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Pay Equity - Closing the Loopholes

By: Grace Conti, PMP

Pay Equity - Closing the Loopholes

In January 2016, New York became one of many recent states to enact pay equity legislation (California, Colorado, Connecticut, Illinois, Louisiana, Maine, Michigan, Minnesota, New Hampshire, New Jersey, Oregon, Vermont) The purpose of the state-driven legislation is to clarify factors of the federal Equal Pay Act (EPA). The EPA requires employers to provide equal pay to men and women in the same establishment for the same work, defined as work requiring equal skill, effort and responsibility and that which is performed under similar working conditions. Then why are these state laws necessary?

The Equal Pay Act was signed on June 10, 1963, and amended the Fair Labor Standards Act, with a purpose of abolishing wage disparities amongst men and women. The EPA prohibits employers from discriminating on the basis of sex by paying wages to employees at a rate less than the rate paid to employees of the opposite sex for equal work on jobs requiring equal skill, effort, and responsibility, and which are performed under similar working conditions. For an employee to establish a prima facie case under the EPA, she must show that:

  1. different wages were paid to employees of the opposite sex;
  2. the employees performed substantially equal work on jobs requiring equal skills, effort, and responsibility; and
  3. the jobs are performed under similar working conditions.

An employer may avoid liability only by proving the existence of one of four statutory affirmative defenses. The EPA allows unequal pay for equal work when the wages are set pursuant to

  • a seniority system;
  • a merit system;
  • a system which measures earnings by quantity or quality of production; or
  • any other factor other than sex.

After fifty years, the Equal Pay Act simply has not achieved its intended goals. The affirmative defenses afforded have provided loop holes for employers to maintain pay disparities. Although many women begin their working careers at approximately the same pay level as their male counterparts, once they leave to begin families that time and pay equity is often lost. Therefore, the seniority system, for example, winds up enabling a pay discrepancy that can last for the remainder of a women's career. Similarly, a quantity and quality of production system can result in a pay disparity for working mothers, as they may not be able to work and produce for the same amount of hours as their male counterparts. A third "neutral" factor that negatively impacts women arises from the fact that most women do not negotiate for their salaries as often nor as well as their male counterparts. A study conducted at Carnegie Mellon University found that when receiving job offers, 51.5% of men and only 12.5% of women asked for more money.

All of these rationales have caused and maintained large pay disparities between men and women. The state pay equity amendments endeavor to remove the loop holes that currently exist under the Equal Pay Act and make the employer defenses more relevant. These state amendments seek to broaden the meaning of "same establishment" by defining it to include workplaces located in the "same geographic region" and replaced the "any other factor other than sex" defense for a wage differential with the more limited defense of "a bona fide factor other than sex, such as education, training, or experience."

For federal contractors effective January 11, 2016, Executive Order #13665 (Non-Discrimination for Disclosure of Compensation Information) requires contractors to:

  1. incorporate specific Pay Transparency language into existing employee handbooks
  2. disseminate the Pay Transparency language, by posting or distributing it, to employees and job applicants
  3. post the "EEO is the Law" poster and its supplement on their career page as well as their bulletin boards

Pay equity has been a long-standing issue with Director Shiu of the Department of Labor, Office of Federal Contract Compliance Programs (OFCCP). Federal contractors are required to conduct pay equity studies on a regular basis. As part of any OFCCP audit, contractors must submit a large amount of compensation data which not only includes annualized salary, but must show any bonus, overtime pay, recent increases in pay received by all employees along with other pertinent information. Upon receipt of this data, the OFCCP will conduct a conference call with the contractor to determine their starting salary practices and to determine if negotiation is used as a factor in determining starting salary.

Employers should also be aware that recent Labor Board decisions have found that a rule restricting employees from discussing their salaries violates employee rights in both union and non-union settings.

Although changes are slowly being made, the addition of state laws to the EPA requirement along with the Executive Order, should result in more companies closing the pay gap between men and women.

Some companies have tried to combat pay discrepancies by publishing salaries. Others have stopped using the applicant's salary history as a factor in setting a starting salary. Google has said it makes offers based on what it has predetermined a job is worth.

It may be too soon to tell whether the state amendments and the Executive Order will be beneficial in resolving the issue, but it is certainly a step in the right direction.

About the Author
Grace, Executive Vice President of PMP, has been with the firm since 1993. She holds a degree in Human Resources/Labor Relations from the State University of New York and has also taken courses at Cornell University.

Ms. Conti is perhaps best known for her expertise in Affirmative Action rules and regulations. Grace works closely with clients in developing affirmative action plans, as well as preparing for difficult affirmative action audits. Often called the "Affirmative Action guru" by her clients, she is proud of her exceptional record of successful OFCCP audits. Her thorough knowledge and experience of the intricacies of Affirmative Action regulations has made her a nationally recognized Affirmative Action specialist. Her clients come from a variety of industries including aerospace and/or aviation, communications, manufacturing and various service industries throughout the United States.

Grace trains supervisors in all aspects of employer/employee issues as well as affirmative action compliance as well as guiding and assisting clients in compliance with other federal and state regulations. Ms. Conti's background, experience and collaborative style helps clients diminish exposure to litigation, reduce turnover and improve the company's bottom line.

In 2008, Grace was a recipient of the Long Island Center for Business and Professional Women's prestigious Achievers' Award. She is Co-Chair of the Long Island ILG.

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