Employers Should Plan for Stronger Pay Equity Laws

Employers Should Plan for Stronger Pay Equity Laws

CHICAGO—Pay equity laws have been around for a long time, but the recent focus on closing the gender pay gap has caused many state and local lawmakers to review and strengthen their laws.

It started at the federal level with the Equal Pay Act of 1963. The purpose of the act was to pay men and women the same wages for equal work in terms of skill, effort, responsibility and working conditions within a single establishment. The next year, Title VII of the Civil Rights Act of 1964 prohibited employment discrimination based on color, national origin, race, religion and sex. 

In recent years, though, pay equity efforts at the federal level have stalled.

"I truly believe that because there haven't been any significant changes at the federal level to really push and strengthen the fair pay agenda, we've unleashed a beast at the state level," said Michele Hester, SHRM-SCP, senior manager of client services at Berkshire Associates, a human resources consulting firm based in Columbia, Md. She was speaking at a concurrent session during the SHRM 2018 Annual Conference & Exposition.

Almost all states have equal pay laws on the books. However, many of those laws were enacted a long time ago and may be considered weak in terms of their effect on discriminatory pay practices, she noted. So states—and cities—have been updating their pay equity laws to strengthen their impact. The trend at the state and local levels is to:

  • Broaden the definition of comparable work by moving from "equal work" to "similar work."
  • Define bona fide reasons for pay disparities, such as education and tenure.
  • Provide pay transparency so that workers know how their wages compare to the target range for the job.
  • Ban salary-history inquiries to stop perpetuating historic pay discrimination.

SHRM vigorously supports equal pay for equal work and believes that any improper pay disparities should be promptly addressed, according to the Society's 2018 Guide to Public Policy Issues

Jodi Dahlgren, SHRM-CP, an Annual Conference attendee from Chicago, said pay equity is an important issue. She wants to make sure she is aware of current trends and best practices when it comes to compensation and pay equity so that she can take those ideas back to her organization. 

The Pioneer States

States that have taken pay equity to the next level include California, New York, Maryland and Massachusetts, according to Hester. Here's a look at recent activity in those states.

  • California revised its pay equity law to require fair pay for men and women who perform "substantially similar work, when viewed as a composite of skill, effort and responsibility." The law was also expanded to include race and ethnicity. The Golden State was the first to take the notion of equal work and broaden it to include substantially similar work, Hester said. Furthermore, employers must compare employees located anywhere in the state, not just in the same establishment.
  • New York's law is similar to California's but has a narrower geographic region for comparison. Employers must compare workers in the same geographic region but not an area that is larger than a county.
  • Maryland also has a countywide comparison, but the law still addresses "equal" work rather than "substantially similar" work.
  • Massachusetts lawmakers broadened the definition of comparable work and established a safe harbor for employers who conduct pay audits and take remedial steps to address any pay disparities. SHRM supports safe-harbor provisions because they serve as an incentive for employers to conduct proactive pay analyses and address any improper disparities.  

It's a challenge for employers to interpret the words "comparable" and "substantially similar" and understand how they apply to the workforce, Hester said. "Each state is taking this to a slightly different place." She recommends consulting legal counsel when developing programs and policies. 

Salary History Questions

The big theme of 2018 has been laws banning inquiries about a job applicant's salary history. These laws are popping up everywhere, so employers shouldn't be asking about salary history for the purpose of determining starting pay, Hester said.

HR professionals need to know the specific laws that affect their locations. Some states have banned salary history inquiries for all employers and others have laws just for public employers. Michigan went against the trend by prohibiting municipalities from enacting such bans. 

[SHRM members-only toolkit: Managing Pay Equity]

SHRM believes that HR professionals should use alternative ways to engage job candidates to reach an agreement on pay by asking, for example, for a candidate's salary expectation rather than salary history. 



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