State Lawmakers Aren’t Waiting for Federal Pay-Equity Reform

 

Jathan Janove, J.D. By Jathan Janove, J.D. May 6, 2019
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Federal law has prohibited gender-based pay discrimination since 1963—yet pay disparities between men and women persist. In response, state lawmakers have increasingly tried to strengthen pay-equity laws. Here are some of the key features of these laws that employers should note. 

Federal Law

Altogether, women had to work for 15 months to earn what men made in calendar year 2018. Why does the gender pay gap still impact the workplace? One answer is that the federal Equal Pay Act (EPA) has limited impact.

The act requires employers to pay the same wage to men and women who perform equal work on jobs that require equal skill, effort and responsibility and are performed under similar working conditions. Wage discrepancies are allowed, however, if they are based on seniority, merit, productivity or "a differential based on any … factor other than sex," according to the act.

The emphasis on "equal work" and a "factor other than sex" have made EPA cases difficult for plaintiffs to win. Moreover, damages are limited to two years' retroactive pay, with liquidated damages (which are meant to punish malicious or reckless acts) in the same amount.

[SHRM members-only toolkit: Managing Pay Equity]

The Paycheck Fairness Act (H.R. 7), which the U.S. House of Representatives passed in March, would prohibit employers nationwide from asking job applicants about their salary history and would require them to prove that pay disparities between men and women are job-related. The bill has been reintroduced many times since 1997 but has failed to pass both chambers of Congress and isn't expected to pass the Senate this year.

Business groups that oppose the bill fear that employers will face frivolous lawsuits under the proposed requirements. 

Broader State Protection

Some state lawmakers have criticized the federal EPA's equal-work comparison as being too narrow and the justification for pay disparities—a factor other than sex—as too broad. So some states are limiting these exceptions.

For instance, in Massachusetts, a claim based on "comparable work" can support a gender-based pay-discrimination lawsuit. Employers can still vary wages based on certain business factors, but there is no catchall defense for "any factor other than sex."

Despite these plaintiff-friendly changes in Massachusetts law, there hasn't been a marked uptick in pay-discrimination claims yet, said Michael Clarkson, attorney with Ogletree Deakins in Boston. Nevertheless, he said, Massachusetts employers should consider performing a pay-equity audit and taking reasonable steps to address any gender-based pay disparities they find. Doing so can help employers establish a legal defense if their practices are challenged.

Oregon employers must also be able to justify pay differentials for employees performing comparable work. The state's law lists the following eight bona fide factors that can justify a pay difference:

  • A seniority system.
  • A merit system.
  • A system that measures earnings by quantity or quality of production.
  • Workplace locations.
  • Travel, if travel is necessary and regular for the employee.
  • Education.
  • Training.
  • Experience.

Any combination of these factors that accounts for the entire compensation differential can also justify pay differentials.

"While well-intentioned, the [Oregon] law is poorly drafted and poorly thought-through," said Paul Buchanan, attorney with Buchanan Angeli Altschul & Sullivan in Portland, Ore. For one thing, employers can't rely on nondiscriminatory differences other than the eight listed factors. This "creates lots of unintended and problematic consequences," he said.

In April 2018, New Jersey enacted one of the most expansive equal-pay laws in the nation. Rather than the federal standard for equal work, the state law uses the broader "similar work" standard, and unlike the federal "any other factor" catchall defense, the Garden State's law enumerates specific, narrower categories.

Some pay-equity laws also address more than gender discrimination. For instance, Oregon's law prohibits discrimination based on any legally protected class, and New Jersey's law applies to a broad list of protected classes.

The Illinois Equal Pay Act, originally enacted in 2003, is similar to its federal counterpart. However, as of Jan. 1, 2019, the act also protects black employees from pay discrimination.

California law also protects workers from being paid less than employees of another race, gender or ethnicity who perform substantially similar work.

Michael Riccobono, an attorney with Ogletree Deakins in Morristown, N.J., notes another key feature that creates challenges for employers: Under New Jersey's law, the equal-pay analysis is based on wage rates for all of an employer's operations, regardless of location. Thus, an employee in New Jersey can be compared to an employee in North Dakota.

"This requirement is likely to be challenged in the courts, given that cost of living and other factors are often very different," he said.

Similarly, amendments to California's law eliminated the requirement that comparable jobs be located at the same establishment.

Compliance Tips

Given the recent pay-equity developments at the state level, it behooves HR professionals to stay current with existing, proposed and emerging laws.

Buchanan recommends that employers conduct an equal-pay analysis of compensation practices—preferably as part of a potentially confidential attorney-client privileged review—to identify and eliminate pay practices that might be challenged.

The most important reason for an employer to conduct an equal-pay analysis is to determine if there are pay differentials in the workforce that aren't readily justifiable and, if so, to fix them before someone asserts a claim, he said.

Buchanan also suggests reviewing various compensation systems that measure merit, seniority, and quality and quantity of production, as such systems can provide a legal basis for differential pay if they are clearly defined.

In addition, employers should have updated and accurate job descriptions to help them determine which employees are performing comparable work, he said.

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