While the notion of pay equity is not new, in the past year, cultural movements such as #equalpay and #metoo have shined a spotlight on the issue, bringing it to the forefront of the media, as well as on the legislative agendas of state and local governments. Indeed, states and localities have begun enacting a patchwork of equal pay laws with varying requirements. It is important that employers understand the pay equity landscape and take steps to navigate these laws to ensure compliance and minimize risk. Outlined below a short summary of some of the recent pay equity trends, as well as some best practices to consider when defending pay equity claims.
The Federal Landscape
Several federal laws dictate the national standard regarding equal pay:
· Equal Pay Act: Requires that men and women in the same workplace be given equal pay for equal work.
· Title VII: Prohibits compensation discrimination on the basis of race, color, religion, sex, or national origin.
· Executive Order 11246: Prohibits compensation discrimination on the basis of race, ethnicity, or sex. Prohibits employers from taking adverse employment action against employees who discuss or disclose pay. This Executive Order applies to federal contractors and subcontractors.
While the federal laws have not substantially changed in recent years, there has been an uptick in the enforcement of these laws and related monetary liability for employers. When an equal pay claim is made, employers have the burden of demonstrating that differences in pay between men and women, and non-minorities and minorities, are based on legitimate, job-related factors. Employers should therefore consider conducting proactive equal pay analyses (under attorney-client and other applicable privileges) to determine exposure from potential claims for pay discrimination.
Recent Trends in State and Local Laws
In addition to the collection of Federal pay equity mandates, many states have passed comprehensive fair pay laws, which span a wide range of topics related to equal pay, including expanding the scope of employees who may be compared, banning inquiries into salary history, limiting the number of permissible pay drivers, and establishing pay transparency. States with particularly robust equal pay laws include California, Massachusetts, Oregon, and New Jersey.
Equal Pay For (_?_) Work
Under the Equal Pay Act, employees must receive equal pay for equal work, limiting the scope of comparable employees. In contrast, states have begun to expand the pool of comparators. For example, in California, employees must be paid equal pay for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions. Other states, like Maryland, require that employees receive equal pay for comparable work. Massachusetts mandates that employees must receive equal pay for comparable work that requires similar skill, effort, and responsibility. While only a few examples, many states have passed such laws, which increases the potential for liability for employers, given that employees may bring a claim for unequal pay for performing unequal, but similar jobs.
Salary History
Many states have also passed laws banning inquiries into salary history during the application process. While state-specific intricacies exist, salary history laws have been passed in states and localities including: California, Connecticut, Delaware, Hawaii, Massachusetts, Oregon, Vermont, Puerto Rico, New York City, Albany County, Westchester County, and San Francisco.
Pay Transparency
Another trend among the states has been to pass pay transparency laws, which state that employers cannot fire or otherwise discriminate against employees or applicants for asking about, discussing, or disclosing their pay. Accordingly, employers should be sure not to stifle discussions among employees regarding salaries or other forms of compensation. Pay transparency laws now exist in more than twenty states, including California, New York, New Jersey, and Massachusetts.
Considerations for Employers
Employers that have not already done so should begin to take proactive steps to ensure compliance with fair pay laws and mitigate potential risk.
Review Handbooks/Policies and Revise as Necessary
Employers should review handbooks, policies, employment contracts, and any other personnel documents and remove any terms prohibiting employees from requesting, discussing or disclosing compensation, benefits, and other protected equal pay information, such as job title and occupational category.
Notify and Provide Training to Managers and Recruiters
Employers should ensure managers and recruiters, including third-party recruitment sources, are aware of requirements and prohibitions in states in which they operate, including specific requirements related to pay transparency and salary history.
Begin Reviewing Hiring and Compensation Policies
To be able to defend and explain pay and differences in pay, an employer needs to understand how compensation is set. Employers should begin to review hiring, pay policies, and practices to ensure employees are being treated consistent with applicable law.
Review Job Applications
Employers should review their job applications for inquiries into salary history. If operating in multiple states or states in which salary history bans have been enacted, employers should remove questions related to prior salary from their applications.
Consider Conducting a Privileged Pay Equity Analysis with Counsel
Consult with Counsel. Employers should consider whether to conduct a privileged, proactive pay equity analysis to identify and resolve potential issues before a claim arises. Legal counsel is imperative to ensure that the pay equity analysis cannot subsequently be used against the employer as the analysis may reveal potential inequity. A pay equity analysis should:
· be privileged;
· take into account both federal and applicable state laws;
· assess all relevant factors such as an employee’s education, training, experience, geographic location, job duties, seniority, job performance and reporting structure; and
· be tailored to meet your organization’s needs.
As always, please contact your Relationship Manager or Service Team with any questions.