NEW ORLEANS — More than half a century has elapsed since the Equal Pay Act and the Civil Rights Act became law in the 1960s, but the U.S. Equal Employment Opportunity Commission (EEOC) continues to see "robust pay disparities based on gender in particular but also race, national origin and other areas," EEOC Commissioner Charlotte A. Burrows told attendees at the American Bar Association's 13th Annual Labor and Employment Law Conference.
Not every pay gap amounts to discrimination, Burrows noted, but "our job at the commission is to take seriously that some of them are." Addressing discriminatory pay disparities is one of its six national priorities; if they aren't caught and corrected, they could add up to a significant financial loss over a lifetime, Burrows said. "That's why it's a priority."
The best way for employers to get pay equity right, Burrows said, is prevention. Employers can take a preventative stance by developing a firm understanding of the laws that prohibit pay discrimination and taking several steps to avoid or unearth and address pay disparities.
Equal pay legislation
Employers need to take note of two federal laws that prohibit pay discrimination based on gender, race and other protected classes, Orrick, Herrington & Sutcliffe Partner Erin M. Connell told attendees at the conference. They will want to pay attention to legislation at the state and local level, as well.
The Equal Pay Act of 1963
The Equal Pay Act of 1963 (EPA) requires employers to give workers equal pay for equal work. If the work requires equal skill, effort and responsibility and it's performed under similar conditions, the work is considered equal under the EPA, Connell said. The law prohibits pay discrimination based on only gender.
If a worker demonstrates to a court that he or she is paid less compared to a worker of the opposite sex performing equal work, the burden to prove otherwise shifts to the employer, Connell said. Employers may use one of four defenses to do so: seniority, merit, earnings by quantity or quality of production, or another factor other than sex.
Title VII of the Civil Rights Act of 1964
Unlike the EPA, Title VII creates more than one protected class; it prohibits pay discrimination based on race, color, religion or national origin, Connell said. It also sets up a broader comparator standard — the employee to whom a plaintiff compares him- or herself must be similarly situated rather than equal, Connell said. To prove illegal discrimination did not affect pay, employers use the same four defenses as they do under the EPA. The plaintiff would need to show the employer's discriminatory intent or prove disparate impact.
States like California, New York, Massachusetts and Washington have strengthened their equal pay act laws recently. Though the updates differ, many have broadened the comparator standard, Connell noted. While the EPA requires equal work to prove sex discrimination, some of these laws have changed that standard to similar work. California's standard is no longer equal work, for example, "but instead is substantially similar work," Connell said.
Some states have also heightened the burden on employers that try to justify pay differentials. California has the same four defenses as the EPA and Title VII, but the fourth defense is a bona fide factor other than sex, rather than another factor. And no matter which defense California employers use, they must show the defense was reasonably applied and accounts for all of the wage differential, Connell said.
It's worth noting that state laws generally cover more than just sex and gender in prohibiting pay discrimination — they cover other protected classes as well, Connell said.
Salary history bans
Some states and localities have also enacted laws banning employers from asking applicants about their pay history and using that information to determine their salary. Asking about salary history may enable and perpetuate pay discrepancies, especially for women and minorities, Connell said.
Pay data collection
Another state law aiming to eliminate pay discrimination may soon appear in California; In 2017, both houses of the state legislature passed a bill that would obligate the collection of pay data using forms akin to the EEO-1. Then-governor Jerry Brown (D) vetoed the bill but it has been reintroduced and may see passage under the state's new governor, Gavin Newsom (D), Connell said.
Of course, there has been another, nationwide effort to collect pay data, led by EEOC. "It's an interesting moment to look at that," Burrows said. During the Obama administration, EEOC decided it would add a component to its EEO-1 forms, which employers had already been submitting every year to disclose data on their workforce demographics. The new component, Component 2, would obligate employers to report pay data. Although EEOC launched Component 2 collection in 2017 and 2018, it will not renew its request for the 2019 calendar year.
5 quick tips for preventing pay discrepancies
1. Keep job descriptions accurate
"Job descriptions are a very good way to make sure you understand what each job is supposed to be," Dresser-Rand Associate General Counsel, Labor and Employment, Ellen Weitz told attendees. A job's duties will allow employers to see how similar one worker is to another.
If two workers — one man and one woman — have the same job title, but their duties differ vastly, that could create confusion in how their pay is evaluated. "You need [the job descriptions] detailed enough so that everybody can understand what the job is and why they're in whatever salary range they're in," Weitz said.
2. Get the union's opinion
If an employer's workforce is unionized, it may behoove the business to ask union committees if jobs and the duties they entail align with the job category and the salary ranges, Weitz said. "To have the union's input, I've found to be very successful and you'll have far fewer issues when it comes to pay," she noted.
3. Look to other companies and review target ranges
Companies may elect to participate in survey groups — preferably ones with a large participation base — to gain insight into what salaries their competitors assign to certain jobs, Weitz said. When an employer understands how a neighboring business sets its minimum and maximum salaries, it can determine how its own pay compares.
Weitz recommended employers participate in these surveys within and outside of their industries. "You do want to remain competitive in the market and overall," she said.
4. Eliminate bias-producing information
Not all states have prohibited employers from asking about salary history, but such laws are increasingly common. Regardless of legislation, employers can always opt to do that, Weitz said.
They may also remove information about applicants' sex from recruiting and hiring materials. "You want to be careful to not look at male or female. Sometimes that's hard to do," Weitz said. "Some companies will create a blind resume so you can't even tell if [the applicant is] male or female, so you're just looking at job history, education. I find that that is a pretty progressive way, but I think it's legitimate."
5. Conduct pay analyses
Pay analyses will serve employers well. "You can learn so much about your overall compensation system but also your job structure, and if you can be doing a better job with that, when you do these sorts of analyses," Connell said.
Before conducting one, HR and others involved would be wise to get executive buy-in: "Tell them you're going to address the problems that you find," Connell said. If the findings aren't addressed appropriately, they could create legal risk.
When a pay discrepancy is discovered, analysis conductors should determine whether the jobs are equal, Altshuler Berzon Attorney Eve H. Cervantez told attendees.
If companies have categorized groups broadly, that won't make for a good defense of a pay gap, she noted. That said, "the jobs do not have to be identical," she said. A German teacher and a French teacher likely have similar jobs in terms of skill and responsibility. What about two programmers, one of whom programs in Java and the other in Python? Remember, it's about skills and responsibility, she said.
It's also important to identify which employees are paid under the same compensation system, Connell said. People in sales, for example, are likely paid differently than those in IT.
It's also important to pursue the source of a pay gap once it's pinpointed and correct it, Edgeworth Economics Partner Nathan Woods told attendees. "If there's a problem today, you as a company don't want to figure out how to solve it for today — you want to go find what caused the problem and fix it forever."