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‘Pay Transparency’ Is Gaining the Attention of the Department of Justice and the Federal Trade Commission

Topics: Pay Equity

Per federal law, it’s illegal for employers to forbid most workers from discussing salary with one another. However, this law is not well understood. Today, many workers still feel like they aren’t allowed to find out how much their colleagues make. Around half of workers surveyed by the Institute for Women’s Policy Research in 2014 said that talking about wage and salary information was either discouraged or prohibited at their workplace and could lead to punishment.

However, legislators are taking new steps to help workers understand their rights. For example, earlier this year, Washington state updated its Equal Pay Opportunity Act to ensure that workers cannot be punished for discussing salary with coworkers. The bill aims to ensure that “All workers [get] a fair shot and an equal opportunity to succeed.”

And soon, we may see a new policy at the federal level that radically levels the playing field for workers.

This June, Senators Cory Booker and Elizabeth Warren issued a letter to the heads of the Justice Department (DOJ) and the Federal Trade Commission (FTC) that makes the case for workers to be given more information about what their peers at other companies earn. They said it’s a crucial step that will level the playing field for negotiating a fair salary and thus help close the gender/racial wage gap.

Argument: The Antitrust “Safety Zone” Advantages Companies Over Workers

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For a long time, the federal government has allowed employers to pay third parties to produce compensation surveys, so they can determine how much to offer their own employees. This kind of information sharing among employers is considered “okay” from the federal government, via a policy developed by the DOJ and FTC known as the antitrust “safety zone.”

But the problem with the policy, the senators argue, is that while employers can shift the pay offered to employees to keep up with the competition, they also have the opportunity to work with their own competitors to keep wages down across the board. This “safety zone” policy can lead to potential collusion, resulting in lower salaries and decreased competition. It’s one of the reasons that real wages for the average worker have been stagnating for decades.

Booker and Warren say that this policy actually gives employer an advantage while holding workers back from being able to negotiate for better pay and benefits.

“Workers have just as much of an interest in ensuring they receive competitive pay that reflects the economic value of their contribution,” the senators write. “And yet workers typically have access only to high-level and/or unreliable public data, like that available on self-reported websites, or on the Bureau of Labor Statistics website, which often shows a national average wage rather than the going rate for a job in a particular city or region.

Even if prospective employees are able to research an average wage, they’re often unable to account for the effect their own seniority, education, or skill level would have on their salary.”

The senators are pushing the agencies to create a plan to address the risks of information-sharing among employers when it comes to compensation, and to explore mandating companies to make compensation surveys available to employees. They say that these changes would empower workers.

Pay Equity: A Sweeping Movement

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Warren and Booker’s letter to the DOJ and the FTC is just the latest act in the pay equity movement, one that’s continued to gain traction over the last several years. In the past couple of years, state and local legislators have ramped up requirements for employers to address the pay gap between men and women, and between white and minority employees. These have included items like laws that ban asking candidates’ salary history, mandates to pay workers equal wages for “substantially similar work”, and expanded protection for workers to discuss salary information with each other.

Furthermore, highly skilled workers have also taken it upon themselves to right the wrongs. In the recent months, a number of employers have faced pay discrimination claims, including Google, Microsoft and Oracle. Earlier in July, a few more prominent organizations have been hit with pay equity lawsuits:

  • The top flutist of the Boston Symphony Orchestra – Elizabeth Rowe – has filed a gender pay discrimination suit against the ensemble, claiming that her compensation is only about 75 percent that of her closest comparable colleague, the orchestra’s principal oboist, who is a man. The suit appears to be the first under a new law in Massachusetts that requires equal pay for “comparable work.” The law was passed in 2016, but it did not go into effect until July 1st, after employers had two years to rectify disparities.
  • Global law firm Jones Day has been hit with a lawsuit alleging that it pays female attorneys less than male attorneys. Wendy Moore, a partner at the firm for more than four years, claimed that the firm “operates as a fraternity” and has a “boys’ club culture” in which men mentor each other; this provides them professional and business development opportunities that ultimately leads to higher salaries.

Do you have a process for ensuring pay equity?

Given all of these developments, it’s much better for employers to be proactive in making sure that there aren’t any biases in their compensation system rather than to be forced into action by legislation or lawsuits.

Why not share salary range information with your employees and tell them what salary data you’re using to make pay decisions? Why not encourage your employees to discuss salary with one another so that they can advocate for themselves?

By doing so, you send the message that you place a high importance on compensating everyone fairly; this will help you stand out as an employer of choice.

At the same time, you’ll also want to conduct a pay equity audit, so that you can root out any unjustified wage gaps in your workforce.

Many organizations acknowledge the need to examine their pay practices from an equity perspective, yet struggle with how to get started: What data sources are needed for this analysis? Do we even have access to all the data? What’s the proper methodology? How should we communicate the findings to employees? What approach is best for rectifying the wage gap?

In our upcoming webinar on August 2nd, Brian Webber, Compensation Expert, and Chris Martin, Director of Research from PayScale, will answer these questions and outline the steps organizations can take to remove biases from your compensation system.

Sign up to learn:

  • How to analyze data to understand potential pay disparities in your organization using PayScale’s compensation management software
  • How to communicate the findings of your pay equity analysis to different stakeholder groups
  • Steps your organizations can take to close the gender and/or race pay gap

Additionally, PayScale has software to help businesses make fair and equitable pay decisions. In our salary survey management software – PayScale Insight Lab, HR compensation professionals can quickly pull reports to identify trends in their workforce including differences in pay between different segments of workers, such as men versus women. You can see how it works by requesting a demo.

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