employment law. federal anti-discrimination laws equal pay act (1963)equal pay act (1963)...

EMPLOYMENT LAW

Federal Anti-Discrimination LawsFederal Anti-Discrimination LawsFederal Anti-Discrimination LawsFederal Anti-Discrimination Laws

• Equal Pay Act (1963)Equal Pay Act (1963)– Prohibits wage discrimination based on gender for jobs that Prohibits wage discrimination based on gender for jobs that

require equal skill, effort, and responsibility and are require equal skill, effort, and responsibility and are performed under similar working conditions.performed under similar working conditions.

– Exceptions to equal pay:Exceptions to equal pay:• Bona fide seniority systemsBona fide seniority systems

• Quality of job performance (i.e., merit-based pay systems)Quality of job performance (i.e., merit-based pay systems)

• Quantity of output (i.e., piece-rate pay systems)Quantity of output (i.e., piece-rate pay systems)

• Factors (contingencies) other than sex (gender)Factors (contingencies) other than sex (gender)

• Equal Pay Act (1963)Equal Pay Act (1963)– Prohibits wage discrimination based on gender for jobs that Prohibits wage discrimination based on gender for jobs that

require equal skill, effort, and responsibility and are require equal skill, effort, and responsibility and are performed under similar working conditions.performed under similar working conditions.

– Exceptions to equal pay:Exceptions to equal pay:• Bona fide seniority systemsBona fide seniority systems

• Quality of job performance (i.e., merit-based pay systems)Quality of job performance (i.e., merit-based pay systems)

• Quantity of output (i.e., piece-rate pay systems)Quantity of output (i.e., piece-rate pay systems)

• Factors (contingencies) other than sex (gender)Factors (contingencies) other than sex (gender)


• Civil Rights Act (1964)Civil Rights Act (1964)– Title VII prohibits discrimination in employment based on Title VII prohibits discrimination in employment based on

race, color, religion, sex, and national origin.race, color, religion, sex, and national origin.– Covers conditions of employment: hiring, firing, promotion, Covers conditions of employment: hiring, firing, promotion,

transfer, compensation, and admission to training.transfer, compensation, and admission to training.– Applies to all private employers with 15 or more employees, Applies to all private employers with 15 or more employees,

state and local governments, educational institutions, state and local governments, educational institutions, employment agencies, and unions.employment agencies, and unions.

– Established the Equal Employment Opportunity Commission Established the Equal Employment Opportunity Commission (EEOC) to oversee and enforce Title VII and all other federal (EEOC) to oversee and enforce Title VII and all other federal labor laws.labor laws.

• Civil Rights Act (1964)Civil Rights Act (1964)– Title VII prohibits discrimination in employment based on Title VII prohibits discrimination in employment based on

race, color, religion, sex, and national origin.race, color, religion, sex, and national origin.– Covers conditions of employment: hiring, firing, promotion, Covers conditions of employment: hiring, firing, promotion,

transfer, compensation, and admission to training.transfer, compensation, and admission to training.– Applies to all private employers with 15 or more employees, Applies to all private employers with 15 or more employees,

state and local governments, educational institutions, state and local governments, educational institutions, employment agencies, and unions.employment agencies, and unions.

– Established the Equal Employment Opportunity Commission Established the Equal Employment Opportunity Commission (EEOC) to oversee and enforce Title VII and all other federal (EEOC) to oversee and enforce Title VII and all other federal labor laws.labor laws.


• Age Discrimination Act (1967)Age Discrimination Act (1967)– Prohibits employment discrimination against employees who Prohibits employment discrimination against employees who

are age 40 or older.are age 40 or older.– Prohibits the setting of mandatory retirement ages except in Prohibits the setting of mandatory retirement ages except in

cases of public safety (e.g., airline pilots).cases of public safety (e.g., airline pilots).– Amended 1990 by Older Workers Protection Act which Amended 1990 by Older Workers Protection Act which

prohibits discrimination in the provision of benefits and the prohibits discrimination in the provision of benefits and the required signing of age discrimination waivers at layoff.required signing of age discrimination waivers at layoff.

– Covers all employers including the federal government.Covers all employers including the federal government.

• Age Discrimination Act (1967)Age Discrimination Act (1967)– Prohibits employment discrimination against employees who Prohibits employment discrimination against employees who

are age 40 or older.are age 40 or older.– Prohibits the setting of mandatory retirement ages except in Prohibits the setting of mandatory retirement ages except in

cases of public safety (e.g., airline pilots).cases of public safety (e.g., airline pilots).– Amended 1990 by Older Workers Protection Act which Amended 1990 by Older Workers Protection Act which

prohibits discrimination in the provision of benefits and the prohibits discrimination in the provision of benefits and the required signing of age discrimination waivers at layoff.required signing of age discrimination waivers at layoff.

– Covers all employers including the federal government.Covers all employers including the federal government.


• Rehabilitation Act (1973)Rehabilitation Act (1973)– Prohibited discrimination by federal (but not private) Prohibited discrimination by federal (but not private)

contractors against handicapped applicants or employees.contractors against handicapped applicants or employees.– Definition of handicapped individuals:Definition of handicapped individuals:

• Persons with physical or mental impairment that substantially Persons with physical or mental impairment that substantially limits one or more major life activities.limits one or more major life activities.

• Persons with a history or record of such impairment.Persons with a history or record of such impairment.

• Persons regarded as having such an impairment.Persons regarded as having such an impairment.

– Handicapped individuals must be “otherwise qualified” to Handicapped individuals must be “otherwise qualified” to perform (with reasonable accommodation) the essential perform (with reasonable accommodation) the essential functions of the job (e.g., no blind bus drivers).functions of the job (e.g., no blind bus drivers).

• Rehabilitation Act (1973)Rehabilitation Act (1973)– Prohibited discrimination by federal (but not private) Prohibited discrimination by federal (but not private)

contractors against handicapped applicants or employees.contractors against handicapped applicants or employees.– Definition of handicapped individuals:Definition of handicapped individuals:

• Persons with physical or mental impairment that substantially Persons with physical or mental impairment that substantially limits one or more major life activities.limits one or more major life activities.

• Persons with a history or record of such impairment.Persons with a history or record of such impairment.

• Persons regarded as having such an impairment.Persons regarded as having such an impairment.

– Handicapped individuals must be “otherwise qualified” to Handicapped individuals must be “otherwise qualified” to perform (with reasonable accommodation) the essential perform (with reasonable accommodation) the essential functions of the job (e.g., no blind bus drivers).functions of the job (e.g., no blind bus drivers).


• Pregnancy Discrimination Act (1978)Pregnancy Discrimination Act (1978)– Prohibits employers from discriminating against pregnant Prohibits employers from discriminating against pregnant

employees by requiring pregnancy leaves and that pregnancy employees by requiring pregnancy leaves and that pregnancy be treated as any other medical disability.be treated as any other medical disability.

– Does not require reinstatement of returning employee to Does not require reinstatement of returning employee to same job.same job.

– Does not allow employer to determine dates of leave.Does not allow employer to determine dates of leave.– Employer cannot refuse to hire or promote on the basis of Employer cannot refuse to hire or promote on the basis of

pregnancy.pregnancy.– Employer cannot provide health plans that do not cover Employer cannot provide health plans that do not cover

pregnancy.pregnancy.

• Pregnancy Discrimination Act (1978)Pregnancy Discrimination Act (1978)– Prohibits employers from discriminating against pregnant Prohibits employers from discriminating against pregnant

employees by requiring pregnancy leaves and that pregnancy employees by requiring pregnancy leaves and that pregnancy be treated as any other medical disability.be treated as any other medical disability.

– Does not require reinstatement of returning employee to Does not require reinstatement of returning employee to same job.same job.

– Does not allow employer to determine dates of leave.Does not allow employer to determine dates of leave.– Employer cannot refuse to hire or promote on the basis of Employer cannot refuse to hire or promote on the basis of

pregnancy.pregnancy.– Employer cannot provide health plans that do not cover Employer cannot provide health plans that do not cover

pregnancy.pregnancy.


• American With Disabilities Act (1990)American With Disabilities Act (1990)– Prohibits all employers with 15 or more employees from Prohibits all employers with 15 or more employees from

discriminating against handicapped persons.discriminating against handicapped persons.– The courts have issued ambiguous and conflicting rulings on The courts have issued ambiguous and conflicting rulings on

“medical conditions”,“major life activities”, and what “medical conditions”,“major life activities”, and what constitutes a “disability.” Decisions are made on a case-by-constitutes a “disability.” Decisions are made on a case-by-case basis.case basis.

– Determination of “reasonable accommodation”:Determination of “reasonable accommodation”:• Cost of accommodation and resources of employerCost of accommodation and resources of employer

• Nature of the job and workplace safety issuesNature of the job and workplace safety issues

• Any relevant collective bargaining provisionsAny relevant collective bargaining provisions

• American With Disabilities Act (1990)American With Disabilities Act (1990)– Prohibits all employers with 15 or more employees from Prohibits all employers with 15 or more employees from

discriminating against handicapped persons.discriminating against handicapped persons.– The courts have issued ambiguous and conflicting rulings on The courts have issued ambiguous and conflicting rulings on

“medical conditions”,“major life activities”, and what “medical conditions”,“major life activities”, and what constitutes a “disability.” Decisions are made on a case-by-constitutes a “disability.” Decisions are made on a case-by-case basis.case basis.

– Determination of “reasonable accommodation”:Determination of “reasonable accommodation”:• Cost of accommodation and resources of employerCost of accommodation and resources of employer

• Nature of the job and workplace safety issuesNature of the job and workplace safety issues

• Any relevant collective bargaining provisionsAny relevant collective bargaining provisions


• Civil Rights Act (1991)Civil Rights Act (1991)– Extended Title VII coverage to federal employees.Extended Title VII coverage to federal employees.– Allows litigants to sue for compensatory and punitive Allows litigants to sue for compensatory and punitive

damages.damages.– Requires a heavier “burden of proof” on the part of employers Requires a heavier “burden of proof” on the part of employers

in rebutting claims of discrimination.in rebutting claims of discrimination.– Provided “extraterritorial enforcement” of federal labor laws in Provided “extraterritorial enforcement” of federal labor laws in

protecting U.S. employees on overseas assignments where protecting U.S. employees on overseas assignments where Title VII compliance does not violate local country laws.Title VII compliance does not violate local country laws.

• Civil Rights Act (1991)Civil Rights Act (1991)– Extended Title VII coverage to federal employees.Extended Title VII coverage to federal employees.– Allows litigants to sue for compensatory and punitive Allows litigants to sue for compensatory and punitive

damages.damages.– Requires a heavier “burden of proof” on the part of employers Requires a heavier “burden of proof” on the part of employers

in rebutting claims of discrimination.in rebutting claims of discrimination.– Provided “extraterritorial enforcement” of federal labor laws in Provided “extraterritorial enforcement” of federal labor laws in

protecting U.S. employees on overseas assignments where protecting U.S. employees on overseas assignments where Title VII compliance does not violate local country laws.Title VII compliance does not violate local country laws.


• Family and Medical Leave Act (1992)Family and Medical Leave Act (1992)– Requires employers to provide up to 12 weeks of unpaid Requires employers to provide up to 12 weeks of unpaid

leave for the birth, adoption, or serious illness of a child, leave for the birth, adoption, or serious illness of a child, family member, or the employee during a 12 month period.family member, or the employee during a 12 month period.

– Act only covers organizations with fifty or more employees.Act only covers organizations with fifty or more employees.– Employee must have been employed a minimum of 25 hours Employee must have been employed a minimum of 25 hours

per week or 1,250 hours yearly. Employees in top 10% of per week or 1,250 hours yearly. Employees in top 10% of employer’s salary range are not covered by the Act.employer’s salary range are not covered by the Act.

– Employer is required to continue employee’s group health Employer is required to continue employee’s group health coverage during leave.coverage during leave.

– Employee must be allowed to return to same/equivalent job.Employee must be allowed to return to same/equivalent job.

• Family and Medical Leave Act (1992)Family and Medical Leave Act (1992)– Requires employers to provide up to 12 weeks of unpaid Requires employers to provide up to 12 weeks of unpaid

leave for the birth, adoption, or serious illness of a child, leave for the birth, adoption, or serious illness of a child, family member, or the employee during a 12 month period.family member, or the employee during a 12 month period.

– Act only covers organizations with fifty or more employees.Act only covers organizations with fifty or more employees.– Employee must have been employed a minimum of 25 hours Employee must have been employed a minimum of 25 hours

per week or 1,250 hours yearly. Employees in top 10% of per week or 1,250 hours yearly. Employees in top 10% of employer’s salary range are not covered by the Act.employer’s salary range are not covered by the Act.

– Employer is required to continue employee’s group health Employer is required to continue employee’s group health coverage during leave.coverage during leave.

– Employee must be allowed to return to same/equivalent job.Employee must be allowed to return to same/equivalent job.

EEOC Enforcement of Federal LawEEOC Enforcement of Federal LawEEOC Enforcement of Federal LawEEOC Enforcement of Federal Law

• Burden of proof initially falls on the complainant Burden of proof initially falls on the complainant (employee) to demonstrate:(employee) to demonstrate:

– Disparate treatmentDisparate treatment in deliberate discrimination of a in deliberate discrimination of a “protected class” individual or“protected class” individual or

– Disparate (adverse) impactDisparate (adverse) impact as a result of the application of a as a result of the application of a standard or treatment applied to all individuals that results in standard or treatment applied to all individuals that results in differential outcomes or consequences for protected groups; differential outcomes or consequences for protected groups; usually demonstrated statistically using the four-fifths rule.usually demonstrated statistically using the four-fifths rule.

– Four-fifths Rule states that the selection rate for protected Four-fifths Rule states that the selection rate for protected class is not 80% of the selection rate for the majority class class is not 80% of the selection rate for the majority class then a then a prima facieprima facie case of adverse impact is established. case of adverse impact is established.

• Burden of proof initially falls on the complainant Burden of proof initially falls on the complainant (employee) to demonstrate:(employee) to demonstrate:

– Disparate treatmentDisparate treatment in deliberate discrimination of a in deliberate discrimination of a “protected class” individual or“protected class” individual or

– Disparate (adverse) impactDisparate (adverse) impact as a result of the application of a as a result of the application of a standard or treatment applied to all individuals that results in standard or treatment applied to all individuals that results in differential outcomes or consequences for protected groups; differential outcomes or consequences for protected groups; usually demonstrated statistically using the four-fifths rule.usually demonstrated statistically using the four-fifths rule.

– Four-fifths Rule states that the selection rate for protected Four-fifths Rule states that the selection rate for protected class is not 80% of the selection rate for the majority class class is not 80% of the selection rate for the majority class then a then a prima facieprima facie case of adverse impact is established. case of adverse impact is established.

EEOC Enforcement of Federal LawEEOC Enforcement of Federal LawEEOC Enforcement of Federal LawEEOC Enforcement of Federal Law

• Employers rebutting a discrimination case:Employers rebutting a discrimination case:– Must demonstrate job-relatedness of any criteria utilized in a Must demonstrate job-relatedness of any criteria utilized in a

selection process.selection process.– Can claim a bona fide occupational qualification (BFOQ) that Can claim a bona fide occupational qualification (BFOQ) that

requires the employee to possess a particular personal requires the employee to possess a particular personal characteristic or be a member of a particular group.characteristic or be a member of a particular group.

– Can use of a bona fide seniority system that was not set up to Can use of a bona fide seniority system that was not set up to intentionally discriminate against a protected class.intentionally discriminate against a protected class.

– Can claim “business necessity”; that the selection criteria are Can claim “business necessity”; that the selection criteria are essential for safe and efficient operations of the firm.essential for safe and efficient operations of the firm.

• Employers rebutting a discrimination case:Employers rebutting a discrimination case:– Must demonstrate job-relatedness of any criteria utilized in a Must demonstrate job-relatedness of any criteria utilized in a

selection process.selection process.– Can claim a bona fide occupational qualification (BFOQ) that Can claim a bona fide occupational qualification (BFOQ) that

requires the employee to possess a particular personal requires the employee to possess a particular personal characteristic or be a member of a particular group.characteristic or be a member of a particular group.

– Can use of a bona fide seniority system that was not set up to Can use of a bona fide seniority system that was not set up to intentionally discriminate against a protected class.intentionally discriminate against a protected class.

– Can claim “business necessity”; that the selection criteria are Can claim “business necessity”; that the selection criteria are essential for safe and efficient operations of the firm.essential for safe and efficient operations of the firm.

Affirmative ActionAffirmative ActionAffirmative ActionAffirmative Action

• Affirmative Action PlansAffirmative Action Plans– Require organizations to develop, implement, and maintain a Require organizations to develop, implement, and maintain a

program to make special efforts to insure that their workforce program to make special efforts to insure that their workforce is representative of the society where the business operates.is representative of the society where the business operates.

– Are Are requiredrequired for organizations with 100 or employees for organizations with 100 or employees andand with $50,000 or more in federal contracts.with $50,000 or more in federal contracts.

– Filed with the Department of Labor and monitored by the Filed with the Department of Labor and monitored by the Office of Federal Contract Compliance. Office of Federal Contract Compliance.

– Are considered temporary measures to correct the Are considered temporary measures to correct the “underutilization” of certain protected classes.“underutilization” of certain protected classes.

• Affirmative Action PlansAffirmative Action Plans– Require organizations to develop, implement, and maintain a Require organizations to develop, implement, and maintain a

program to make special efforts to insure that their workforce program to make special efforts to insure that their workforce is representative of the society where the business operates.is representative of the society where the business operates.

– Are Are requiredrequired for organizations with 100 or employees for organizations with 100 or employees andand with $50,000 or more in federal contracts.with $50,000 or more in federal contracts.

– Filed with the Department of Labor and monitored by the Filed with the Department of Labor and monitored by the Office of Federal Contract Compliance. Office of Federal Contract Compliance.

– Are considered temporary measures to correct the Are considered temporary measures to correct the “underutilization” of certain protected classes.“underutilization” of certain protected classes.

Sexual HarassmentSexual HarassmentSexual HarassmentSexual Harassment

• Supreme Court rulings:Supreme Court rulings:– Meritor Savings BankMeritor Savings Bank

• Sexual harassment is a form of sexual discrimination under Sexual harassment is a form of sexual discrimination under Title VII.Title VII.

– Oncale v. Sundowner Offshore ServicesOncale v. Sundowner Offshore Services• Same-sex harassment is actionable under Title VII.Same-sex harassment is actionable under Title VII.

• Sexual harassment (definition)Sexual harassment (definition)– is an individual’s clear rejection of an offensive and is an individual’s clear rejection of an offensive and

inappropriate (“unwelcome”) advance.inappropriate (“unwelcome”) advance.

• Supreme Court rulings:Supreme Court rulings:– Meritor Savings BankMeritor Savings Bank

• Sexual harassment is a form of sexual discrimination under Sexual harassment is a form of sexual discrimination under Title VII.Title VII.

– Oncale v. Sundowner Offshore ServicesOncale v. Sundowner Offshore Services• Same-sex harassment is actionable under Title VII.Same-sex harassment is actionable under Title VII.

• Sexual harassment (definition)Sexual harassment (definition)– is an individual’s clear rejection of an offensive and is an individual’s clear rejection of an offensive and

inappropriate (“unwelcome”) advance.inappropriate (“unwelcome”) advance.

Forms of Sexual HarassmentForms of Sexual HarassmentForms of Sexual HarassmentForms of Sexual Harassment

• Quid pro QuoQuid pro Quo– The promise or use of work-related benefits or threats to The promise or use of work-related benefits or threats to

bargain with or coerce an individual for sexual favors.bargain with or coerce an individual for sexual favors.

• Hostile working environmentHostile working environment– The presence (perceived or actual) of an offensive or The presence (perceived or actual) of an offensive or

threatening environment.threatening environment.

• Harassment standards used by the court:Harassment standards used by the court:– The “reasonable woman” test.The “reasonable woman” test.– Pattern of behavior (frequency and pervasiveness) or isolated Pattern of behavior (frequency and pervasiveness) or isolated

event/act of an individual.event/act of an individual.– Response of the organization to the complaint.Response of the organization to the complaint.

• Quid pro QuoQuid pro Quo– The promise or use of work-related benefits or threats to The promise or use of work-related benefits or threats to

bargain with or coerce an individual for sexual favors.bargain with or coerce an individual for sexual favors.

• Hostile working environmentHostile working environment– The presence (perceived or actual) of an offensive or The presence (perceived or actual) of an offensive or

threatening environment.threatening environment.

• Harassment standards used by the court:Harassment standards used by the court:– The “reasonable woman” test.The “reasonable woman” test.– Pattern of behavior (frequency and pervasiveness) or isolated Pattern of behavior (frequency and pervasiveness) or isolated

event/act of an individual.event/act of an individual.– Response of the organization to the complaint.Response of the organization to the complaint.

Sexual HarassmentSexual HarassmentSexual HarassmentSexual Harassment

PERFORMANCE MANAGEMENTAND FEEDBACK

10–19

Performance Management and Performance Management and FeedbackFeedback

Performance Management and Performance Management and FeedbackFeedback

• Organizations need broader performance measures Organizations need broader performance measures to insure that:to insure that:

– Performance deficiencies are addressed in a timely manner Performance deficiencies are addressed in a timely manner through employee development programs.through employee development programs.

– Employee behaviors are being channeled in the appropriate Employee behaviors are being channeled in the appropriate direction toward performance of specific objectives.direction toward performance of specific objectives.

– Employees are provided with appropriate and specific Employees are provided with appropriate and specific feedback to assist with their career development.feedback to assist with their career development.

• Organizations need broader performance measures Organizations need broader performance measures to insure that:to insure that:

– Performance deficiencies are addressed in a timely manner Performance deficiencies are addressed in a timely manner through employee development programs.through employee development programs.

– Employee behaviors are being channeled in the appropriate Employee behaviors are being channeled in the appropriate direction toward performance of specific objectives.direction toward performance of specific objectives.

– Employees are provided with appropriate and specific Employees are provided with appropriate and specific feedback to assist with their career development.feedback to assist with their career development.

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Training and DevelopmentTraining and DevelopmentTraining and DevelopmentTraining and Development

10–22

Who Evaluates?Who Evaluates?Who Evaluates?Who Evaluates?

• Problems with immediate supervisors conducting Problems with immediate supervisors conducting performance evaluations:performance evaluations:

– Lacking appropriate information to provide informed feedback Lacking appropriate information to provide informed feedback on employee performance.on employee performance.

– Insufficient observation of the employee’s day-to-day work to Insufficient observation of the employee’s day-to-day work to validly assess performance.validly assess performance.

– Lack of knowledge about the technical dimensions of a Lack of knowledge about the technical dimensions of a subordinate’s work.subordinate’s work.

– Lack of training or appreciation for the evaluation process.Lack of training or appreciation for the evaluation process.– Perceptual errors by supervisors that create bias or lack of Perceptual errors by supervisors that create bias or lack of

subjectivity in evaluations.subjectivity in evaluations.

• Problems with immediate supervisors conducting Problems with immediate supervisors conducting performance evaluations:performance evaluations:

– Lacking appropriate information to provide informed feedback Lacking appropriate information to provide informed feedback on employee performance.on employee performance.

– Insufficient observation of the employee’s day-to-day work to Insufficient observation of the employee’s day-to-day work to validly assess performance.validly assess performance.

– Lack of knowledge about the technical dimensions of a Lack of knowledge about the technical dimensions of a subordinate’s work.subordinate’s work.

– Lack of training or appreciation for the evaluation process.Lack of training or appreciation for the evaluation process.– Perceptual errors by supervisors that create bias or lack of Perceptual errors by supervisors that create bias or lack of

subjectivity in evaluations.subjectivity in evaluations.

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Perceptual Errors of RatersPerceptual Errors of RatersPerceptual Errors of RatersPerceptual Errors of Raters

• Halo EffectHalo Effect– Rater allows a single trait, outcome or consideration to Rater allows a single trait, outcome or consideration to

influence other measures of performance.influence other measures of performance.

• StereotypingStereotyping– Rater makes performance judgments based on employee’s Rater makes performance judgments based on employee’s

personal characteristics rather than the employee’s actual personal characteristics rather than the employee’s actual performance.performance.

• Recency ErrorRecency Error– Recent events and behaviors of the employee bias the rater’s Recent events and behaviors of the employee bias the rater’s

evaluation of the employee’s overall performance.evaluation of the employee’s overall performance.

• Halo EffectHalo Effect– Rater allows a single trait, outcome or consideration to Rater allows a single trait, outcome or consideration to

influence other measures of performance.influence other measures of performance.

• StereotypingStereotyping– Rater makes performance judgments based on employee’s Rater makes performance judgments based on employee’s

personal characteristics rather than the employee’s actual personal characteristics rather than the employee’s actual performance.performance.

• Recency ErrorRecency Error– Recent events and behaviors of the employee bias the rater’s Recent events and behaviors of the employee bias the rater’s

evaluation of the employee’s overall performance.evaluation of the employee’s overall performance.

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Perceptual Errors of Raters (cont’d)Perceptual Errors of Raters (cont’d)Perceptual Errors of Raters (cont’d)Perceptual Errors of Raters (cont’d)

• Central Tendency ErrorCentral Tendency Error– Evaluator avoids higher and lower ends of performance Evaluator avoids higher and lower ends of performance

assessment rating in favor of placing all employees at or near assessment rating in favor of placing all employees at or near the middle of the scales.the middle of the scales.

• Leniency or Strictness ErrorsLeniency or Strictness Errors– Evaluator’s tendency is to rate all employees either above Evaluator’s tendency is to rate all employees either above

(leniency) or below (strictness) their actual performance level.(leniency) or below (strictness) their actual performance level.

• Personal Biases and Organizational PoliticsPersonal Biases and Organizational Politics– Have a significant impact on the ratings employees receive Have a significant impact on the ratings employees receive

from their supervisors.from their supervisors.

• Central Tendency ErrorCentral Tendency Error– Evaluator avoids higher and lower ends of performance Evaluator avoids higher and lower ends of performance

assessment rating in favor of placing all employees at or near assessment rating in favor of placing all employees at or near the middle of the scales.the middle of the scales.

• Leniency or Strictness ErrorsLeniency or Strictness Errors– Evaluator’s tendency is to rate all employees either above Evaluator’s tendency is to rate all employees either above

(leniency) or below (strictness) their actual performance level.(leniency) or below (strictness) their actual performance level.

• Personal Biases and Organizational PoliticsPersonal Biases and Organizational Politics– Have a significant impact on the ratings employees receive Have a significant impact on the ratings employees receive

from their supervisors.from their supervisors.

10–25

What to Evaluate?What to Evaluate?What to Evaluate?What to Evaluate?

• Traits MeasuresTraits Measures– Are an assessment of how the employee fits with the Are an assessment of how the employee fits with the

organization’s culture, not what the employee actually does.organization’s culture, not what the employee actually does.

• Behavior-based measuresBehavior-based measures– Focus on what an employee does correctly and what the Focus on what an employee does correctly and what the

employee should do differently.employee should do differently.

• Results-based measuresResults-based measures– Focus is on accomplishments or outcomes that can be Focus is on accomplishments or outcomes that can be

measured objectively. Problems occur when results measured objectively. Problems occur when results measures are difficult to obtain, outside employee control, or measures are difficult to obtain, outside employee control, or ignore the means by which the results were obtained.ignore the means by which the results were obtained.

• Traits MeasuresTraits Measures– Are an assessment of how the employee fits with the Are an assessment of how the employee fits with the

organization’s culture, not what the employee actually does.organization’s culture, not what the employee actually does.

• Behavior-based measuresBehavior-based measures– Focus on what an employee does correctly and what the Focus on what an employee does correctly and what the

employee should do differently.employee should do differently.

• Results-based measuresResults-based measures– Focus is on accomplishments or outcomes that can be Focus is on accomplishments or outcomes that can be

measured objectively. Problems occur when results measured objectively. Problems occur when results measures are difficult to obtain, outside employee control, or measures are difficult to obtain, outside employee control, or ignore the means by which the results were obtained.ignore the means by which the results were obtained.

10–26

How to Evaluate?How to Evaluate?How to Evaluate?How to Evaluate?

• Absolute MeasurementAbsolute Measurement– Employees are all measured strictly by absolute performance Employees are all measured strictly by absolute performance

requirements or standards of their jobs.requirements or standards of their jobs.

• Relative AssessmentRelative Assessment– Employees are measured against other employees and Employees are measured against other employees and

ranked on their distance from the next higher to the next ranked on their distance from the next higher to the next lower performing employee.lower performing employee.

– Ranking allows for comparison of employees but does not Ranking allows for comparison of employees but does not shed light on the distribution of employee performance.shed light on the distribution of employee performance.

• Absolute MeasurementAbsolute Measurement– Employees are all measured strictly by absolute performance Employees are all measured strictly by absolute performance

requirements or standards of their jobs.requirements or standards of their jobs.

• Relative AssessmentRelative Assessment– Employees are measured against other employees and Employees are measured against other employees and

ranked on their distance from the next higher to the next ranked on their distance from the next higher to the next lower performing employee.lower performing employee.

– Ranking allows for comparison of employees but does not Ranking allows for comparison of employees but does not shed light on the distribution of employee performance.shed light on the distribution of employee performance.

10–27

Measures of EvaluationMeasures of EvaluationMeasures of EvaluationMeasures of Evaluation

• Graphic Rating ScalesGraphic Rating Scales

• Weighted ChecklistsWeighted Checklists

• Behaviorally Anchored Behaviorally Anchored Rating Scales (BARS)Rating Scales (BARS)

• Behavioral Observation Behavioral Observation Scales (BOS)Scales (BOS)

• Critical Incident MethodCritical Incident Method

• Management By Management By Objectives (MBO)Objectives (MBO)

• Graphic Rating ScalesGraphic Rating Scales

• Weighted ChecklistsWeighted Checklists

• Behaviorally Anchored Behaviorally Anchored Rating Scales (BARS)Rating Scales (BARS)

• Behavioral Observation Behavioral Observation Scales (BOS)Scales (BOS)

• Critical Incident MethodCritical Incident Method

• Management By Management By Objectives (MBO)Objectives (MBO)

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10–29

10–30

10–31

Behavioral Observation Scale (BOS)Behavioral Observation Scale (BOS)Behavioral Observation Scale (BOS)Behavioral Observation Scale (BOS)

10–32

Performance Management Systems Performance Management Systems GuidelinesGuidelines

Performance Management Systems Performance Management Systems GuidelinesGuidelines

• Feedback to employees must be specific rather Feedback to employees must be specific rather than general.than general.

• Feedback should come only from credible, Feedback should come only from credible, trustworthy sources.trustworthy sources.

• Feedback should be provided as soon as possible Feedback should be provided as soon as possible for maximum benefit.for maximum benefit.

• Performance measures must be based on clear, Performance measures must be based on clear, measurable goals.measurable goals.

• The performance system must involve a dialogue The performance system must involve a dialogue between the employee and the manager.between the employee and the manager.

• Feedback to employees must be specific rather Feedback to employees must be specific rather than general.than general.

• Feedback should come only from credible, Feedback should come only from credible, trustworthy sources.trustworthy sources.

• Feedback should be provided as soon as possible Feedback should be provided as soon as possible for maximum benefit.for maximum benefit.

• Performance measures must be based on clear, Performance measures must be based on clear, measurable goals.measurable goals.

• The performance system must involve a dialogue The performance system must involve a dialogue between the employee and the manager.between the employee and the manager.

10–33

Reading 10.1:Reading 10.1:Has 360 Degree Feedback Gone Amok?Has 360 Degree Feedback Gone Amok?


• Purposes of 360 Degree feedback systems:Purposes of 360 Degree feedback systems:– Furthering management and leadership development.Furthering management and leadership development.– Facilitating organizational change and improvement initiatives Facilitating organizational change and improvement initiatives

that allow the organization to become more open and that allow the organization to become more open and participative.participative.

– Expand the formal appraisal system by making feedback Expand the formal appraisal system by making feedback evaluative and linking it more with a manager’s or employee’s evaluative and linking it more with a manager’s or employee’s formal performance appraisal.formal performance appraisal.

• Purposes of 360 Degree feedback systems:Purposes of 360 Degree feedback systems:– Furthering management and leadership development.Furthering management and leadership development.– Facilitating organizational change and improvement initiatives Facilitating organizational change and improvement initiatives

that allow the organization to become more open and that allow the organization to become more open and participative.participative.

– Expand the formal appraisal system by making feedback Expand the formal appraisal system by making feedback evaluative and linking it more with a manager’s or employee’s evaluative and linking it more with a manager’s or employee’s formal performance appraisal.formal performance appraisal.

10–34



• Recommendations for increasing the likelihood Recommendations for increasing the likelihood that 360 feedback will benefit the organization:that 360 feedback will benefit the organization:

– Assign an internal consultant or champion to oversee the Assign an internal consultant or champion to oversee the process and hold that individual accountable for results.process and hold that individual accountable for results.

– Initial implementation should be on a limited basis to allow for Initial implementation should be on a limited basis to allow for an evaluation of the process using a pre-post test control an evaluation of the process using a pre-post test control group test design.group test design.

– Create a focus group to clearly identify effectiveness criteria Create a focus group to clearly identify effectiveness criteria measures that the organization values most highly and that measures that the organization values most highly and that will be used in the measurement process.will be used in the measurement process.

– Train all raters to avoid systematic rater errors.Train all raters to avoid systematic rater errors.

• Recommendations for increasing the likelihood Recommendations for increasing the likelihood that 360 feedback will benefit the organization:that 360 feedback will benefit the organization:

– Assign an internal consultant or champion to oversee the Assign an internal consultant or champion to oversee the process and hold that individual accountable for results.process and hold that individual accountable for results.

– Initial implementation should be on a limited basis to allow for Initial implementation should be on a limited basis to allow for an evaluation of the process using a pre-post test control an evaluation of the process using a pre-post test control group test design.group test design.

– Create a focus group to clearly identify effectiveness criteria Create a focus group to clearly identify effectiveness criteria measures that the organization values most highly and that measures that the organization values most highly and that will be used in the measurement process.will be used in the measurement process.

– Train all raters to avoid systematic rater errors.Train all raters to avoid systematic rater errors.

Copyright © 2002 South-Western. All rights reserved. 11–36

The Importance of CompensationThe Importance of CompensationThe Importance of CompensationThe Importance of Compensation

• Impacts an employer’s ability to attract and retain Impacts an employer’s ability to attract and retain employees.employees.

• Ensure optimal levels of employee performance in Ensure optimal levels of employee performance in meeting the organization’s strategic objectives.meeting the organization’s strategic objectives.

• Compensation’s componentsCompensation’s components– Direct compensation in the form of wages or salaryDirect compensation in the form of wages or salary

• Base pay (hourly, weekly, and monthly)Base pay (hourly, weekly, and monthly)

• Incentives (sales bonuses and or commissions)Incentives (sales bonuses and or commissions)

– Indirect compensation in the form of benefitsIndirect compensation in the form of benefits• Legally required benefits (e.g., Social Security)Legally required benefits (e.g., Social Security)

• Optional (e.g., group health benefits)Optional (e.g., group health benefits)

• Impacts an employer’s ability to attract and retain Impacts an employer’s ability to attract and retain employees.employees.

• Ensure optimal levels of employee performance in Ensure optimal levels of employee performance in meeting the organization’s strategic objectives.meeting the organization’s strategic objectives.

• Compensation’s componentsCompensation’s components– Direct compensation in the form of wages or salaryDirect compensation in the form of wages or salary

• Base pay (hourly, weekly, and monthly)Base pay (hourly, weekly, and monthly)

• Incentives (sales bonuses and or commissions)Incentives (sales bonuses and or commissions)

– Indirect compensation in the form of benefitsIndirect compensation in the form of benefits• Legally required benefits (e.g., Social Security)Legally required benefits (e.g., Social Security)

• Optional (e.g., group health benefits)Optional (e.g., group health benefits)


Equity TheoryEquity TheoryEquity TheoryEquity Theory

• Internal equityInternal equity– Fairness of pay differentials between different jobs in the Fairness of pay differentials between different jobs in the

organization can be established by job ranking, job organization can be established by job ranking, job classification, point systems and factor comparisons.classification, point systems and factor comparisons.

• External equityExternal equity– Fairness of organizational compensation levels relative to Fairness of organizational compensation levels relative to

external compensation is assessed by collecting wage and external compensation is assessed by collecting wage and salary information to guide in setting the organization’s pay salary information to guide in setting the organization’s pay strategy to lead, meet or lag labor market wages.strategy to lead, meet or lag labor market wages.

• Internal equityInternal equity– Fairness of pay differentials between different jobs in the Fairness of pay differentials between different jobs in the

organization can be established by job ranking, job organization can be established by job ranking, job classification, point systems and factor comparisons.classification, point systems and factor comparisons.

• External equityExternal equity– Fairness of organizational compensation levels relative to Fairness of organizational compensation levels relative to

external compensation is assessed by collecting wage and external compensation is assessed by collecting wage and salary information to guide in setting the organization’s pay salary information to guide in setting the organization’s pay strategy to lead, meet or lag labor market wages.strategy to lead, meet or lag labor market wages.


Equity Theory (cont’d)Equity Theory (cont’d)Equity Theory (cont’d)Equity Theory (cont’d)

• Individual EquityIndividual Equity– Fairness about pay differentials among individuals who hold Fairness about pay differentials among individuals who hold

the same job in the organization is established by using:the same job in the organization is established by using:• Seniority-based pay systems that reward longevity with the Seniority-based pay systems that reward longevity with the

organization.organization.

• Merit-based pay systems that reward employee performance.Merit-based pay systems that reward employee performance.

• Incentive plans that allow employees to receive part of their Incentive plans that allow employees to receive part of their compensation based on their job performance.compensation based on their job performance.

• Skills-based pay systems where compensation is based on Skills-based pay systems where compensation is based on employees possessing skills that the firm values.employees possessing skills that the firm values.

• Team-based pay plans that encourage cooperation and Team-based pay plans that encourage cooperation and flexibility in employees.flexibility in employees.

• Individual EquityIndividual Equity– Fairness about pay differentials among individuals who hold Fairness about pay differentials among individuals who hold

the same job in the organization is established by using:the same job in the organization is established by using:• Seniority-based pay systems that reward longevity with the Seniority-based pay systems that reward longevity with the

organization.organization.

• Merit-based pay systems that reward employee performance.Merit-based pay systems that reward employee performance.

• Incentive plans that allow employees to receive part of their Incentive plans that allow employees to receive part of their compensation based on their job performance.compensation based on their job performance.

• Skills-based pay systems where compensation is based on Skills-based pay systems where compensation is based on employees possessing skills that the firm values.employees possessing skills that the firm values.

• Team-based pay plans that encourage cooperation and Team-based pay plans that encourage cooperation and flexibility in employees.flexibility in employees.


Job Evaluation: Point System MethodJob Evaluation: Point System MethodJob Evaluation: Point System MethodJob Evaluation: Point System Method


Five Levels of the Compensable Factor “Technical Skills”


Job Evaluation MethodsJob Evaluation MethodsJob Evaluation MethodsJob Evaluation Methods


Legal Issues in CompensationLegal Issues in CompensationLegal Issues in CompensationLegal Issues in Compensation

• Title VII of Civil Rights Act of 1964Title VII of Civil Rights Act of 1964– Protects workers rights to fair treatment.Protects workers rights to fair treatment.

• Equal Pay Act of 1963Equal Pay Act of 1963– Requires equal pay for equal work.Requires equal pay for equal work.

• Comparable WorthComparable Worth– Argues that standards of equal pay for equal work should be Argues that standards of equal pay for equal work should be

replaced with the doctrine of equal pay for equal value.replaced with the doctrine of equal pay for equal value.– Objective, measurable data to support an assessment of the Objective, measurable data to support an assessment of the

value of different jobs is lacking.value of different jobs is lacking.– There is no basis in current law for the arguments of There is no basis in current law for the arguments of

comparable worth.comparable worth.

• Title VII of Civil Rights Act of 1964Title VII of Civil Rights Act of 1964– Protects workers rights to fair treatment.Protects workers rights to fair treatment.

• Equal Pay Act of 1963Equal Pay Act of 1963– Requires equal pay for equal work.Requires equal pay for equal work.

• Comparable WorthComparable Worth– Argues that standards of equal pay for equal work should be Argues that standards of equal pay for equal work should be

replaced with the doctrine of equal pay for equal value.replaced with the doctrine of equal pay for equal value.– Objective, measurable data to support an assessment of the Objective, measurable data to support an assessment of the

value of different jobs is lacking.value of different jobs is lacking.– There is no basis in current law for the arguments of There is no basis in current law for the arguments of

comparable worth.comparable worth.


Legal Issues in Compensation Legal Issues in Compensation (cont’d)(cont’d)

Legal Issues in Compensation Legal Issues in Compensation (cont’d)(cont’d)

• Fair Labor Standards Fair Labor Standards Act of 1938Act of 1938– Regulates the minimum Regulates the minimum

wagewage– Sets overtime policy (time Sets overtime policy (time

and one-half after forty and one-half after forty hours)hours)

– Establishes exempt Establishes exempt classes for managers and classes for managers and other professional other professional employees.employees.

• Fair Labor Standards Fair Labor Standards Act of 1938Act of 1938– Regulates the minimum Regulates the minimum

wagewage– Sets overtime policy (time Sets overtime policy (time

and one-half after forty and one-half after forty hours)hours)

– Establishes exempt Establishes exempt classes for managers and classes for managers and other professional other professional employees.employees.


Key Strategic Issues in Key Strategic Issues in CompensationCompensation

Key Strategic Issues in Key Strategic Issues in CompensationCompensation

• Determining compensation relative to the market.Determining compensation relative to the market.• Striking a balance between fixed and variable Striking a balance between fixed and variable

compensation.compensation.• Deciding whether or not to utilize team-based Deciding whether or not to utilize team-based

versus individual pay.versus individual pay.• Creating the appropriate mix of financial and non-Creating the appropriate mix of financial and non-

financial compensation.financial compensation.• Developing a cost-effective compensation program Developing a cost-effective compensation program

that results in high performance.that results in high performance.

• Determining compensation relative to the market.Determining compensation relative to the market.• Striking a balance between fixed and variable Striking a balance between fixed and variable

compensation.compensation.• Deciding whether or not to utilize team-based Deciding whether or not to utilize team-based

versus individual pay.versus individual pay.• Creating the appropriate mix of financial and non-Creating the appropriate mix of financial and non-

financial compensation.financial compensation.• Developing a cost-effective compensation program Developing a cost-effective compensation program

that results in high performance.that results in high performance.


Reading 11.1: Compensating TeamsReading 11.1: Compensating TeamsReading 11.1: Compensating TeamsReading 11.1: Compensating Teams

• Reasons for tailoring compensation to individuals:Reasons for tailoring compensation to individuals:– Motivation comes from within the individual as opposed to the Motivation comes from within the individual as opposed to the

group.group.– The development of skills and behaviors is an individual The development of skills and behaviors is an individual

undertaking.undertaking.– Fairness in dealing with teams does not mean equal pay for Fairness in dealing with teams does not mean equal pay for

all.all.– Team compensation is not a payoff but a means of nurturing Team compensation is not a payoff but a means of nurturing

behavior that benefits the team.behavior that benefits the team.

• Reasons for tailoring compensation to individuals:Reasons for tailoring compensation to individuals:– Motivation comes from within the individual as opposed to the Motivation comes from within the individual as opposed to the

group.group.– The development of skills and behaviors is an individual The development of skills and behaviors is an individual

undertaking.undertaking.– Fairness in dealing with teams does not mean equal pay for Fairness in dealing with teams does not mean equal pay for

all.all.– Team compensation is not a payoff but a means of nurturing Team compensation is not a payoff but a means of nurturing

behavior that benefits the team.behavior that benefits the team.


Reading 11.2:Reading 11.2:New Thinking for the New MillenniumNew Thinking for the New Millennium

Reading 11.2:Reading 11.2:New Thinking for the New MillenniumNew Thinking for the New Millennium

• Strategic approaches to may compensation (pay) Strategic approaches to may compensation (pay) systems more responsive:systems more responsive:

– Pay the personPay the person for individual worth (knowledge, skills and for individual worth (knowledge, skills and competencies) rather than for the value of a job they perform.competencies) rather than for the value of a job they perform.

– Reward excellenceReward excellence through a pay for performance through a pay for performance compensation that establishes a clear relationship between a compensation that establishes a clear relationship between a significant amount of pay and attainment of organizational significant amount of pay and attainment of organizational objectives.objectives.

– Individualize the pay systemIndividualize the pay system to give employees choices in to give employees choices in how they are rewarded and what reward they receive.how they are rewarded and what reward they receive.

• Strategic approaches to may compensation (pay) Strategic approaches to may compensation (pay) systems more responsive:systems more responsive:

– Pay the personPay the person for individual worth (knowledge, skills and for individual worth (knowledge, skills and competencies) rather than for the value of a job they perform.competencies) rather than for the value of a job they perform.

– Reward excellenceReward excellence through a pay for performance through a pay for performance compensation that establishes a clear relationship between a compensation that establishes a clear relationship between a significant amount of pay and attainment of organizational significant amount of pay and attainment of organizational objectives.objectives.

– Individualize the pay systemIndividualize the pay system to give employees choices in to give employees choices in how they are rewarded and what reward they receive.how they are rewarded and what reward they receive.

employment law. federal anti-discrimination laws equal pay act (1963)equal pay act (1963)...

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