Chapter 19 · Legal Controls over Employment
Why governments protect employees against discrimination and low pay—and how these laws affect businesses.
Learning objectives
- Understand equal-opportunities legislation and its impact on businesses.
- Explain forms of discrimination related to gender, race, religion, disability, sexual orientation and age.
- Understand minimum-wage legislation and evaluate its costs and benefits to businesses.
Legal Controls over Employment
Governments introduce employment legislation to protect workers from unfair treatment and exploitation. Without legal safeguards, some employers might pay excessively low wages, create unsafe working conditions, dismiss staff unfairly or refuse jobs and promotions because of personal characteristics rather than ability.
This chapter focuses on two important areas: equal opportunities at work and minimum-wage legislation. Both may protect employees and also influence how businesses recruit, pay, train, manage and retain staff.
- Employees: may gain fairer access to employment, training, promotion and pay.
- Businesses: need suitable procedures, fair decisions and compliance checks; failures may lead to disputes, compensation, fines or damaged reputation.
- Governments: may use employment laws to reduce unfairness, poverty and exploitation.
In a historical 2014 case, two restaurants near Brisbane were found responsible for age discrimination involving an older employee. The case resulted in a reported award of about A$30,000, illustrating the financial and reputational consequences of ignoring employees’ rights.
Important: laws vary between countries and change over time. Older legal cases and legislation discussed below are historical and should not be assumed to reflect every law currently in force.
What Are Equal Opportunities?
Equal opportunities means that applicants and employees should be assessed fairly, especially on relevant ability, qualifications, performance and experience—not on unrelated personal characteristics. Businesses should use objective criteria when advertising vacancies, selecting applicants, deciding pay, offering training and promoting workers.
Areas commonly protected by employment law include gender, race and religion, disability, sexual preference and age. The older term “sexual preference” is generally now referred to as sexual orientation.
Gender
Gender discrimination occurs where an employer treats someone less favourably because of their gender. Examples include unequal access to promotion and unexplained differences in earnings. A difference in average pay between groups does not by itself establish discrimination in every individual case, but may prompt further investigation.
- Use gender-neutral job titles and recruitment adverts.
- Recruit, promote and offer training using job-related skills and performance.
- Provide equal pay for equal or comparable work as required by applicable law.
- Avoid wording in job descriptions or person specifications that unjustifiably excludes a gender.
Historical UK legislation includes the Sex Discrimination Act 1975 and Equal Pay Act 1970. These are historical examples; the UK’s principal present-day framework is different, so students should not treat those older statutes as current stand-alone legal advice.
Race and Religion
Businesses should not select, dismiss or disadvantage workers unfairly because of race, colour, ethnic origin, nationality or religious belief. This includes avoiding biased selection tests and unfair treatment relating to religious dress or festivals. Fair policies can also reduce harassment and workplace conflict.
- Make recruitment and assessment decisions using consistent criteria.
- Avoid unnecessary restrictions on religious clothing or practices.
- Consider reasonable arrangements for religious observance where practicable and legally required.
- Provide equality and anti-harassment training to managers and employees.
Differences in unemployment rates between groups should be investigated carefully, but such figures alone do not prove that every difference results from employer discrimination.
A 2014 Canadian tree-planting case concerned unfair treatment of African workers. It reports poor conditions, discriminatory treatment and compensation ordered by a tribunal. The case illustrates why employers need fair pay systems, safe working conditions and a clear response to racial harassment.
Disability
Employers should avoid disadvantaging a worker or applicant because of a disability. Where required, they should make reasonable adjustments to help the person perform the job and participate fairly in working life.
- Improve access with ramps or suitable door widths.
- Provide adapted equipment or accessible software.
- Adjust training arrangements or allow appropriate time for treatment and medical appointments.
- Ensure managers understand employees’ individual support needs rather than making assumptions.
The UK Equality Act 2010 protects workers against disability discrimination. In a historical employment case, a Starbucks worker with dyslexia was disciplined after making errors in workplace records. The example shows why employers should consider reasonable adjustments before penalising employees for disability-related difficulties.
In a 2016 employment case, an employee with dyslexia was accused of falsifying fridge-temperature records after making mistakes. A tribunal found she had been discriminated against and that suitable adjustments had not been made. Businesses should investigate individual needs and adapt processes where appropriate.
Sexual Preference
Discrimination connected with sexual orientation can affect employment decisions. Employees should not experience harassment or unfair decisions about recruitment, pay, promotion, training or dismissal because of their orientation. Laws vary by jurisdiction, and examples involving particular laws should always be checked for current applicability.
An employer can reduce risks by setting clear conduct rules, maintaining confidential reporting procedures and applying the same performance criteria to everyone.
Age
Age discrimination arises when workers or applicants are rejected, denied training, overlooked for promotion or dismissed because of age rather than relevant ability. For example, describing a qualified older applicant as “too old” without a job-related reason may be discriminatory.
- Do not advertise arbitrary upper or lower age limits unless there is a lawful and justified reason.
- Judge experience and suitability individually, without stereotypes.
- Offer promotion and training fairly across age groups.
- Ensure employees have ways to report age-related harassment.
The historical Australian restaurant case at the start of the chapter shows that age-related assumptions can result in legal action. The overall message is that recruitment and promotion should be based on suitability for the role.
Why compliance matters: discriminatory practices may result in disputes, legal expense, lower staff morale, loss of capable employees and conflict between colleagues. Fair procedures can strengthen trust and widen the pool of potential recruits.
Check your understanding · Halfway
Answer each question before opening the suggested answer.
What is meant by equal opportunities in employment?
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Workers and applicants should be assessed fairly on relevant skills, qualifications, experience and performance, without unjustified discrimination because of personal characteristics.
Give two examples of practices that could amount to gender discrimination.
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For example, refusing to interview suitably qualified applicants because of gender, or denying training and promotion because of gender.
Why might a firm need to provide adapted equipment for a worker with a disability?
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Reasonable adjustments can remove work-related barriers and allow the employee to carry out duties fairly and effectively; they can also help the firm comply with applicable law.
What does the historical Brisbane restaurant case illustrate about age discrimination?
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An older worker was treated unfairly because of age, leading to a legal ruling and an award of approximately A$30,000, in this historical example.
Why should managers avoid judging candidates by ethnicity rather than job-related skills?
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Such decisions may be discriminatory and can exclude qualified workers. Consistent selection criteria help businesses recruit fairly and reduce legal and reputational risks.
Give two business consequences of discriminatory recruitment or promotion practices.
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Possible consequences include legal expenses or compensation and reduced employee morale; other valid examples include losing talented applicants or workplace conflict.
Minimum Wage Laws
A minimum wage is a legally established minimum hourly or other applicable rate of pay. It prevents employers from paying covered workers below the legal threshold. Some countries have different rules for particular age groups or trainees, and penalties can apply when employers pay too little.
Reasons for a Minimum Wage
Governments may introduce minimum-wage legislation for three main reasons:
- Benefit disadvantaged workers: raise the income of workers on low wages and support fairer earnings.
- Reduce poverty: increase the take-home earnings of low-paid households, although the total effect depends on hours worked and employment.
- Help businesses: potentially improve motivation, retention and productivity when workers receive higher pay.
Higher earnings may also allow workers to spend more, supporting demand for other businesses’ goods and services.
Minimum-wage changes can affect different groups of workers differently, depending on their existing pay, hours and employment patterns. The effect on an individual business depends on how many employees earn below the new rate.
If a covered employee currently receives US$9 an hour and a new legal minimum is US$14, hourly pay must rise by US$5. At 40 paid hours per week, that is US$200 more per week, before considering other employer costs.
A legal minimum wage is not necessarily the same as a living wage estimate, and statutory rates are different across countries. Always check the applicable rules for a real business decision.
Effects of Minimum Wage Laws on Businesses
A new or higher minimum wage can have costs and benefits. The size of the impact depends on the number of affected workers, the size of the pay increase, productivity, and whether the business can adjust prices or its methods of production.
Cost and Employment Effects
- Higher wage bills: firms paying below the new minimum must increase the affected workers’ pay.
- Pressure on prices and profit: if productivity and selling prices stay unchanged, the extra cost can reduce profit margins.
- Changes in employment: some employers may reduce hours or recruitment, although this is not inevitable and depends on business conditions.
- Changes in production: businesses may look for labour-saving technology or alter where work is performed, but not all services can be automated or outsourced.
It is also possible that a successful business may keep staff and meet stronger customer demand even after wage rates rise. Therefore, employment effects should be evaluated rather than assumed.
Possible Business Benefits
- Motivation and productivity: better-paid employees may work more effectively.
- Staff retention: fewer employees may leave, lowering recruitment and training costs.
- Reliability: improved pay may help reduce absence and support consistent service.
- Customer demand: low-paid customers with more income may buy more products.
A business employs 1,340 workers, each paid US$9 per hour for 40 hours per week and 52 weeks per year. A new minimum of US$14 per hour adds US$5 per hour. Annual additional basic pay = 1,340 × 40 × 52 × US$5 = US$13,936,000, assuming the same staff numbers and hours.
This result measures the change in direct wages for the stated workers. It does not include possible changes in staffing, overtime, employer contributions, productivity or prices.
Potential disadvantages
- Higher labour expenses.
- Pressure on profit margins.
- Possible reductions in hours or hiring.
- Need to review operations and prices.
Potential advantages
- Better morale and staff retention.
- Potential productivity improvements.
- Greater spending power for some customers.
- More predictable minimum pay standards.
Large vs Small Businesses
Remember that businesses of all sizes must take discrimination seriously. A small firm may have only a handful of employees, making the composition of its workforce look different from that of a large company; this does not justify unfair decisions about individual workers. The relevant question is whether employment choices were lawful and based on fair criteria.
Large businesses
- Often have specialist human resources teams and formal equality policies.
- May spread compliance and training costs across many workers.
- Employing many low-paid people can make minimum-wage increases expensive in total.
Small businesses
- Owners may manage recruitment and employment rules personally.
- Have fewer resources for legal advice and staff training.
- A single dispute or wage increase can have a significant effect on cash flow.
Balanced judgement: legal controls offer essential protection for employees. The costs of compliance and higher minimum wages vary between firms, while fair treatment, stronger morale and improved retention may benefit both employees and businesses.
End-of-chapter questions
Answer each question before opening the suggested answer.
Define a legal minimum wage and state one reason governments may introduce it.
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It is the lowest pay rate an employer may legally pay a covered worker. Governments may use it to support disadvantaged workers, reduce poverty or improve fairness.
Explain the difference between equal opportunities and identical treatment.
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Equal opportunities requires fair access and assessment. Different workers may need reasonable adjustments, for example accessible software, so giving everyone identical arrangements is not necessarily fair.
Outline two measures a business can use to prevent discrimination linked to religion or ethnicity.
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Use consistent job-related recruitment criteria, allow appropriate religious observance where practicable and required, train staff about harassment and provide a fair complaints procedure.
How could an employer accommodate a worker with hearing or sight difficulties?
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The employer could provide suitable adapted computers, software, communication equipment or training arrangements, depending on the worker’s needs.
Explain why age-based recruitment restrictions may harm a business.
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They may unlawfully exclude capable candidates, reduce the skills available to the firm, damage reputation and lead to disputes or compensation.
Why might a minimum-wage increase affect part-time workers and full-time workers differently?
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The impact depends on their current hourly pay and the number of paid hours. A worker already earning above the new minimum may not receive a rise, while an affected worker gains a higher hourly rate.
A shop pays an employee US$9 hourly for 40 hours a week. How much more would the employee earn per week if pay increased to US$14, assuming hours stay unchanged?
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The increase is US$5 per hour. US$5 × 40 = US$200 more each week.
Calculate the annual additional basic wages for a business with 1,340 employees, each working 40 hours for 52 weeks, if hourly pay rises from US$9 to US$14.
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1,340 × 40 × 52 × (14 − 9) = US$13,936,000 extra basic wages per year, assuming unchanged hours and employment.
Analyse one possible disadvantage of a large increase in the minimum wage to a labour-intensive firm.
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Its wage bill may rise significantly. If it cannot improve productivity or charge higher prices, its profit margin may fall, possibly affecting investment or staffing decisions.
Explain two ways an increase in the minimum wage might benefit businesses.
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Higher pay may improve morale and reduce labour turnover, saving recruitment costs. It may also increase the spending power of low-paid customers, increasing demand for some products.
Evaluate whether a minimum-wage increase is likely to harm every small business.
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No. A small business with many low-paid workers may face pressure on costs, but one paying above the new rate might be little affected. Better motivation, retention or stronger customer spending could offset some costs. The effect depends on staff numbers, pay rates, productivity and demand.
Chapter 19 recap
Employment legislation aims to protect workers against unfair discrimination and pay below an applicable minimum wage. Employers should choose, train and reward workers fairly, make appropriate adjustments where required, and understand that wage laws can bring both higher costs and potential benefits through motivation and retention.
Independent revision notes and questions for Pearson Edexcel International GCSE Business (9–1). Legal examples and data are historical and jurisdiction-specific; this page is not legal advice.