Benefits and Compensation, HR Management & Compliance, Recruiting

Paycheck Fairness Act 101

Even with the passing of the Equal Pay Act of 1963, paycheck inequality remains a problematic issue in today’s workplace. There are a lot of reasons behind this—some more objective and obvious, and some more subtle—but the fact remains that pay has not equalized despite that law passing more than 50 years ago.

One issue many states and localities have addressed on this point is the question of asking about a person’s salary history as part of the hiring process. Some states, including Massachusetts, Oregon, and many other states and cities, have outright prohibited employers from asking about an applicant’s salary history.

The rationale behind this is quite simple: basing a new salary on someone’s previous salary runs the risk of continuing a past discriminatory pay decision. If that person was paid lower than others in a similar role before, and an employer simply builds their salary on that value, that does nothing to correct the problem—and in fact prolongs the issue. Instead, employers can simply create an appropriate salary range for the role, that takes into account the role’s requirements and internal and market fairness—and make an offer within that salary range, regardless of what the person taking the job was previously paid.

This idea is gaining steam. The Paycheck Fairness Act has been reintroduced this year to congress as H.R. 7 and S. 270. It should be noted that this act was originally introduced in 1997 and has been reintroduced without success several times over the years since. This is another reintroduction in 2019. The Paycheck Fairness Act would amend the Equal Pay Act of 1963 in several ways, one of which would be prohibiting employers from asking about salary history or using that information to set pay.

Here’s a summary from SHRM on it.[i]

“The proposed legislation would strengthen the Equal Pay Act by:

  • Prohibiting employers from asking job applicants about their salary history or relying on salary history to set compensation.
  • Prohibiting employers from retaliating against workers who discuss their pay with co-workers.
  • Requiring employers to show that pay disparities between men and women are job-related and consistent with business necessity.
  • Providing plaintiffs who file EPA claims the same remedies that are available to plaintiffs who file race- or ethnicity-based wage-discrimination claims under Title VII of the Civil Rights Act of 1964.
  • Making it easier for plaintiffs to participate in class-action lawsuits that challenge systemic pay discrimination.
  • Establishing a negotiation-skills training program for women and girls.”

While for some, this act may seem straightforward, it does have detractors as well. One criticism is that the act may make it more difficult for employers to defend legitimate pay discrepancies that are not based on gender discrimination—simply because the burden of proof is more difficult to meet.

As with any other proposed legislation, it remains to be seen what will happen with this in congress. This is one area where HR professionals should watch and see what happens next.

What has been your experience? What actions does your organization take to ensure that pay practices are not discriminatory?

[i] https://www.shrm.org/ResourcesAndTools/legal-and-compliance/employment-law/Pages/Congress-Considers-Nationwide-Ban-on-Salary-History-Inquiries.aspx