Paycheck and Arbitration 'Fairness' Worry Employers

By McGuireWoods LLP May 18, 2009

In addition to the recently enacted Lilly Ledbetter Fair Pay Act, two additional pieces of legislation are pending in Congress in that could alter the employer-employee relationship in pay-related disputes significantly:

The Paycheck Fairness Act (H.R. 12 and S. 182) would amend the Equal Pay Act (EPA) to create new damages and causes of action while removing impediments for employees to bring suits.

The Arbitration Fairness Act(H.R. 1020 and S. 931) would amend the federal Arbitration Act so that mandatory arbitration clauses in employment, consumer and franchise agreements are unenforceable.

Each piece of legislation, if enacted in its current form, could usher in a new era in employment-related litigation that is decidedly pro-employee, employment attorneys say.

The Paycheck Fairness Act

The Paycheck Fairness Act passed the U.S. House on Jan. 9, 2009. One day earlier, it was introduced in the U.S. Senate by then-Sen. Hillary Clinton, D-N.Y. As of May 2009, it is pending on the Senate calendar. The Paycheck Fairness Act would make the following changes to the EPA:

Bar retaliation against workers who share information about wages with other employees.

Allow for compensatory and punitive damages.

Allow for opt-out class actions (as opposed to the current opt-in collective actions under the Fair Labor Standards Act, 29 U.S.C. section 216(b)).

Narrow the “any factor other than sex” affirmative defense by requiring employer-proffered rationales for pay disparity to be job-related, bona fide factors linked to business necessities.

The Paycheck Fairness Act, especially when combined with the recently passed Lilly Ledbetter Fair Pay Act, could trigger a wave of individual and collective wage-and-hour actions. Employers are advised to take appropriate measures to ensure that their compensation policies and procedures are updated and being implemented properly. Employers should start looking more closely at their compensation structure (preferably in an attorney-privileged context) to ensure that any disparity is based on bone-fide factors related to business necessity.

The Arbitration Fairness Act

On April 1, 2009, the U.S. Supreme Court ruled in the case of 14 Penn Plaza LLC v. Pyett that mandatory arbitration clauses with respect to claims under the Age Discrimination in Employment Act (ADEA) are enforceable. In direct response to that decision and the increasing willingness of many courts to enforce mandatory arbitration agreements, Congress has begun an attempt to overturn 14 Penn Plaza and other precedent favoring arbitration.

On Feb. 12, 2009, Rep. Hank Johnson, D-Ga., introduced the Arbitration Fairness Act of 2009 in the House. It was referred to the House Subcommittee on Commercial and Administrative Law. On April 29, 2009, Sen. Russ Feingold, D-Wis., introduced an almost identical version of the bill in the Senate, also called the Arbitration Fairness Act of 2009. It was referred to the Senate Committee on the Judiciary.

The Arbitration Fairness Act is designed to make pre-dispute mandatory arbitration provisions contained in employment, consumer and franchise agreements unenforceable. However, mandatory arbitration clauses in employment agreements entered into before enactment of the Arbitration Fairness Act would still be enforceable. Finally, pre-dispute arbitration clauses in collective bargaining agreements unrelated to an employee’s ability to seek judicial enforcement for discrimination claims would still be enforceable.

Enactment of this legislation would alter the employment landscape drastically, as employers would no longer be allowed to include arbitration clauses in employment agreements. Instead, if an employer prefers the arbitral forum, it would have to wait until after a dispute arises and then seek an agreement with the employee to resolve the matter in arbitration.

© 2009 McGuireWoods LLP. All Rights Reserved.

This article should not be construed as legal advice.​


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