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50th Anniversary HR Magazine: How the Law Changed HR

HR Magazine, 50th Anniversary 2005Five decades of social upheaval and lawmakers response to it have stimulated radical change in the HR profession.

Fifty years ago, most employers did not yet view human resource management as a core business function, and few aspiring executives viewed HR as a desirable career path. Things certainly have changed. Today, most organizations consider HR professionals indispensable to their enterprise. HR officers, who often hold graduate degrees in human resource management, business or law, occupy the highest levels of management in most of the countrys largest employers.

Changes in societal values and norms and in workplace demographics led to dramatic changes in U.S. employment laws beginning in the 1960s. The proliferation of employment laws and regulations, in turn, stimulated the evolution of the HR profession. It has now become so difficult for even the most ambitious HR professional to master the alphabet soup of employment statutes and regulations that the trend toward specialization in the profession is increasing and is unlikely to let up.

Lets take a closer look at how five decades of labor and employment law developments have contributed to making the job of HR professional the multidisciplinary phenomenon that it is today and speculate a bit about what the future for the profession may hold.

1950s: Untamed Wilderness

During the 1950s, the typical American employee was a white male with a high school diploma. Women made up a third of the civilian workforce, and minorities made up only a tenth. Most employees worked blue-collar jobs; professional employees represented 18 percent of the labor force, while service-sector workers accounted for only 12 percent.

On the legal front, two overarching constructs characterized the American workplace: the presumption of at-will employment and the federally protected alternative of unionization. The only significant federal regulation of most employers consisted of the National Labor Relations Act (NLRA), which governs the rights of employees with respect to unionization and other collective activity, and the Fair Labor Standards Act (FLSA), which sets minimum wage and overtime requirements, among other things. Thus, in the absence of a labor union, employers had virtually unfettered discretion over most employment decisions.

Employers response to workforce changes wrought by World War II illustrates the extent of their freedom from regulation. During the war, the armed forces increased from 800,000 men in December 1940 to 12.3 million in June 1945. Women flooded the civilian workforce to alleviate labor shortages. As veterans, mostly male, returned to the workforce, however, employers often fired their female employees simply to create job openings for men. Making employment decisions based on sex, race or national originthe mere thought of which gives modern HR professionals the shakeswas commonplace. Without protective legislation, many employees turned to labor unions to represent their interests.

Management and labor established terms and conditions of employment bilaterally through collective bargaining and incorporated a just cause standard for discharge in most labor agreements.

By 1954, 35 percent of nonagricultural workers belonged to a unionthe highest proportion in American history. With the 1947 Taft-Hartley Act amendments to the NLRA, Congress attempted to curb what was perceived as excessive union power by leveling the playing field for employers and unions, but the changes did little in the short term to stunt union growth.

The union culture of the 1950s reflected the ethos of post-World War II America. Organized labors philosophy that workers were stronger when they banded together resonated in a country of war veterans who had witnessed the power of collective action while in the military, and who had been trained to protect and look out for their comrades in arms.

1960s: Civil Rights Comes to Work

The civil rights movement brought significant changes as societal pressures set the wheels in motion for using laws to drive social change and for using litigation to protect constitutional rights in voting, housing and employment. Several pieces of employment legislationthe first in decadeswere enacted to root out job discrimination in America.

  • In 1963, the Equal Pay Act prohibited employers from making gender-based distinctions in pay for equal work.
  • In 1964, Title VII of the Civil Rights Act prohibited discrimination in any aspect of employmentincluding hiring, wages, working conditions, promotions or terminationson the basis of race, color, sex, national origin or religion. Title VII also prohibits employers from retaliating against employees who oppose discrimination or participate in Title VII proceedings.
  • In 1967, the Age Discrimination in Employment Act (ADEA) made it unlawful for employers to discriminate against individuals age 40 and over in any aspect of employment.

New government entities, including the Equal Employment Opportunity Commission (EEOC), were created to eradicate job discrimination.

Compliance with the antidiscrimination laws required employers to devise more-sophisticated personnel policies and procedures both to ensure that they did not base employment decisions on prohibited criteria and to enable them to defend their decisions if challenged.

HR professionals became, perhaps unwittingly, pioneers in the frontier of a workplace cultural change that required training managers and supervisors to conform to the new legal mandates, developing policies for reporting and investigating discrimination claims, and validating tests and other selection criteria. Because of the importance of the new laws, and the potential penalties to employers found to have violated them, the HR function began to increase in importance and visibility.

1970s: Sex, Safety And Collective Actions

The 1970s saw the rise of the feminist movement and, once again, as society changed, the law evolved with it. In 1972, the U.S. Supreme Court ruled that the constitutional right to privacy includes an unmarried persons right to use contraceptives, and that Title IX of the Education Amendments banned sex discrimination in schools. In 1973, the high court ruled in Roe v. Wade that laws prohibiting abortion violate the Constitution. In 1978, the concept of sexual harassment first appeared in case law (though it was not firmly established until the Supreme Court ruled in Meritor Savings Bank v. Vinson in 1986).

One of the eras key pieces of legislation was the Pregnancy Discrimination Act of 1978 (PDA), passed in direct response to two Supreme Court decisions holding that pregnancy was not a disability for benefits purposes. The PDA amended Title VII to include discrimination based on pregnancy, childbirth or related medical conditions as a type of sex discrimination. No longer could an employer use pregnancy, or potential pregnancy, as the basis of employment decisions.

Workers safety and retirement security also captured congressional attention during the 1970s. The Occupational Safety and Health Act of 1970 sought to eliminate dangerous conditions in the workplace and required employers to take action to achieve safe and healthy working conditions. The Employee Retirement Income Security Act of 1974 (ERISA) contained federal standards for reporting and disclosure of employee benefits plan information, plan participation, vesting, funding, benefits accrual and fiduciary responsibility. Recognizing that compliance with these two new complex laws required the attention of specialists, many companies created separate safety and benefits groups in their HR departments.

Class-action lawsuits over employment law issues also began to pick up steam during the 1970s, a trend thats still going strong 30 years later. Historic class actions, such as the 1971 Griggs v. Duke Power, put employers on notice that individual discrimination suits were not an employers only risk. Failure to properly validate tests and other objective measures of performance could result in costly lawsuits involving hundreds or even thousands of employees.

1980s: Layoffs And Individual Rights

Changes in workforce demographics and the passage of antidiscrimination laws had contributed to a steady decline in American unionism during the 1960s and 1970s, and the trend accelerated in the 1980s. On Aug. 3, 1981, almost 13,000 air traffic controllers went on strike after months of negotiations with the federal government. Forty-eight hours after the walkout, President Reagan fired the 11,350 air traffic controllers who disobeyed orders to return to work, sending a clear and symbolic message that the era of labor union strength was officially over.

The 1980s became a period of deep uncertainty for American workers when, by mid-decade, major companies began to experience mass layoffs. Worker concerns about job security intensified after the stock markets Black Monday in 1987, when the Dow Jones Industrial Average fell more than 22 percent in a single day and triggered a downturn in the U.S. economy that would continue through the early 1990s.

Congress responded by passing two important laws to protect laid-off workers. The Consolidated Omnibus Budget Reconciliation Act of 1986 (better known by its acronym, COBRA) required covered employers to offer employees who had lost their employer-provided medical coverage the opportunity to continue coverage for up to 18 months at the employees expense. The Worker Adjustment and Retraining Notification Act obligated covered employers to give employees 60 days notice of impending mass layoffs or plant closings.

But perhaps the greatest legacy of the 1980s was the emergence of the individual rights movement. The decade saw substantial erosion of the at-will doctrine, as new worker protections developed not through legislation or organized labors collective action, but rather through employment-related litigation. During this period, courts carved out exceptions to the employment-at-will doctrine by, for example, prohibiting terminations in violation of public policy, permitting employees to bring claims based on representations made in employment handbooks, and permitting claims based on the common-law doctrine of good faith and fair dealing.

As American workers struggled to adapt, HR professionals responsibilities continued to mushroom. Their departments were charged with managing large-scale reductions-in-force that were highly visible both within the corporation and in the larger business community. Increased foreign competition heightened the demand for more-flexible and productive workforces. CEOs expected their HR professionals to design training programs that would develop the new skills required of workers in a global economy.

HR professionals were also at the forefront of cooperative labor-management programssuch as quality circles and labor-management committeesdesigned to increase productivity by relying on line workers knowledge and ideas when re-engineering business processes.

1990s: Older Workers, Disability, Family Leave

The economy continued to battle through a recession as the 1990s opened. Significant corporate downsizing marked the first Bush administration, and the Gulf War further exacerbated difficult economic conditions, leaving older workers most vulnerable.

Responding to companies increasing use of early retirement incentives, Congress enacted the Older Workers Benefit Protection Act in 1990 to ensure that employers did not compel or pressure older workers into waiving their rights under the ADEA.

On the state level, after several courts held employers liable for the consequences of references they had provided for former employees (including the 1997 Supreme Court decision in Robinson v. Shell Oil), the Society for Human Resource Management proposed model legislation to exempt employers from liability for employee references as long as they provided accurate and unbiased information. By June 1998, 31 states had adopted this model legislation.

Congress passed the Americans with Disabilities Act (ADA) in 1990, making it illegal for employers to discriminate against any qualified individual with a disability who could perform the essential functions of the desired position, with or without reasonable accommodation.

In 1993, the Family and Medical Leave Act (FMLA) was enacted to guarantee employees up to 12 weeks unpaid leave in a 12-month period for the birth, adoption or foster-care placement of a child, to care for a spouse or an immediate family member with a serious health condition, or for the employees own serious health condition. Upon return from FMLA leave, employees had the right to the same or an equivalent position with equivalent pay, benefits, and other terms and conditions of employment.

Congresss 1991 amendment of Title VII to allow plaintiffs to seek compensatory and punitive damages and a jury trial invigorated the plaintiffs employment bar, a group of trial attorneys who devote their careers to suing employers under the employment discrimination statutes. In response to the proliferation of costly discrimination litigation, employers began to compel employees to resolve disputes through arbitration and other alternative dispute resolution mechanisms, such as mediation.

Employers reliance on arbitration to keep employee claims out of courtand away from unpredictable juriesitself has set off a wave of litigation over whether, when and how employers can require employees to waive their right to a jury trial.

21st Century: Where Are We?

Much has changed since the 1950s. Both unionsnow representing just 12.5 percent of the nonagricultural workforceand the at-will rule have receded in significance. And the workplace has evolved from being largely unregulated to being governed by myriad statutes, regulations and judicial precedentsboth federal and state.

Mobility of capital, intensified cost-cutting to remain competitive, the shift from a manufacturing to a service economy, growth in the number of women and minorities in the workforce, and increasing reliance on contingent workers all are features of the 21st century business environment.

Todays employers also cope with a measurable lack of employee loyalty (perhaps a backlash from decades of downsizing), causing them to rely increasingly on noncompete, trade secret and confidentiality agreements.

The 1991 amendments to Title VII stimulated a resurgence in litigation under 1960s employment lawsa trend that persists today.

Although single-plaintiff employment discrimination cases have increased significantly, employers major and well-foundedconcern today is the class-action lawsuit. In recent years, companies have paid hundreds of millions of dollars to resolve Title VII and FLSA disputes.

Complaints filed with the EEOC alleging sexual harassment have almost doubledto 13,136 in fiscal 2004 from 6,883 in 1991since Anita Hill testified in the confirmation hearings on Clarence Thomas nomination to the Supreme Court. Sex discrimination, of which sexual harassment is a large subset, is now the second most frequently alleged violation in EEOC charges.

Employers have responded by taking steps to deter harassment and to detect and remedy it promptly when it does occur. After the 1998 Supreme Court decisions in Faragher v. City of Boca Raton and Burlington Industries v. Ellerth, these measures also serve to minimize the likelihood that the employer will suffer liability for harassment.

Effective and well-maintained antidiscrimination policies and procedurestypically the responsibility of the human resource professionalare essential.

Whats Next?

What changes are HR professionals likely to see in the legal environment that will push them further along their evolutionary path?

Although neither scientists nor prophets, as mere lawyers well venture a few predictions.

  • The trend likely will continue of major collective action settlements under the FLSA. In fiscal 2003, the Department of Labor pursued more than 29,425 FLSA complaints, collecting $212.5 million in back wages.
  • We likely will see an increase in ADEA and ERISA issues corresponding to an aging American workforce and graying and retiring baby boomers. In 2004, approximately $4.3 trillion, or about a third of the total value of the nations retirement investments, was in private-sector, employer-provided plans that are regulated by ERISA.
  • In the second decade of the ADA, courts will continue to clarify who is protected by the statute and the extent of employers duty of reasonable accommodation.
  • In an attempt to reduce litigation costs, we likely will see continued use by employers of arbitration and other alternative dispute resolution procedures to resolve employment claims.
  • As the concept of the physical workplace becomes more fluid (work at home, Internet, etc.), employers must develop personnel policies to cover a workforce that spends less time in a worksite, and policies to address e-mail and Internet usage as they become the dominant form of communication for many employers.
  • With new interest in corporate transparency, whistle-blower laws like Sarbanes-Oxley will likely get more attention.
  • After the recent secessions of unions from the AFL-CIO, we may see a renaissance in union organizing, particularly through the use of corporate campaigns and neutrality agreements.
  • State and local legislative initiatives regarding employment issues are much more likely than federal legislation, especially in the areas of sexual orientation discrimination, domestic partner benefits and lactation rights.

The personnel administrators of the 1950s could not have predicted how drastically their field would evolve in the ensuing 50 years, and that an HR officer would occupy one of the most powerful and best-paid positions in virtually all of the largest companies.

But whatever the next 50 years may hold, one thing we are sure of is that jurisprudence will continue to contribute to the professions evolution.

Paul Salvatore and Daniel Halem are partners in New York, and Allan Weitzman is a partner in Boca Raton, Fla., in the labor and employment law practice group of Proskauer Rose LLP. Salvatore was a longtime member of the Society for Human Resource Managements former Employee and Labor Relations Committee and now is a member of its Labor Relations Special Expertise Panel. Weitzman also has served SHRM in several ways, including authoring SHRMs amicus briefs in landmark Supreme Court cases. Gershom Smith and Ian Schaefer, both Proskauer associates in New York, also contributed to this article.


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