Leveling the Playing Field on Compensation

Gender Bender: Pay Equity in The Workplace

As pay equity continues to rise as a hot topic issue, Clyde Jacob, Director at Coats Rose, P.C.’s labor and employment practice, provides an in-depth analysis of where the issue arose from and the current avenues dictating where the issue of compensation and compliance is heading. Jacob acknowledges this will be an ongoing dilemma; however, businesses nationwide can start taking proactive approaches to “level the playing field.”

The issue of the gender compensation disparity has been an issue for many years. As early as 1963, the Equal Pay Act was passed to protect women from wage discrimination in the workplace. The issue, however, has continued to persist on a number of different levels – social, political, familial and, of course, legal. It has a new resilience now, and corporate counsel and HR professionals must pay attention to the new developments on the subject.

Historical Legal Protections

Currently on the books are both federal and state laws establishing that discriminatory pay practices are illegal. As mentioned above, as early as 1963, federal law made the practice of paying males and females unequally for the same work a violation of the law. The next year, 1964, Congress passed the Civil Rights Act including Title VII, which expanded 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 in pay. The U.S. Department of Labor regularly monitors the many federal contractors and subcontractors requiring them to ensure they have no compensation discrimination. An additional layer of protection from gender compensation discrimination is at the state level. Many states have passed nondiscrimination workplace laws, and compensation is protected from discrimination.

All of these current laws should be sufficient to protect women and employees in the workplace from wrongful discrimination in compensation. But have they done so?

The Gender Pay Gap Issue

It is publicly maintained and reported regularly by the news media that regardless of the established legal protections, there is a significant gap in gender pay. The actual existence of a gap and the amount of a gap is hotly debated. The Pew Research Center has reported that the pay gaps today hover around the same numbers they did in 2005, with a woman today making $0.83 to a man’s $1.00, and this is also consistent with the Bureau of Labor Statistics findings. This position of a gap, however, has been challenged. This $0.17 gap incorrectly aggregates all male jobs and all female jobs, which is not refined and which amounts to comparing apples to oranges. The proper way to analyze the existence of a gap and its amount is to examine individuals in the same job receiving different compensation and the reasons for any differential. When this refined analysis is done, comparing men and women in identical jobs, the gap may not be statistically significant to support that it is discriminatorily based. There are a number of factors for any gap that are unrelated to employer discrimination. For example, BLS data show that women who have never married have virtually no wage gap; they earn nearly $0.94 for every $1.00 a man makes.

Yet, regardless of the debate and the existence of laws against compensation discrimination, the gender pay gap issue continues to have traction with new laws and legal initiatives.

Prior Salary History – The New Legal Push

Many commentators on the gender pay gap issue point to salary pay history as a significant factor contributing to the pay gap. There are now laws being passed, not at the federal level, but by the states and municipalities, restricting employers from requesting salary history from applicants. Oregon, Massachusetts and Delaware have passed legislation forbidding employers from seeking prior salary history from applicants. California has similar legislation pending with AB 168 which could be signed any time now. New York City passed such a law in April 2017, as did Philadelphia in January 2017. The Philadelphia law, however, was challenged in court, and the Pennsylvania legislature is attempting to pass a 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.

There are some common threads in these laws. First, a voluntary revealing by an applicant does not violate the law. This makes good sense because it could be an advantage for some applicants to provide their prior history. A second element is that once an offer is made to an applicant, including starting salary, an employer may ask and obtain compensation history for the sole purpose of confirming the applicant’s history.

Paid Sick Leave

Paraphrasing the Mamas and the Papas, paid sick leave “dreaming is becoming a reality.” The U.S. is the only industrialized nation without a paid sick leave law or regulation. On January 1, 2017, an Executive Order for certain federal contractors and subcontractors went into effect providing paid sick leave of seven days, or 56 hours per year. The only contractors covered, however, are those who are subject to the Davis-Bacon Act, the Service Contract Act and the Walsh-Healey Act. Various states and cities have mandated paid sick leave: California, Connecticut, Massachusetts, Oregon, Vermont, Washington and, as of July 1, Arizona. The Arizona statute, in particular, is very comprehensive and goes beyond just sickness. Maryland, Illinois and Rhode Island are also actively considering paid sick leave legislation, as are about 28 cities or other local jurisdictions.

At the federal level, paid sick leave is a priority for the President’s daughter, Ivanka Trump, who has created an interagency working group to address the issue. That current proposal would apply to mothers and fathers for six weeks paid leave after birth or the adoption of a child. States would be required to run their own programs. There have been Congressional counters from the Republicans to this. One would be to allow workers to use earned overtime toward paid time off and a second that would provide a tax incentive for companies to offer two weeks per year of paid family leave.

Maternity/Paternity Leave

There are two issues involving maternity/paternity leave for the birth of a child: One involves whether men and women are permitted time off to care for a newborn and the other is whether such leave must be paid.

Thanks to the Family and Medical Leave Act (FMLA) of 1993, both men and women are entitled to take 12 weeks off in a year when working for an employer with 50 or more employees. In a survey by the Society for Human Resource Management (SHRM) reported in March of this year, however, it was found that of the employers surveyed, 14.5 weeks was the average maximum amount of maternity leave that U.S. companies offered in 2016, while paternity leave was lower, with the average amount at 11 weeks. As mentioned in the prior section on paid sick leave, there are legislative initiatives to pass paid sick leave, and these would include parental leave.

The United States is one of the very few nations in the world that does not have legislation on paid parental leave. As with other legislation in the gender area, the states have been more active. New York, Rhode Island, New Jersey and California have enacted paid leave. Some large companies have taken the lead in this area including Netflix, Amazon, Microsoft, Johnson & Johnson and Ernest & Young, and in December 2016, American Express increased its paid parental leave policy to 20 weeks. In the SHRM survey, it was reported that from 2005 to 2016, the percentage of organizations offering some replacement pay for women on maternity leave increased from 46 percent to 58 percent. A percentage of those, however, offering full pay continued to drop from 17 percent in 2005 to 10 percent in 2016. In fact, in 2016, only 6 percent of all employers with 50 or more employees surveyed offered full pay during maternity leave.

Takeaways

Employers who do business nationally will have to closely monitor the legislation in the various states in which they operate, as well as in specific municipalities and local jurisdictions. Employers could have a patchwork quilt of policies from state to state. Applications and interview questions may have to vary from state to state where prior salary information is prohibited.

On compensation, a recognized best practice is a regular compensation analysis, which not only looks at geography and competitive companies, but also internally at the equity of the pay system. Even without any new legislation in the gender pay area, there are significant federal and state laws available to employees who have been paid discriminatorily based upon gender or any other protected classification.