Closing the Wage Gap: Dos and Don’ts for Employers

Pink and blue figures on coin stacksThe issue of equal pay is everywhere today, and the push for pay equity, pay transparency and closing the wage gap is taking on a life of its own. These efforts include:

1. Amended and expanded equal pay laws in Massachusetts, New York and California;
2. Executive orders and Department of Labor (DOL) rules aimed at enforcing equal pay laws and combating wage discrimination among federal contractors; and
3. The EEOC’s focus on its Strategic Plan to enforce equal pay laws and end gender discrimination, and its proposed changes to the EEO-1 report seeking data on compensation and hours worked in addition to race, ethnicity and gender from large employers.

Here are some dos and don’ts for employers to follow when it comes to promoting and ensuring equal pay and closing the wage gap in the workplace.

Do Give Equal Pay for Equal Work

An employer should make sure that it is paying equal wages for equal work in terms of skills, responsibilities and working conditions. Further, an employer should be aware that various new state laws go further and require equal wages to be paid for comparable or substantially similar work in terms of skill, effort and responsibility and performed under similar working conditions.

An employer needs to look beyond the job title, position and description to fully evaluate the job content and corresponding pay. Jonathan Segal, a partner at Duane Morris LLP in Philadelphia, says, “It’s what people actually do that matters, so whether it would be for equal pay or wage and hour compliance, employers need to redouble their efforts to ensure that they truly understand what employees actually are doing.” Segal also cautions that there should not be a disconnect between written job descriptions and the actual job responsibilities.

Do Remember an Employer May Pay Different Wages for a Good Reason

An employer may pay different wages if there is a legitimate and nondiscriminatory reason for the practice, such as a:
• Merit system;
• Seniority system; or
• System that measures earnings by quantity or quality of production or sales or revenue.

Depending on state law, an employer may also be able to pay different wages based on geographic location, education, training or experience to the extent that these factors are reasonably related to the job.

Don’t Prohibit Employees from Discussing Wages

In today’s workforce, there is a new push to ban employer policies that prohibit employees from discussing their wages with each other, inquiring about their own or another employee’s wages or retaliating against an employee for discussing wages. In fact, various state laws specifically prohibit this practice. As a result, wage transparency should be promoted.

Do Update Policies

An employer should ensure that its workplace policies and practices prohibit compensation and wage discrimination based upon not only sex, but also race, color, ethnicity, religion, age and membership in any protected class, as this is good practice and specifically required in some states. This information can often be part of an EEO or discrimination policy, but an employer also may promulgate a separate discussion of wages policy.

Further, the policies should also provide a multi-channel complaint procedure, allowing employees to bring complaints to multiple members of management, and assure employees that they will not face retaliation for complaints.

Don’t Forget Training

Training of supervisors and managers and those with responsibilities such as recruiting, interviewing, screening and hiring applicants on the parameters of equal pay is essential. Supervisors and managers need to be up-to-date on the latest legal requirements in the jurisdiction in which they are working, and should make sure to avoid engaging in unlawful conduct.

Individuals making decisions regarding compensation and promotions should also be trained, as this impacts pay practices. If two employees in an equal or comparable position are paid different wages, supervisors and manager should be prepared to defend their decision-making process. Segal advises that “in conducting the training, emphasize not only the legal but also the business imperative. If there is a pay gap due to gender, the gap may disappear when the employee takes her talent and contracts to a competitor who pays her what you don’t”

Do Publicize Guidelines and Requirements for Salaries and Bonuses

The employer’s expectations should be adequately conveyed to all employees so that they are aware of how compensation decisions are made. For example, it may be helpful to establish pay ranges for positions to maximize consistency.

An employer should make sure that any salary guidelines or requirements for any bonus (whether it is based on merit, productivity, sales or commissions or a combination of factors) are:
• Well documented;
• Based on fair, objective, predictable and measurable criteria; and
• Made public to all employees.

Do Keep Adequate Records and Documentation

It is critical for an employer to be detailed and thorough when it comes to maintaining records regarding pay practices and ensure that all decisions regarding pay, performance and promotion are carefully documented. Complete records can be a very useful tool and provide critical evidence if an employer faces an equal pay or wage discrimination claim down the line. This will also make it easier if and when the EEOC’s new EEO-1 Report takes effect in 2018.

New York City employment attorney Jason Habinsky, a partner at Haynes and Boone, says, “The recent trend towards pay equality provides employers with the impetus to remedy institutional disparity and the opportunity to embark upon a fresh start with pay equality as a priority. To accomplish these goals, employers need to commit to the heavy- lifting involved, which includes a steady regimen of homework, evaluation, documentation, and implementation.”

Do Audit Pay Practices and Evaluate Wages

An employer should undertake a careful review and audit of its pay practices, job descriptions and salaries of all employees to root out discrimination with respect to:
• Wages;
• Bonuses;
• Equity;
• Benefits; and
• Any other forms of compensation.

An employer should ensure that any wage differentials are supported by well documented and legitimate nondiscriminatory reasons. If not, the differences should be adjusted and the pay corrected.

The recently-passed Massachusetts law explicitly provides employers conducting self- evaluations in good faith with an affirmative defense. This defense is particularly strong if an employer can show that it has made reasonable progress toward eliminating wage differentials based on sex for comparable work.

Self evaluations and audits can be helpful and reduce the chance of employer liability and the potential for litigation which can be costly in terms of time and resources.

Do Comply With Notice-Posting Requirements

An employer should be aware that a handful of state laws (including Georgia, Maryland, Maine, New Hampshire and Pennsylvania) require an employer to notify employees of their right to be paid an equal wage under the law. Many states supply model posters for use by employers.

Don’t Ask for Salary Information

An employer should be particularly cautious about asking prospective employees or applicants about prior salary history or wages during the recruiting and hiring process or during an interview as this may perpetuate an existing wage gap if an individual was underpaid in a previous position. This prohibition was specifically incorporated into Massachusetts’ new law and has been proposed in New York City as well.

Speaking of the Massachusetts law and its salary history question ban, Boston employment attorney Peter Mee says it could place employers and job applicants in difficult positions. “As written, the Massachusetts law prohibits employers from asking applicants about their salary histories, but it allows applicants to volunteer such information. In many ways, this framework raises more questions than answers,” says Mee, who practices with Morgan, Lewis & Bockius. He explains that if courts and regulators do not interpret the voluntary disclosure provision broadly, the law could have the unintended consequence of reducing compensation.

Similarly, an employer should be diligent and ensure that any job applications or related forms do not seek this type of information. Jonathan Segal adds that “Not asking about salary can also help minimize exposure to age bias claims. Older employees sometimes are not considered because of their higher salaries at prior jobs.”

Don’t Cut Pay to Even the Playing Field
Finally, an employer should know that the federal Equal Pay Act and many state laws specifically ban an employer from reducing pay to become legally compliant. In adjusting pay because of a pay differential, an employer may increase the pay of the lower paid employee.

 

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