Unequal pay: legal and practical issues


In 2009, President Obama signed into law the Lilly Ledbetter Fair Pay Act, his first bill.

The bill, which extends the time period in which claimants can file pay discrimination claims, was only the beginning of the administration’s concerted effort to bring attention to the issue of unequal pay—whether the inequity is based on gender, race, color, religion, national origin, age, or some other characteristic protected by law.

Not long after signing the Fair Pay Act, for example, the President established the National Equal Pay Task Force.

And last year, when the EEOC celebrated the 50th anniversary of the Equal Pay Act—which mandates employers to pay men and women the same rate of pay for substantially equal work—the agency was quick to note that a significant pay gap still exists between men and women, despite the EPA’s long history.

Finally, this past April, Obama released a Presidential Memorandum (Advancing Pay Equality Through Compensation Data Collection), which instructs the Secretary of Labor to establish new regulations requiring federal contractors and subcontractors to submit compensation data, including data by sex and race, to the Department of Labor.

In short, the President has made it clear that when it comes to equal pay he means business. And workers are taking note, as proven by these recent wage discrimination cases filed by the EEOC.

What Can You Do to Protect Your Company?

Great question! We invited Ashley Kaplan, HR Consultant and Senior Employment Law Attorney for PosterTracker.com, to answer. (Kaplan graciously responded to our queries via email.)

If you had to name one thing employers can do to avoid claims of unequal pay, what would it be?

One of the most important precautions for avoiding claims of unequal pay is to tie pay to the actual work being performed, rather than the job title. Any differences in pay (whether related to gender or other legally protected characteristic) must be based on business-related criteria, such as a merit system, a seniority system, a system that links earnings to the quantity or quality of work, or another set of factors, such as experience or education.

What are your top three tips for conducting an internal pay audit?

(1) Be objective. Objectivity is critical. Rather than having a qualified member of your staff review your records, hire a third-party person or business to conduct a thorough audit at least once a year.

(2) Scrutinize every job position and determine, if applicable, why an individual in the same category is not paid the same—whether it’s a certain degree, skill, or experience the employee holds (and uses regularly on the job), or years of service. Claiming that an individual was hired at a time when the company paid lower wages is not an excuse and could get you into trouble in a legal proceeding.

 

(3) In addition to preventing direct or indirect pay discrimination, strive to offer equal opportunity for advancement. Review the length of time women (and minorities) stay within job positions before moving up. If you notice disparities, be certain you have legitimate, nondiscriminatory reasons for them.

In the eyes of the government, how much of a pay gap is too much? Put another way, is there any such thing as a “de minimis” pay differential?

Basically, no. If the pay differential can’t be justified, it’s not okay—even if the gap is small. Remember, too, that a small pay differential adds up. For example, let’s say someone earns $10/hour vs. $10.20/hour. That 20 cents may not seem like a big deal, but if you factor in the overtime rate ($15/hour vs. $15.30/hour), the first employee would earn $550 in a 50-hour workweek and the second employee would earn $561. The numbers are even more dramatic if you look at the earnings for the year—the first employee making $28,600 compared to the second employee at $29,172.

What’s the first thing an employer should do after receiving a complaint of pay discrimination?

If you receive an employee complaint and can’t justify the pay difference—again, based on a certain degree, skill, or experience that is essential to the job duties, or a specific merit, seniority, or quantity/quality-related system—you should look into raising the wages to close the gap. If you don’t respond to the employee or resolve the situation appropriately, be aware that the employee could file a formal complaint with the EEOC, or even sue for violation of the Equal Pay Act in federal court.

What’s the one thing the employer shouldn’t do?

In situations of wage inequality, you may not reduce the wages of either sex to equalize the pay. Also, don’t get angry or act hastily with the employee who has raised a concern, which could expose you to a new problem—a charge of retaliation.

EEOC complaints of wage discrimination are on the rise. To what do you attribute the increase, and do you see this trend reversing itself any time soon?

Unfortunately, the wage gap is a continuing problem in the U.S., with the typical full-time female making 77 cents for every dollar earned by her male counterpart. That, coupled with the fact that pay discrimination cases can be filed with the EEOC without the help of a lawyer, has resulted in a spike in claims. In my experience, one of the most common situations that can get employers in trouble is bringing in a new employee at a much higher salary than similarly situated coworkers. Many employers mistakenly believe it’s acceptable to pay a higher wage in today’s more competitive environment, but if the job duties are substantially equal between positions, the existing employee could question the variance and file a claim for unequal pay. 

Regarding whether I see this trend reversing itself any time soon, I’d have to say “no.” The rise in discrimination claims seems to be directly related to employee awareness of their rights. The more employees understand the federal laws ensuring equal pay for equal work, the more they’ll tune into oversights and feel empowered to act on them.  

Learn more about how to handle pay inequities with this whitepaper: How to Identify and Resolve Pay Inequities in a Position

 

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6 Comments

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  1. 2
    Gayle

    EEOC tends to focus on the complainant. The financial risk is even greater if you are a Federal contractor. The OFCCP will take your compensation data and any factors you claim effect an individual’s compensation and run a statistical analysis on all your jobs. Remedies will be class-wide and are often substantial.

  2. 4
    Crystal

    @Martin — Hey Martin, as you know I’m NOT an attorney, but here’s what the law says (from eeoc.gov):

    “It shall be an unlawful employment practice for an employer –

    (1) to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin; or …”

    Deliberately withholding a promotion from a qualified employee BECAUSE OF his membership in a protected class would be covered.

  3. 6
    Patricia

    what is your opinion on paying a certain class of employees (such as seasonal or part-time) a different hourly rate ($8 to $10 per hour less) from the full-time employees who are performing the exact same job duties, same title. Everyone in the class of employees may not be in a “legally protected class” Shouldn’t equal pay for equal work apply to everyone?

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