-year-old boy was protected as an employee, even though children working under the age of 8 was unlawful. However, in
Hoffman Plastic Compounds, Inc. v. NLRB, the Supreme Court held 5 to 4 that an undocumented worker could not claim back pay, after being discharged for organizing in a union. The gradual withdrawal of more and more people from the scope of labor law, by a slim majority of the Supreme Court since 1976, means that the US falls below international law standards, and standards in other democratic countries, on core labor rights, including
freedom of association. held that
Uber drivers are controlled and sanctioned by the company and are therefore not self-employed. Common law tests were often important for determining who was, not just an employee, but the relevant employers who had "
vicarious liability". Potentially there can be multiple, joint-employers could who share responsibility, although responsibility in
tort law can exist regardless of an employment relationship. In
Ruiz v. Shell Oil Co, the
Fifth Circuit held that it was relevant which employer had more control, whose work was being performed, whether there were agreements in place, who provided tools, had a right to discharge the employee, or had the obligation to pay. In
Local 217, Hotel & Restaurant Employees Union v. MHM Inc the question arose under the
Worker Adjustment and Retraining Notification Act of 1988 whether a subsidiary or parent corporation was responsible to notify employees that the hotel would close. The
Second Circuit held the subsidiary was the employer, although the trial court had found the parent responsible while noting the subsidiary would be the employer under the
NLRA. Under the
Fair Labor Standards Act of 1938, 29 USC §203(r), any "enterprise" that is under common control will count as the employing entity. Other statutes do not explicitly adopt this approach, although the
NLRB has found an enterprise to be an employer if it has "substantially identical management, business purpose, operation, equipment, customers and supervision." In
South Prairie Const. Co. v. Local No. 627, International Union of Operating Engineers, AFL-CIO, the Supreme Court found that the DC Circuit had legitimately identified two corporations as a single employer given that they had a "very substantial qualitative degree of centralized control of labor", but that further determination of the relevant bargaining unit should have been remitted to the
NLRB. When employees are hired through an agency, it is likely that the end-employer will be considered responsible for statutory rights in most cases, although the agency may be regarded as a joint employer.
Contracts of employment When people start work, there will almost always be a
contract of employment that governs the relationship of employee and the employing entity (usually a
corporation, but occasionally a human being). A "contract" is an agreement enforceable in law. Very often it can be written down, or signed, but an
oral agreement is also a fully enforceable contract. Because employees have
unequal bargaining power compared to almost all employing entities, most employment contracts are "
standard form". Most terms and conditions are photocopied or reproduced for many people. Genuine
negotiation is rare, unlike in commercial transactions between two business corporations. This has been the main justification for enactment of rights in federal and state law. The federal right to
collective bargaining, by a labor union elected by its employees, is meant to reduce the inherently unequal bargaining power of individuals against organizations to make
collective agreements. The federal right to a minimum wage, and increased
overtime pay for working over 40 hours a week, was designed to ensure a "minimum standard of living necessary for health, efficiency, and general well-being of workers", even when a person could not get a high enough wage by individual bargaining. These and other rights, including
family leave, rights against
discrimination, or basic
job security standards, were designed by the
United States Congress and state legislatures to replace individual contract provisions. Statutory rights override even an express written term of a contract, usually unless the contract is more beneficial to an employee. Some federal statutes also envisage that state law rights can improve upon minimum rights. For example, the
Fair Labor Standards Act of 1938 entitles states and municipalities to set minimum wages beyond the federal minimum. By contrast, other statutes such as the
National Labor Relations Act of 1935, the
Occupational Safety and Health Act of 1970, and the
Employee Retirement Income Security Act of 1974, have been interpreted in a series of contentious judgments by the
US Supreme Court to "
preempt" state law enactments. These interpretations have had the effect to "stay experimentation in things social and economic" and stop states wanting to "serve as a laboratory" by improving labor rights. Where minimum rights do not exist in federal or state statutes, principles of
contract law, and potentially
torts, will apply. . Aside from terms in oral or written agreements, terms can be incorporated by reference. Two main sources are
collective agreements and company handbooks. In
JI Case Co v. National Labor Relations Board an employing corporation argued it should not have to bargain in
good faith with a labor union, and did not commit an
unfair labor practice by refusing, because it had recently signed individual contracts with its employees. The
US Supreme Court held unanimously that the "very purpose" of collective bargaining and the
National Labor Relations Act 1935 was "to supersede the terms of separate agreements of employees with terms which reflect the strength and bargaining power and serve the welfare of the group". Terms of collective agreements, to the advantage of individual employees, therefore supersede individual contracts. Similarly, if a written contract states that employees do not have rights, but an employee has been told they do by a supervisor, or rights are assured in a company handbook, they will usually have a claim. For example, in
Torosyan v. Boehringer Ingelheim Pharmaceuticals, Inc. the
Supreme Court of Connecticut held that a promise in a handbook that an employee could be dismissed only for a good reason (or "just cause") was binding on the employing corporation. Furthermore, an employer had no right to unilaterally change the terms. Most other state courts have reached the same conclusion, that contracts cannot be altered, except for employees' benefit, without new
consideration and true agreement. By contrast, a slight majority on the
California Supreme Court, appointed by Republican governors, held in
Asmus v. Pacific Bell that a company policy of indefinite duration can be altered after a reasonable time with reasonable notice, if it affects no vested benefits. The four dissenting judges, appointed by Democratic governors, held this was a "patently unfair, indeed unconscionable, result—permitting an employer that made a promise of continuing job security ... to repudiate that promise with impunity several years later". In addition, a basic term of
good faith which cannot be waived, is implied by common law or equity in all states. This usually demands, as a general principle that "neither party shall do anything, which will have the effect of destroying or injuring the right of the other party, to receive the fruits of the contract". The term of
good faith persists throughout the employment relationship. It has not yet been used extensively by state courts, compared to other jurisdictions. The
Montana Supreme Court has recognized that extensive and even punitive damages could be available for breach of an employee's reasonable expectations. However others, such as the
California Supreme Court limit any recovery of damages to contract breaches, but not damages regarding the manner of termination. By contrast, in the
United Kingdom the requirement for "
good faith" has been found to limit the power of discharge except for fair reasons (but not to conflict with statute), in Canada it may limit unjust discharge also for self-employed persons, and in Germany it can preclude the payment of wages significantly below average. Finally, it was traditionally thought that arbitration clauses could not displace any employment rights, and therefore limit access to justice in public courts. However, in
14 Penn Plaza LLC v. Pyett, in a 5 to 4 decision under the
Federal Arbitration Act of 1925, individual employment contract arbitration clauses are to be enforced according to their terms. The four dissenting judges argued that this would eliminate rights in a way that the law never intended.
Wages and pay While contracts often determine wages and terms of employment, the law refuses to enforce contracts that do not observe basic standards of fairness for employees. Today, the
Fair Labor Standards Act of 1938 aims to create a national minimum wage, and a voice at work, especially through collective bargaining should achieve fair wages. A growing body of
law also regulates
executive pay, although a system of "
maximum wage" regulation, for instance by the former
Stabilization Act of 1942, is not currently in force. Historically, the law actually suppressed
wages, not of the highly paid, by ordinary workers. For example, in 1641 the
Massachusetts Bay Colony legislature (dominated by property owners and the official church) required wage reductions, and said rising wages "tende to the ruin of the Churches and the
Commonwealth". In the early 20th century, democratic opinion demanded everyone had a
minimum wage, and could bargain for fair wages beyond the minimum. But when states tried to introduce new laws, the
US Supreme Court held them unconstitutional. A right to
freedom of contract, argued a majority, could be construed from the
Fifth and
Fourteenth Amendment's protection against being deprived "of life, liberty, or property, without due process of law". Dissenting judges argued that "due process" did not affect the legislative power to create social or economic rights, because employees "are not upon a full
level of equality of choice with their employer". federal minimum wage has declined by 46% since February 1968. Lower line is
nominal dollars. Top line is
inflation-adjusted. After the
Wall Street Crash, and the
New Deal with the election of
Franklin D. Roosevelt, the majority in the
US Supreme Court was changed. In
West Coast Hotel Co. v. Parrish Hughes CJ held (over four dissenters still arguing for
Freedom of Contract) that a
Washington law setting minimum wages for women was constitutional because the state legislatures should be enabled to adopt legislation in the public interest. This ended the "
Lochner era", and Congress enacted the
Fair Labor Standards Act of 1938. Under §202(a) the federal minimum wage aims to ensure a "standard of living necessary for health, efficiency and general well being". Under §207(a)(1), most employees (but with many exceptions) working over 40 hours a week must receive 50 per cent more
overtime pay on their hourly wage. Nobody may pay lower than the minimum wage, but under §218(a) states and municipal governments may enact higher wages. This is frequently done to reflect local productivity and requirements for decent living in each region. However the federal minimum wage has no automatic mechanism to update with inflation. Because the
Republican Party has opposed raising wages, the federal
real minimum wage is over 33 per cent lower today than in 1968, among the lowest in the industrialized world. has fallen by 43% compared to 1968.
Souter J, joined by three dissenting justices, held that no such "sovereign immunity" existed in the
Eleventh Amendment.
Twenty-eight states, however, did have minimum wage laws higher than the federal level in 2016. Further, because the
US Constitution,
article one,
section 8, clause 3 only allows the federal government to "regulate
Commerce ... among the several States", employees of any "enterprise" under $500,000 making goods or services that do not enter commerce are not covered: they must rely on state minimum wage laws.
FLSA 1938 §203(s) explicitly exempts establishments whose only employees are close family members. Under §213 the minimum wage may not be paid to 18 categories of employee, and paying overtime to 30 categories of employee. This include under §213(a)(1) employees of "
bona fide executive, administrative, or professional capacity". In
Auer v. Robbins police sergeants and lieutenants at the
St Louis Police Department,
Missouri claimed they should not be classed as executives or professional employees, and should get overtime pay.
Scalia J held that, following
Department of Labor guidance, the St Louis police commissioners were entitled to exempt them. This has encouraged employers to attempt to define staff as more "senior" and make them work longer hours while avoiding overtime pay. Another exemption in §213(a)(15) is for people "employed in domestic service employment to provide companionship services". In
Long Island Care at Home, Ltd. v. Coke, a corporation claimed exemption, although
Breyer J for a unanimous court agreed with the
Department of Labor that it was only intended for carers in private homes. Second, because §206(a)(1)(C) says the minimum wage is $7.25 per hour, courts have grappled with which hours count as "working". Early cases established that time traveling to work did not count as work, unless it was controlled by, required by, and for the benefit of an employer, like traveling through a coal mine. For example, in,
Anderson v. Mt. Clemens Pottery Co. a majority of five to two justices held that employees had to be paid for the long walk to work through an employer's Mount Clemens Pottery Co facility. According to
Murphy J this time, and time setting up workstations, involved "exertion of a physical nature, controlled or required by the employer and pursued necessarily and primarily for the employer's benefit." In
Armour & Co. v. Wantock firefighters claimed they should be fully paid while on call at their station for fires. The
Supreme Court held that, even though the firefighters could sleep or play cards, because "[r]eadiness to serve may be hired quite as much as service itself" and time waiting on call was "a benefit to the employer". By contrast, in 1992 the
Sixth Circuit controversially held that needing to be infrequently available by phone or pager, where movement was not restricted, was not working time. Time spent doing unusual cleaning, for instance showering off toxic substances, does count as working time, and so does time putting on special protective gear. Under §207(e) pay for overtime should be one and a half times the regular pay. In
Walling v. Helmerich & Payne, Inc., the
Supreme Court held that an employer's scheme of paying lower wages in the morning, and higher wages in the afternoon, to argue that overtime only needed to be calculated on top of (lower) morning wages was unlawful. Overtime has to be calculated based on the average regular pay. However, in
Christensen v. Harris County six
Supreme Court judges held that police in
Harris County, Texas, could be forced to use up their accumulated "compensatory time" (allowing time off with full pay) before claiming overtime. Writing for the dissent,
Stevens J said the majority had misconstrued §207(o)(2), which requires an "agreement" between employers, unions or employees on the applicable rules, and the Texas police had not agreed. Third, §203(m) allows employers to deduct sums from wages for food or housing that is "customarily furnished" for employees. The
secretary of labor may determine what counts as fair value. Most problematically, outside states that have banned the practice, they may deduct money from a "tipped employee" for money over the "cash wage required to be paid such an employee on August 20, 1996"—and this was $2.13 per hour. If an employee does not earn enough in tips, the employer must still pay the $7.25 minimum wage. But this means in many states tips do not go to workers: tips are taken by employers to subsidize low pay. Under
FLSA 1938 §216(b)-(c) the secretary of state can enforce the law, or individuals can claim on their own behalf. Federal enforcement is rare, so most employees are successful if they are in a labor union. The
Consumer Credit Protection Act of 1968 limits deductions or "garnishments" by employers to 25 per cent of wages, though many states are considerably more protective. Finally, under the
Portal to Portal Act of 1947, where Congress limited the minimum wage laws in a range of ways, §254 puts a two-year time limit on enforcing claims, or three years if an employing entity is guilty of a willful violation. •
Income tax in the United States •
Legal history of income tax in the United States •
State income tax •
Payroll tax,
Federal Insurance Contributions Act tax
Working time and family care of 1948 article 23 requires "reasonable limitation of working hours and periodic holidays with pay", but there is no federal or state right to
paid annual leave: Americans have the least in the developed world. People in the United States work among the longest hours per week in the
industrialized world, and have the least annual leave. The
Universal Declaration of Human Rights of 1948 article 24 states: "Everyone has the right to rest and leisure, including reasonable limitation of working hours and
periodic holidays with pay." However, there is no general federal or state legislation requiring paid annual leave. Title 5 of the
United States Code §6103 specifies ten
public holidays for federal government employees, and provides that holidays will be paid. Many states do the same, however, no state law requires private sector employers to provide paid holidays. Many private employers follow the norms of federal and state government, but the right to annual leave, if any, will depend upon
collective agreements and individual employment contracts. State law proposals have been made to introduce paid annual leave. A 2014
Washington Bill from
United States House of Representatives member
Gael Tarleton would have required a minimum of 3 weeks of paid holidays each year to employees in businesses of over 20 staff, after 3 years work. Under the
International Labour Organization Holidays with Pay Convention 1970 three weeks is the bare minimum. The bill did not receive enough votes. By contrast, employees in all
European Union countries have the right to at least 4 weeks (i.e. 28 days) of paid annual leave each year. Furthermore, there is no federal or state law on limits to the length of the working week. Instead, the
Fair Labor Standards Act of 1938 §207 creates a financial disincentive to longer working hours. Under the heading "Maximum hours", §207 states that
time and a half pay must be given to employees working more than 40 hours in a week. Shorter working time was one of the labor movement's original demands. From the first decades of the 20th century, collective bargaining produced the practice of having, and the word for, a two-day "weekend". State legislation to limit working time was, however, suppressed by the
US Supreme Court in
Lochner v. New York. The
New York State Legislature had passed the Bakeshop Act of 1895, which limited work in bakeries to 10 hours a day or 60 hours a week, to improve health, safety and people's living conditions. After being prosecuted for making his staff work longer in his
Utica, Mr Lochner claimed that the law violated the
Fourteenth Amendment on "
due process". Despite the dissent of four judges, a majority of five judges held that the law was unconstitutional. The Supreme Court, however, did uphold Utah's mine workday statute in 1898. The Mississippi State Supreme Court upheld a ten hour workday statute in 1912 when it ruled against the due process arguments of an interstate lumber company. The whole
Lochner era of jurisprudence was reversed by the
US Supreme Court in 1937, but experimentation to improve working time rights, and "
work-life balance" has not yet recovered. for
children under five, the costs of child care fall on parents. But in 2016, four states had legislated for
paid family leave. Just as there are no rights to paid annual leave or maximum hours, there are no rights to paid time off for child care or
family leave in federal law. There are minimal rights in some states. Most collective agreements, and many individual contracts, provide paid time off, but employees who lack
bargaining power will often get none. There are, however, limited federal rights to unpaid leave for family and medical reasons. The
Family and Medical Leave Act of 1993 generally applies to employers of 50 or more employees in 20 weeks of the last year, and gives rights to employees who have worked over 12 months and 1250 hours in the last year. Employees can have up to 12 weeks of unpaid leave for child birth, adoption, to care for a close relative in poor health, or because of an employee's own poor health. Child care leave should be taken in one lump, unless agreed otherwise. Employees must give notice of 30 days to employers if birth or adoption is "foreseeable", and for serious health conditions if practicable. Treatments should be arranged "so as not to disrupt unduly the operations of the employer" according to medical advice. Employers must provide benefits during the unpaid leave. Under §2652(b) states are empowered to provide "greater family or medical leave rights". In 2016 California,
New Jersey,
Rhode Island and
New York had laws for paid family leave rights. Under §2612(2)(A) an employer can make an employee substitute the right to 12 unpaid weeks of leave for "accrued paid vacation leave, personal leave or family leave" in an employer's personnel policy. Originally the Department of Labor had a penalty to make employers notify employees that this might happen. However, five judges in the
US Supreme Court in
Ragsdale v. Wolverine World Wide, Inc. held that the statute precluded the right of the Department of Labor to do so. Four dissenting judges would have held that nothing prevented the rule, and it was the Department of Labor's job to enforce the law. After unpaid leave, an employee generally has the right to return to his or her job, except for employees who are in the top 10% of highest paid and the employer can argue refusal "is necessary to prevent substantial and grievous economic injury to the operations of the employer." Employees or the
secretary of labor can bring enforcement actions, but there is no right to a jury for reinstatement claims. Employees can seek damages for lost wages and benefits, or the cost of child care, plus an equal amount of liquidated damages unless an employer can show it acted in good faith and reasonable cause to believe it was not breaking the law. There is a two-year limit on bringing claims, or three years for willful violations. Despite the lack of rights to leave, there is no right to free
child care or
day care. This has encouraged several proposals to create a public system of free child care, or for the government to subsize parents' costs.
Pensions In the early 20th century, the possibility of having a "retirement" became real as people lived longer, and believed the elderly should not have to work or rely on charity until they died. The law maintains an income in retirement in three ways (1) through a public
social security program created by the Social Security Act of 1935, (2) occupational pensions managed through the employment relationship, and (3) private pensions or
life insurance that individuals buy themselves. At work, most
occupational pension schemes originally resulted from
collective bargaining during the 1920s and 1930s. Unions usually bargained for employers across a sector to pool funds, so that employees could keep their pensions if they moved jobs. Multi-employer retirement plans, set up by
collective agreement became known as "
Taft–Hartley plans" after the
Taft–Hartley Act of 1947 required joint management of funds by employees and employers. Many employers also voluntarily choose to provide pensions. For example, the pension for professors, now called
TIAA, was established on the initiative of
Andrew Carnegie in 1918 with the express requirement for participants to have voting rights for the plan trustees. These could be collective and
defined benefit schemes: a percentage of one's income (e.g. 67%) is replaced for retirement, however long the person lives. But more recently more employers have only provided individual "
401(k)" plans. These are named after the
Internal Revenue Code §
401(k), which allows employers and employees to pay no tax on money that is saved in the fund, until an employee retires. The same
tax deferral rule applies to all pensions. But unlike a "
defined benefit" plan, a
401(k) only contains whatever the employer and employee
contribute. It will run out if a person lives too long, meaning the retiree may only have minimum social security. The
Pension Protection Act of 2006 §902 codified a model for employers to
automatically enroll their employees in a pension, with a right to opt out. However, there is no right to an occupational pension. The
Employee Retirement Income Security Act of 1974 does create a series of rights for employees if one is set up. It also applies to health care or any other "employee benefit" plan. and all pension trustees, are
fiduciaries. This means they must avoid
conflicts of interest. During a takeover bid,
Donovan v. Bierwirth held trustees must take advice or not vote on corporate stocks if in doubt about
conflicts. Five main rights for beneficiaries in
ERISA 1974 include information,
funding,
vesting,
anti-discrimination, and
fiduciary duties. First, each beneficiary should receive a "summary plan description" in 90 days of joining, plans must file annual reports with the
secretary of labor, and if beneficiaries make claims any refusal must be justified with a "full and fair review". If the "summary plan description" is more beneficial than the actual plan documents, because the pension fund makes a mistake, a beneficiary may enforce the terms of either. If an employer has pension or other plans, all employees must be entitled to participate after at longest 12 months, if working over 1000 hours. Second, all promises must be funded in advance. The
Pension Benefit Guaranty Corporation was established by the federal government to be an insurer of last resort, but only up to $60,136 per year for each employer. Third, employees' benefits usually cannot be taken away (they "
vest") after 5 years, and contributions must
accrue (i.e. the employee owns contributions) at a proportionate rate. If employers and pension funds merge, there can be no reduction in benefits, and if an employee goes bankrupt their creditors cannot take their occupational pension. However, the
US Supreme Court has enabled benefits to be withdrawn by employers simply amending plans. In
Lockheed Corp. v. Spink a majority of seven judges held that an employer could alter a plan, to deprive a 61-year-old man of full benefits when he was reemployed, unbound by
fiduciary duties to preserve what an employee had originally been promised. In dissent,
Breyer J and
Souter J reserved any view on such "highly technical, important matters". Steps to terminate a plan depend on whether it is individual, or multi-employer, and
Mead Corp. v. Tilley a majority of the
US Supreme Court held that employers could recoup excess benefits paid into pension plans after
PBGC conditions are fulfilled.
Stevens J, dissenting, contended that all contingent and future liabilities must be satisfied. Fourth, as a general principle, employees or beneficiaries cannot suffer any discrimination or detriment for "the attainment of any right" under a plan. Fifth, managers are bound by responsibilities of competence and loyalty, called "
fiduciary duties". Under §1102, a
fiduciary is anyone who administers a plan, its trustees, and investment managers who are delegated control. Under §1104,
fiduciaries must follow a "
prudent" person standard, involving three main components. First, a fiduciary must act "in accordance with the documents and instruments governing the plan". Second, they must act with "care, skill and diligence", including "diversifying the investments of the plan" to "minimize the risk of large losses". Liability for carelessness extends to making misleading statements about benefits, and have been interpreted by the
Department of Labor to involve a duty to vote on proxies when
corporate stocks are purchased, and publicizing a statement of investment policy. Third, and codifying fundamental equitable principles, a
fiduciary must avoid any possibility of a
conflict of interest. Fiduciaries must act "solely in the interest of the participants ... for the exclusive purpose of providing benefits" with "reasonable expenses", and specifically avoiding
self-dealing with a related "party in interest". For example, in
Donovan v. Bierwirth, the
Second Circuit held that trustees of a pension which owned shares in the employees' company as a
takeover bid was launched, because they faced a potential
conflict of interest, had to get independent legal advice on how to vote, or possibly abstain. Remedies for these duties have, however, been restricted by the
Supreme Court to disfavor damages. In these fields, according to §1144,
ERISA 1974 will "supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan". ERISA did not, therefore, follow the model of the
Fair Labor Standards Act of 1938 or the
Family and Medical Leave Act of 1993, which encourage states to legislate for improved protection for employees, beyond the minimum. The preemption rule led the
US Supreme Court to strike down a
New York that required giving benefits to pregnant employees in
ERISA plans. It held a case under
Texas law for damages for denying vesting of benefits was preempted, so the claimant only had
ERISA remedies. It struck down a
Washington law which altered who would receive life insurance designation on death. However, under §1144(b)(2)(A) this does not affect 'any law of any State which regulates insurance, banking, or
securities.' So, the Supreme Court has also held valid a
Massachusetts law requiring mental health to be covered by employer group health policies. But it struck down a
Pennsylvania statute which prohibited employers becoming subrogated to (potentially more valuable) claims of employees for insurance after accidents. Yet more recently, the court has shown a greater willingness to prevent laws being preempted, however the courts have not yet adopted the principle that state law is not preempted or "superseded" if it is more protective to employees than a federal minimum. , proposed by
Bernie Sanders but not yet passed, would give every employee the representatives on boards of their pension plans, to control how vote are cast on
corporate stocks. Currently
investment managers control most voting rights in the economy using "other people's money". The most important rights that
ERISA 1974 did not cover were who controls investments and
securities that beneficiaries' retirement savings buy. The largest form of retirement fund has become the
401(k). This is often an individual account that an employer sets up, and an
investment management firm, such as
Vanguard,
Fidelity,
Morgan Stanley or
BlackRock, is then delegated the task of trading fund assets. Usually they also vote on corporate shares, assisted by a "proxy advice" firm such as
ISS or
Glass Lewis. Under
ERISA 1974 §1102(a), a plan must merely have named fiduciaries who have "authority to control and manage the operation and administration of the plan", selected by "an employer or employee organization" or both jointly. Usually these
fiduciaries or
trustees, will delegate management to a professional firm, particularly because under §1105(d), if they do so, they will not be liable for an investment manager's breaches of duty. These investment managers buy a range of assets, particularly
corporate stocks which have voting rights, as well as
government bonds,
corporate bonds,
commodities, real estate or
derivatives. Rights on those assets are in practice monopolized by investment managers, unless pension funds have organized to take voting in house, or to instruct their investment managers. Two main types of pension fund to do this are union organized
Taft–Hartley plans, and
state public pension plans. Under the amended
National Labor Relations Act of 1935 §302(c)(5)(B) a union bargained plan has to be jointly managed by representatives of employers and employees. Although many local pension funds are not consolidated and have had critical funding notices from the
Department of Labor, more funds with employee representation ensure that corporate voting rights are cast according to the preferences of their members.
State public pensions are often larger, and have greater
bargaining power to use on their members' behalf. State pension schemes invariably disclose the way trustees are selected. In 2005, on average more than a third of trustees were elected by employees or beneficiaries. For example, the
California Government Code §20090 requires that its public employee pension fund,
CalPERS has 13 members on its board, 6 elected by employees and beneficiaries. However, only pension funds of sufficient size have acted to replace
investment manager voting. Furthermore, no general legislation requires voting rights for employees in pension funds, despite several proposals. For example, the
Workplace Democracy Act of 1999, sponsored by
Bernie Sanders then in the
US House of Representatives, would have required all single employer pension plans to have trustees appointed equally by employers and employee representatives. This means votes in the largest
corporations that people's retirement savings buy are overwhelmingly exercised by investment managers, whose interests potentially conflict with the interests of beneficiaries' on
labor rights,
fair pay,
job security, or pension policy.
Health and safety The
Occupational Safety and Health Act, signed into law in 1970 by President
Richard Nixon, creates specific standards for workplace safety. The act has spawned years of litigation by industry groups that have challenged the standards limiting the amount of permitted exposure to chemicals such as
benzene. The Act also provides for protection for "whistleblowers" who complain to governmental authorities about unsafe conditions while allowing workers the right to refuse to work under unsafe conditions in certain circumstances. The act allows states to take over the administration of OSHA in their jurisdictions, so long as they adopt state laws at least as protective of workers' rights as under federal law. More than half of the states have done so. •
Child labor laws in the United States Civil liberties •
Pickering v. Board of Education, 391 US 563 (1968) 8 to 1, a public school teacher was dismissed for writing a letter to a newspaper that criticized the way the school board was raising money. This violated the
First Amendment and the
Fourteenth Amendment •
Connick v. Myers, 461 U.S. 138 (1983) 5 to 4, a public attorney employee was not unlawfully dismissed after distributing a questionnaire to other staff on a supervisor's management practices after she was transferred under protest. In dissent, Brennan J held that all the matters were of public concern and should therefore be protected by the
First Amendment •
Rankin v. McPherson, 483 U.S. 378 (1987) 5 to 4, a Texas deputy constable had a First Amendment right to say, after the assassination attempt on
Ronald Reagan "Shoot, if they go for him again, I hope they get him." Dismissal was unlawful and she had to be reinstated because even extreme comments (except potentially advocating actual murder) against a political figure should be protected. She could not be fired for merely exercising a right in the Constitution. •
Waters v. Churchill, 511 U.S. 661 (1994) 7 to 2, a public hospital nurse stating, outside work at dinner, that the
cross-training policies of the hospital were flawed, could be dismissed without any violation of the
First Amendment because it could be seen as interfering with the employer's operations •
Garcetti v. Ceballos, 547 U.S. 410 (2006) 5 to 4, no right against dismissal or protected speech when the speech relates to a matter in one's profession •
Employee Polygraph Protection Act (1988) outlawed the use of lie detectors by private employers except in narrowly prescribed circumstances •
Whistleblower Protection Act (1989) •
Huffman v. Office of Personnel Management, 263 F.3d 1341 (Fed. Cir. 2001) • ''
O'Connor v. Ortega'', 480 U.S. 709 (1987) searches in the workplace •
City of Ontario v. Quon, 130 S.Ct. 2619, (2010) the right of privacy did not extend to employer owned electronic devices so an employee could be dismissed for sending sexually explicit messages from an employer owned pager. •
Heffernan v. City of Paterson, 578 US __ (2016) ==Workplace participation==