Addressing the Gender Wage Gap and Pay Transparency

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​More wage claims, new pay equity laws and a recent heightened interest in pay transparency may all help close the wage gap—and may fundamentally change how HR professionals think about compensation.

"Why are we talking about pay equity?" asked Mickey Silberman, an attorney with Jackson Lewis in Denver, speaking at the Society for Human Resource Management Employment Law & Legislative Conference on March 14.

Because "we know that women earn less than men," he said. On average, women earn 79 cents for every dollar men earn, and for black and Hispanic women, that number is even less—64 and 55 cents, respectively.

The Equal Pay Act of 1963 and Title VII of the Civil Rights Act of 1964 were the first federal laws to provide employment protections based on sex.

That means, in 1962 employers could overtly discriminate based on sex, Silberman said.

What happened after these laws took effect is exactly what proponents of the laws hoped would happen: the pay gap narrowed.

After that, he said, there was an expectation that the pay gap would resolve, but it plateaued in the early 1980s.

That was 35 years ago, and women are still paid less than men. "It's a stubborn, persistent gap that has not gone away."

The gap has driven efforts by federal and state governments, civil rights groups, pay experts, and academics to develop tools that will eliminate this gap, including:

  • Annual EEO-1 pay data reporting.
  • Bans on asking applicants for salary history.
  • Activist efforts.
  • New pay transparency rules.
  • Aggressive state and international equal pay laws.

He noted that pay equity has historically been evaluated based on gender, but recent attention has also been given to pay disparities based on race and ethnicity.

Justifications

"Every pay disparity falls into one of two buckets," Silberman explained. 

First, there are pay differences that are fully explained by a legitimate factor other than discrimination—such as seniority, education, years of experience or prior experience with a direct competitor. 

Second, there are pay discrepancies by race and gender that are not explained by such factors. 

He noted that many differences in pay are justified by permissible business considerations. 

But you can violate pay equity laws without intentionally discriminating against someone. An audit might reveal unintentional and unexplained pay gaps by race or ethnicity or between men and women, he said.

Transparency

If pay disparities are so common, why aren't there more class-action lawsuits in this area? 

Silberman said people just don't have the information about pay disparities. 

As part of workplace culture, people don't often talk about their current pay or what compensation has been extended to them in a job offer. Furthermore, employers don't tend to share this information freely because they have business reasons for keeping salary information confidential.

That leads to a situation where employees and job applicants don't know if their salary is in line with their peers.

Importantly, the HR professional doesn't tend to know about pay disparities in the organization either. An annual compensation analysis usually evaluates pay grades and job levels compared to the market and looks at whether workers are paid below or above the pay range for their position.

But those analyses usually aren't looking at pay differentials based on gender or race or other demographics, Silberman said. 

[SHRM members-only how-to guide: How to Establish Salary Ranges]

Additionally, the federal government doesn't currently evaluate pay data based on gender or race. The Equal Employment Opportunity Commission plans to start collecting pay data on its EEO-1 reports in March 2018, but Silberman noted that experts are uncertain if the current presidential administration will keep or enforce the requirement for employers to submit this information.

Salary History Inquiries

Banning salary history inquiries during the hiring process is a recent trend that is gaining momentum in cities and states across the country.

Massachusetts, Philadelphia and Puerto Rico have passed such laws, and many states are currently considering similar legislation. 

The ban makes sense as a tool to close the pay gap, Silberman said, because if an employer bases an offer on what a candidate previously earned, it could be building on past inequities. The more relevant benchmarks are experience, education and other job-related factors.

Still, these bans are going to change the way HR professionals approach talent acquisition and compliance. 

Another issue, Silberman said, is that employers operating in 10 locations with 10 different laws will have to comply with a patchwork of different limitations on salary inquiries—and some of those laws may have conflicting provisions.  

Blue states may think that pay equity won't be a priority for President Donald Trump's administration, he noted. Advocates may be pushing for state and local laws based on the assumption that nothing is going to get done at the federal level.

That assumption might not be true. "Trump is an unpredictable guy," but he has been very supportive of pay equity, and his daughter Ivanka has been a champion of pay equity and paid maternity leave, Silberman said.

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