A Bill Prohibiting Questions About Past Compensation Introduced In Congress

By Kate S. Gold and Philippe A. Lebel

On September 14, 2016, Representative Eleanor Holmes Norton (D – D.C. At Large) introduced the Pay Equity for All Act of 2016 (the “PEAA”) in the U.S. House of Representatives.   In relevant part, the PEAA would amend the Fair Labor Standards Act of 1938 (“FLSA”), 29 U.S.C. §§ 201 et seq., to prohibit employers from asking prospective employees about their previous wages or salary histories, including benefits or other compensation.  In addition to prohibiting these pre-hire inquiries, the PEAA prohibits employers from seeking out the information on their own.  The PEAA prohibits employers from retaliating against any employee or applicant because the employee opposed any practice unlawful under the law or for testifying or participating in any investigation or proceeding relating to any act or practice made unlawful by the PEAA.  Any “person” who violates the PEAA is subject to a civil penalty of $5,000 for the first “offense,” which increases by $1,000 for each subsequent offense, up to $10,000.  In addition, any person violating the PEAA is liable to each employee or prospective employee who is subject to a violation for special damages not to exceed $10,000 plus attorneys’ fees, as well as potential injunctive relief.

In her introductory remarks, Representative Norton explained that the purpose of the PEAA was to “help eliminate the gender and racial pay gap” and to “ensure that applicants’ salaries are based on their skills and merit, not on a potentially problematic salary history.” The bill initially was co-sponsored by Representatives Rosa DeLauro (D – CT), Jerrold Nadler (D – NY), and Jackie Speier (D – CA); subsequent co-sponsors include Representatives Gwen Moore (D – WI), John Conyers, Jr. (D – MI), Barbara Lee (D – CA), and Frederica S. Wilson (D – FL).  The PEAA was immediately referred to the House Committee on Education and the Workforce.

The PEAA follows the enactment of a similar piece of legislation by Massachusetts in August of this year. That new law, An Act to Establish Pay Equity, takes effect on July 1, 2018.

If passed, the PEAA could dramatically impact employers’ ability to gauge “market rate” pay for new employees. At the same time, setting pay prospectively based on employers’ objective beliefs about the positions in question, without the benefit of employees’ past pay histories, may reduce potential pay inequity in subsequent audits down the road.

Although the PEAA is in its early stages, and there is no guarantee that it will ultimately pass, employers should continue to monitor this important piece of legislation. The text of the current language of the bill can be accessed by the following link.

Maryland’s Expanded Equal Pay Law Takes Effect October 1, 2016

By Alexa E. Miller, Kate S. Gold and Lynne A. Anderson

Maryland joins California, New York and Massachusetts by passing legislation aimed at combating wage disparity based on gender. (For a discussion on California, New York and Massachusetts’s Equal Pay Laws, click on our previous posts.)

Expanding Equal Pay for Equal Work

The new law, which goes into effect October 1, 2016, amends Maryland’s existing Equal Pay for Equal Work Act by expanding the prohibition on wage discrimination based on “sex” to also include “gender identity.” The protection against pay discrimination for work performed in the same establishment and of comparable character or on the same operation encompasses more than just unequal payment of wages.  The new law also bars discrimination for “providing less favorable employment opportunities,” which includes: (1) assigning or directing an employee into a less favorable career track or position; (2) failing to provide information about promotions or advancement opportunities in the full range of career tracks offered by the employer; or (3) limiting or depriving an employee of employment opportunities that would otherwise be available but for the employee’s sex or gender identity.

New Defenses to Wage Differentials

The new law expands the permissible factors that employers can legitimately use to explain variations in wages to employees of one sex or gender identity. The law, as previously enacted, provided exceptions based on: (1) a non-discriminatory seniority system; (2) a non-discriminatory merit increase system; (3) jobs that require different abilities or skills; (4) jobs that require regular performance of different duties or services; and (5) work performed on different shifts or at different times of day. The new law adds defenses for (6) a system that measures performance based on a quality or quantity of production; or (7) a bona fide factor other than sex or gender identity, including education, training, or experience, provided that the factor is not based on or derived from a gender-based differential in compensation, is job-related and consistent with a business necessity, and accounts for the entire differential.

Increased Wage Transparency

Additionally, the new law includes provisions to promote pay transparency in the workplace. Specifically, employers may not prohibit an employee from inquiring about, discussing or disclosing their own wages or the wages of a co-worker, or from requesting that the employer provide a reason for why the employee’s wages are a condition of employment. Likewise, employers are prohibited from taking an adverse employment action against employees who inquire about, discuss, or disclose their own wages or the wages of other employees (if those wages have been voluntarily disclosed), ask employers to provide a reason for the employee’s wages, or aid/encourage other employees in exercising their rights under the law. Significantly, the law allows employers to maintain a written policy which establishes reasonable workday limitations on the time, place and manner for wage discussions. Such limitations must be consistent with standards adopted by the Commissioner of Labor and Industry and all other state and federal laws.

It’s important to note that the new law does not : (1) require employees to discuss or disclose their wages, (2) diminish employees’ rights to negotiate terms and conditions of employment (including compensation), (3) limit employees’ rights under a collective bargaining agreement, (4) obligate employers or employees to disclose wages, (5) permit disclosure of proprietary information, trade secrets or information that is otherwise protected by law without written consent of the employer, or (6) permit disclosure of wage information to a competitor of the employer.

Takeaways for Employers

Maryland’s amended equal pay law applies to employers of any size. Therefore, Maryland employers should be proactive and conduct internal audits to analyze compensation data and evaluate the non-discriminatory reasons for any pay disparities. Notably, the definition of “same establishment” was expanded to include any workplace of the same employer located in the same county in the state, broadening the scope of comparators. Employers should also train managers and supervisors about the pay transparency provisions and modify existing policies, such as non-disclosure and anti-retaliation policies, to reflect the new law’s requirements.

If you have any questions or concerns about this alert please contact the author named above or your usual Drinker Biddle contact.

Massachusetts Joins California and New York with Aggressive Equal Pay Law

By Lynne A. Anderson

On August 1, Massachusetts added significant teeth to the state’s current equal pay law. The new law, “An Act to Establish Pay Equity,” not only targets compensation decisions, it also affects hiring practices.   As of July 1, 2018, when the new law takes effect, employers cannot ask an applicant to provide his or her prior salary history until after the candidate has successfully negotiated a job offer and compensation package.  This measure is intended to stop the perpetuation of gender pay disparities from one employer to the next.  In addition, employers cannot use an employee’s prior salary history as a legitimate basis to pay a man more than a woman for comparable work.

The definition of comparable work is broad: “work that is substantially similar in that it requires substantially similar skill, effort and responsibility and is performed under similar working conditions: provided, however, that a job title or job description alone shall not determine comparability.”

Under the new law, employees can openly discuss their wages without fear of retaliation. As a result, non-disclosure provisions in handbooks and employment agreements will need to be modified.

Also, while the law recognizes seniority is a legitimate reason for a pay disparity, it prohibits the employer from reducing credit for seniority based on time off due to a pregnancy-related condition or protected parental, family and medical leave. Therefore, policies that take leaves of absence into account when determining pay will need to be adjusted.  As in California’s Fair Pay Act, an employer cannot reduce the wages of other Massachusetts employees to rectify any wage disparities.  Also, having an employee contract away any rights under the new law will not be a valid defense to an equal pay claim.

The new law also lowers barriers to litigation.   The statute of limitations to file an equal pay claim under the new law is extended to three years from the one year limitations period under the current statute.  Also, employees can now sue employers in court without having to first file a claim with the Massachusetts Commission Against Discrimination – which is required under the existing statute.

The law does encourage employers to self-audit in order to address pay disparities; the new law provides an affirmative defense to an employer that has completed a self-evaluation of its pay practices and can demonstrate that reasonable progress has been made towards eliminating wage differentials within the three years prior to the commencement of any lawsuit. In addition, claimants are barred from using evidence of a recent audit and remedial steps to prove their equal pay claims.

As far as next steps for the state, the Massachusetts Attorney General will issue regulations interpreting and applying the new law. The law also provides that a special commission will investigate, analyze and study causes of gender-based pay disparity as well as other protected characteristics, including race, color, religious creed, national origin, gender identity, sexual orientation, genetic information, ancestry, disability and military status. This commission must submit its initial findings to the Massachusetts legislature by January 1, 2019.

For more information on compliance with Title VII, the Equal Pay Act and various state laws regarding gender discrimination and fair pay, contact Kate Gold or Lynne Anderson.

Spotlight on Fair Pay for Female Law Firm Partners: Class Action Lawsuit Filed Against Sedgwick

By Kate S. Gold

Traci Ribeiro’s class action lawsuit against her employer Sedgwick LLP is the latest in a string of lawsuits in the pay equity battle, which has been highlighted in this year’s Presidential election and through the recent EEOC claim filed by the U.S. womens’ soccer team. Ribeiro is a non equity partner who claims that, as one of the firm’s three highest revenue generating partners, she has been denied equity partnership and was subjected to retaliation for filing an EEOC complaint claiming gender discrimination.  She seeks to represent a class of past and present female attorneys in partnership track positions at the firm; her complaint alleges violations of the California Fair Pay Act, Illinois Fair Pay Act, and Federal Equal Pay, as well as gender discrimination and retaliation under the California FEHA, Illinois Human Rights Act, and Title VII.  Ribeiro claims, in addition to routinely paying women lawyers less than their male counterparts, Sedgwick has denied women equity partnership and membership on its Executive Committee (until 2016, when Ribeiro made a formal complaint about gender discrimination).  She asserts discrimination under both a disparate treatment and disparate impact theory.

Among the more remarkable allegations in her complaint is that female associates were paid $40,000-$50,000 less annually than their male counterparts, and that despite her own high revenue generation, she was denied promotion to equity partnership three years in a row and, in 2015, an equity partner promotion was given to a male with less than 10% of Ribeiro’s revenues. But there is clearly a lot we can’t tell from reading the complaint:  as to the gender discrimination claims, what is the firm’s criteria and process for determining compensation and partnership and how is it biased in favor of men?  As to the fair pay claims, will the firm rely on the established defenses to pay disparities, such as a seniority system, a merit system, a system that measures earnings by quantity or quality of production, or upon a bona fide factor other than sex, such as education, training, or experience? Employers and employment lawyers will no doubt be following this case as the topic of pay equity continues to hold a firm place in the public spotlight.  That is, unless the case ends up in a private arbitration.  Ribeiro is also seeking declaratory relief that the dispute is not subject to the parties’ arbitration agreement (and is also attempting to stay Sedgwick’s arbitration demand which also seeks a declaration that the dispute should be compelled to arbitration).  For more information on compliance with Title VII, the Equal Pay Act and various state laws regarding gender discrimination and fair pay, contact Kate Gold or Lynne Anderson.

Get the Most Out of Your Employee Payroll Audit

By Kate S. Gold, Heather B. Abrigo and Philippe Lebel

Employee payroll audits, which have long been recommended as a best practice for corporations that want to stay on the right side of the law, have become even more critical with the current proliferation of labor and employment laws at the state level. Among other things, the California Fair Pay Act, which went into effect on January 1, 2016, places new demands on California employers that in many cases can only be effectively satisfied by means that include a payroll audit.

Earlier this month, we held a webinar to discuss the CA Fair Pay Act requirements and what employees should do to comply. Below you will find some of the key takeaways.

What is the California Fair Pay Act?

The new law goes further and imposes more obligations on employers than longstanding federal and state equal-pay and employment-discrimination laws. More than simply requiring employers to pay men and women equal pay for the same work, the California statute prohibits employers from paying members of one sex less than the rates paid to employees of the opposite sex “for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions.” And the employees of opposite sexes whose jobs and pay are being compared need not work together in the same establishment. There are several important defenses to liability under the law, such as the employer’s use of a bona fide factor that is not sex-related.

How can a payroll audit help?

Determining what types of work are “substantially similar” in terms of skill, effort, responsibility and working conditions is no easy task. That’s where a payroll audit can help.

On a step-by-step basis, a properly conducted audit will identify potential problems under the California Fair Pay Act by identifying positions that have “substantially similar work,” analyzing the pay of these workers by gender, finding any disparities in pay, and determining whether any defenses apply. For example, does the company have a bona fide seniority system or merit system, or is there a business necessity for the disparities in pay?

In addition to these complex Fair Pay Act questions, employee payroll audits remain desirable or necessary for other purposes, such as ensuring that employees are treated fairly under the company’s employee benefit plan and that certain employees or groups of employees are not excluded from the plan.

What steps should be taken?

 When conducting a payroll audit, it should be done with review and consultation of attorney with the end goal of identifying and quickly addressing disparities that cannot be explained adequately or need to be corrected. It is important to note that the audit is subject to attorney/client privilege and/or work product protection. The following are key steps in the audit process:

  • Consider all job titles/descriptions across all geographic regions
  • Consider how to identify or sort based on disparate geographical locations
  • Compare the positions that have “substantially similar work
  • Determine if the statutory exemptions apply
  • Identify explanations for disparities
  • Address disparities that can’t be explained
  • Determine what action needs to be taken

Ongoing Compliance

From a compliance perspective, the number one benefit to conducting employee payroll audits is the ability to determine what action needs to be taken to address and correct disparities if they exist. Failure to address disparities that can’t be explained within the requirements of the California Fair Pay Act or the Federal Pay Act can result in penalties, sanctions and, in some cases, litigation with the DOL and/or IRS. Ongoing compliance should include regular review of the following:

  • Handbooks and policies to remove outdated references to “equal” work
  • Policies that prevent employees from discussing or asking about other employees’ compensation
  • How compensation decisions are made and adjust if necessary
  • Job descriptions – update and describe as comprehensive as possible
  • Record keeping – records must be kept for three years
  • Training of HR personnel, senior management on the new law and how it should be applied in setting compensation at hiring

Click here to watch the full presentation.

Click here to view a PDF of the presentation.