Legal And Ethical Issues In Hrm

Human resource management (HRM) is the strategic and coherent approach to the management of an organization's most valued assets — the people working there who individually and collectively contribute to the achievement of the objectives of the business. The Human Resources Management (HRM) function includes a variety of activities, and key among them is deciding the staffing needs of an organization and whether to use independent contractors or hire employees to fill these needs, recruiting and training the best employees, ensuring they are high performers, dealing with performance issues, and ensuring your personnel and management practices conform to various regulations. Activities also include managing your approach to employee benefits and compensation, employee records and personnel policies.

Wikipedia, defines ethics as

"…a study of values and customs of a person or a group. It covers the analysis and employment of concepts such as right and wrong, good and evil, and responsibility."

The names of the most recent corporate villains could fill this page, and now they are going to jail! The questioning of their actions could fill a library, and their actions do imperil a nation; truly a world epoch as been soundly shaken. Throughout the history of the United States, businessmen and, recently women, have been called to task. As a nation we are increasingly divided about market capitalism and free enterprise. Over the past twenty years we have seen deregulation come, and now the pendulum swings the other direction yet again. A famous Chinese curse reads: May you live in interesting times!

No times are more challenging and interesting than the one’s we live! And within today’s business arena, ethics are both important and vital if one is to succeed over the long haul.

The complexities of business and our human/social society makes corporate ethics a very interesting study. To a practicing manager in the working world today, this becomes critically important, especially if they don’t get it! And many obviously have not and still do not.

The questions are really simple to ask - yet hard to answer:

What does good business today really mean?

What does ethics have to do, if anything, with good business?

What impact can the human resource function have on either?

Within business, what is my responsibility as a human resource professional?

During this nation’s past, business ethics have wrought some of the most heated debates. (One could even argue that our Civil War was in a large part due to business ethics.) No doubt free markets and capitalism has benefited our nation. However, the cost has been great. Consider the ethics of cigarette manufacturers, nicotine and their advertising — not to mention the false and misleading testimony of several leading executives before congress; the Ford Motor Company and the Pinto, Bronco, and Explorer; General Motors and its fuel tanks in its pick up trucks, Al Dunlap and Sunbeam’s sales and marketing scandal and Sunbeam’s subsequent bankruptcy; the drop in value of Countrywide Financial

due to its sub-prime lending practices; the housing loan debacle in general; Japanese bureaucrats and Lockheed’s bribery transgressions; and Johns Manville and its handling of asbestos. (The readers will kindly note that this is all old news! No; the latest batch of troubled executives did not invent this stuff, although the dollar amounts are much larger.)



Amy Velez filed charges of discrimination against Novartis which alleged conduct of discriminatory behaviour with issues related to pay, promotion and pregnancy and led to the of a class litigation in the year 2003 with Amy velez as the lead plaintiff in the District of Columbia.

After Amy velez filed her charges seven more plaintiffs filed their charges leading to an amended complaint being filed on the 23rd of February 2005. As the information about the class action lawsuit spread across Novartis, more and more of female Novartis employees kept on adding to the litigation.

In all, over the last seven years plaintiffs produced 109 declarations and 40000 pages of documents to Novartis including 2 testifying expert witness, 4 consulting experts and 4 trial consultants.

The women, who are part of the Novartis’ workforce which boasts of 14000 employees, said that they been paid well below the current market salary as compared to their male colleagues, overlooked for promotion and especially female employees who were pregnant were subjected to a hostile work environment.

One female employee testified that her male manager told her to get an abortion and another female employee said that she’d been excluded from all professional and social gatherings.

To this, Novartis’ lawyer denied the all the allegations and charges filed against them and said that the company promoted and encouraged women into management positions through its “Women in Leadership" program and sacked the manager the women complained about.

One female employee claimed in an affidavit that her male manager told her he was averse to hiring young women, saying that love came first, and then came marriage, and then came flex time and a baby carriage whenever they hired young women.

Another plaintiff claimed that she was encouraged to go through an abortion, while another employee, who had twins in 2001, says that she was repeatedly overlooked for promotion in favour of men who had inferior sales numbers as compared to hers.

The jury found that Novartis discriminated against female sales representatives, district managers in decisions regarding pay and promotion and against employment terms related to pregnancy.

David Sanford, one of the plaintiff’s lawyers in the case said that even while the 5,600 women in the class endured outrageous and gross gender discrimination for years, the company did nothing, even after being warned time and again about the deep-seated culture of gender discrimination at the company.

The nine-figure award from the jury this morning will go to all 5,600 current and former Novartis workers who are plaintiffs in the class action, first filed in 2004.


After 7 years of litigation and 7 weeks of trial, a 9 member jury returned a verdict for plaintiffs on each of the three claims and awarded 250 million as punitive damages to a class as a whole and awarded total of 3.36 million as compensatory damaged to 12 testifying witnesses.


After the verdict, the parties entered into a hard fought labour negotiation. This negotiation culminated on 14th of July 2010 and parties entered into a settlement agreement.


The settlement agreement provides for class wide non-monetary and monetary relief value up to $175 million including the following implementations:

Novartis will implement proactive equal employment opportunity measures detailed in settlement agreement.

Novartis will increase the size of human resource business partner’s staff and employee relations group.

Novartis will revise its policies and processes for investigating discrimination claim.

Novartis will revise the timing and function of “the clarification meeting".

Novartis will train its staff on the changes as detailed in the settlement agreement.

Novartis will implement specified changes to its performance evaluation system.

Novartis will retain an external specialist to design and carry out an annual adverse impact analysis of ratings.

Novartis will create an appeals process for employees who disagree with their performance ratings.

Novartis will work with external compensation and benefits specialist to design a base salary pay-in-range analysis and subsequent adverse impact analysis of annual rates of pay.

Novartis will implement changes to its promotional policies.

Novartis will implement changes to its MDP.

Novartis will implement changes to tracking and monitoring promotional opportunities.

Novartis will work with 2 outside consultants to improve overall culture of the company.

The court will appoint a compliance master to monitor the company’s implementation of their terms of section vii of the settlement agreement.

Novartis will report annually to class counsel detailing its compliance with section vii of the agreement and thereafter submit a report to the compliance master.

Novartis will pay 152.5 million into a settlement fund to satisfy (a) back pay (60 million) (b) compensation damage claims (40 million)(c) attorney’s fees and cost associated with this litigation(38,125,000) (d) administrative fees cost and expense incurred in connection with administering the settlement fund (2.375 million) and 2 million committed towards reimbursement of litigation expense and 10 million is committed to testifying witness class representatives.






The Department of Fair Employment and Housing (DFEH)'s first test case involving a person discriminated against by his employer on the basis of his physical handicap (AIDS) was recently upheld by a superior court in Santa Barbara.

The case concerned the now deceased John Chadbourne who was a quality control analyst at Raytheon Company, which manufactured military hardware. John had worked for Raytheon since 1980.

His job duties primarily encompassed inspection of incoming materials in order to ensure that such materials are in compliance with contractual and governmental specifications.

Chadbourne’s job did not require him to have any public contact and required a minimal contact with his fellow employees. Casual contact as used in the context of this case was defined as contact that is not intimate, sexual or blood-to-blood.

On December 13, 1983, Chadbourne was diagnosed with AIDS. He had pneumocystic carinii, a type of pneumonia that is associated with persons suffering from AIDS. He was hospitalized from December 15 1983, through January 22, 1984.

Following his release from the hospital, Chadbourne attempted to resume his duties in his position at Raytheon. Chadbourne also gave Raytheon a letter from his own attending physician, who was a specialist in infectious diseases, which stated that he could return to work.

The letter also clearly mentioned that there had been no cases of AIDS resulting from close contact with a person who was suffering from AIDS. Chadbourne's doctor also stated the various possibilities through which AIDS is transmitted which was primarily by blood transfusions, sharing of intravenous needles or sexual contact.

Raytheon conceded that Chadbourne was physically able to return to work during the relevant time period.

However, as soon as the company knew that it had an employee with AIDS who wanted to return to work, it directed its occupational nurse, who had no working knowledge or prior experience in treating patients suffering from AIDS in particular or infectious diseases, with the responsibility of collecting materials regarding AIDS, especially material regarding the various ways of transmission of AIDS.

The occupational nurse then contacted an epidemiologist at the SBCH Department, who was in agreement with Chadbourne's doctor. In two letters sent to Raytheon, the epidemiologist stated Chadbourne was fit to return to work as he presented no health risk to other employees.

In addition to the letter, the epidemiologist also met with Raytheon's nurse and physician, and had a tour of Chadbourne's work site and repeated that Chadbourne was fit to return to work.

Raytheon's nurse also enquired with the Centres for Disease Control (CDC), which again concurred that Chadbourne's illness presented no health risk to Raytheon's employees.

On January 26, 1984, Raytheon's physician also wrote a confidential memo to management supporting and urging Chadbourne's reinstatement.

Despite all the assurances and reports and advice from Chadbourne's doctor, the local public health department, the CDC and its own doctor, Raytheon did not reinstate Chadbourne or attempt to accommodate his physical handicap.

Chadbourne tried to return to his previous work at Raytheon. He even brought medical information report to Raytheon which stated AIDS is not transmitted via casual contact.

Chadbourne suffered from a great deal of anxiety and depression due to Raytheon’s firm stance to not to reinstate him. He was also in financial distress as disability payments were perennially late and had also taken some time to start.

When a management director informed Chadbourne that he would not be allowed to return to work unless a cure for AIDS was found, Chadbourne was disheartened and crestfallen leading to depression and suicidal tendencies.

Following this, Chadbourne filed a complaint in April 1984 with the DFEH complaining unlawful employment discrimination due to Raytheon's failure to allow him to return to his job due to his physical handicap, AIDS.

He started working as a volunteer for the Gay and Lesbian Centre in Santa Barbara.

In July 1984, Chadbourne was diagnosed as having Kaposi's sarcoma, a type of cancer associated with persons who have AIDS. On January 6, 1985, Chadbourne died from complications due to AIDS.


Once the DFEH established that AIDS is a physical handicap under the Act, the onus was on Raytheon to prove its innocence through the available defences under the Act. Raytheon argued that Chadbourne's condition posed a health and safety risk to other Raytheon employees.

To the contrary, the information Raytheon received during the relevant time period and the medical evidence available to Raytheon all pointed to the undisputed and documented fact that AIDS is only transmitted through semen, blood and blood by-products.

At the hearing, a number of medical experts testified regarding the modes in which AIDS is transmitted. They concluded AIDS is not transmitted casually.

There are no documented cases of someone contracting AIDS via casual contact such as exists in most workplaces.

The FEHC held:"We are highly sensitive to the critical need to protect co-workers and others from contracting AIDS. And we are acutely aware that the devastating effects of this condition and widespread lack of knowledge about it have produced deep anxieties, and considerable hysteria, about the disease and those who suffer from it. But neither ignorance and fear nor the serious consequences of AIDS justify our departure from the carefully developed rules and procedures that govern our physical handicap cases. Those rules have served well in the past to protect both the health and safety of other persons and the civil rights of the disabled, and they will do so in this case as well. Our task here, therefore, is to determine carefully and objectively whether the evidence in the record before us demonstrates that there would in fact have been danger to Chadbourne's co-workers, under the standard stated above, had he returned to work".

FEHC concluded that evidence demonstrated that Chadbourne would not have endangered the health or safety of his co-workers any more than an employee without AIDS. They therefore inferred that respondent had not provided sufficient justification in its defense and thus it was held that dismissal of Chadbourne violated the Act.

The commission's decision was upheld by the Santa Barbara Superior Court, and relief which was ordered by the commission was also sustained.

The commission ordered Raytheon to pay Chadbourne's estate back pay and conduct a training program for its employees regarding AIDS and the manner in which it can and cannot be transmitted.

The FEHC also directed Raytheon to post a notice explaining to its employees that the Act prohibits unlawful discrimination against employees with AIDS.


The DFEH currently has 67 AIDS-related cases on file and is accepting complaints from persons with AIDS, AIDS-related condition (ARC), persons who have tested positive to the AIDS virus anyone who has been discriminated against because they have associated with these persons or any person who is perceived to have AIDS, ARC or has tested positive as to the AIDS virus.

The department will expedite any AIDS or catastrophic illness case. The department will also consider whether any of its AIDS cases are appropriate for injunctive relief pursuant to Government Code Section 12974.

The DFEH recommends that employers develop a physical handicap policy that includes persons with AIDS, ARC and persons who test positive as to the AIDS virus. Employers may also want to conduct a training program to educate their employees about AIDS and how the disease is transmitted.




The case pertains to instances of gender Discrimination in Air India on the basis of medical conformance (weight) and age of retirement.

In 2002, Air India mandated a medical check-up of its crew and on the basis of results of medical check up air hostesses who were found overweight were given a verbal instruction to report back after they reached the permissible weight.

The Airhostesses were not given prior notice of the medical check up and permissible weight to be maintained. The permissible weights arrived were also decided arbitrarily without any scientific measures used.

The Airhostesses were immediately grounded and hence not given a fair deal to comply with the health regulations and also were not compensated appropriately after grounding.

The Airhostesses thus filed a petition in 2003 and were granted permission to fly after getting their weight checked in a hospital certified by Air India.

The overall polices however continued to be gender biased. The crew of Air India is made to compulsorily undergo weight check before boarding a flight but only women who are overweight are penalised. The Male crew are permitted to fly even if they are 40 kg in excess.

The airlines also mandates internal gynaecological examination once a year for women crew members who are above 35 .Women are allowed to have only two children while men do not have to adhere to the rule nor are they subjected to any form of medical examination.

The promotion polices too are not fair Air-India's hostesses are junior to all male crew members on board although many of the women crew members have more than 30 years of experience. The discrimination is not limited to airhostesses alone even women in executive positions are subordinate to male workmen in flight and are not eligible for supervisory positions on board.

The retirement age for male employees is 58,the age of retirement stipulated by the Government of India but

The Initial retirement age for Air Hostess is earlier of following

On attaining age of 35 years

On Marriage if it takes place within four years of service

First Pregnancy

The retirement age decided after amendments made over several years was 50 years which was lower than retirement age for men which was 58 years.


The Air-India Cabin Crew Association (AICCA), which initially supported women crew on issue of age later, changed their stance by saying that early retirement is beneficial for the middle aged women, as they can lead a peaceful and stress free life.

The Air-India management justified grounding of overweight airhostesses on the grounds that it would lead to enormous financial savings for the airline. The Saving would result from the fact that 75% of an Air-India hostess' salary derived from flying allowance. Thus by grounding air hostesses the airline would be able to save a substantial amount.

The grounded airhostesses will no longer be entitled to the flying allowance. The airhostesses retired on basis of seniority would face huge financial loss as senior air hostess earns approximately Rs.25,000 as basic salary besides Rs.80,000 as flying allowance.

The retirement age at 50 years which was is arbitrary, and the criteria for determining the age are not defined as there is no scientific way to determine that airhostesses above the age of 50 years are inefficient.

The Airhostesses appealed against both the discrimination based on age and medical (weight) conditions in High court and later in Supreme Court.


The Bombay High Court ruled that Air-India increase the flying age to 58 years. But Air-India did not honour the court's decision and moved to supreme court.

The Supreme Court review allowed Air-India to lower the flying age for women crew members from 58 to 50.

The Supreme Court ruling the hostesses have had to concede defeat in court.

The Supreme Court gave the decision after considering the perspective of airlines that airhostesses are meant to serve passengers hence they were required to be young,beautiful,and represent Air India. The extra weight and age would compromise on the required standards and service.