Pay Equity Movement Pushing Employers to Self-Audit

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By Martin Berman-Gorvine

The pay equity movement is gathering force—including in state legislatures—and employers should audit their pay practices to get out in front of it, attorneys and advocates say.

A bill in Washington State is waiting for Gov. Jay Inslee’s (D) signature. And activist shareholders are continuing to press for action from employers that are publicly traded. For example, Arjuna Capital said March 15 that while it applauds Google parent company Alphabet’s finding of zero statistically significant gender pay disparity for 89 percent of its employees worldwide, “Arjuna Capital and Proxy Impact will not withdraw its shareholder proposal at Google” while the data remain incomplete.

“The rules of the game have changed drastically in the last 18 months, and change in the next 18 months will dwarf that,” Mickey Silberman, a management-side attorney and shareholder with Washington-based Fortney & Scott, LLC, said March 13 at the Society for Human Resource Management’s Employment Law & Legislative Conference in Washington.

Since the start of the year, 23 states have seen proposed pay equity legislation that will make life more difficult for employers, joining 12 that have acted in the past 12 months, said Silberman, who chairs his firm’s Affirmative Action & Pay Equity Practice Group.

But federal action still is needed, Kate Nielson, state policy manager at the American Association of University Women, told Bloomberg Law March 14. Employers should “follow the strongest laws, because they are not really in conflict,” she said.

Question of Fairness

Why the push now? By some measures, gender pay disparities have actually been getting worse, Kristin Rowe-Finkbeiner, executive director, CEO, and co-founder of nonprofit MomsRising, told Bloomberg Law March 15. Citing a working paper from the Washington Center for Equitable Growth on the “wage penalty” working mothers suffer compared with childless women who work, she said this gap increased from 8 percent to 14 percent from 1986 to 2014, comparing childless women to women with one child. “Moms of color are experiencing the most intense wage gaps,” she said.

Managers and those in charge of hiring must realize that implicit gender biases are built into our culture, she said. Diverse teams can help alleviate that, and have better business outcomes, too, she said.

But it’s not clear what constitutes fairness. By Silberman’s definition, “Pay equity is paying employees fairly, taking into account job-related factors such as education, work experience, and tenure.” The slogan “equal pay for equal work” doesn’t take into account company loyalty, performance, and other matters employers consider crucial, he said. “It completely contradicts your pay system.”

However, “Nobody’s asking for equal pay for unequal work,” Rowe-Finkbeiner said.

Pay equity may lead to better performance due to improved morale. A step like self-auditing that improves pay transparency “helps employees feel they are valued and sets a better tone for everyone,” said AAUW’s Nielson.

New Equity Tools

Silberman said there are “new, aggressive tools to attack the pay gap.” He cited California’s expanded standard of equal pay for “substantially similar” work, which means “similar work when viewed as a composite of skill, effort, and responsibility.” California also requires employers to provide job applicants with a pay scale on request.

The Massachusetts standard goes even further, addressing “comparable work.” Such yardsticks are much tougher than the federal standard applying to “similarly situated” workers, which “essentially says to compare employees doing the same job,” Silberman said. Some employers have responded to the federal standard by doing what plaintiffs’ lawyers call “divide and hide,” giving almost every employee a different job title, he said.

Another new tool is the ban many states have imposed on employers asking for salary history during job interviews, Silberman said. “If you’re still asking, stop right now.” Instead, employers can ask candidates their salary expectations, he said.

Research by Seattle-based PayScale Inc., which provides on-demand compensation data and software, has shown that “women who refuse to answer” salary history inquiries get offered less, while men who refuse to answer get offered more, Vice President Lydia Frank told Bloomberg Law March 14. This may be due to cultural assumptions—the women are seen as impolite while the men are seen as confident, she said.

“We think it’s best to talk about salary expectations, not history,” she said. “Employers can also post salary ranges, which makes people gasp, but why? What do we think will happen, and how can we mitigate that fear?”

This is linked to the broader question of transparency about compensation, which is not “an on-off switch” employers flip, Frank said. A range of stances is possible, such as letting people know the pay range for their type of position, she said.

Employer, Audit Thyself

Alongside sticks, some states are offering the “carrot” of safe harbor provisions for employers that voluntarily conduct a pay analysis and take steps to remedy unexplained disparities, Silberman said. Massachusetts has a “deep” safe harbor, while Oregon and Puerto Rico have “shallower” safe harbors that only protect employers against additional damages beyond “making whole” employees who have suffered pay discrimination.

“Making pay audits a part of your regular practice to make sure no pay inequities are cropping up” is a great way for employers to get ahead of the wave on pay equity, Frank said. On an annual or other regular basis, companies can check for gender, racial, or ethnic pay disparities.

“Five years ago, I would have said ‘maybe’ if you asked me if you should do a proactive pay analysis. Now, you are imperiling your organization if you don’t,” Silberman said. When carrying one out, he said employers should first establish legal privilege for the results so they can’t be used by plaintiff attorneys. Next, decide on groupings for analysis, and then gather data, conduct an analysis, investigate disparities, and if necessary, make equity adjustments. If pay adjustments turn out to be necessary, do not pay out lump sums; instead, slip the extra money in “below the radar,” Silberman said.

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