As laid-off and furloughed workers return to the workplace, it may be time for employers to conduct pay equity audits. Women and people of color were more likely to lose their jobs as companies shut down during the pandemic, and their pay may now be unevenly matched to that of their peers. To ensure workers are paid fairly and avoid claims of discrimination, take a close look at your pay practices.
Pay Concerns for Women
Many women who left their jobs during the pandemic, either because they were laid off or needed to care for their children while day care centers were closed, are returning to the workforce.
Emily Martin, vice president for education and workplace justice at the National Women's Law Center in Washington, D.C., said that because women were laid off in larger numbers than men, they may have lower wages than male workers long term. Unemployment was particularly severe among Black and Latina women, she observed.
Robin Shea, an attorney with Constangy, Brooks, Smith & Prophete in Winston-Salem, N.C., noted that two industries severely affected by the pandemic were restaurants and hotels, which have large percentages of female employees. "The pandemic may have disproportionately affected women's jobs and pay," she said. While Shea hasn't seen evidence of pay discrimination, she recommended employers self-audit employees' compensation periodically.
"Companies should be proactive about leveling pay gaps," said Nela Richardson, chief economist at ADP in the New York City metropolitan area.
Privileged Audit
Similarly situated employees—employees performing similar tasks with similar job performance and approximately the same experience level—must be paid fairly, said Alissa Horvitz, an attorney with Roffman Horvitz in McLean, Va. Otherwise employers risk violating Title VII of the Civil Rights Act of 1964 and the Equal Pay Act, and federal contractors may be liable for not complying with Executive Order 11246. "To address pay equity, employers should be retaining employment lawyers who are well-versed in proper statistical analysis so that the employers can obtain meaningful, privileged legal advice as to which workers are similarly situated," Horvitz said.
Lawyers also can ensure any mathematical model of compensation using acceptable statistical methods is being used properly, she added.
"The pandemic is not an excuse to not invest the time, money, resources and effort into a robust pay equity review," said Joanna Colosimo, SHRM-SCP, director of compliance and workforce analytics and principal consultant with DCI Consulting Group in Washington, D.C. She recommended evaluating sex differences as well as race and ethnicity disparities in pay annually.
This may include using statistical pay audit tools—such as regression analysis—that are accepted by courts and enforcement agencies, including the Office of Federal Contract Compliance Programs, she said.
A scientifically valid assessment of pay discrimination would require that the study control for the position held, a full-time versus part-time schedule, educational level, years in the workforce, relevant work experience, career interruptions, geography and many other factors, Shea said.
When the results of well-designed and legally accurate analyses reveal preliminary indicators of gender-, race- or ethnicity-based pay discrimination, the employer should investigate those factors, Horvitz said. The employer then should obtain a legal opinion about whether the additional information that the employer gathers explains the pay difference or whether the employer should make pay adjustments.
If an employer is paying workers different wage rates for the same work, the employer has the burden to explain why that is. In many cases, these reasons can be discerned from a resume or application at the time of hire, such as if one worker has different education or prior relevant experience. Or it may be based on other employer records during an employee's tenure, such as the scope of the worker's responsibilities, performance and budgets, she noted.
"It is often the case, however, that legitimate, nondiscriminatory reasons for pay differences are not readily quantifiable in a database or documented at the time of hire," Horvitz said. If that's the case, the employer must research the information before concluding that gender or race is or isn't the reason for the differences.
Employers should not undertake a pay equity analysis if they aren't prepared to remedy pay inequities, Horvitz said. An employer that has knowledge of pay inequities based on race or sex and fails to remedy those differences could be found to be willfully or intentionally violating equal opportunity laws.
Audits should not focus only on pay but also on compensation, which is broader and can include commissions, opportunities for overtime bonuses and other forms of remuneration, Shea said. "If the employer focuses only on base pay rates, it may miss discrepancies in these other areas that need to be corrected."
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Other ways to help overcome pay inequities include rooting out discriminatory barriers in the hiring process and preventing the steering of women or Black or Latino workers into low-paying positions. Take a critical look at promotions and terminations, Colosimo recommended. And scrutinize higher rates of turnover for women than men.
"Any justifiable discrepancies should be thoroughly documented so that the information is easy to recall and retrieve in the event of a challenge," Shea said.