Benefits and Compensation, HR Management & Compliance

Review of Pay Practices Advised Regardless of Paycheck Fairness Act’s Fate

Although the Paycheck Fairness Act has passed the U.S. House, its fate in the Senate is doubtful. But employers are being advised to examine their pay practices anyway.

The Act passed the House on a 217-210 vote on April 15, with one Republican joining the Democratic majority in voting for the bill. The purpose of the bill is to reduce gender-based pay discrimination and make employers more accountable.

female employee
Source: Yuri_Arcurs / DigitalVision / Getty Images

If enacted, the bill would require employers to justify pay differentials in wage discrimination claims by using “bona fide” factors such as education, training, or experience. Also, employers would be prohibited from retaliating against employees who compare salaries or asking prospective hires for salary history.

Ida Shafaie, an attorney with Armstrong Teasdale LLP in St. Louis, Missouri, reminds employers that other laws already cover some aspects of the Paycheck Fairness Act. “For instance, the National Labor Relations Act protects an employee’s right to discuss pay and other working conditions.”

David M. Stevens, an attorney with Whiteford, Taylor & Preston, L.L.P. in Baltimore, Maryland, also points out other laws—including a number of state laws—prohibit sex discrimination in pay practices.

“As a result, employers should be proactively monitoring their own compensation practices to ensure that there are not unexplained differences in pay rates that cut along gender lines or that result in lower wages being paid to employees of a particular race or ethnicity,” Stevens says.

If the bill passes, Shafaie says employers can expect an increase in litigation on wage-disparity and other claims. “In particular, employers should maintain detailed records demonstrating the rationale behind compensation decisions,” she says. “These types of records will be essential to show compliance and act as evidence in the event of a complaint or lawsuit.”

In addition to covering gender-based pay disparities, the Paycheck Fairness Act would prevent employers from asking prospective employees about their salary history during the hiring process. That provision is notable, Stevens says, because “it shows a push at the federal level to limit the use of salary history in hiring practices.”

Limiting the use of salary history has been a developing trend in state laws, including in Stevens’ state, Maryland, where a similar restriction took effect last year.

Regardless of whether the Paycheck Fairness Act passes, Shafaie advises employers to evaluate their decision-making process around hiring and pay practices “early and often.”

“Many states are considering similar legislation, so having a clear policy in place is good practice even if this bill fails in the Senate,” Shafaie says. Also, once sound policies are in place, employers should make sure members of management with decision-making power are trained and required to follow the established protocol.

Tammy Binford writes and edits news alerts and newsletter articles on labor and employment law topics for BLR web and print publications.