Equal Pay

Author: Beth Zoller, XpertHR Legal Editor

In today's workplace, there is an increased focus on equal pay.

At the federal level, the Equal Pay Act requires that men and women receive equal pay for substantially equal work in terms of skill, effort and job responsibility, subject to some exceptions. Pay refers not just to salary but also overtime, bonuses, vacation and holiday pay, stock options, life insurance, and all other benefits and compensation. Federal discrimination law also prohibits wage discrimination based on race, religion, sex, national origin, age and disability, among other things. The Equal Employment Opportunity Commission (EEOC) is committed to eradicating wage discrimination and increasing pay transparency as part of its Strategic Enforcement Plan. Beginning in 2018, the agency will require certain employers to provide information on compensation and hours worked in addition to racegender and ethnicity on their annual EEO-1 Report.

At the state and local level, there also is a renewed focus on equal pay laws. Many jurisdictions now specifically prohibit an employer from banning employees from discussing their salaries. Other states such as Maryland and Pennsylvania require employers to provide specific notice to employees of their equal pay rights. California even prohibits an employer from asking prospective employees about prior salary history or wages, as this may perpetuate an existing wage gap.

The following are some key steps for HR to take to prevent wage discrimination and promote fair pay:

1. Audit Pay Practices

To minimize the risk of an equal pay claim, an employer should frequently review its pay practices, job descriptions, salaries, benefits and bonuses to ensure it is not engaging in discrimination based on sex, race, national origin or any other protected class under federal law. An employer also may want to consider state and local law with respect to protected classes. An employer should make sure that any wage differentials are based on legitimate and nondiscriminatory factors - such as education, training or experience - and supported by written documentation. If they are not, these issues should be corrected. An employer should abide by clear compensation standards and be able to easily defend all employment decisions.

2. Implement Policies Prohibiting Wage Discrimination

An employer should implement and enforce a policy prohibiting wage discrimination based on an employee's membership in a protected class. All employees should be paid fairly based on merit, skills and qualifications. A prudent employer should also maintain a multichannel internal complaint procedure allowing employees to bring wage discrimination complaints. Employees should be assured that they will not face retaliation for complaints.

3. Set Clear Standards for Salaries and Bonuses

It is important to establish clear guidelines for fair pay, salary increases and bonuses and make sure that they are tied to predictable and objective and nondiscriminatory factors such as merit, productivity, performance, sales or some combination of factors. Employees should be aware of the employer's expectations and how compensation decisions are made. Further, employees should be provided with yearly or bi-annual performance evaluations and reviews that advise employees as to whether they are meeting the employer's expectations.

4. Maintain Complete Wage Records

It is crucial to implement recordkeeping policies and procedures that enable an employer to keep comprehensive wage records for at least three years. An employer should be sure to carefully document all decisions regarding hiring,pay, performance and promotion. Recordkeeping provisions should extend not only to wage records, but also to records of job classifications, pay performance, promotion and other terms and conditions of employment. 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. It will also be useful in preparing for the revised EEO-1 Report due in 2018.

5. Train Supervisors

All supervisors and managers - and especially those with responsibilities for recruiting, interviewing, screening and hiring employees - must receive proper training on how to avoid wage discrimination and make employment decisions based on legitimate and nondiscriminatory reasons such as merit, skill and performance. Managers and supervisors should also be instructed on how to maintain proper records and documentation regarding compensation decisions.

6. Do Not Prohibit Employees from Discussing Wages

Employees should be permitted to freely discuss information concerning wages, salary and benefits and inquire about their own or a co-worker's wages. The National Labor Relations Act guarantees employees the right to engage in protected concerted activity and collective action to improve their wages, hours and working conditions. Further, a number of states such as Illinois and New York have laws addressing the discussion of wages. Thus, an employer should not ban salary discussions.