Laws Impacts on Business and Its Costs Research Paper

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laws that affect business, pertaining to the issues of employment, health and safety, unions, discrimination, privacy and job security. These laws guide how businesses should conduct themselves in the human resources function, setting constraints on employer behavior. This paper will outline a number of these laws with respect to how they affect the employer.

Employment and Discrimination

There are several laws that fall into the category of civil rights laws. The base law is the Civil Rights Act of 1964, in particular Title VII. This clause established the Equal Employment Opportunity Commission and set out guidelines for equality in employment, providing protections on the basis of race, ethnicity, gender, color, religion or national origin (EEOC, 2013). Since the passage of the Civil Right Act the 1970s saw the passage of other acts that extended the protections of the CRA. These extensions applied to the disabled (Americans with Disabilities Act), on the basis of age (Age Discrimination in Employment Act) and now genetic information (Genetic Information Nondiscrimination Act) (EEOC, 2013).

Title VII has also been subject of numerous court cases that have refined its application in the workplace. One such case was University of Texas Southwestern Medical Center v Nassar, in which the Supreme Court found that the employee has to prove that the motivating factor test -- wherein discrimination is found to be a motivating factor in adverse action -- is only applicable to status-based discrimination and not to retaliation. This ruling basically gives employers an exclusion from the Civil Rights Act, since they can retaliate in any manner against an employee with impunity. Another decision was Vance v. Ball State University, wherein a definition of supervisor was specified by the Supreme Court. The supervisor must be one whose authority "primarily consists of the power to hire, fire, demote, promote, transfer or discipline an employee," but not someone who merely oversees the person's day-to-day work. This again opens the door wide for employers to skirt Civil Rights Act protections, using an alleged non-supervisor employee to conduct discrimination (Brill, Fant & Baddish, 2013). With the current composition of the Supreme Court, employers probably do not need to worry too much about discrimination, since they have been able to blatantly get away with it in these two cases. The court did affirm that employers will be liable for the actions of non-supervisory employees if the employer is on notice and negligent in failing to take steps to stop it, so employers need to ensure that they build enough separation between the official supervisor and the situation that the harassment can continue for an extended period before action needs to be taken. (Brill, Fant & Baddish, 2013).

Another issue for human resources departments is that of arbitration. In Circuit City v. Adams, the Supreme Court ruled in favor of arbitration under the Federal Arbitration Act. The ruling left a narrow definition of exemptions to the Act, specifically that it only applies to seamen, railroad workers and transportation workers. Other workers -- Adams was a sales counselor, so not engaged in transportation. It was found that his contract was subject to the Federal Arbitration Act (Zuckerman, n.d.). The Federal Arbitration Act requires that where parties have agreed to arbitrate, they must do so in lieu of going to court. Adams had an arbitration clause in his employment agreement.

There are new judgments every year on matters that relate to human resources, so it is important to follow these events in the human resources department. A larger company is recommended to have a full-time human resources lawyer to ensure that the company builds not only the up-to-date laws into its systems but the latest court rulings as well, particularly the Supreme Court rulings as those are essentially final. However, it is worth paying attention to lower court rulings as well. It should be noted that smaller companies who are not engaged in interstate commerce are more likely to be accountable to state laws, and only when a company has over 15 employees and engages in interstate commerce will be it subject to the body of federal laws.

There are other considerations for employers as well. For example, there are ethical issues and insurance costs associated with the legal environment. The recent Supreme Court cases that weaken Title VII are examples of a situation where there is hazard. While employers have been granted greater protections with these decisions, they must consider that there are ethical dimensions to such cases.

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The ability to skirt legal responsibility for discrimination on a technicality may be enshrined in law, but morally it is still wrong. It is just that the law is not overly concerned with right and wrong. For an employer, however, there is risk in walking anywhere near the line, not the least because the lines are so fine that it is easy to cross over them. Ethically, an employer may prefer to-based policies around a much stricter interpretation of Title VII protections than the law allows, not the least of which is because litigation is expensive.

Schooler (2013) notes that employers can acquire employment practices liability insurance (EPLI), that protects the company against a broad range of discrimination and harassment claims. While it is nice to know that there is an option for such insurance, companies can lower the cost of insuring against employment litigation by having strong policies, procedures and training programs in place to reduce the likelihood of legal action in the first place. Working with the insurance company to lower the cost of insurance will allow the company to arrive at best practices for human resources functions.

Costs

For operating a business organization, there should not be any additional costs associated with following these laws. The laws have been in place for decades, and the underlying objective of the laws is to increase economic efficiency (Bagnestos, 2013). When companies discriminate against workers, they are essentially reducing the size of their talent pool or their potential talent pool . Maximum economic efficiency demands that all resources are utilized to their maximum potential, and in a perfectly free market that will be the case. The point of employment equity laws is to prevent individual business owners or managers from taking the overall economy away from the condition of efficiency because of their own prejudices. For the individual business, following these laws is not a cost be something that is beneficial, as the company will move closer to economic efficiency as well.

That the EEOC and individuals can litigate on discrimination issue provides an economic incentive for employers to act more rationally. When there is no such specific disincentive, employers may be tempted by their personal biases, but where such disincentive exists the employer may be compelled to behave more rationally, as an agent of the corporation's owners. This is especially true of human resources departments, in that they must act in accordance with their roles as agents of the shareholders and seek to maximize the economic value of the firm. This means, among other things, taking actions to remain within the law, to minimize the risk of discrimination lawsuits and to maximize the efficient deployment of human resources within the organization.

Consumers

For consumers, there are no discernable impacts. Such impacts would be highly theoretical in nature, and proving impacts would rely on comparative studies of the pre- and post-1964 periods, controlled for other factors that affect the cost and availability of goods. It would be quite surprising to see such a study in existence.

On the theoretical level, consumers should benefit from employment equity legislation. Rational firms will operate within the confines of the law. As such, they will experience a higher level of economic efficiency. The result of this will be that the company will have a bigger labor pool from which to draw talent, and this should lower the overall cost of talent.

Moreover, as more people in society are given opportunities to engage in meaningful employment, and as that employment more closely aligns with their skill sets, society benefits because the total economic output is going to be greater. With a greater economic output at a lower cost, total economic efficiency should be the natural outcome of employment equity laws. Again, this is difficult to prove without excluding other factors such as the evolution of technology, but worker productivity has increased steadily over the past few decades since employment equity laws were first put into place.

Thus, consumers should theoretically benefit from this legislation. These benefits will be partially offset at least by the fact that average wages should be suppressed with this legislation as part of the trend towards greater efficiency in the deployment of human resources, but on the whole consumers and workers alike should both benefit from these laws......

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