state pay equity compliance for employers: closing the...
TRANSCRIPT
State Pay Equity Compliance for Employers:
Closing the Pay Gap and Conducting
Privileged Pay Audits
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WEDNESDAY, SEPTEMBER 12, 2018
Presenting a live 90-minute webinar with interactive Q&A
Cheryl L. Behymer, Partner, Fisher & Phillips, Columbia, S.C.
Kathleen McLeod Caminiti, Partner, Fisher & Phillips, Murray Hill, N.J.
Cheryl Pinarchick, Partner, Fisher & Phillips, Boston
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State Pay Equity Compliance for Employers:
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Cheryl Behymer
(803) 740-7671
Kathleen McLeod Caminiti
(908) 516-1062
Cheryl Pinarchick
(617) 532-8215
Closing the Pay Gap and Conducting
Privileged Pay Audits
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Goals
• Provide an overview of recent pay equity legislation passed by various states around the country
• Define the “pay gap” and how state pay equity laws seek to correct it
• Describe how to conduct a privileged pay audit and how employers can use them to identify unlawful wage practices
• Discuss best practices to correct any unlawful pay disparities
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Federal LawEqual Pay Act (EPA) 29 U.S.C. § 206(d) – 1963
Equal Pay Act requires that men and women
in the same workplace be given equal pay
for equal work.
Prima facie case:
▪ Lower wages paid to employees of the opposite
sex in the same establishment
▪ Employees perform substantially equal work
▪ Jobs performed under similar working conditions
Key: no intent to discriminate required
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Federal Law
Jobs must be “substantially equal”: compare actual job duties, not just job titles.
• Skill
• Effort
• Responsibility
• Working Conditions
• Establishment
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Federal Law
EPA: Exceptions for unequal pay
▪ A seniority system
▪ A merit system
▪ A system which measures earnings or quantity or quality of production
▪ A differential based on any other factor other than sex*
Key: These must be shown by employer
* But see recent 9th Circuit case that says using salary history does not meet this standard.
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• The EPA has been in place for decades but the “pay gap” persists.
• Median female workers with a full-time, year-round job made 80.5 cents
for every man-earned dollar in 2016 (Sept. 12, 2017) – Census Bureau
Pay Disparities Remain a National Focus
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• Legal• States and cities are
enacting laws and ordinances to try and close the “pay gap”
• Increased compliance requirements outside the US
• Result: patchwork of inconsistent laws
• Heightened Public Awareness and Scrutiny• Social media
• Public relations
• Shareholder demands
• Grassroots efforts (e.g., Paradigm for Parity)
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The Changing Landscape
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Compliance Challenges
As an increasing number of jurisdictions pass pay equity legislation, the compliance
challenges for employers become more and more complicated because each jurisdiction has
its own unique set of rules.
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Compare the EPA and State Laws
EPA requires equal pay for “equal work.”
Many of the new laws are redefining “equal work”• Similarly Situated – work that requires equal skill,
effort, and responsibility, and is performed under similar working conditions.
• Substantially Similar – work that is mostly similarwhen viewed as a composite of skill, effort, and responsibility under similar working conditions.
• Comparable Work – work that requires substantially similar skill, effort and responsibility and is performed under similar working conditions.
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Compare the EPA and New Laws
• States are limiting the lawful justifications for paying men and women differently.
• States are expanding equal pay laws to cover race, nationality and other protected categories of workers.
• Many state laws have pay transparencyprovisions that make it unlawful for employers to prohibit employees from discussing or disclosing their pay.
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California
California Fair Pay Act
• Prohibits employers from paying employees less than employees of the opposite sex, or of another race, or of another ethnicity for substantially similar work
• Cannot justify a differential solely on the grounds of prior salary
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Massachusetts
Massachusetts Equal Pay Act
• Prohibits discrimination in wages on the basis of sex
• Effective July 1, 2018
• Salary history inquiry ban
• Affirmative defense available for employers that conduct self-evaluation and take steps to remedy pay disparities
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New York
Achieve Pay Equity Law
• Requires private employers to provide equal pay on the basis of sex for “equal work on a job the performance of which requires equal skill, effort, and responsibility and which is performed under similar working conditions”
• Executive Order 161: sex, race, and ethnicity for public employees
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New Jersey
Diane B. Allen Equal Pay Act
• Prohibits discrimination in wages on the basis of any protected class
• Amends the Law Against Discrimination (“LAD”)
• Effective July 1, 2018
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Salary History Bans
• Many laws, and even local ordinances, prohibit, or limit, an employer from seeking salary history from applicants and/or using salary history in setting compensation.• Rationale: pay discrimination can follow employees
from job to job throughout their careers, resulting in a systemic reduction in earning power.
• If an employee experiences pay inequality in a prior job, disclosing past salary when applying for a new job may perpetuate the effect of the past discrimination.
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Salary History Bans –Effective Dates
• Hawaii (1/1/19)
• Puerto Rico (3/8/17)
• New York City (10/31/17)
• Delaware (12/14/17)
• Albany Cnty, NY (12/17/17)
• California (1/1/18)
• San Francisco (7/1/18)
• Massachusetts (7/1/18)
• Vermont (7/1/18)
• Westchester Cnty., NY (7/9/18)
• Oregon (1/1/19)
• Connecticut (1/1/19)
• Philadelphia (TBD)
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An employer cannot:
• screen applicants based on their compensation histories, including requiring that an applicant’s prior compensation satisfy minimum or maximum criteria
• seek the compensation history of an applicant from the applicant or a current or former employer
An employer can:
• discuss and negotiate compensation expectations, provided the employer does not request or require the applicant’s compensation history
• seek applicant’s compensation history after offer of employment with terms of compensation is made and accepted, for the sole purpose of confirming compensation history
Delaware
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New York City
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An employer cannot:
• inquire about the salary history of an applicant for employment
• rely on the salary history of an applicant in determining the salary, benefits or other compensation for such applicant during the hiring process
An employer can:
• without inquiring about salary history, discuss with the applicant their compensation expectations, including unvested equity or deferred compensation that an applicant would forfeit by virtue of the applicant’s resignation from their current employer
• consider salary history in determining compensation for an applicant, and may verify such applicant’s salary history, if the applicant voluntarily and without prompting discloses salary history
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Massachusetts
• Nothing in law expressly prohibits an employer from using salary history when it is voluntarily disclosed
• However, salary history is not a recognized legal justification for pay disparities between men and women
• That means that even if an applicant volunteers their salary, you can’t use it to justify a pay disparity between the sexes
An employer can:
• request written authorization to confirm prior compensation after the employer makes an offer of employment that includes an amount of compensation
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California
An employer cannot:
• seek salary history information, including compensation and benefits, about an applicant for employment
• rely on salary history as a factor in determining whether to offer employment to an applicant or what salary to offer unless the applicant voluntarily discloses salary information without prompting
An employer must:
• upon reasonable request, provide the pay scale for a position to an applicant applying for employment
An employer can:
• consider or rely on salary history information in determining the salary of an applicant if the applicant voluntarily discloses salary history information
• provided however, an employer cannot use prior salary history by itself to justify disparities in compensation
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Salary History and the Federal EPA
Recent landmark decision by the 9th Circuit Court of Appeals:
Rizo v. Yovino
• Ruled that employers cannot justify wage differentials between men and women performing “equal work” by relying on prior salary
• Cited to cases in the 2nd Circuit, 6th Circuit, 10th Circuit and 11th Circuit as interpreting the EPA in a similar manner
• Noted that the 7th Circuit and 8th Circuit have shied away from issuing such a broad pronouncement
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“Outlier” States—Wisconsin and Michigan
• Wisconsin• Local legislation is prohibited; discrimination is an
area of statewide concern.
• Salary history bans are banned (March 2018)
• Michigan• Legislation passed prohibiting salary history bans
(March 2018)
• Laws banning salary history bans attempted and failed in• Minnesota, Washington, Mississippi
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Fisher Phillips’ Pay Equity Interactive Map
• State laws
• Key language
• Specific requirements
• Fluid—monitor where you have operations
• The map is a starting point, not a substitute, for careful review and consideration of the applicable laws.
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Fisher Phillips’ Pay Equity Interactive Map
https://www.fisherphillips.com/equity
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State Law Claims on the Rise
• Cahill v. Nike, Inc., No. 3:18-cv-01477 (D. Oregon 8/9/18): Four women who worked in corporate headquarters filed a class-action lawsuit in federal court in Oregon claiming Nike violated the EPA and the recently enacted Oregon Equal Pay Act by engaging in systemic gender pay discrimination and ignoring rampant sexual harassment.
• Ellis v. Google, Inc., No. CGC-17-561299 (California Superior Court 9/14/17): Class action filed by former female employees of Google alleging widespread compensation disparities against women in violation of California law.
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• Avalanche of litigation in the area of pay equity under federal and state laws
• High profile lawsuits against technology companies, law firms, pharmaceutical companies, and retail chains
• Collective and class actions
• Multi-million dollar settlements
• #TimesUp movement suggests more on the horizon
What About Litigation?
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Conducting a Privileged Pay Audit to Identify Unlawful Pay Disparities
• Consider conducting a privileged pay audit in specific locations or among certain groups of employees.• Massachusetts, Oregon and Puerto Rico provide a
safe harbor against liability if a pay audit is conducted in accordance with the new laws and reasonable steps are taken to address pay disparities.
• There is currently no safe harbor under federal law or other state laws, so it’s important to put the appropriate legal protections into place at the start of the audit to protect potentially harmful documents and information from disclosure.
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The Privileged Pay Equity Audit
• Establish a protocol to ensure audit is privileged
• Remember the law varies from jurisdiction to jurisdiction
• Treat the process privileged throughout
• Repeat the audit at reasonable intervals
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7 Steps for Conducting a Pay Equity Audit
1. Budget for costs of audit and compliance
2. Identify your team and set up privilege protocols
3. Examine pay policies and practices
4. Identify resources and collect data
5. Analyze compensation of workers performing “comparable work”
6. Determine corrective actions, if necessary
7. Revise compensation policies and human resources forms
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1. Budget for Costs of Audit and Compliance
• Budget sufficient human and financial resources to effectively conduct and complete the audit
• Evaluate how will this impact your FY budget• Costs associated with data collection—HRIS
database?• Costs associated with correcting unlawful pay
disparities, if identified
• Employers are prohibited from decreasing an employee’s salary or compensation package to rectify the pay inequity
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2. Identify Your Team and Establish Privilege Protocols
• HR/Compliance team member(s): person(s) who can access employee databases and personnel files, and who understand relevant pay and grading arrangements
• Finance/payroll team member(s): person(s) who can access the payroll system to collect data and generate reports
• Legal counsel: partner with internal and/or external legal counsel and implement a privilege protocol
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3. Examine Pay Policies and Practices
• Review existing pay policies• Do you have a method to determine salaries and benefits?
• Are jobs scored or assigned pay grades?
• Determine how compensation decisions are made • Are pay polices being followed?
• How much discretion is involved?
• Do you have a consistent job evaluation system?
• Do you know of any factors that could skew pay (acquisition, geography, business need, etc.)?
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4. Identify Resources and Collect Data
• Review current HRIS and payroll databases and evaluate their compatibility and capabilities
• Coordinate with IT to review any issues identified
• Collect data, e.g.:• Job title or category• Hire date• Gender
• Depending on the audit scope, other protected class identifiers such as race or ethnicity
• Job location• Resume and/or employment application• Total hours worked by each employee over the past 52
weeks• Total compensation data
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4. Identify Resources and Collect Data
▪ Large Group(s)
▪Small Group(s)
▪EEO-1 Category
▪Dept
▪ Job Title
▪Name
▪DOH
▪Base Salary
▪ Total Salary
▪Specific Benefits
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Prepare an Excel spreadsheet with headings
needed to conduct the audit, such as:
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5. Analyze compensation of workers performing “comparable work”
• Which employees are “similarly situated” or performing “comparable work”?
• Factors to consider:• Skill
• Effort
• Responsibility
• Performed under similar working conditions
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5. Analyze compensation of workers performing “comparable work”
▪Comparisons▪ Mean
▪ Median
▪ Cohort
▪Statistical Analyses▪ Multiple regression analyses
▪ Fisher’s exact test
▪ Two or more standard deviations may be an indicator of discrimination
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5. Analyze compensation of workers performing “comparable work”
• Forward red flags to HR/Compliance team• Further review with operations
• Evaluate and document bona fide factors to justify differences• Examples: seniority, performance, responsibility,
experience, education, geography, travel
• Follow up: Additional analyses needed?
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6. Determine Corrective Actions to Remedy Potentially Unlawful Pay Disparities
• Correct any identified job title issues• Consider employee relations issues
• Equity adjustments?• Amount(s)
• Timing
• Employee relations issues
• Communications• Recruiters, hiring managers, compensation team,
executive team
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7. Revise Compensation Policies, Procedures and HR Forms
• Update applications and hiring documents to eliminate questions seeking salary history information.• Remember, it’s okay to ask for salary expectations.
• Update handbooks, policies, and hiring documents to eliminate prohibitions against employees’ discussing pay and confidentiality provisions aimed at compensation.
• Train employees involved in the hiring process about prohibitions against seeking salary history and the changing pay equity laws more broadly.
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7. Revise Compensation Policies, Procedures and HR Forms
• Consider implementing standard pay ranges or guidelines for each position or classification.
• Create and/or update job descriptions.
• Review or create compensation policies and procedures—including checks and balances—and train managers on implementation.
• Communicate with employees about pay increases and their eligibility for same.
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7. Revise Compensation Policies, Procedures and HR Forms
• Assess the performance evaluation process and its role in pay decisions; standardize the process.
• Train decision-makers: • How to make proper pay decisions that comply with
organizational policies and the applicable law; • What the appropriate factors are to consider when
making pay decisions; • How to apply guidelines and exercise discretion
properly; and • How to document the bases for decisions.
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Questions?
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