Published on: February 6, 2019
Authors: D. Mark Wilson, Daniel V. Yager
Topics: Inclusion and Diversity
Paycheck Fairness Act Overlooks Existing Efforts to Address Pay Gap, Seeks Solutions Through Counterproductive Litigation
Bill Would Create Unprecedented Unlimited Damages and Eliminate Legitimate, Non-Discriminatory Factors for Defending Pay Differences
While employers are stepping up their efforts to address the pay gap between men and women by increasing diversity at all levels of their operations, Congress continues to be preoccupied with addressing it through increased litigation. Advocacy groups attribute the pay gap primarily to discrimination, arguing the law needs to be strengthened in order to increase its effectiveness. Others argue that existing protections against pay discrimination are already strong and pervasive, and that most proposals to amend the Equal Pay Act overlook the real reasons for the gap and will prohibit legitimate, nondiscriminatory pay differences, and increase unnecessary litigation.
The latest version of the Paycheck Fairness Act (S. 207 and H.R. 7) was introduced on January 30, 2019, by Sen. Patty Murray (D-WA) and Rep. Rosa DeLauro (D-CT). The legislation currently has 239 cosponsors in the House and 45 cosponsors in the Senate. In 2008, an earlier version of the Paycheck Fairness Act (PFA) passed the House of Representatives by a vote of 247 to 178 with 14 Republicans voting for the bill. However, the Senate version of the PFA was never brought up for debate, and the bill was never enacted into law.
Employers Actively Addressing the Real Causes for the Pay Gap
Employers have long recognized the fundamental role that equal pay for equal work plays in enabling their companies to attract, motivate, develop, and retain the talent they need to compete in a diverse marketplace. And most companies have long-established nondiscriminatory pay policies and programs that are designed to achieve those objectives. Yet, because the gap has many causes, employers are taking a number of steps to address the issue including, educating managers and employees about existing pay policies and monitoring the application of those policies through self-evaluations. For example, companies are reinforcing the intent and operation of existing pay policies through education. Enhanced communication efforts are directed at managers who make pay decisions to ensure they understand the company’s pay philosophies and policies. Some companies are going further, expanding education to include training on the impact of explicit or implicit bias in the workplace, and how it may impact pay and other talent-related decisions. Some companies are also communicating more information about pay policy and practices to their employees, reflecting a more general tendency toward greater transparency in how organizations relate to their stakeholders. Companies are also conducting self-evaluations of their compensation systems to ensure their pay policies are being applied fairly and equally.
Most large employers believe their own solutions, coupled with needed changes in education and workforce development systems, hold the key to progress. These efforts go to the broader needs of ensuring greater diversity within their management talent pipelines and in higher-paying occupations. Employers are committed to achieving this progress, and view the PFA as unnecessary and counterproductive.
Existing Protections Against Pay Discrimination Already Strong and Pervasive
Currently, where gender pay discrimination is suspected, plaintiffs and their attorneys have two options. If they can prove that the employer has intentionally discriminated, they can bring an action under Title VII of the Civil Rights Act for compensatory and punitive damages—up to $300,000—in addition to make whole remedies. If intent cannot be proven, the Equal Pay Act allows claims under a type of strict liability that only requires a showing of pay disparity between two or more employees. The employee prevails unless the employer can show a nondiscriminatory reason for the disparity. Moreover, the employee who prevails can receive double back pay, unless the employer can show that it had “objective, reasonable grounds” for believing it was not violating federal law. Of course, plaintiffs may elect to bring a claim under both laws simultaneously and attorney’s fees are available under both. Further, the non-retaliation provision in the PFA that is designed to protect the rights of employees to discuss and disclose their wages to one another is unnecessary because the National Labor Relations Act already protects such rights as protected concerted activity.
Paycheck Fairness Act PFA Would Penalize Legitimate, Nondiscriminatory Pay Decisions
Although under the PFA an employer would be able to show that pay differences are the result of “bona fide” factors such as education, training, or experience that are “job-related” and “consistent with business necessity,” an employee could refute this defense by simply showing that an “alternative employment practice” exists that would serve the same business purpose without producing the wage differential. This attack on legitimate pay practices led The Washington Post to issue two separate editorials on the PFA in 2009 and 2010. One editorial commented the legislation would:
Mandate that the business necessity defense “shall not apply” when the employee “demonstrates that an alternative employment practice exists that would serve the same business purpose without producing such differential and that the employer has refused to adopt such alternative practice.” But what if the employer has refused because it has concluded that the alternative is – contrary to the employee’s assertion – more costly or less efficient? What if the employee and employer disagree on what the business purpose is or should be?1
The Washington Post continued by noting that:
This approach also could make employers vulnerable to attack for responding to market forces. Take an employer who gives a hefty raise to a valued male employee who has gotten a job offer from a competitor. Would a court agree that the raise advanced a legitimate business purpose or could the employer be slammed unless he also bumps up the salary of a similarly situated female employee?2
Another Washington Post editorial concluded that the PFA “potentially invites too much intrusion and interference with core business decisions[,] . . . risks tilting the scales too far against employers and would remove, rather than restore, a sense of balance.”3
Unlimited Damages Available For Successful Suits
In addition to making it easier to prevail in pay discrimination lawsuits, the PFA departs from all other equal employment opportunity laws by providing for unlimited compensatory damages, and unlimited punitive damages where an employee can show the employer acted with malice or reckless indifference. This is in direct contradiction to precedent set by Title VII and the Americans with Disabilities Act that have a cap on damage awards up to $300,000, based on employer size. The only discrimination law which allows such unlimited damages is the Civil Rights Act of 1866, which was originally enacted to enforce the 13th, 14th, and 15th amendments to the U.S. Constitution following the Civil War.
Expands Maze of Pay History Bans
The PFA would add to the confusing labyrinth of state and local laws by making it unlawful at the federal level for employers to rely on the wage history of a prospective employee when determining the wages for such prospective employee, or for considering that person for employment. Currently, 8 states and 6 localities have differing laws addressing the issue of salary history. These laws are generally consistent in prohibiting employers from asking prospective employees about their salary history, but have wide variations in how the prohibition is applied. For example, in Delaware and New York City, it is permissible for the employer to consider the salary history information if it is voluntarily offered by the applicant; but, in Oregon, the employer is not permitted to use that information even if given voluntarily. This discrepancy has significant, practical consequences. It is very difficult for an employer to stop an applicant from voluntarily sharing what he or she earned at a former job—or to “un-ring the bell” once that disclosure is made. Further, it is nearly impossible for an employer to show that the applicant’s disclosure was voluntary, and even if the employer was able to present such a defense, questions will remain as to how the disclosed information was used. Moreover, there is confusion about whether employers may use salary history information when evaluating internal applicants for transfer or promotion. Some jurisdictions, including New York City and Oregon, specifically state that reliance on salary data is appropriate and permissible in such situations. Yet other states and municipalities have not made that exception explicit. Many state and local laws also need to be clarified to ensure that employers can ask about salary expectations in order to ensure that they aren’t offering too little.
The lack of uniformity between the PFA and state laws makes the administration of a company-wide policy risky and difficult to formulate. When employers are forced to abide by conflicting laws on the same subject, the risk of liability, or at least litigation, expands with each additional nuance. In other words, the margin of error grows, putting companies at risk of litigation and prospective employees at risk of unintentional unfair treatment. The alternative—juggling the differing federal, state and local laws depending on jurisdiction—is equally troublesome because administrative and training methods will be inconsistent throughout a company, increasing the possibility for inadvertent error.
Same Establishment Requirement Expanded
Under the EPA, wage differentials based on sex are prohibited in the same establishment (i.e., same physical place of business). The PFA would expand “establishment” to mean any of the employer’s facility within the same county or similar political subdivision. Importantly, the PFA would enable the EEOC to draft new regulations to define the meaning of “establishment.”
Mandatory Pay Data Collection Will Misdirect and Waste Agency and Employer Resources
The PFA directs the Equal Employment Opportunity Commission (EEOC) to collect compensation, hiring, termination, and promotion data disaggregated by sex, race, and national origin of employees for no apparent reason. The EEOC already has authority to collect such data when it conducts investigations and having access to disaggregated data prior to those investigations is simply unnecessary and potentially subject to dangerous data breeches.
The PFA also directs the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) to redundantly collect compensation, hiring, termination, and promotion data from federal contractors. Such data collection will also mislead and misdirect OFCCP and federal contractor resources at great cost. The pay data collected by the reports is more likely to generate significant numbers of “false positives” that will waste OFCCP resources and inappropriately target non-discriminating employers, who will then need to spend significant time, money and resources defending themselves against meritless allegations. Further, the new report is likely to generate significant numbers of “false negatives” where true discriminators would be identified as non-discriminators by the OFCCP and thus would fail to target them for audits. Notably, in 2006, OFCCP rescinded a similar reporting requirement after an analysis of actual federal contractor data by a reputable statistical firm found the survey’s usefulness “to be only slightly better than chance.”4
The Pay Gap Should be Narrowed Through Voluntary Efforts Addressing its Real Causes, Not More Litigation
There are compelling business reasons to establish and maintain a workplace that not only treats employees fairly but goes above and beyond to recognize the outsized role many working parents play in running a household and raising a family. Fostering such a culture is also the right thing to do. In addition to the elimination of discrimination, critical to any long-term solution to the gender pay gap is the furtherance of education, training, and occupational development of women, particularly investments that increase their representation in occupations and positions that involve higher levels of compensation. Businesses that take steps to achieve these goals gain both a competitive advantage and a loyal workforce. Policymakers should take steps to encourage companies that are making these efforts. The proliferation of an increasingly complicated patchwork of laws stretching from coast to coast can actually hinder these goals. It makes business sense for employers—large and small—to be innovative in recruiting and retaining talented women. HR Policy Association will continue to work with elected and appointed policymakers, thought leaders, and coalition partners to close the gender pay gap with all due speed.
D. Mark Wilson
President and CEO, American Health Policy InstituteContact D. Mark Wilson LinkedIn
Daniel V. Yager
Senior Advisor, Workplace Policy, HR Policy AssociationContact Daniel V. Yager LinkedIn