Compensation

Conundrums:Does your compensation plan comply

with the Equal Pay Act, Affirmative

Action and other legal requirements?

Anne Birgel Cunninghamacunningham@verrilldana.com

June 28, 2011

Better Question

• Do you have a compensation

plan?

Hypothetical Employer

• 30 locations

• Each location has a Manager, Assistant

Manager, Department Managers,

Hourly Sales Staff

• Each location has slightly different

market conditions

• Each location negotiates employee

salaries independently

Hypothetical Employer

• No uniformity in pay from location to

location

• No uniformity in pay from position to

position

• No uniformity in pay even within a

single location

Hypothetical Employer• Seven-year female employee works her

way from hourly sales position to

Assistant Manager

• Manager hires “experienced” male

Department Manager from competitor at

$2/hour more than his female assistant

Statistics• 2003 US General Accounting Office

Study

– Even taking into account work pattern

differences between men and women, women

earned on average 80% less than their male

counterparts

• 2004 Maine DOL Report on Women‟s

Wages– Maine women earned approximately 76¢ for

every $ earned by their male counterparts

Statistics• Things haven‟t gotten any better

– 2006: 77% wage differential

– 2008: 77% wage differential

• 2011 White House Report - Women in

America: Indicators of Social and

Economic Well Being

– Despite near equalization of ratios of men

and women in the workforce, “At all levels

of education, women earned 75% of their

male counterparts.

What we’re going to cover

• Federal Equal Pay Legislation

– Affirmative Action; Equal Pay Act;

Title VII; Lilly Ledbetter Fair Pay

Act

• State Equal Pay Legislation

– Equal Pay Act

– Maine Department of Labor

Regulations

Federal Equal Pay Act

• Prohibits wage discrimination between

employees on basis of sex by paying

different wages for

• Equal work – requiring

– Equal skill, effort and responsibility

– Performed under similar conditions

Federal Equal Pay Act

• Applies only to employees; does not

apply to independent contractors

• Employees in the same “establishment”

– Separate physical plants are considered the

same establishment if

• Employees hired by same entity

• Pay rates set by same entity

• Employees interchange work locations

• Employees have identical duties and similar

working conditions

Federal Equal Pay Act

• Does “equal work” mean identical?

– Federal regulations acknowledge that

whether two positions require equal work

eludes easy regulatory description

– Courts have interpreted “equal work” to

mean “substantially equal”

Federal Equal Pay Act

• Equal work does NOT mean identical

– Different job titles will not insulate

employer from liability

– Totality of circumstances assessment

– Minor differences in skill or effort requires

by positions could still lead to liability

Federal Equal Pay Act• Statute does not prohibit pay

differences based on:

– Seniority system

• Not necessarily written, but administered

systematically and objectively

– Merit system;

• Organized and structured performance

evaluation procedures

– System which measures earnings by

quantity or quality of production;

– Any other factor other than sex.

Federal Pay Act• Specifically prohibits lowering an

employee‟s wages to comply with its

requirements

• Unlike Title VII, no requirement that

employee establish intent to

discriminate – need only show:

– Different wages to opposite sex;

– Equal work which requires equal skill,

effort and responsibility;

– Similar working conditions

What’s at stake?

• Claims can be brought to EEOC or

directly to Court

• No punitive damages available

• Remedies

– Difference in wages as back pay

– Liquidated damages equal to amount of

back pay if employer can show good faith

– If violation is “willful,” criminal sanctions

possible: $10,000 fine/6 months in prison

or both

Title VII

• Prohibits using any protected

characteristic as a motivating factor in

any “employment practice

• Much broader sweep than Equal Pay

Act

• Employer bears burden to show that

pay differences based on gender are

motivated by “bona fide occupational

qualification”

Title VII

• Disparate impact

– Facially neutral policy results in pay

differences between men and women (or

other protected characteristic)

• Disparate treatment

– Employer practice or policy treats genders

(or other protected characteristic)

differently

Title VII

• Must file administrative claim with

EEOC within 180/300 days

– 300 days in Maine because of MHRC

• Lilly Ledbetter Fair Pay Act

– Each paycheck that delivers discriminatory

compensation is an actionable wrong

regardless of when discrimination began

– Practically means that statute of limitations

restarts with each discriminatory paycheck

What’s at stake?

• Compensatory Damages if plaintiff can

show intentional discrimination

• Punitive Damages if plaintiff can show

employer acted with “malice” toward or

“reckless disregard” for employee‟s

rights

Maine Equal Pay Act

• Prohibits wage discrimination between

employees on the basis of sex by

paying different wages for

– Comparable work

– On jobs that have comparable

requirements relating to skill, effort and

responsibility

Maine Equal Pay Act

• Does not prohibit differences in pay

based on

– Seniority systems

– Merit increase systems

– Shift differentials

• Systems or circumstances must not be

found to discriminate on basis of gender

Maine Equal Pay Act

• Merit Increase System

– Established, bona fide, uniform and

objective system which rewards employee

with promotion, pay increases, or other

advantages of competence

• Seniority System

– System that gives preference to workers

based on years of service

Maine Equal Pay Act

• Explicitly proscribes an employer from

prohibiting employees from disclosing

their own wages or from inquiring

about another employee‟s wages if

purpose is to enforce rights under

statute

Maine Equal Pay Act• DOL Regulations

– Provide for complaint process through

Bureau of Labor Standards, much like

MHRC process

– If complaint filed, DOL will investigate to

determine whether “reasonable grounds”

exist to believe discrimination has

occurred

– Provide for employer self-evaluation as

means of establishing a presumption of

compliance with the statute

Maine Equal Pay Act

• Employer Self Evaluation

Requirements– Clearly define the establishment –different

locations will be considered one establishment if

employees are engaged in functionally similar

operations and there is substantial degree of

central authority re personnel rules and wage rates

– Analyze employee population to identify problem

areas

Maine Equal Pay Act– Establish job evaluation plan to determine

value of jobs

• Plan must be free of gender bias

• Plan must allow for comparison of all jobs

• Plan must “fully and accurately” measure

effort and responsibility of each job based on

actual job performance requirements

• Plan must apply job evaluation to all or

“significant sample” of jobs, focusing on those

that are predominantly occupied by one gender

Maine Equal Pay Act

– Job evaluation plan, continued

• Create job classification structure, keeping

jobs of equal value in same level or group

• Determine pay level differentials between jobs

predominantly occupied by one gender as

opposed to those occupied by the other gender

• Remedy any identified base pay differentials

What’s at stake?

• Before “reasonable cause” is found by

Bureau, parties can seek settlement

• “Nothing” prevents the parties from

agreeing to class-wide relief if Bureau

determines complainant is an adequate

representative of class and proposed

settlement fairly compensates class as

whole

What’s at stake?

• If „reasonable grounds” found

– Bureau can seek voluntary compliance

agreement that eliminates unlawful

practice AND provides appropriate relief

to complainant; OR

– Bureau can refer to State Attorney General

for prosecution of civil enforcement action

Affirmative Action

• Executive Order 11246

• Requires that Contractors take

“affirmative action” to ensure that

applicants and employees are “treated

during employment, without regard to

their race, color, religion, sex or

national origin”.

Affirmative Action

• Compliance with reporting and recordkeeping obligations

– EEO-1 Report

– Equal Opportunity Survey

– AAP

• Obligations are passed down to subcontractors

Affirmative Action

• What is an Affirmative Action Plan?

– A document designed to allow self

analysis of your workforce

– Required contents specified by OFCCP

regulations; form not mandatory

– Not submitted unless requested

Affirmative Action

• Key elements of an AAP

• Organizational Profile

– Array by Department, Function …

– Supervisor title, gender and race

– Total Employees

– Number of Employees by Race and Sex

Affirmative Action

• Work Force Analysis

– Listing of each job title as it appears in

payroll records from lowest to highest paid

in each organizational unit.

• Total number of employees

• Total males and females

• Total number of males and females by ethnic

Group

Affirmative Action

• Job Group Analysis

– First step in Utilization Analysis

– Groups of jobs with similar duties and

responsibilities, wages and advancement

opportunities

– Jobs ranked lowest to highest wage

– Exception for smaller employers

Affirmative Action

• Determining Availability

– Provides a benchmark against which

contractor can compare incumbent

workforce?

– How does your workforce compare to

availability of qualified or qualifiable

persons?

– Statistical disparities? Set placement goal

Affirmative Action

• Narrative should include:

– Designation of responsibility

– Acknowledgement of problem areas,

including progress towards previous goals

– Compensation analysis

– Action-oriented programs

Affirmative Action

• Compensation analysis is required by

OFCCP Audit

• Analysis of total wages and salaries

paid in each job title by job group, sex

and ethnic group

• Key element in OFCCP current wage

disparity evaluation

What’s at stake?

• For the Contractor who is not in compliance:

– Back Pay

– Front Pay

– Duty to Hire

– Reinstatement

– Wage and Salary Adjustments

• QUESTIONS?