legal implications

Legal Implications

Control

Looking at a business activity, comparing to what is supposed to be happening, and addressing any problems that are found.

Control

Controls give a manager ways to uncover and correct problems before they damage the business.

Controls can also provide the information necessary to improve business functions What activities in your life do you try to control?

Why Controls are Needed

Prevent CrisesStandardize outputsAppraise employee performanceUpdate plansProtect the organizations assets

Three Requirements for Control

Setting Standards Standard – outlines what is expected of the employee

or organizational unit. Monitoring PerformanceCorrecting Deviations


Monitoring Performance – gather data and detect problem areas. Should be monitored often enough that a problem will be caught quickly.

Fix the problem


Performance Deviations Faculty Planning Insufficient Communication Need for Training Lack of Motivation Unforeseen Forces

Correcting Deviations – Managers should address the cause of the problem rather than simply try to fix the symptoms

Assignment

Explain using the three requirements for control to explain how you can control your nine weeks and semester grade in this class Standard Monitor Performance Correct for Deviations

Types of Controls

Behavior Control – the monitoring of an employees behaviors through direct surveillance EX. Office internet use, monitoring of emails

Output Control – Monitoring based on the measurement of something that is produced by the employee or work unit

Timing of Control

Preliminary Control – designed to prevent problems from occurring

Concurrent Control – focused on thing that happen during the work process

Post-action control – detect problems after they occur

Tools for Control

BudgetsFinancial ControlsDirect ObservationsWritten ReportsAudits

Budgets

A numerical plan for allocating resources to specific activities.

Budgets can be used for a number of different areas or items. Expense Budget Profit Budget Cash Budget Capital Expenditure Budget Fixed Budget Variable Budget Incremental Budget

Types of Budgets

Profit Budget – used by separate units of an organization that combines revenue and expense to determine the units profit contribution

Cash Budget – forecasts how much cash an organization will have on hand and how much is needed to meet expenses

Types of Budgets

Expense Budget – lists the primary activities undertaken by a unit and allocates a dollar amount to each

Capital Expenditure Budget – forecasts investments in property, buildings, and major equipment

Types of Budgets

Fixed Budget – Assumes a fixed level of sales or production

Variable Budget – Takes into account those costs that vary with volume.

Approaches to Budgets

Incremental Budget – Allocates funds to departments according to previous period earnings

Zero-based Budget – Budget requests start from scratch regardless of previous appropriations

Zero-Based Budgeting

Some organizations use the same budget from the previous year, without considering changing circumstances.

Some circumstances to consider: Situation changes Cost reduction Decrease in demand Past year inefficiencies


Requires each Budget request be justified in detail.

Must show why the expense is necessaryEach activity must compete for a share of

available resourcesActivities:

Equipment upgrades Training for employees Employee compensation Raw materials


Advantages: Cost saving Elimination of unnecessary functions Ability to reevaluate projects each year

Disadvantages Difficulties in planning for multiyear projects Morale problems with agencies constantly fighting for

existence.

Budget Misuses

Budgets are an essential Business tool, but can be misused.

Problems to be discussed Inflexibility Budget being the primary goal Misplaced priorities

Inflexibility

Progress sometimes requires spending money.

On a budget, making $500 may be frowned upon due to the spending of $5 over budget.

Where in your life have you not spent money but lost the opportunity to make money?

Budget as Primary Goal

The budget should not be the primary goal of a business.

Each department should be primarily focused on its part in the organizations mission. Service to a group of customers or clients

Organizations should not exist only to get their paperwork to balance out at the end of the year.

Misplaced Priorities

Do not lose site of the main goals and objectives of the company itself.

Make the best decision for the success of the company in the long run rather than the numbers on a budget sheet.

Tools for Control


Financial Controls

Managers use Financial Info for control purposes Balance Sheets Income statements Financial ratios

Financial info is not meaningful out of context.

It must be compared to: Historical performance figures for a company Figures of another company

Usually will compare to an industry average

Financial Ratios

4 basic types of financial ratios:

Profitability Ratios Liquidity Ratios Debt Ratios Activity Ratios

Financial Ratios

Profitability ratio – indicates how efficiently the organization is being managed

Liquidity ratio – measures the ability to meet short term obligations. EX. Payroll, accounts payable

Financial Ratios

Debt ratio – indicates the ability to meet long term obligations

Activity ratio – measures how effectively the organization manages its basic operations

Tools for Control


Direct Observations

The observing of an employee by a manager with their own eyes and own opinions

Observation is necessary to get an accurate picture of an organization Can be time consuming Can be misinterpreted due to employees being on

their best behavior or the manager bringing a bias to the observation.

Direct Observation

What can a manager do to ensure that his or her visits are interpreted positively?

Make visits a common event Give notice to employees Engage employees in discussion of their work to make

it seem like the observation is not an inspection

Tools for Control


Written Reports

Management controls that may be prepared on a periodic or “necessary” basis.

Two basic types of written reports Informational Analytical

Written Reports

Informational Reports – Presents a series of facts

Analytical Reports – provides an interpretation of the facts they present.

Written Reports

Preparing a report is a multistep process: Planning what is to be done Collecting the facts Organizing the facts Interpreting the facts Writing the report

Reports should be prepared for the benefit of the reader, not the writer.

Tools for Control


Audits

A detailed look at an organizations financial or other practices

They see if accounting methods are: Fair Consistent In accordance with regulations and customary

practices

Audits

Audits can be external or internal

External audits are performed by outside accountants who examine a companies financial records

Internal audits are performed by members of an organization itself

Audits

Management audits look at areas other than finance and accounting Personnel procedures to ensure equal opportunity

laws

Mgt audits may be external or internal Internal is less expensive but have a greater risk of

bias

Workers and the Law

In the early twentieth century, companies had tremendous power over employees

Companies could Pay workers as little as they wanted Make them work under dangerous conditions Refuse to hire minorities Pay women less than men at the same job

Workers and the Law

In 1930’s, Congress and state legislatures wanted to help the average worker.

To protect and provide benefits to employees, and provide a better power balance between companies and workers, Employment Laws were formed.

Employment Laws

Regulates the relationship between companies and their workers. Gives workers significant rights and benefits Including working in a safe environment

There are strict penalties for companies who violate these laws Fines Loss of government contracts

Employment Laws

Companies must comply with 5 major employment laws:1. Equal Employment Opportunity Laws2. Occupational safety and health laws3. Wage-hour laws4. Benefits laws5. Labor relations laws

Employment Laws

In 1938, the Fair Labors Standards Act initially provided for a minimum wage of $0.25 per hour and a maximum work week of 44 hours. What are the total wages a person would earn in one week if they worked maximum hours?

Minimum wage now is $7.25 per hour. How much do you make in minimum work week? Maximum?

Do workers work harder now or in the past?

Equal Employment Opportunity laws

Prohibit companies from discriminating against workers.

1960’s was the height of the Civil Rights Movement

Civil Rights leaders spoke out about discrimination against African Americans and other minorities


Congress listened to civil rights leaders and passed 3 major EEO laws that protect workers from discrimination by companies:

Title VII of the Civil Rights Act of 1964 Age Discrimination in Employment Act Americans with Disabilities Act


Title VII of the Civil Rights Act of 1964 States companies cannot discriminate against an

employee because of race, color, religion, sex or national origin.

To enforce this act, they formed the Equal Employment Opportunity Commission (EEOC) EEOC can sue a company that discriminates against

an employee The employee may also take the company to court

Equal Employment Opportunity Laws

Title VII of the Civil Rights Act of 1964

In 1999, a California Superior Court awarded a supervisor at a public transit company $5.7 million because the company had discriminated against him on the basis of his national origin.

What examples can you think of where this may take place?


Age Discrimination in Employment Act States companies cannot discriminate against

employees because of their age. Cannot discriminate against workers due to age in:

Hiring Promotions Retirement

Workers may sue employers for discrimination based on age


In 1998, a 61-year old senior manager at Goodyear Tire and Rubber Company successfully sued the company for $2.1 million for age discrimination when it tried to force him to accept an early retirement.

In your opinion, Right or Wrong?


Age Discrimination in Employment ActDiscussion

A writer for a popular TV program about young adults lied about her age because the producers did not want to hire any writers over 30

What do you think of this hiring practice? Legal or Illegal?


Americans with Disabilities Act States companies cannot discriminate against any person with a

disability Companies cannot fire or refuse to hire people based on

disabilities or illness. Companies must also accommodate a workers disability

Disabilities include: Spinal cord injuries

Loss of limbsMultiple SclerosisMuscular DystrophyCerebral PalsyHearing, Speech, Visual, and Learning impairmentsHead injuriesPsychiatric disordersDiabetesAIDS


Americans with Disabilities Act In 1998, a court ruled that a supermarket could not

make a worker with a bad back lift or carry heavy boxes and had to find him less strenuous work.

Right or Wrong? What if you worked with this person?

Occupational Safety and Health Laws

Require employers and employees to comply with safety and health standards established by federal, state, and local governments.

Enforced by the U.S. Department of Labor’s: Occupational Safety and Health Administration OSHA


Sets standards for keeping workplaces clean and free of hazards Unsafe machinery Dangerous chemicals

Business must keep records of employee illness, injuries, and deaths and submit them to the U.S. Department of Labor


OSHA inspectors visit many workplaces each year to ensure they comply with regulations.

Employees may request OSHA visits the workplace if they feel it is not meeting regulations.

OSHA may issue Citations Written warnings Shutdown of the working environment until regulations are

met.


In 1999, utility workers in Florida bombarded OSHA with complaints following an explosion at Tampa Electric Company. OSHA responded by investigating these complaint. Companies are not allowed to retaliate against

workers who request an OSHA visitHelena laboratories in Beaumont, Texas had

to pay $137,100 in 1999 due to an employee requested visit that found workers being exposed to blood-related products without adequate protection.

Wage-Hour Laws

In 1938, Congress passed the Fair Labor Standards Act (FLSA).

Also Known as the Wage-Hour Law

Established minimum wage, overtime, and child labor standards for employees.

Wage-Hour Laws

Fair Labor Standards Act (FLSA) protects workers in three ways: Sets the minimum wage companies can pay their

workers Sets the number of hours per week workers can work

without receiving overtime pay Prohibits companies from employing children under

the age of 14 years old.

Wage-Hour Laws

Minimum Wage currently is $7.25 per hour

Overtime Pay is the regular amount someone is paid per hour plus half of that total added together. Time and a half.

Workers under the age of 18 must be off work by 10 p.m. to allow for the opportunity for attending school.

Benefits Laws

Guarantee that workers will receive certain benefits regardless of what happens to them on the job.

Benefits include: Vacation Sick leave Pensions Tuition assistance

Benefits Laws

Companies must comply with five different benefits laws: Social Security Act Employee Retirement Income Security Act (ERISA) Unemployment Insurance Laws Workers Compensation Laws Family and Medical Leave Act (FMLA)

Benefits Laws

Social Security Act The SS act of 1935 was designed to provide workers

and their families with income after retirement

Social security funds also support disabled workers and the federal Medicare programs Medicare provides health insurance for senior citizens

Benefits Laws

Social security (SS) defined: Workers and Employers share the cost of SS taxes

while the worker is employed. Every employee and employer must pay SS

When they retire, they receive a pension based on their lifetime earnings.

The spouse, children, and other dependents of a worker who dies can receive a portion of the benefits

Benefits Laws

Employee Retirement Income Security Act (ERISA) Protects the money put into an employee’s retirement

fund by companies and workers

Benefits Laws

Unemployment Insurance Laws

Both the SS act and the Federal Unemployment Tax Act provide workers with assistance during times of unemployment

Benefits Laws

Unemployment Insurance Laws To be eligible, workers must meet two requirements:

Must have lost their jobs through no fault of their own Must have worked a certain length of time

Employers must pay a certain amount into the unemployment fund for each worker The amt a worker receives is based on:

Length of Employment Salary

Benefits Laws

Workers Compensation Laws that insure workers against injury, illness, or

death because of job conditions

Each state has these laws Some state have employers pay into a special fund Some buy insurance from private companies

Benefits Laws

Workers Compensation Laws Employers are responsible for an employee’s on-the-

job injury, no matter how the injury or illness occurs Workers comp covers accidents even if it is the

workers fault

Payment will depend on a passed drug test If failed, all workers comp will be lost.

Benefits Laws

Family and Medical Leave Act (FMLA) Requires companies to allow up to 12 weeks of leave

to care for a child, spouse, or parent. The law only affects companies with 50 or more

employees Companies don’t have to pay salary during leave, but

must give them the job back upon return with no penalties.

Employers must also maintain health insurance during leave.

Why is there a need for this act?

Labor Relations Laws

Protects the right of employees to organize into unions to bargain collectively for better wages and working conditions.

Most important labor relation law is the: National Labor Relations Act (NLRA)


Union – Groups of workers who collectively bargain for rights such as higher wages and better working conditions.

Companies must bargain in “Good Faith”

Companies must at least listen to what unions have to say. They cannot dismiss the bargaining without at least making a counteroffer.


Things unions might bargain for: Wages Hours Conditions of Employment – safety

Things managers might bargain with: Sick leave Work rules Drug testing Layoffs Overtime Holiday bonuses Disciplinary procedures


Unions can be effective due to the right to STRIKE – stop working to get demands

A strike is a last resort when they see no other alternative

legal implications

Documents

budgetsincremental budget

production variable

concurrent control

previous year

problemthree requirements

correct problems

problem areas

specific activities