Pay Equity Laws: The Latest Trend

25 Jul Pay Equity Laws: The Latest Trend

Eighty percent. That’s the number. The number that represents how much women earn compared to their male counterparts as of 2016. At the current rate of change, it will take many years until that gap is closed according to the latest studies on the matter.

Some take issue with what has been stated above and claim that it is not true. This article will not attempt to convince you one way or another. Where you land on the argument is a moot point.

A number of states have already decided they land firmly in the “it’s true” camp and have taken matters into their own hands. That is what should concern you as it may impact you currently or in the near future.

From an employment compliance standpoint, we pinpoint trends when laws that are similar in nature get passed very quickly in multiple states. New pay equity laws are such a trend. In just two years, 7 states have enacted some type of pay equity law. As of this writing, it’s been reported that 20 additional states have some form of equal pay legislation proposed. This doesn’t even count cities and/or counties that have enacted their own legislation.

Some may be asking, “what does this mean, hasn’t there always been a law protecting against pay discrimination in the workplace?”  Indeed, that is correct.

In 1963, president John F. Kennedy signed the Equal Pay Act. As a federal law, this applied to all employers nationwide. This law “prohibits sex-based wage discrimination between men and women in the same establishment who perform jobs that require substantially equal skill, effort and responsibility under similar working conditions.”

What’s different now is the reach, beyond the federal law, that states, counties and cities are taking. 

For years, states simply took the federal regulation and applied it. In some cases, they added their own state-based rules along the way. Until now, however, those changes were not drastic. They more-or-less kept consistent with federal law. All of that changed about 2 years ago. States are now applying new, more aggressive, standards to which employers must be mindful.

State Trend #1: Salary History Ban

The new laws prohibit employer inquiries or reliance on a candidate’s prior salary history during the hiring process to set the candidate’s salary. The Equal Pay Act, however, has long held that prior salary is a “factor other than sex” and can be used in the hiring process. Thus, this new stance goes beyond long-held beliefs and will represent a change in how salary is negotiated in the states that have enacted this type of legislature.

In the bills in which this type of inquiry is prohibited, the thought process is this: if women are being paid less in jobs, whether intentionally discriminatory or not, using their pay from other jobs will perpetuate low salaries at future jobs. Therefore, the salary for the job and the offer to the candidate should be based on the job being performed, not what someone may or may not have earned at prior employers.

State Trend #2: Broader Protections

States are broadly defining the equal pay standard. Going back to what the Equal Pay Act prohibits, if we dig a little deeper, the Equal Pay Act requires employers to pay employees “equal pay for equal work,” meaning pay equity for “substantially similar” jobs (similar in skill, effort, responsibility, working conditions, same establishment, etc.).

Under new state laws, the standard may require equal pay for “comparable work” or “work of a comparable character.” It may also include comparison for employees in separate locations, or “same geographic region,” or within “the same county.” In other words, there is overall broadening of what can constitute pay discrimination. These laws also include new rules for being able to justify pay and possible pay differences.

State Trend #3: Pay Transparency

Wrapped up in these laws is also more specific protections for employees to openly discuss their pay with one another. The thought here being that if employees cannot discuss their pay with one another how can they learn of a pay discrepancy issue in order to address the problem and possibly have it rectified?  This is building upon the National Labor Relations Act (NLRA), which has been around for years, and ends any question about whether an employer can have wage secrecy policies. Employers cannot have these, no matter the state, and the consequences can be more significant with these state laws.

Scrutinizing State Laws

So now that we know what some of the trends are, let’s look at some of the state laws and how they may affect you:

California Fair Pay Act: Effective January 1, 2016, 2017, and 2018 depending on parts of the bill

• Pay transparency: Employers may not prohibit employees from disclosing or discussing their own wages or the wages of others, or from aiding or encouraging other employees to exercise their right under the law.
• Salary history ban:
  • (a) An employer shall not rely on the salary history information of an applicant for employment as a factor in determining whether to offer employment to an applicant or what salary to offer an applicant.
  • (b) An employer shall not, orally or in writing, personally or through an agent, seek salary history information, including compensation and benefits, about an applicant for employment.
  • (c) An employer, upon reasonable request, shall provide the pay scale for a position to an applicant applying for employment.

Maryland Equal Pay for Equal Work Act: Effective October 1, 2016

• Unique to MD:
  • Prohibits pay discrimination on the “basis of sex or gender identity.”
  • Prohibits employers from “providing less favorable employment opportunities,” which includes placing employees into “less favorable career tracks” or positions, “failing to provide information about promotions or advancement,” and “limiting or depriving” employees of employment opportunities because of sex or gender identity.
• Pay transparency: An employer may not prohibit an employee from inquiring about, discussing, or disclosing the wages of an employee or another employee, or requesting that the employer provide a reason for why the employee’s wages are a condition of employment. An employer is prohibited from requiring an employee to sign a waiver or other document to deny the employee the right to disclose or discuss the employee’s wages.
• Salary history ban: For employers with 15+ employees (Unique!), an employer may not: seek orally, in writing, or through an employee or an agent salary history information, including compensation and benefits, for an employee; or screen an applicant for employment based on the applicant’s salary history.

 Massachusetts Equal Pay Act: Effective July 1, 2018

• Pay transparency: It shall be an unlawful practice for an employer to require, as a condition of employment, that an employee refrain from inquiring about, discussing or disclosing information about either the employee’s own wages, or about any other employee’s wages. Nothing in this subsection shall obligate an employer to disclose an employee’s wages to another employee or a third party.
• Salary history ban: Employers may not seek the salary or wage history of any prospective employee before making an offer of employment that includes compensation and may not require that a prospective employee’s wage or salary history meet certain criteria.
• Affirmative Defense (Unique!): The law provides a complete defense for any employer that, within the previous three years and before an action is filed against it, has conducted a good faith, reasonable self-evaluation of its pay practices. To be eligible for this affirmative defense, the self-evaluation must be reasonable in detail and scope and the employer must also show reasonable progress towards eliminating any impermissible gender-based wage differentials that its self-evaluation may reveal.

New Jersey Diane B. Allen Equal Pay Act: Passed March 2018; Effective July 1, 2018

• Unique to NJ: It is an unlawful employment practice for an employer to pay any employee who is a member of a class protected by the state’s anti-discrimination law at a rate of compensation, including benefits, which is less than the rate paid by the employer to employees who are not members of the protected class for substantially similar work, when viewed as a composite of skill, effort and responsibility.”
• Pay transparency: in effect.

 New York Achieve Equal Pay Law: Effective January 19, 2016

• Unique to NY: liquidated damages for willful violations will be increased to 300% of wages due.
• Pay transparency: No employer shall prohibit an employee from inquiring about, discussing, or disclosing the wages of such employee or another employee.

 Oregon Equal Pay Law: Effective October 2017 & January 1, 2019

• Pay transparency: Wage transparency law actually went into effect January 1, 2016. It is an unlawful employment practice for an employer to discharge, demote or suspend, or to discriminate or retaliate against, an employee with regard to promotion, compensation or other terms, conditions or privileges of employment because the employee has: (a) Inquired about, discussed or disclosed in any manner the wages of the employee or of another employee; or (b) Made a charge, filed a complaint or instituted, or caused to be instituted, an investigation, proceeding, hearing or action based on the disclosure of wage information by the employee.
• Salary history ban: Employers are prohibited from seeking the pay history of an applicant or employee from the applicant or employee or a current or former employer of the applicant or employee before the employer makes an offer of employment to the prospective employee that includes an amount of compensation.

Washington Equal Pay Opportunity Act: Passed March 2018; Effective June 7, 2018

• The new law makes it a misdemeanor for an employer to discriminate in providing compensation based on the gender of “similarly employed”
• By replacing the term sexwith gender, the new law also extends equal pay protections to LGBT employees.
• Extends protections to employees who are “offered lesser career advancement opportunities”based on gender.
• Pay transparency: in effect.

With a few exceptions, these laws primarily focus on gender inequality. This does not mean that other pay practices may not be illegal and cause problems. For example, two female employees employed in the same job; one is African-American and one is Caucasian. If an employer is paying the Caucasian woman more than the African-American woman without actual job-related reasons for doing so, it could result in liability. In general, the laws are there to ensure everyone is treated without regard to protected characteristics.

Conclusion

There is a spotlight on pay equity currently happening nationwide which is not likely to end anytime soon. While it remains to be seen how these new laws will shape the litigation landscape, it’s a good time to audit pay practices. Fix problems now before they are challenged later. Now more than ever, employers need to ensure their pay practices are based on objective criteria and are not discriminatory. Focus needs to be placed on determining what the job is and how much it pays regardless of how much someone made at a previous job. The expansion of pay transparency means many employers with policies, in writing or not, that prohibit employees from discussing wages, benefits or working conditions have a serious potential liability that should be remedied immediately. Consequences for failing to follow these new laws will be steep, but avoidable if you simply pay employees fairly and equitably regardless of race, gender, or other non-job-related characteristics.