Wage gaps between the genders and among the races, although smaller than they were decades ago, remain significant in the United States. Among full and part-time workers, the median wages of women are 83% of the median wages of men, and the median wages of African-American workers is 75% of the median wages of white workers. In an effort to address these disparities, the EEOC and at least one state legislature have taken steps to spotlight pay equity issues.
The EEOC’s effort includes revamping the traditional EEO-1, an annual report required for all employers with more than 100 employees. The changes to the EEO-1 are significant, and require employers to examine and analyze wages at twelve different levels within pre-existing job categories. The basis for establishment of the twelve levels is unclear, and the increments range from as little as $5,000 to as much as $45,000. Based on the Bureau of Labor Statistics’ Occupational Employment Statistics, employers will need to place and report every position and employee into the extensive new form. Employers have until March 2018, when the new form will first be required, to prepare human resources and payroll information systems for the change. The purpose of the enhanced EEO-1 is the identification and monitoring of pay disparities related to protected class status, which employers are expected to correct in order to remain in compliance with anti-discrimination law.
A number of states are considering pay equity legislation. Massachusetts recently passed a new law, effective July 2018, which prohibits employers from asking candidates about salary histories. Proponents of this legislation argued that if employers know an applicant’s salary history, wages will be set based on what the candidate earned before and that may perpetuate existing inequities. A lot has been said about this legislative prohibition, and it remains to be seen whether it will result in a smaller gap between the earnings of women and men.
Irrespective of whether an employer is in a state considering pay equity legislation, all should be aware of wage disparity issues, which may be evidence of unlawful discrimination. Regardless of their confidence in the fairness of their pay practices, employers with more than 100 employees should prepare for implementation of the new EEO-1. Here are steps such employers should consider taking:
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Perform a basic analysis of the wages currently paid. A report from a payroll provider or the company's human resources information systems can provide the necessary information, which should be sorted and analyzed based on the EEO job classifications already established on the EEO-1.
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With current wages in hand and sorted by job classification, determine whether there are any obvious race, national origin, or gender-related disparities. Are women in comparable roles paid more or less than men? Are Asian programmers paid more or less than Caucasian programmers doing essentially the same work? Are higher paying jobs disproportionately populated by employees of a particular gender, race, national origin, or other protected class status?
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If disparities are noted, determine whether or not they exist for defensible, nondiscriminatory reasons. The Equal Pay Act allows for differences in pay if they are based on nondiscriminatory factors. Do differences in wages exist due to skill level, education, or level of responsibility? Are they based on the cost of living in a particular location? Are they based on seniority, and if so, does time in service actually add value? Will employees have the opportunity to earn comparable pay at some point in the future, or will the discrepancies exist in perpetuity?
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Determine if changes need to be made in order to avoid unlawful pay disparities, and remember that employers cannot cut employee wages just to equalize pay. It can be complicated and time-consuming to modify job classifications or a pay structure, but a Department of Labor audit or a lawsuit alleging discriminatory pay practices can cause even more headaches and expense.
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Remember the importance of documenting this analysis, the reasons for disparities, and the corrective measures, if any, that have been taken. Explanations that are clear, consistent, and easy to understand will be helpful to an agency investigating potential discrimination and in the defense of claims of discrimination.
Finally, because doing the analysis described above may uncover problems, consider having an attorney supervise. The involvement of legal counsel offers the chance to protect the findings of such an audit through attorney-client privilege. It can limit agency or opposing-party access to audit results, and may afford the employer the opportunity to correct problems and come into compliance without worrying about outside scrutiny.
