Benefits and Compensation

Watch Out: Gender Pay Equity Law Is on the Move

Gender pay equity is a perennial social, political, and ultimately legal issue in our country. Corporate general counsel and HR professionals have watched this issue ebb and flow, and we are now seeing a new flow, but not from where it was expected.

Source: thodonal, Getty

The Legal Background

There are, and have been, federal and state laws establishing that discriminatory pay practices are illegal.
As early as 1963, the Equal Pay Act established a federal violation of paying males and females unequally. Next came Title VII of the Civil Rights Act of 1964, expanding the protection of gender pay discrimination from not only intentional discrimination but also to unintentional discrimination where there is a statistically significant adverse impact against women as a class.
There is also the U.S. Department of Labor which monitors the many federal contractors and subcontractors requiring them to ensure they have no compensation discrimination. Even the many states which have passed non-discrimination laws have included compensation as an element for which discrimination is illegal.

The Pay Gap Issue

Yet even with these established legal protections, it is publicly maintained that there is a significant gap in gender pay. The existence of this gap, and the amount of any gap, has been hotly debated.
The Pew Research Center has reported that the pay gaps today hover around the same numbers they did in 2005 where a woman today makes $0.83 to a man’s $1.00, which is also consistent with the Bureau of Labor Statistics findings. The counter argument is that this analysis aggregates all male and female jobs, which is comparing apples to oranges.
A proper legal analysis must include examining individuals in the same job receiving different compensation and the reasons for the differential. Moreover, there are already sufficient laws in place to address any pay discrimination.

The New Legal Initiative to Close the Gap – Prior Salary History

For corporate counsel and HR professionals, the law is developing a new element purportedly to close the gap – salary pay history. It is not coming from the federal government, but from states and municipalities.
Already Oregon, Massachusetts, and Delaware have passed legislation forbidding employers from asking applicants about prior salary history, and California has pending legislation with AB 168. New York City passed such a law in April 2017, and Philadelphia did in January 2017, but the Philadelphia law has been challenged in a lawsuit and the Pennsylvania legislature is attempting to pass law that would preempt it.
It has been reported that 39 states have pending legislation related to pay equity with 23 states considering bills addressing salary history. The basis for this legislation is the belief that asking for salary history of a female is a contributing element to a gender pay gap because it continues any historical pay differences.
In addition to the prohibition, there are two other common threads in these laws. One is that a voluntary revealing by an applicant does not violate the law. This makes sense because it could be an advantage for some applicants to provide their prior history. The second thread is that once an offer is made, including starting salary, an employer may ask and obtain compensation history for the sole purpose of confirming the applicant’s history.

Practical Advice

Employers have several choices in this instance. If they are doing business in localities that do not prohibit asking for prior salary history, they can continue to do so. They must, however, be mindful of changes in the law of the states and municipalities where they do business. For employers who do business nationally, they have two choices:  (1) have different applications and interviewing questions for those states where questions about prior salary history are restricted or (2) do away with any application or interview question nationally that seeks prior salary history.
For employers that are covered federal contractors or subcontractors for affirmative action, who are required in their annual plans to analyze compensation, a simple statement in the affirmative action plan can suffice: “We have a policy of addressing any complaints of alleged compensation discrimination.” There is no requirement or need for federal contractors and subcontractors to perform statistical regression analyses on compensation.
Clyde Jacob is a Director in the Coats Rose labor relations and employment practice with over 30 years working exclusively in the field. He speaks regularly to employers and associations nationwide, trains managers on the fundamentals of employee relations, and advises companies on the development of human resource policy manuals and employee handbooks.