Glossary: Employment Law

Small business owners should know the key employment law terms that could affect their business. This article provides a brief description of common employment law terms. For more helpful articles about state and federal labor laws, visit FindLaw's Employment Law and Human Resources section.

Age Discrimination in Employment Act (ADEA): A federal law that protects employees over 40 from employment discrimination based on age. An amendment raised the mandatory retirement age to 70.

Americans with Disabilities Act (ADA): A federal law that protects employees from discrimination on the basis of disability. This law also requires employers to make "reasonable accommodations" for their employees' disabilities.

At-will employment: A type of employment relationship in which there is no contractual agreement. Either party may end the employment relationship at any time for any reason, or no reason at all, without incurring a penalty.

Back pay: Money awarded in an employment lawsuit representing pay the employee should have received if their pay had not been reduced or they were not wrongly terminated.

Cafeteria plan: An employment benefits plan in which the employee selects benefits from a menu up to a specified dollar amount.

Collective Bargaining: Employees negotiate wages and hours as a group or union rather than individually. The National Labor Relations Act (NLRA) of 1935 guaranteed the right of labor unions and collective bargaining. Independent contractors and government employees are exempt from collective bargaining.

Comparable worth: A legal concept under which people who work similar jobs and are of similar worth to the employer deserve equal pay.

Constructive discharge: Terminating the employment where the employee quits due to intolerable working conditions. The employer is liable for wrongful termination.

Consolidated Omnibus Budget Reconciliation Act (COBRA): A federal law that requires employers to offer terminated employees the option to continue their health insurance coverage with the same benefits. The employee must pay the full premium.

Employee Assistance Program (EAP): A workplace program provided by the employer to assist employees in recovering from drug or alcohol abuse, emotional problems, job stress, marital discord, or workplace conflict.

Employee Stock Ownership Plan (ESOP): An employer-provided benefit that allows eligible employees to buy stock in the company under favorable terms.

Equal Employment Opportunity Commission (EEOC): The federal administrative agency that enforces discrimination laws in employment.

Equal Pay Act: A federal law that requires employers to pay the same wage to all employees who do the same work, regardless of gender.

Fair Labor Standards Act (FLSA): Federal laws which set minimum standards for state labor laws. The FLSA sets the federal minimum wage, exempt and nonexempt employees, and eligibility for overtime pay.

Family Medical Leave Act (FMLA): The federal law that requires certain employers to give time off to employees to take care of their own or a family member's illness or to care for a newborn or adopted child.

Front pay: Money awarded in an employment lawsuit representing pay the employee would have received at a higher rate or in a new position.

Garnishment of wages: Taking an amount an employee owes for child support or other judgment directly from their wages under a court order.

Hostile working environment: A work environment that is so charged with harassment or similar unwanted behavior it interferes with the ability to do one's job.

Implied contract: A contract based on statements or circumstances surrounding the conditions of employment rather than a specific written document.

Individual Retirement Account (IRA): A tax-deferred savings account into which a person can only contribute up to a certain amount each year.

Independent Contractor: A worker paid by a business to perform specific tasks but who is not an employee. An employer has less control over an independent contractor's schedule, location, and nature of the work.

Minimum wage: The lowest wage employers can pay per hour. The FLSA sets the federal minimum wage. State laws may set higher minimum wages but may not go below it.

Mitigation: Any action that reduces the harm done by an unlawful act. Action by an employee that will reduce the amount of damages resulting from an unlawful employment practice, such as obtaining new employment after a wrongful termination.

National origin discrimination: Discrimination based on an employee's country of birth or ethnicity.

Noncompetition agreement: A contract or part of a contract in which an employee promises not to work for a competing employer or set up a competing business during, or for a certain length of time after, the employment with the employer.

Occupational disease: An illness contracted by workplace conditions or functions which differs from an illness suffered by the general public. Occupational disease qualifies employees for workers' compensation.

Occupational Safety and Health Administration (OSHA): The federal agency in charge of creating and enforcing workplace safety regulations.

Overtime compensation: A higher rate of pay an employer must pay employees who work more than a certain number of hours in a day or week. Overtime, like minimum wage, is set by the Wage and Hour Division of the Department of Labor.

Restrictive Covenant: Also called a noncompetition covenant. A terminated employee agrees not to work for a competing employer or engage in a competitive business for a certain period of time. Restrictive covenants must be carefully written to avoid undue hardship and restraint of trade.

Sexual harassment: Unwelcome sexual advances by an employer or supervisor that become a condition of the employee's employment or represent a threat to the employee's continued employment. A hostile work environment arises when the demeaning or sexual atmosphere is so pervasive it creates an intimidating and offensive work environment.

Social Security: A federal program of retirement or disability payments created from an employee's payroll taxes.

Stock options: A type of retirement plan in which employees can purchase stock in their company.

Telecommuting: Working from home or another location remote from the office, using technology such as telephones and computers.

Title VII: Part of the federal Civil Rights Act of 1964 that prohibits discrimination in employment based on age, color, national origin, race, religion, or sex.

Tuition reimbursement: An employee benefit in which the employer pays all or part of the employee's tuition for coursework or training.

Whistleblower: The term for an employee who "blows the whistle" on an employer by reporting an employer's illegal action or practice to the authorities. Whistleblowers are entitled to protection under state and federal laws.

Worker Classification: Determining whether a worker is an employee or an independent contractor. Worker classification or status is important for tax purposes, benefits, and whether you must pay overtime.

U.S. Department of Labor (DOL): Branch of the federal government tasked with monitoring federal employment laws, enforcing labor laws, and creating and maintaining regulatory agencies.

Getting Legal Help

You should contact a local employment lawyer for advice if you have questions about these terms or other general questions or concerns about your business.