October 8, 2019
According to the American Bar Association (ABA)
Gender-based wage discrimination remains a pernicious problem in the workplace despite enactment over 50 years ago of the Equal Pay Act (EPA), which made it illegal for employers to pay unequal wages to men and women in the same workplace who perform substantially equal work.
Common explanations for the gender pay gap “cannot be dismissed entirely as the inevitable byproduct of women’s choices in education, career and family matters,” the ABA also maintains.
Efforts at the federal level to expand the scope of the EPA, aimed at addressing perceived weaknesses in that 1963 law, have gone nowhere in recent years. The EPA allows unequal pay for equal work if wages are set based on a seniority system, a merit system, a productivity-based system, or any other factor besides gender. That fourth open-ended criterion allows for the possibility of pay differentials based on an employee’s compensation at a previous employer.
Legislation called the Paycheck Fairness Act has been proposed and re-proposed in Congress for a long time, but without passage. However, after winning a recent legal skirmish, the Equal Employment Opportunity Commission (EEOC) is moving ahead and requiring employers with at least 100 employees to file the newly expanded EEO-1 report, which collects demographic data on staff members. The new report is for years 2017 and 2018 and must be filed by Sept. 30.
The revised “Component 2” section of the survey form (which asks for hours and pay information from W-2s) requires more detailed reporting differentiated by income bracket, gender and ethnicity classification, and job category. That could ultimately give more ammunition to pay discrimination accusers where state and local jurisdictions haven’t made this issue a high priority.
In some jurisdictions, the legal requirements that are aimed at anti-gender pay discrimination among employers may include a ban on asking for a job candidate’s salary history. States with such prohibitions include California, Colorado (beginning in 2021), Connecticut, Delaware, Hawaii, Illinois (beginning September 29, 2019), Maine, Massachusetts, New York (beginning in 2020), Oregon, Vermont, and Washington. Typically, however, if a job applicant provides a salary history without having been asked, employers are permitted to verify that information, but generally not to justify an otherwise unjustifiable pay disparity.
The theory behind this prohibition is that when the pay component of a job offer is linked to prior earnings, women often become locked into lower pay brackets indefinitely because of having taken time away from work to tend to family responsibilities. The argument is, if an employer would be willing to pay a man a higher wage for the same job, why should a woman’s compensation be any less?
Salary History Off Limits?
Several states, including many that prohibit employers from requiring job applicants to furnish salary histories, are more restrictive than federal law regarding permissible factors for pay distinctions between genders. For example, a New Jersey law that took effect in July 2018 allows pay disparities based on similar criteria as the EPA. But unlike the EPA, the law doesn’t leave the door open to other unspecified justifications. Rather, New Jersey places the burden on employers to defend a disparity on grounds that it’s “reasonably necessary to the normal operation of the particular business.”
Under that test, it might be difficult to explain, for example, hiring a man and a woman at (or nearly at) the same time for similar jobs, but paying the woman less — for almost any reason.
New Jersey’s law includes significant penalties for violators. Specifically, an employee who wins a pay discrimination case can be awarded three times the amount of the pay disparity for a period going as far back as six years. That means, for instance, that a woman who was underpaid (based on a successful discrimination lawsuit) by $10,000 over a three-year period could be awarded $10,000 x three years x “treble” (triple) damages = $90,000, plus legal costs.
Comparing Notes on Pay
Some state laws also prohibit employers from enacting policies to keep workers from discussing their compensation among themselves. Without being able to compare their pay and thus provide preliminary evidence of discrimination, it’s difficult for employees to convince an attorney to take them on as clients on a contingency basis.
Along with features typical of other states’ laws, Colorado’s “Equal Pay for Equal Work Act” seeks to tackle pay discrimination through disclosure requirements. Colorado employers (beginning in 2021) will need to announce, post, or otherwise communicate all opportunities for promotion, on the same day of the year. And for all job postings, Colorado employers are required to list the job’s pay rate or a pay range for the position. Cities with gender pay discrimination ordinances include New York and Philadelphia.
Whether your state or locality will enact a gender pay equity law may depend upon how “blue” or “red” it is or becomes in the future. Laws in Michigan, generally considered a “purple” state, currently mirror federal standards. Michigan employers are free to ask job applicants for their salary histories, and Michigan prohibits local jurisdictions from enacting laws that would ban employers from requesting that information.
Work with your attorney to identify the specific pay-related laws in your area. Meanwhile, your CPA can help you devise a competitive but reasonable compensation strategy.