Canada is the Latest Country to Contemplate Pay Equity Legislation

Fair pay initiatives continue to sweep the globe. Canada is the latest to consider legislation.

On October 29, 2018, the Government of Canada announced the introduction of an “Act to Establish a Proactive Pay Equity Regime within the Federal Public and Private Sectors (Pay Equity Act).” The Act would address a number of legislative findings on gender pay equity in Canada, including the following:

  • In 2017, women working full-time for hourly wages made 88.5 cents for every dollar earned by men, but just 69 cents for every dollar when looking at overall annual earnings;
  • Women are overrepresented in part-time work;
  • Labor market segmentation has left women in predominantly lower-paying jobs; and
  • Women are significantly underrepresented in senior positions.

The Act is unique in its approach to pay analyses. Under the Act, employers would be required to:

(1) Identify job classes predominated by men and women;

(2) Evaluate the “value of work” performed by male- and female-predominant job classes;

(3) Compare the compensation associated with male- and female-predominated job classes that are “of similar value”;

(4) Identify female-predominant job classes that require an increase in pay as compared to male-predominant job classes performing work of similar value; and

(5) Identify when the pay increases are due.

The Act would apply to federally regulated public and private employers with at least 10 employees. It also would require pay analyses to be included in a “pay equity plan” to be prepared within three years of the Act’s effective date.

The Pay Equity Act also requires employers to:

  • Update pay equity plans every five years;
  • Post employee notices regarding their Pay Equity Act obligations and their progress toward “key milestones in fulfilling these obligations”;
  • Provide employees an opportunity to comment on the proposed the pay equity plan and updates, and consider those comments before finalizing the plan; and
  • File “annual statements” with the Pay Equity Commissioner regarding their pay equity plans.

If the Act passes, the Pay Equity Commissioner is expected to issue regulations providing details on identify job classes performing work of “similar value,” as well as the types of analyses that would suffice to identify pay disparities requiring pay adjustments.

Common provisions in pay equity legislation include:

(1) Employers must proactively and periodically analyze pay to determine if employees are paid fairly, regardless of race and gender;

(2) To be fair, pay among employees performing similar, substantially similar, or equal work (depending on the specific law) must be based on relevant, race- and gender-neutral pay factors; and

(3) Race and gender pay disparities that cannot be justified based on neutral pay factors must be remedied.

For our previous posts regarding international pay equity issues, please see here and here.

If you need assistance with pay equity issues or analyses in your workplace, please contact a Jackson Lewis attorney.

Grade/Step Pay-Setting System Insufficient to Defeat Pay Discrimination Claim, Fourth Circuit Holds

The courts are making it increasingly difficult for employers to prevail on equal pay discrimination claims based on the “factor other than sex” affirmative defense. One recent example is the decision in EEOC v. Maryland Ins. Admin., 879 F.3d 114 (4th Cir. 2018), from the U.S. Court of Appeals for the Fourth Circuit. There, the Equal Employment Opportunity Commission filed suit against the Maryland Insurance Administration (MIA) on behalf of three female fraud investigators alleging pay discrimination in violation of the Equal Pay Act, 29 U.S.C. 206(d).

The female fraud investigators alleged that they were paid less than men in the same role with similar experience. In defending the differences in pay, MIA relied upon its grade and step system for setting pay at the time of hire. MIA argued that the male comparators were set at a higher level in grades and/or steps because of different experience and qualifications.

The Fourth Circuit held that the alleged differences in experience and qualifications were relevant only to MIA’s affirmative defense, but not to the plaintiffs’ ability to state a prima facie claim of pay discrimination. As to the affirmative defense that the pay difference was based on a “factor other than sex” — namely, different experience and qualifications — the Court held that the discretion available in assigning the step and grade could have allowed gender to influence the pay-setting decision. According to the Court:

MIA exercises discretion each time it assigns a new hire to a specific step and salary range based on its review of the hire’s qualifications and experience. A fact finder faced with the present record could have determined that, when exercising this discretion, MIA at least in part based its assignment of the claimants’ step levels on their gender with a resulting diminution of their assigned starting salary.

Critically, the Court also noted, “the record does not contain any contemporaneous evidence showing that the decisions to award [the male comparators] their respective starting salaries were in fact made pursuant to their aforementioned qualifications.” (Emphasis added.)

This raises a key issue in defending pay discrimination claims: is the company able to establish with evidence the actual reason for the pay difference, as opposed to different possible reasons.

The Fourth Circuit joined other circuit courts in holding that “an employer [must] submit evidence from which a reasonable factfinder could conclude not simply that the employer’s proffered reasons could explain the wage disparity, but that the proffered reasons do in fact explain the wage disparity.”

Employers should continue to monitor pay practices to ensure compliance with federal and state pay discrimination laws. For assistance, please contact a Jackson Lewis attorney or our Pay Equity Group.

Knocking on Pay Equity’s Door: Commercial Real Estate Women Network Seeks Answers to Gender Wage Gap

The Commercial Real Estate Women (CREW) Network recently evaluated the pay gap by gender in the commercial real estate industry and published a white paper entitled “Achieving Pay Parity in Commercial Real Estate” (Linked here).  The white paper reports that the gender pay gap “persists and is strongest for [women] earning less than $100,000 and above $250,000.” The greatest gap was found with commercial real estate brokers, with a pay differential of 33.8% between women and men.

The CREW Network suggests that several factors are responsible for the persistent pay gap, including: (i) salary negotiations; (ii) mid-career disruptions; and (iii) unconscious bias. The white paper reports that although executive level women and men appear to negotiate their salaries equally, the wage gap widens mid-career, suggesting, in part, that “women are starting from lower offers and basing negotiations on salary history rather than skills, abilities, and experiences.” According to a series of experiments conducted by Harvard University researchers, and cited by the white paper, “evaluators penalized women more than men for initiating negotiations, and nervousness around male evaluators made females less inclined to negotiate compensation versus encountering a female evaluator.”

The white paper also reports that “[w]omen are much more likely to take time off from their careers to care for a family member, with 42% reducing their hours, 39% taking significant time off, 27% quitting jobs, and 13% being passed over for a promotion. On the other hand, only 28% of men reduced their hours, 24% took significant time off, 10% have quit jobs; and 10% have been passed over for a promotion.”

The white paper recommends specific steps to achieve “pay parity” in the industry. The CREW Network advocates for salary transparency and greater diversity in senior management.

The CREW Network’s white paper is the latest example of industry-specific efforts to tackle pay disparity.

For more information on efforts being made in other industries, see Jackson Lewis’ recent updates:

Please contact Jackson Lewis with any questions.

Leading By Example: Oregon State Government Conducts Expansive Internal Pay Equity Analysis

Oregon’s state government, ahead of the January 1, 2019, effective date of the state Equal Pay Act (EPA), is conducting an expansive, behind-the-scenes pay equity analysis of its departments to identify and remedy any potential pay disparities between male and female employees.

Under Oregon’s pay equity law, businesses are not required to conduct pay equity audits. However, the law contains a safe harbor provision providing that if an organization conducts a pay equity analysis and fixes any issues, the organization will be protected from compensatory and punitive damage liability in any related lawsuit for the next three years.

Oregon’s legislative branch had set an internal deadline of November 1 to complete its audits. However, with more than 350 employees, the entire legislative assembly, and six support agencies, the undertaking has proven to be quite a challenge. Employees received surveys and emails in late-September reminding them to verify their work experience and education information. Although a legislative work group representing both sides of the political aisle was formed to discuss exactly how the EPA will be implemented, many employees feel the audits and information gathering is premature, since the work group has yet to determine how all of the collected information will be used.

Oregon’s executive branch also sent out surveys to each of its 35,000 employees, requesting an up-to-date resume detailing experience, education, seniority, and any additional job-related training. Based on a preliminary analysis, the executive branch anticipates a $400-million budgetary impact as a “worst case scenario.” Employees slated to receive pay increases will receive back pay to June 1.

Employers must carefully scrutinize the interplay between federal and state laws in order to determine the correct course. Members of the Jackson Lewis Pay Equity Group can provide strategic advice and counseling on compliance with the law.

Déjà Vu? Illinois Governor Vetoes Salary History Ban

Illinois is not yet on the salary history ban wagon. For the second time since 2017, Illinois Governor Bruce Rauner vetoed a law that would prohibit employers from seeking salary history information from prospective employees, among other fair pay provisions.

House Bill 4163 closely resembles the bill the Governor vetoed in 2017, House Bill 2462. The bill would amend Illinois’ Equal Pay Act to:

  • Prohibit discrimination in wages among employees performing substantially similar work which requires substantially similar skill, effort, and responsibility.
  • Require that factors used to describe pay differentials not be based on sex or any protected characteristic and account for the entire differential.
  • Prohibit employers from seeking salary history, including benefits or other compensation, of any job applicant unless the information is a matter of public record or the applicant is a current employee.
  • Create a private right of action against employers, which could lead to compensatory and punitive damages.

In a message to the General Assembly, Governor Rauner offered specific recommendations for future successful salary history legislation that would gain his support. The Governor noted the law should resemble that of Massachusetts, which, he stated, has “a best-in-the-country approach” to salary history legislation.

The Governor’s recommended law would allow employers to consider salary history information in limited circumstances, including when a prospective employee has voluntarily disclosed their current or prior salary. The Governor’s suggested amendments also would permit an employer to seek to confirm salary history after making an offer of employment with salary negotiated. Also like Massachusetts’, the Governor recommended inclusion of a “self-evaluation” defense, where employers can use proactive pay analyses and progress toward eliminating pay differentials as an affirmative defense to actions alleging unequal pay.

The legislature has not yet responded to the Governor’s recommendations.

Jackson Lewis will continue to monitor and report on pay history legislation. Please contact Jackson Lewis with any questions.

Equal Pay Act Claim Requires Show of Pay Disparity “Based on Sex” as Part of Prima Facie Case, Court Holds

Departing from other federal appeals courts, the U.S. Court of Appeals for the Federal Circuit has held that Equal Pay Act plaintiffs must establish that the pay differential between similarly situated employees is “historically or presently based on sex” to make out a prima facie case.

In Gordon v. U.S., No. 17-1845 (Fed. Cir. Sept. 7, 2018), two female emergency room physicians employed by a Veterans Administration hospital alleged they were underpaid compared to male emergency room physicians. Their pay discrimination claim related primarily to one male physician who was hired at the same time they were hired at the same pay rate in the same position, but he received a pay increase one year after they were hired that the female plaintiffs did not receive.

To state a claim of an EPA violation, an employee must show the employer:

  • Paid employees of opposite sexes different wages;
  • For substantially equal work;
  • In jobs that require substantially equal skill, effort, and responsibility; and
  • That are performed under similar working conditions.

If an employee provides evidence establishing each of these elements, the burden shifts to the employer to prove the pay disparity is justified under one of four affirmative defenses: (1) a seniority system; (2) a merit system; (3) a pay system based on quantity or quality of output; or (4) any factor other than sex.

Here, the employer argued that the plaintiffs had not established a prima facie case and that, even if they had, the pay differential was justified under the “factor other than sex” affirmative defense. The Court, which hears appeals involving federal employee EPA claims, held that the plaintiff doctors must meet an additional requirement to establish their prima facie EPA violation:

To make their prima facie case, however, [the doctors] must also establish that the pay differential between the similarly situated employees is “historically or presently based on sex.”

Id. at 9-10. The Court held that the plaintiffs could not make this showing and that the employer was entitled to summary judgment on this basis alone. Notably, the Court held the employer had not introduced sufficient evidence to establish the “factor other than sex” affirmative defense. Id. at 10 n. 4.

The holding was based on a prior ruling, Yant v. United States, 588 F.3d 1369 (Fed. Cir. 2009). Judge Reyna wrote the panel decision, but also wrote separately to express the view that Yant should be overturned because the additional requirement improperly shifts the burden of proof in a manner inconsistent with the text of the EPA and Supreme Court precedent. Judge Reyna also notes that no other Circuit Court of Appeals requires this additional showing as part of the prima facie case. Id. at 17.

For assistance with compliance with federal and state pay discrimination laws, please contact a Jackson Lewis attorney or our Pay Equity Group.

OFCCP’s New Compensation Directive – What You Need to Know

OFCCP’s new Directive on how the OFCCP will review federal contractors’ compensation practices during a compliance evaluation stresses a commitment to transparency and outlines how the Agency it will review data, group employees for analytical purposes, perform statistical analyses, and communicate findings with federal contractors.

Data Request and Review Procedures

During a compliance evaluation, contractors provide employee-level data to the Agency for review. According to the Directive, the Agency will review the data to ensure the contractor has submitted everything requested in the scheduling letter and itemized listing. The compliance officer will request any missing information. Contractors who fail to respond to the request within seven business days may be at risk of receiving a Show Cause Notice.

Similarly-Situated Analysis Groupings

Once contractors submit data to OFCCP, the Agency will cluster employees into similarly-situated groups for analytical purposes. The Agency defines similarly-situated employees as those “who would be expected to be paid the same based on (a) job similarity (e.g., tasks performed, skills required, effort, responsibility working conditions and complexity); and (b) other objective factors such as minimum qualifications or certifications.” The Agency will prepare a statistical analysis controlling for differences among members of a pay analysis group (PAG) and individual employee characteristics.

Welcome news: the Agency will strive to prepare PAGs that mirror a contractor’s compensation system. However, the Directive makes clear, the Agency can do so only if contractors provide information regarding their compensation hierarchy and job structure that will enable OFCCP to develop meaningful analyses. If the Agency does not have information regarding the contractor’s compensation system, it will conduct its preliminary analysis using EEO-1 or AAP job groups as units of analyses and control for appropriate variables.

Statistical Methodology

The Directive also details how the Agency will prepare its statistical analyses. Knowing this will allow contractors to prepare their own proactive analyses in anticipation of an audit. For example, the Agency will analyze base pay separate from total compensation and use age as a proxy for prior experience in its preliminary analysis.

Findings, Transparency, Conciliation

The Agency has committed to the following practices to facilitate transparency, consistency, and resolution of discrimination findings through conciliation:

  1. Upon completion of a desk audit, OFCCP will notify contractors, in writing, of the general nature of any preliminary compensation disparities the Agency will continue to investigate;
  2. Any Pre-Determination Notice for preliminary compensation findings will be accompanied by the individual-level data that will enable contractors to replicate the Agency’s formation of PAGs and regression results; and
  3. OFCCP will include representatives from its Branch of Expert Services to facilitate conciliation discussions.

Historically, the Agency often did not share their databases or methodology with contractors during the conciliation process. Moreover, Agency representatives involved in the conciliation process were unable to speak to the intricacies of the statistical models utilized by OFCCP statisticians. This increased transparency may improve the conciliation process by giving contractors the information necessary to make informed decisions regarding conciliation.

Looking Ahead

The transparency outlined in the Directive will better equip contractors to conduct their own proactive analyses and conciliate with the Agency. We will monitor how the Agency implements the practices in the Directive and report on developments.

For a deeper dive in the technical aspects of the Directive, please visit our Affirmative Action & OFCCP Law Advisor blog.

The Jackson Lewis webinar on the Directive will be held on September 19, 2018. Click here to register.

Crossing the Pay Gap: Tips for Employers Considering Pay Adjustments to Achieve Pay Equity

With the #MeToo and #TimesUp movements re-energizing the focus on #EqualPay, employers increasingly may find themselves facing questions about how they are paying employees and what they are doing to help close the pay gap. A growing number of companies are adjusting their compensation programs to address pay equity concerns. In recent months, several large companies announced broad overhauls of pay and bonus plans in an effort to eliminate potential discrimination and achieve pay parity.

General considerations for employers before making large-scale changes to compensation plans include:

  • Ensure Consensus Among Internal Stakeholders. All appropriate internal stakeholders should be informed and aligned on the direction the organization wants to take.
  • Conduct a Privileged Pay Equity Analysis. Employers should take a careful look at their current pay system with the assistance of legal counsel. Such an analysis should include review of the pay process itself as well as compensation to determine if a pay gap exists in the first place and needs to or should be addressed. A thorough and sound analysis should identify problematic pay gaps, whether adjustments may be needed, and if so, in what areas and for whom.
  •  Do Not Discriminate in Making Pay Adjustments. The Equal Pay Act expressly provides that pay for male employees cannot be reduced to correct a pay gap. In addition, federal and state laws prohibit making pay decisions on the basis of gender or other protected characteristics. Accordingly, pay adjustments should be designed to address unexplained pay gaps, rather than be based on gender. This means that male employees as well as female employees may receive pay adjustments.
  • Consider the Appropriate Communication Strategy. Implementing pay equity adjustments requires careful consideration of the content of internal and external communications, as well as ensuring input from all appropriate stakeholders.

For assistance with compliance with federal and state pay discrimination laws, please contact a Jackson Lewis attorney or our Pay Equity Group.

Protest Challenges Pay Discrimination Behind the Lens

Since the start of the “Times Up” and “Me Too” movements, the spotlight has remained on the gender-based wage disparities existing between female and male actors that work on the same cinematic productions, yet receive unequal pay. However, many in Hollywood feel that women who work behind the scenes in film production or as part of the “below the line” crew, such as in script production, make-up and costume creation, pre- or post-production film editing, and graphics and art design, should not be overlooked.

 Reel Equity, a group of film industry professionals and their allies, has petitioned the heads of various production companies and studios to address wage disparities and pay discrimination in film and television production. Several high-profile Hollywood media moguls, as well as such affinity groups as Women in Film, the ACLU of Southern California, the National Women’s Law Center, Equal Rights Advocates, and Women in Media, as well as other organizations, have already endorsed the petition.

 The group’s petition was based on a recent study commissioned by Working IDEAL, an organization advising companies on diversity, inclusion, and equity counseling and initiatives. Working IDEAL conducted an in-depth assessment of the compensation structure for four majority female positions involved in film and television production. The study concluded that, despite the breadth of California’s Fair Pay Act (which took effect in January 2017 and is arguably one of the most expansive pay equity measures in the United States), women in several of these crafts “are [still] paid hundreds or even thousands of dollars per week less than counterparts in comparable male-dominated crafts.” Many women interviewed for the study also reported concerns of harassment and stereotyping affecting their compensation.

 As pay discrimination issues continue to gain traction in various industries, employers should evaluate their obligations under their respective pay equity measures and ensure compliance with state, local, and federal laws. Additionally, employers may consider conducting a thorough review of their compensation structures to identify and address any potential disparities.

 Attorneys from our Pay Equity Resource Group are able to provide strategic advice on pay equity issues and evaluations.

Mind the (Gender & Race) Gap

When we think about the “pay gap,” often only the disparity between genders comes to mind – the disparity in pay between all males and all females. It is not the only gap employers should be mindful of. For example, Black Women’s Equal Pay Day, which this year fell on August 7, shines a spotlight on wage inequities based on race and gender.  Black Women’s Equal Pay Day marks how long a black woman has to work into 2018 to earn the same amount as a white male. On August 7, news stations published articles, #BlackWomensEqualPayDay was trending on Twitter, and celebrities spoke out about the issue. Pay equity has been a hot-button issue, especially at the state and local levels.

Pay equity by race and gender has been the subject of state fair pay laws. The laws passed in New Jersey, Oregon, and California, for example, prohibit pay discrimination not only on the basis of sex, but also on the basis of other protected characteristics, including race.

What does this mean for employers? Mind the gap. While suggested actions depend on the state(s) in which each employer operates, as each state law is different, employers can consider taking some general steps:

  • Understand how compensation is set and strive for consistency in carrying out compensation policies.
  • Document the reasons for pay decisions, as appropriate, in case they are challenged. If Amy is paid less than others with a similar job because Amy doesn’t have the same certificates, for example, be sure to note that Amy doesn’t have the preferred certificates. Be ready to defend disparities in pay with valid reasons.
  • Consider conducting a privileged, proactive pay equity analysis with qualified legal counsel to identify and resolve potential issues before they arise.

Please contact Jackson Lewis for compliance and other assistance.

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