pay equity under heightened eeoc ofccp...
TRANSCRIPT
Presenting a live 90‐minute webinar with interactive Q&A
Pay Equity Under Heightened EEOC d OFCCP S iEEOC and OFCCP ScrutinyMinimizing Exposure to Government Enforcement and Employee Lawsuits for Wage Discrimination
T d ’ f l f
1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific
TUESDAY, JUNE 18, 2013
Today’s faculty features:
Alison B. Marshall, Partner, Jones Day, Washington, D.C.
Katharine Kores, District Director, Equal Employment Opportunity Commission, Memphis, Tenn.
Dr. Donald R. Deere, Senior Economist, Welch Consulting, Bryan, Tex.Dr. Donald R. Deere, Senior Economist, Welch Consulting, Bryan, Tex.
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PAY EQUITY UNDERHEIGHTENED EEOCHEIGHTENED EEOC
AND OFCCP SCRUTINY
June 18 2013
Alison Marshall51 Louisiana Ave N W
June 18, 2013
51 Louisiana Ave., N.W.Washington, D.C. 20001
5
Why do we need this program?• Pay equity issues are receiving renewed attentionPay equity issues are receiving renewed attention.• President Obama has made pay equity a priority.• Enforcing equal pay laws is listed in the EEOC’s new g q p y
Strategic Enforcement Plan as one of six national priorities.
• On February 28 2013 the OFCCP rescinded its 2006• On February 28, 2013, the OFCCP rescinded its 2006 compensation standards and issued new enforcement directive.P i t t ti ti• Private sector actions continue.
6
Overview• Quick review of key lawsQuick review of key laws• Recent EEOC activity around pay equity• New OFCCP directive• Proactive measures employers can take• Statistical analyses: data and methodologies
7
Key LawsKey Laws• Equal Pay Act of 1963, 29 U.S.C. §206(d)(1) provides in pertinent
part:
No employer…shall discriminate, within any establishment. . ., between employees on the basis of sex by paying wages to employees in such establishment at a rate less than the rate at which he pays wages to employees of the opposite sex in such establishment for equal work on jobsemployees of the opposite sex in such establishment for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions. . .” (emphasis added).
– Comparison between employees working at the same “establishment”.
– “Wages” encompasses all forms of compensation.
– No showing of intent is required.
– Key issue in most EPA cases is whether the comparators are performing “equal work”.
– Burden shifts to employer to establish affirmative defense: seniority system, merit system, production measure, or reasonable factor other y , y , p ,than sex.
8
Key Laws cont’dKey Laws cont d.• Title VII
– Encompasses race as well as gender pay claims.– For disparate treatment, plaintiff needs to establish
intentional discrimination.– For disparate impact, plaintiff needs to identify a specific
di i i t ti th t lt i di itiy
discriminatory practice that results in wage disparities.– May or may not overlap with EPA.
• Executive Order 11246– Prohibits gender and race discrimination by government
contractors and subcontractors.– Contractors may not discriminate in “rates of pay or other y p y
forms of compensation.” 41 C.F.R. §60-1.4(a)(1).– Contractors must review and monitor their compensation
systems.– Record-keeping obligations.
9
Pay Equity Under Heightened EEOC & OFCCP ScrutinyEEOC & OFCCP Scrutiny
June 18, 2013
Katharine W. Kores, DirectorMemphis District Office
President John F.
Kennedy signed the
Equal Pay Act on
June 10, 1963
Source::www.jfklibrary.org 11
World War I (1914 – 1918)
Source: Library of Congress 12
1938 – Fair Labor Standards Act1938 Fair Labor Standards Act
Source: www.democrats.org 13
World War II (1939 – 1945)
Source: National Archives 14
In 1945, Senators Claude Pepper and Wayne MorseIntroduce an Equal Pay bill.
Source: National Park Service15
The Equal Pay Act of 1963
Source: National Archives 16
Source: U. S. Women’s Bureau, Dept. of Labor, 17
W G O TiWage Gap Over Time
73 3%73 3%73 3% That’s less than
77.4%
60 7%60 7%60 7% 59.4%59.4%59.4%60.2%60.2%60.2%
71.6%71.6%71.6%
73.3%73.3%73.3% half a penny progress per year!
60.7%60.7%60.7% 59 %59 %59 %
1960 1970 1980 1990 2000 2010
Source: National Committee on Pay Equity, Census Bureau 18
The Equal Pay Act
O Cl i d b d di i i tiOne Claim: gender-based wage discrimination
19
Th l i t i l th
Equal Pay Claim
The complainant receives a lower wage than an employee of the opposite sex in the same establishment; and;
The employees perform substantially equal work requiring equal skill effort and responsibilityrequiring equal skill, effort and responsibility under similar working conditions.
20
Employer Defenses for Wage Differences
Seniority system
Merit system
Incentive system
A f t th thAny factor other than sex
21
Factor Other Than SexEducation, Experience, Training, and AbilityParticipation in Training ProgramShift DifferentialJob Classification S stemsJob Classification Systems“Red Circle” RatesTemporary ReassignmentsTemporary ReassignmentsRevenue ProductionMarket FactorsPart‐time/Temporary Job Status
22
• Two years back pay for violation; three years if willful;
Remedies and Relief
Two years back pay for violation; three years if willful;
• Liquidated damages if lacked good faith
• Salary increasey
• Back pay
• Attorneys fees and costs• Compensatory and punitive damages recovered for retaliation under EPA not subject to statutory caps which apply only to claims under Title VII and ADA• Injunctive relief
23
h kPaycheck Fairness ActH.R. 377‐ 1/23/2013
•Intended to address persistent M/F wage gapg p•Introduced in Congress 18 times in last 16 yearsyears•Changes “Any Factor Other Than Sex” and EPA remediesEPA remedies.
24
Si 1992 EEOC h i d l tSince 1992, EEOC has received almost 23,000 Equal Pay Act charges and recovered
$124 illi i b fit f i ti fover $124 million in benefits for victims of wage discrimination under the act.
25
National Equal Pay Enforcement Task Force
• President Obama’s Administration created Task Force• President Obama s Administration created Task Force consisting of:
• Equal Employment Opportunity CommissionEqual Employment Opportunity Commission
• Department of Justice
• Department of Labor• Department of Labor
• Office of Personnel Management
26
National Equal Pay Enforcement Task ForceNational Equal Pay Enforcement Task Force Five Challenges
1. Three different federal agencies have responsibility to enforce laws prohibiting wage discrimination, and they do not consistently coordinate these responsibilities.
2 The government’s ability to understand full scope of wage gap and to2. The government s ability to understand full scope of wage gap and to identify and combat wage discrimination can be improved by access to more data than currently available.
3. Employees and employers are insufficiently educated on their rights and bli ti ith t t di i i tiobligations with respect to wage discrimination.
4. Government Accountability Office has identified an eleven cent wage gap between men’s and women’s average salaries in federal workforce.
5. Existing laws do not always provide federal officials with adequate tools g y p qto fight wage discrimination.
27
EEOC Strategic Enforcement Plan (SEP) EEOC Strategic Enforcement Plan (SEP) Fiscal Years 2012 Fiscal Years 2012 ‐‐ 20162016
Strategic Plan contains 6 national priorities:
#4 E f i E l P L Th EEOC ill#4: Enforcing Equal Pay Laws: The EEOC will target compensation systems and practices that discriminate based on gender.g
•National outreach focus on EPA•Directed InvestigationsDirected Investigations•Commissioner’s Charges
28
Equal Pay Act Equal Pay Act –– EEOC LitigationEEOC Litigation
•EEOC v National Railroad Passenger Corp (Amtrak)•EEOC v. National Railroad Passenger Corp. (Amtrak),
settled for $171,483 in 2011.
EEOC H d i Id l El i C l d f• EEOC v. Hyundai Ideal Electric Co., settled for
$188,000 in 2011.
• EEOC v. Texas Dept. of Rural Affairs, a joint action
with the Department of Justice which settled for $175,000
in 2012.
29
For additional information:
www.eeoc.gov
1-800-669-40001-800-669-6820 (TTY)
Katharine Kores@eeoc [email protected]
30
OFCCP – New Compensation DirectiveDirective
• Effective February 28, 2013, OFCCP rescinded its 2006 ec e eb ua y 8, 0 3, O CC esc ded s 006enforcement guidance documents on pay discrimination: the Compensation Standards and Voluntary Guidelines.
• Reason articulated for change is that the 2006 documents “significantly constrained OFCCP’s ability to investigate pay discrimination to the full extent permitted by law.”
• Issued new directive #307: “Procedures for Reviewing Contractor Compensation Systems and Practices ”Contractor Compensation Systems and Practices.
• New directive describes OFCCP’s new investigation procedures.
• Will consider all practices that may lead to pay disparities and use all available evidence to evaluate compliance.
31
OFCCP – New Compensation pDirective cont’d.• Summary of ProcedureSummary of Procedure
– Conduct preliminary analysis of summary data.– Conduct an analysis of individual employee-level data.
D i h h f f i i i– Determine the approach from a range of investigative and analytical tools.
– Consider all employment practices that may lead to compensation disparities.co pe sat o d spa t es
– Develop pay analysis groups.– Investigate systemic, small group and individual
discrimination.– Review and test factors before accepting factors for
analysis.– Conduct onsite investigation, offsite analysis, and
fi t f th d lrefinement of the model.
32
Implications of Directive #307Implications of Directive #307
• Relaxes comparability.• Allows for more aggregated analyses.• Focuses on range of employment practices.• No longer need anecdotal or individual evidence of pay
discriminationdiscrimination.
33
Wh t C E l B D i ?What Can Employers Be Doing?
• Review current pay policies and practicesReview current pay policies and practices.
• Review manager training and how well managers understand the compensation system.
• Review documentation around compensation decisions, particularly starting salary decisions, and consider whether more structure needs to be imposed on documentation.
• If using market rate data, review how complete the data is.
• Conduct privileged pay equity studies.
– Privileged review of compensation data.
• If disparities exist, consider whether pay structure needs to be reviewedreviewed.
34
Pay Equity Self-Auditsy q y
• Is the organization prepared to make adjustments in compensation practices or actual pay if differentials arecompensation practices or actual pay if differentials are found?
• Consider privilege issues.• If decide to do an analysis, avoid creating a paper trail
that could be used against the organization in litigation.• Consider retaining outside labor economistConsider retaining outside labor economist.• Review all components of compensation, including base
pay, incentive awards, and bonuses.• Look at starting salaries.
35
Broad Band Compensation Systems
• Many organizations moved to broad band compensation systems in the 1990s and early 2000s.systems in the 1990s and early 2000s.
• Combined salary grades into a few “wide” bands.• Reflected philosophy about performance management.• Designed to encourage career growth through increased
responsibilities, skill development and job mobility.P t l t l th• Promote lateral career growth.
• Provided ability to respond to market more quickly.• Flatter organization• Flatter organization.• But, need to be cognizant that broad banding, because
of its great flexibility, if not managed carefully can lead to inequities.
36
Starting Salary Differentials as a Defense• King v. Acosta Sales & Marketing, Inc., 678 F.3d 470 (7th Cir. 2012).
– Gender discrimination pay under Equal Pay Act and Title VII.
– 7th Circuit reversed the district court’s dismissal of the pay claims.
Emphasized that under the EPA the employer has the burden of– Emphasized that, under the EPA, the employer has the burden of persuasion and proof as to the affirmative defense.
– As to Title VII claim, court found there was an issue of fact as to whether the company’s articulated reason for differentials was pretextual.
– Differences in education and prior experience may have justified differences in starting salaries, but if men and women are equally good in doing the job, women should have received greater and more frequent increases and the salaries should have converged over time.
37
Pay Equity Under Heightened EEOCPay Equity Under Heightened EEOCand OFCCP Scrutiny
June 18, 2013
D ld R D Ph DDonald R. Deere, Ph.D.Welch Consulting
(979) 691-0704
Outline
• Background on regressiong g
• Reviewing compensation- Where to Look- Five Questions- Simple Example- Complications- Pooling- Pooling- Challenges
• Analytical Issues from Directive 307
39
Background on Regression
A pay regression compares the pay of multiple employees controlling for various factors
• Distinguish two types of factors:-Those that identify “peer groups” of employees who should be compared to each other (e g in the same job)each other (e.g., in the same job)-Those that explain differences in pay among employees in the same comparison peer group (e.g., time in the job)
• The regression makes an adjustment for every factor, so that g j ypay is measured “as if” all of the factors were the same for each employee in the peer group
• The adjusted pay values are used to estimate the average j p y g(unexplained) gender pay difference in the peer group
• Note: The estimated gender pay difference assumes all omitted factors are gender neutralg
40
Background on Regression
What if include, or “pool”, employees from multiple peer groups in the same regression?
• “Develop Pay Analysis Groups” – OFCCP Dir. 307
• Pooling assumes there is a single gender pay difference for allPooling assumes there is a single gender pay difference for all peer groups (i.e., peer group-specific gender differences are ignored)
• Pooling assumes that the “effect” of a factor, such as time-in-job, on pay is the same within every peer group
• Can assess these issues statistically particularly for class• Can assess these issues statistically, particularly for class certification and in light of Dukes and Comcast
41
Reviewing Compensation – Where to Look
• Individual outliersAre there individuals paid significantly lower than peers for
h th i l iti t j b l t d j tifi ti ?whom there is no legitimate, job-related justification?• Group differences within peer groups
Within a set of peers, are there significant differences between the average pay of two demographic groups (e.g., women and men) after controlling for legitimate factors?
• Aggregates of peer groups, or “Pooling”Are there appropriate collections of peer groups where, overall,
there is a significant difference between the average pay of two demographic groups after controlling for legitimate factors and testing/allowing these factors to have different (“interaction”) effects across peer groups?
What is the underlying pattern of peer group-specific differences—are most adverse or only a relative few?
42
Reviewing Compensation - Five Questions
• Who are peers?– Similar work, responsibility, skill, effort, qualifications, location
Wh t th l iti t t l f t ?• What are the legitimate control factors?– Experience– Education– Performance, etc.
• Are there collections of peer groups that are sensible and defensible for an aggregated analysis?– Function– Business Unit
• Can these peer groups be pooled statistically?• What is the pattern of peer group-specific differences?
43
Reviewing Compensation – Simple Example
• In this simple regression, pay adjusted for time-in-position yields an unexplained gender difference that is favorable to
b t t ti ti ll i i ifi t
$130 000
$140,000
women, but statistically insignificant.
Est. Avg. Diff w/o Control = ‐$9,491O i i l SD 4 74
$100,000
$110,000
$120,000
$130,000 Original SD = ‐4.74Males = 180 Females = 120
Est. Avg. Diff w/ TIP Control = +$882SD w/ TIB Control = +0.76
$60,000
$70,000
$80,000
$90,000
$50,0000 2 4 6 8 10 12 14
Time in Position (Years)
M l F l R i LiMale Female Regression Line
44
Reviewing Compensation – Complications
• The chart below illustrates how time-in-position may not capture relevant experience resulting in an estimated
l i d d diff th t i t ti ti ll i ifi t
$130,000
$140,000
unexplained gender difference that is statistically significant.
Entered position with
$100,000
$110,000
$120,000
$ , Entered position with prior experience
$70,000
$80,000
$90,000
Est. Avg. Diff = ‐$6,654SD = ‐3 81
$50,000
$60,000
0 2 4 6 8 10 12 14Time in Position (Years)
M l F l R i Li
SD 3.81Males = 180 Females = 120
Male Female Regression Line
45
Reviewing Compensation – Pooling or Not
• Pooling of peer groups affects the results, may not be appropriate, and obscures the peer group-specific differences
Peer Group 1
Est. Avg. Diff = +$1,436SD = +1.25Males = 180 Females = 120
Pooling Peer Groups
No InteractionEst. Avg. Diff = ‐$4,151SD = ‐3.16
$
$80,000
$110,000
$140,000
Males = 180 Females = 120
Peer Group 2
$
Peer Group InteractionEst. Avg. Diff = ‐$1,221SD = ‐2.01
$50,0000 2 4 6 8 10 12 14 16 18
$90,000
$120,000
Est. Avg. Diff = ‐$1,696SD = ‐1.65Males = 180 Females = 120
Full InteractionEst. Avg. Diff = ‐$1,065SD = ‐1.78
Statistical test of pooling? NO
$30,000
$60,000
0 2 4 6 8 10 12 14 16 18
$110,000
Peer Group 3
Est. Avg. Diff = ‐$2,857SD = ‐3.16Males = 180 Females = 120
NO
Statistical test of common gender difference? NO
Males = 540 Females = 360$20,000
$50,000
$80,000
0 2 4 6 8 10 12 14 16 18Time in Position (Years)
Male Female Regression Line
46
Reviewing Compensation - Challenges
What to make of a statistically significant gender difference in pay?
F i l d d i h i l l i diff i• Factors included in the regression poorly explain differences in the pay of women and men
- Something “wrong” with factors/model, orSomething “wrong” with pay- Something “wrong” with pay
• Examine pairs of individuals with similar predicted pay, but quite different actual payP t d i t hi l th l ti f ll t• Pay today is pay at hire plus the accumulation of all past changes in pay
- Separately compare starting pay and pay growth
Pay decisions are made one at a time but now must explain the• Pay decisions are made one at a time, but now must explain the cumulative results of all past decisions affecting pay
• If make adjustments, use regression to re-assess
47
Reviewing Compensation - Challenges
How can control factors be improved?
Skill d P i E iSkill and Prior Experience• Prior experience (and pay?), particularly with previous employers, is likely
crucial to explaining current pay• Above entry level will compare employees who were hired-in and who wereAbove entry level, will compare employees who were hired in and who were
promoted-up• Also will be comparing employees who held a variety of positions and those
who “came straight through”M ll th t t j b ill h l l i t• More generally, pathway to current job will help explain current pay, e.g., demoted and red-circled
Effort and Performance History• Prior individual performance is clearly important to explaining current pay• Prior “unit” performance may be important because of past differences in
raise pools
48
Reviewing Compensation - Challenges
How can control factors be improved?
R ibili i d R i SResponsibilities and Reporting Structure• The number and type of individuals reporting to an employee may capture
responsibility that is reflected in pay• Direct and indirect reports; “level” of the reportsDirect and indirect reports; level of the reports• Also non-HR data, such as budgets, may capture responsibility that is
reflected in pay
Acq isitionsAcquisitions• The pay structure of acquired units may be quite different• Integration will take time and may initially distort pay comparisons, e.g., may
compare employees before they are really comparablep p y y y p
49
Additional Analytical Issues Raised by Directive 307
• “Develop Pay Analysis Groups”- Pooling, testing for pooling, and peer group-specific differences
• “Consider All Employment Practices that May Lead to Compensation Disparities”
Initial assignment and position preferences- Initial assignment and position preferences- Competitive promotions/posting; in-place/career promotions- Assignment of sales territories, customers, etc.
• “Review and Test Factors before Accepting”- Does factor explain pay differences within demographic groups?
• “Investigate Systemic Small Group and Individual• Investigate Systemic, Small Group and Individual Discrimination”
- Make sure statistics are done correctly (what is probability of a finding difference if look in enough places?)g p )
- Are the small group/individual differences consistent with “systemic”?50