Employment and Labor Forum:
Equal Pay Laws and Developments
Presented by:
Michael Childers, Nancy Delogu and Josh Waxman of Littler and
Katherine Cheung of Marriott International, Inc.
Presented by:
Nancy N. Delogu
Shareholder
Littler | Washington, DC
(202) 414-6863
[email protected]
Nancy Delogu counsels and defends employers in a range
of employment disputes, including workplace harassment,
discrimination, privacy, fitness-for-duty and disability
accommodation issues. She regularly appears before
federal and state courts and administrative agencies,
including the Equal Employment Opportunity Commission,
and related state and local agencies.
Nancy is a recognized authority on federal and state drugfree workplace and drug-testing issues and counsels
employers, including DOT-regulated employers, comply
with Americans with Disabilities Act requirements and
medical qualification standards.
Nancy is a member of the District of Columbia,
Massachusetts, and Virginia Bars.
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Presented by:
Josh B. Waxman
Shareholder
Littler | Washington, DC
(202) 789-3406
[email protected]
Josh Waxman has a wide-ranging labor and employment
law practice with a primary focus on complex labor and
employment litigation and strategic labor advice. He
represents clients across the country in connection with
state and federal class and collective action, single-plaintiff
and multi-plaintiff litigation and traditional labor matters,
as well as matters before government agencies, including
the Department of Labor, National Labor Relations Board
and Equal Employment Opportunity Commission.
Josh has substantial experience advising, managing and
litigating wage and hour class and collective actions for
clients in a variety of industries, including retail, hospitality,
financial services, technology, computer services,
manufacturing, restaurant and travel. He also advises
employers with respect to compliance measures that
reduce wage and hour disputes and other employmentrelated issues.
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Presented by:
Michael L. Childers
Attorney
Littler | Washington, DC
(202) 789-3420
[email protected]
Michael counsels employers on compliance issues related
to affirmative action and equal employment opportunity
laws. He uses a data-driven approach to preparing
affirmative action plans, responding to the Office of
Federal Contract Compliance Programs (OFCCP) requests
for information and preparing desk audit submissions,
reports necessary under various state affirmative action
laws and the Canadian Employment Equity Act.
In addition, Michael assists clients engaging in data
analysis and disparate impact analyses in class and
collective action litigation and reductions-in-force,
including compliance with the Older Workers Benefit
Protection Act.
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Presented by:
Kathy Cheung
Kathy serves as Vice President and Senior Counsel in the
Employment Law Group at Marriott International, Inc.
Prior to joining the Marriott Law Department five years
ago, she was with the law firm of Norris, Tysse, Lampley
& Lakis in Washington, D.C., which is the primary firm for
the Equal Employment Advisory Council, an employer
membership group designed to keep employers abreast
of cases, laws, and regulations in the employment arena.
Kathy also served as Vice President, Employment Law at
U.S. Foodservice for five years. Earlier in her career, Kathy
worked at both the U.S. Department of Commerce and
Hogan & Hartson and clerked for Judge Hargrove on the
U.S. District Court for the District of Maryland.
Vice President and Senior Counsel
Marriott International, Inc.
Kathy is a graduate of Harvard Law School and Harvard
(301) 380-8823
College.
[email protected]
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Our Agenda
• Pay Equity
• Recent Laws on Equal Pay or Fair Pay
– Federal
– State
• Compliance
• Whack a Mole or Controlling Unintended
Consequences
• Digging Deeper
• Closing It Out
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PAY EQUITY
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The White House’s Push for Equal Pay
• President Obama’s 2016
State of the Union:
– “I will keep pushing for
progress on the work that I
believe still needs to be
don…equal pay for equal
work…”
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Top Initiative of President Obama
• January 29, 2016: New
Step by White House to
Advance Equal Pay on the
Seventh Anniversary of the
Lilly Ledbetter Fair Pay Act:
– “Today, the median wage of
a woman working full time
year-round in the United
States is about $39,400 –
only 79% of a man’s
median earnings of
$50,400...”
• Renewed call for Congress
to take up and pass
Paycheck Fairness Act
• April 12, 2016 Equal Pay
Day
– “the date in the current year
that represents the extra
days a typical woman
working full time would have
to work just to make the
same as a typical man did in
the previous year...”
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What Is Pay Equity?
• Under existing laws, both federal and state, there is a
prohibition on paying individuals working in the same job
different wages
• Fortunately, the record of government enforcement
efforts led by the EEOC and the OFCCP over the past
decades have established that these instances of pay
discrimination are rare
• Unfortunately, there is still a cognizable disparity
between the average salaries paid to men and women
• Pay equity is the movement to “shrink the gap”
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Is the Gap a Problem?
• There are a number of studies that suggest that
our current understanding of the gap is the result
of a failure to properly analyze pay data
– The gap is consistently shrinking
– The gap is explainable by legitimate factors
– The gap is substantially smaller than we believe when
individual choices are taken into account
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Proposals for Closing the Gap
• Advocates of pay equity favor revising the existing
standards of proof for establishing pay discrimination
– Expand the definition of “similarly situated” based on factors
ranging from job duties, job qualifications, pay grade, etc.
• A more radical position is the adoption of the
“comparable worth” standard
– Under this standard, all jobs are evaluated and given a point
value according to the level of knowledge and responsibility
required to do the job
– Employers would then be required to adjust employee
compensation such that men and women in jobs with similar
points are paid equally
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Private Litigation Picks up Steam
• Pharmaceutical company agreed to pay $8 million to
group of female sales representatives claiming gender
discrimination and Equal Pay Act claims before litigation
originally launched by two women
• Financial services company paid $340,000 to female
employee whose predecessor earned substantially more
than she did
• New York City paid $38 million in back wages to female
school safety agents and pledged to pay more than $48
million to bring current wages to parity
• Vermont’s Equal Pay Act entitled a terminated female
manager to prevail on her wage discrimination claim
after her replacement, a man, was hired at a $5,000
greater annual salary
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FEDERAL EQUAL PAY
INITIATIVES
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The National Equal Pay Task Force
• President Obama created the National Equal
Pay Task Force to enforce equal pay laws and
increase education and outreach efforts
• Litigation and Enforcement Efforts
– $550,000 settlement with Western Sugar Cooperative
– $250,000 settlement with AstraZeneca
– $188,000 settlement with Hyundai Ideal Electric Co.
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Timeline of OFCCP Equal Pay
Initiatives
• February 2013: OFCCP Rescinds the 2006 Standards for
Investigating Systemic Discrimination in Compensation and
Replaces them with Directive 307
– Provides authority for broadly investigating “any observed difference in
compensation” using a variety of tools
• August 2014: OFCCP Publishes Proposed Rule Requiring
Government Contractors to Report Summary Data on Employee
Compensation
– The reaction of the contractor community is overwhelmingly negative
• October 2014: OFCCP Issues Contractor Minimum Wage Final Rule
• September 2015: OFCCP Issues Pay Transparency Final Rule
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Pay Transparency
• Executive Order 13665 amends Executive Order
11246 to prohibit policies and practices that
prevent applicants and employees from freely
discussing their pay
– The intention is that if women find out their male
co-workers are earning more,
they will do something about it
• The Rule applies to contracts or
subcontracts over $10,000 entered
into or modified after January 11, 2016
$
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Pay Transparency Policy Statement
The contractor will not discharge or in any other manner
discriminate against employees or applicants because they
have inquired about, discussed, or disclosed their own pay or
the pay of another employee or applicant. However,
employees who have access to the compensation information
of other employees or applicants as a part of their essential
job functions cannot disclose the pay of other employees or
applicants to individuals who do not otherwise have access to
compensation information, unless the disclosure is (a) in
response to a formal complaint or charge, (b) in furtherance
of an investigation, proceeding, hearing, or action, including
an investigation conducted by the employer, or (c) consistent
with the contractor’s legal duty to furnish information.
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EEOC Proposal on Data Collection
• EEOC action on Pay
Data Collection: New
EEO-1 form: Proposal
to collect summary
pay data by gender,
race and ethnicity
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Proposed EEO-1 Revisions
• EEOC proposes to amend the rules for EEO-1
reporting to require employers to include compensation
information as part of their annual EEO-1 reporting
• Would apply to all EEO-1 Filers with 100 or
more employees
– Beginning with the 2017
reporting cycle
– Reported compensation to
be based on W-2 income
– Many unanswered questions
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The Proposed EEO-1 Report
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STATE FAIR PAY LAWS
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California Labor Code Amendment
• The Fair Pay Act Amended Labor Code section
1197.5
• Took effect January 1, 2016
• Requires employers to pay wage
rates to employees equal to the
rates paid to opposite sex
employees
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Changes Imposed by Act
• Prohibits paying employees of the
opposite sex less than those
performing “substantially
similar work”
• Substantially similar work
is work that is similar
when viewed as “a
composite of skill,
effort, and responsibility”
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Changes Imposed by Act
• There is no “same establishment” requirement
• Employees may ask about comparators throughout
the company
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Changes Imposed by Act
• Employees permitted
to inquire about and discuss
wages without consequence
• No more pay secrecy!
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Changes Imposed by Act
• Substantially relaxes evidentiary
burden of proof for Plaintiff
• Once Plaintiff makes a prima
facie case, burden shifts to the
employer to defend against
the claim
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Employer’s Defense
• Requires employer to show any pay differential is
based on
–
–
–
–
Seniority
Merit
Quantity/Quality of Production
Bona Fide Factor Other than Sex
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New York State Equal Pay Act
• Women and men must receive equal pay for equal
work unless difference based on:
– Seniority system
– Merit system
– System that measures earnings
by quantity or quality of production
– Any factor other than sex.
– Bona fide factor other
than sex, such as
education, training
or experience.
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New York State Equal Pay Act
Bona Fide Factor
• Cannot be based upon or derived from
sex-based differential in compensation
• Must be job-related and consistent
with business necessity
– “Business Necessity” – “factor that
bears a manifest relationship to
the employment in question”
i.e., effectively fulfills the business
purpose it is supposed to serve
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New York State Equal Pay Act
Bona Fide Factor Defense Fails if Employee Shows:
• the employer uses an employment
practice/factor that causes a disparate impact on
the basis of sex
• an alternative employment practice/factor exists
that would serve the same purpose without
causing a disparate impact; and
• the employer has refused to adopt the
alternative practice/factor.
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New York State Equal Pay Act
• Employees can be compared even if do not work in
same establishment – must only work within same
county
• Employers cannot prohibit employees from sharing wage
information with other employees
– OK to have written policies establishing reasonable
workplace/workday limitations on time, place and
manner and to prohibit disclosure of another’s wages
without permission
– Policies must be consistent with other laws (NLRA)
• Liquidated damages – now 300% of unpaid wages
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MA Current Pay Equity Statute
• Cannot discriminate against
employees on basis of gender
in payment of wages/salary for
comparable work
– Except when premised
on seniority
– Minimal enforcement
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Proposed MA Pay Equity Act
• MA Senate unanimously passed
– Under consideration by House
– Equal pay for “comparable work”
• Requiring “substantially similar
skill, effort and responsibility”
and “performed under similar
working conditions”
– shift differentials
– physical surroundings
– hazards
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Proposed MA Equity Act (cont’d)
• Would also prohibit:
– Screening applicants based on salary history
(disclosure of prior wage/salary info)
– Seeking salary info from current or former employer
• Unless conditional offer of employment and written
authorization
– Preventing employees from discussing compensation
with coworkers
– Decreasing pay to ensure compliance
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Proposed MA Equity Act (cont’d)
• Extend SOL from 1 to 3 years
• Can go directly to court – no administrative charge
prerequisite
• Affirmative defense – good faith “self-evaluation” of
pay practices within 3 years
– Reasonable in detail and scope given
employer’s size
• Liquidated damages / Attorneys’ Fees
• January 1, 2018 effective date
• Anti-retaliation provision
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COMPLIANCE
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Compliance
• Where do you start?
• How do you analyze
the areas in need of
correction?
• How does an
employer comply
once pay disparities
are identified?
• What about multistate employers?
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Audit?
• Attorney-client
privilege
• Designing the audit
– What should be
measured?
– Do employees with the
same job title or
classification actually
perform the same
work?
• Controlling the data
– What data is relevant
to be analyzed?
– Data analyzed by
location/title/tenure/
assignment?
• Using the results
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The Reactive or Proactive Approach?
Completely Reactive Approach
• Strengths:
– Less costly in the short
term
– Less immediate work
– Focuses all efforts on only
identified problems
Weaknesses:
– Unknown and potentially
greater risks
– Less time to react to
possible issues
Completely Proactive Approach
• Strengths:
– Keep problems from
escalating
– Less costly in the long run
– Focuses efforts on finding
potential problem areas
• Weaknesses:
– More immediate work
– Greater responsibility
associated with knowledge
of specific problem areas
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Littler’s Recommendations
• Conduct a privileged audit to evaluate pay
data and identify potential problems
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Overview of 3-Step Approach
1. Data inventory + identification of
substantially similar comparison groupings;
2. Statistically evaluate distributional gaps in
compensation in each SS comparison
group;
3. Evaluate whether and to what extent gaps
may be mitigated by the introduction of
viable quantifiable measures of skill, effort,
or accountability.
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Step 1: Data Inventory
1. Identify employees (ID#, gender)
2. Substantially similar groupings (function
/ role) + comparisons to make across
function or role
3. All component parts of total annualized
compensation
4. Explanatory measures of skill, effort, or
accountability.
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Common Challenges in Identifying
SSEGs
•
Using EEO category - Typically EEO categories (e.g., Officials and Managers, Professionals,
Technicians, etc.) will be too broad to use as SSEGs.
•
Using pay grade - Typically pay grades will define the upper and lower parameters of
compensation for a specific job title irrespective of the fact that employees within each grade may
have dissimilar work, levels of responsibility, skills, or qualifications.
•
Using AAP job groups - AAP job groups combine jobs that are similar in content, wage rate, and
opportunity but sometimes will not consider similarity of work, levels of responsibility, skills, or
qualifications.
•
Combining employees irrespective of academic background - For example, within the
"Faculty" job title at a teaching hospital when the title includes both medical doctors (MDs) and
academic doctors (Ph.D.s) and the medical doctors are hired at a higher rate.
•
Not considering departmental hierarchy - Employees within the same job title may be paid
dramatically different wages based upon their department and/or division. For example, a
Manager in Human Resources will likely be paid less than a Manager in Engineering.
•
Not considering geographic location and cost of living increases - For example, performing
analyses by AAP job group in a roll-up AAP (i.e., where smaller locations are combined into a
single larger AAP) and not considering that some individuals within the AAP job groups may live in
rural areas and paid less while others in the same job group live in urban areas and are paid more
due to the higher cost of living.
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Sometimes it is helpful to array by
function and role
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Step 2: Evaluate distributional gaps
Role
(comparison Headcount
)
Is the
Parametric
Difference
Avg. Total
Statistical
Avg. Total
or nonStatistically
Target Comp.
Dif. (M. - F.) comparison
P-value
Target Comp. F.
parametric
Significant
M.
possible?
comparison?
(w/out any
explanations)?
Does the
introduction of
controls
explain away
the difference?
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Step 3: Evaluate whether and to what
extent differences are mitigated
•
•
•
•
•
Introduce explanatory measures of skill, effort, or
accountability and model total annualized
compensation.
Does the introduction of controls eliminate the gap?
“Controls” are elements like location, tenure with the
company, certifications related to the job, educational
attainment related to the job, etc.
Controls must be related to the job. They may not be
based on factors that perpetuate pay disparities
existing in the marketplace.
Don’t double count! If controls accounted for in SSEG
set
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An Example
In the stylized output below, female executives are paid
statistically significantly less than male executives. This is also
the case for “widget makers.” The introduction of controls (other
factors that explain total compensation) mitigates the statistical
disparity for executives, but not for widget makers.
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Additional notes
• Care must be taken in identification of roles. Adopt a
plaintiff’s perspective, not a company’s perspective. Ask
how a jury or fact-finder might regard the substantial
similarity of work based on skill, effort, and
accountability, not based on job titles alone.
• Be sure to include all forms of compensation.
• These statutes are not anti-discrimination statutes.
Auditing for compliance with fair pay laws does not
ensure compliance with state or federal gender
discrimination laws.
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How to Fix Pay Inequity
• Implement a Pay Transparency Policy
– Pay transparency lets everyone know what their
colleagues are earning and would make women
aware if they are making less than their male
counterparts
• Eliminate Pay Negotiation
– Study after study show that women don’t perform as
well as men in negotiations. Often women avoid
negotiation altogether, accepting the first offer
presented by a prospective employer
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How to Fix Pay Inequity
Monitor promotions and raises to ensure they are biasfree. According to the U.S. Department of Labor, there
is equitable development of talent when women and
men who have similar qualifications at their time of hire
are proportionately:
• Assigned or placed in jobs where pay and promotion
opportunities are better;
• Recommended for opportunities to increase skills
that will affect advancement, such as management
training;
• Given similar earning opportunities, for example,
high-volume sale territories;
• Given access to similar increases and add-ons to
base pay, i.e., bonuses.
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AVOIDING UNINTENDED CONSEQUENCES
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Controlling Unintended Consequences
• Selective Recruiting
• Selective Mentoring
Programs
• Favoritism
• Reverse
Discrimination
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Managing Proactively
• How is initial
compensation set?
• Is salary at prior
employer relevant to
hiring discussion?
• Recruiters/Managers
trained?
• How is compensation
evaluated once
employed?
• Are numbers
evaluated to spot
potential
discrepancies?
• Are justified
discrepancies
documented?
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Questions?
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Employment and Labor
Forum:
Equal Pay Laws and
Developments
May 12, 2016
59