Equal Pay Day Another Reminder to Review Pay Practices

Court decisions, changing state and local laws aim to stop pay inequity

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Employers must proactively monitor their pay practices for equity as more states and cities pass laws to address the gender wage gap.

April 10 is National Equal Pay Day, the day that represents how long into the current year women must work to earn what men made during the prior year.

"Because women earn less, on average, than men, they must work longer for the same amount of pay," according to the National Committee on Pay Equity, a coalition of women's and civil rights organizations. "The wage gap is even greater for most women of color."

Pay-Equity Trends

The federal Equal Pay Act prohibits employers from paying one gender less than the other for equal work—but it has exceptions for wages determined by a merit or seniority system, a system that bases pay on the quantity or quality of work, or "a differential based on any other factor other than sex."

On April 9, the 9th U.S. Circuit Court of Appeals ruled that a job applicant's prior salary can't be used to justify a wage differential between male and female employees (Rizo v. Yovino, 9th Cir., No. 16-15372).

The catch-all exception for factors other than sex is limited to legitimate job-related considerations, such as experience, education and prior job performance, the appeals court held.  

In addition to the federal Equal Pay Act, most states have their own pay-equity laws. In recent years, several states and cities have also banned employers from asking job candidates about their salary history. The purpose of these laws is to stop prolonging prior pay inequities.

[SHRM members-only toolkit: Managing Pay Equity]

Six states—California, Delaware, Massachusetts, New Jersey, New York and Oregon—and Puerto Rico have outlawed salary-history inquiries to varying degrees. A number of cities and local governments have also banned the question, including Albany County, N.Y., New Orleans, Philadelphia (effective date pending), Pittsburgh, New York City and San Francisco. Employers should note that some of these state and local laws apply to private employers, and some apply only to public employers (and some have yet to take effect). Each law has different nuances, too, which makes compliance challenging for businesses with workers in more than one location.

Employers who operate in multiple jurisdictions need to make sure they are keeping abreast of these new laws as they are emerging, going into effect and being interpreted through regulations, case law or other guidance, said Liz Washko, an attorney with Ogletree Deakins in Nashville. She said that, in addition to bans on salary-history inquiries, state and local pay-equity trends to watch include laws that:

  • Mandate that employers permit workers to discuss their compensation with other employees—even those who are not covered by the National Labor Relations Act.
  • Require employers to make pay ranges available to applicants under certain circumstances.
  • Limit the factors on which an employer may rely to justify a pay difference (such as education and prior experience).

In 2016, California's pay-equity law was amended to provide broader coverage. Instead of requiring equal pay for equal work, the state requires fair pay for men and women who perform "substantially similar work, when viewed as a composite of skill, effort, and responsibility." Also, effective Jan. 1, 2017, California's fair pay law was expanded to include race and ethnicity. And the state's ban on salary-history inquiries took effect on Jan. 1, 2018. 

It is certainly getting harder for employers to comply with all of the new local laws, said Megan Winter, an attorney with Fisher Phillips in San Diego. Even employers who are not in locations with strict pay-equity laws should be preparing for them and conducting privileged wage audits with counsel, she added.

Closing the Gap

It isn't always easy to measure the gender wage gap, because employers usually consider education, years of experience and other factors when making a job offer. Additionally, job titles and duties can vary significantly from one organization to another. 

Although women in the U.S. earn on average 17.6 percent less than men, the gap significantly diminishes when comparing men and women who work at the same job level for the same company and perform the same function, according to research findings by pay consultancy Korn Ferry.

However, Hired—a San Francisco-based technology job resource—identified a wage gap in the tech industry when comparing candidates who interviewed for the same job at the same company.

In its 2018 The State of Wage Inequality in the Workplace study, Hired found that 63 percent of the time, men were offered higher salaries than women for the same role at the same company. Women were offered an average of 4 percent less than men for the same role—and sometimes were offered 45 percent less.

Furthermore, the survey found that black and Hispanic woman were offered 90 cents for every dollar white men earned.

Both the Hired and the Korn Ferry studies found that the lack of women in leadership and high-paying roles contributes to the gender pay gap. Women make up only about 25 percent of executive, senior-level and manager positions at S&P 500 companies, according to Hired.

"We want to empower all candidates to recognize their value, know the market rate for their skill set, and ask for the salary they deserve," the Hired report said. "Ultimately though, it is the company's responsibility to establish a compensation philosophy, execute it consistently, and pay fairly."

HR's Role

The first step toward compliance is to make sure employers understand the laws that apply in the jurisdictions in which they operate and have a system in place to keep up with new laws, Washko said.

Employers should work with their in-house or outside counsel to determine what is required for compliance with the applicable laws in each jurisdiction, and coordinate that guidance with HR and the employees responsible for hiring and making pay decisions—including decisions that affect starting salaries, merit increases, bonuses and other compensation.

Pay equity is not a topic that can simply be reviewed once a year, Winter said. HR professionals have to stay vigilant, particularly those in multiple jurisdictions.

 

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