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.

Physician Pay Equity Issues Are Under the Microscope

As our Healthcare Workplace Update reported on June 21, and as is the case across many industries, issues related to physician pay equity are receiving increased attention nationwide.

Doximity’s 2018 Physician Compensation Report (its second annual report) contained key national findings on the gender wage gap that point to widespread disparities in physician compensation. Please find the rest of this article in our Healthcare Workplace Update here.

New Jersey Issues Equal Pay Data Reporting Instructions and Forms

The New Jersey Department of Labor and Workforce Development has issued two reporting forms for the new Diane B. Allen Equal Pay Act: Contracts for Qualifying Services and Contracts for Public Works. To assist contractors with filing the forms, the state also has issued Instructions.

The Equal Pay Act went into effect on July 1, 2018. Among many provisions, the Act requires pay data reporting by employers that provide services to New Jersey and its agencies or that perform construction work on New Jersey public works projects.

  • Service Contractors: Every employer (including those outside New Jersey) providing services to the state or any state agency or instrumentality must report compensation and hours worked data for those employed in in the state working in connection with the contract.
    • The data provided must include: gender, race, job title, ethnicity, occupational and job category (EEO-1 Code), and total compensation.
  • Public Works Contractors: Similarly, every employer (including those outside New Jersey) that enters into a public works contract (not including contracts for goods or products) must provide data. Bottom line: public works contractors must add employee sex, race, and ethnicity data to their weekly Prevailing Wage Act reports.

The Instructions add some clarifying information:

  • As with EEO-1 reports, contractors providing services must file reports annually by March 31 for the preceding year, using employment figures from any pay period in October through December.
  • Also consistent with EEO-1 reporting, if an employee declines to voluntarily self-identify sex, race, or ethnicity, the contractor must use employment records or observer identification to provide the identification.
  • Regarding sex (gender), the state allows a “non-binary category.”
  • For service contractors, the pay data reporting requirements revive those proposed for EEO-1 pay data reporting, which the Trump Administration subsequently rejected.
    • Contractors report for each employee annual earnings from the federal W-2 form, Box 1.
    • Contractors report employee earnings in 12 pay bands.
    • For employees that are not exempt from the Fair Labor Standards Act (FLSA), employers must report the actual number of hours worked by each employee.
    • For FLSA-exempt employees, contractors may report actual hours worked (if tracked) or proxy numbers of 40 hours and 20 hours per week for full- and part-time employees, respectfully.

The Equal Pay Act is not clear regarding how the Department or the Division of Civil Rights may proactively use reported pay data. However, the Department will make the data available, upon request, to “anyone who is or was an employee of the employer during the period of any of the contracts between the employer and any public body, or [to] any authorized representative of the employee.” Thus, regardless of how the state may proactively use the reported pay data, your employees will have access to it for their own purposes.

Please review the actions we suggest employers take to proactively prepare for the Act’s requirements. Jackson Lewis attorneys are available to assist employers as they navigate the Diane B. Allen Equal Pay Act, including pay data reporting.

California Clarifies Ambiguous Language of Salary History Ban

California has enacted new legislation aimed at clarifying its law banning an employer from inquiring about a job applicant’s salary history information.

Assembly Bill 168 (codified as Labor Code Section 432.3) prohibits employers from seeking salary history of applicants for employment. Designed to eradicate the wage gap, AB 168 also requires employers to provide applicants, upon reasonable request, with the pay scale for the position.

Since the salary history ban’s enactment in January 2018, employers have struggled to understand the restrictions it imposes, as it fails to define key terms, such as “applicant,” “reasonable request,” and “pay scale.” On July 18, 2018, Governor Jerry Brown signed into law Assembly Bill 2282 to clarify the intended meaning of these terms.

AB 2282 defines “applicant” or “applicant for employment” as an individual who is seeking employment with the employer and is not currently employed with that employer in any capacity or position.

It defines “pay scale” as a salary or hourly range and provides that a “reasonable request” for such pay scale is a request made after an applicant has completed an initial interview.

AB 2282 additionally seeks to address the legality of an employer’s questions related to an applicant’s expected salary. Although several local ordinances adopting salary history bans permitted employers to inquire about such information, AB 168 was silent on the issue. AB 2282 expressly provides that employers are not prohibited from asking an applicant about his or her salary expectation for the position being applied for.

Finally, AB 2282 authorizes employers to consider a current employee’s existing salary when making a compensation decision, so long as any disparity resulting from that decision is justified by a seniority system, merit system, or other bona fide factor unrelated to the employee’s sex, race, or ethnicity.

Employers should revisit and revise their hiring practices and policies to ensure compliance with the laws in the states in which they operate. Jackson Lewis attorneys will continue to monitor pay equity developments. Please contact us with any questions about the potential implications of AB 2282 or other legal developments.

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