What Employers Need to Know as Pay Equity Protections Widen

There have been changes on both the federal and state level to compensation law. Read more about it in these two articles from IMA Update and Littler Mendelson P.C.

Minding the Pay Gap: What Employers Need to Know as Pay Equity Protections Widen

The pay gap – or paying women and other historically marginalized groups less for the same or substantially similar work – has increasingly been in the media spotlight. Politicians have also taken note. While there have been pay discrimination laws on the books at the federal level and in most states for decades, over the past several years, state and local governments and Puerto Rico have passed numerous new laws all aimed at closing the pay gap. Since 2016, more than 200 bills addressing pay equity were introduced in nearly every state. At the time of publication, 13 states have enacted “second wave” pay equity laws; 24 states and municipalities – along with Puerto Rico – have enacted salary history inquiry bans; and 19 states have enacted wage transparency provisions. In addition, employers with 100 or more employees that are subject to Title VII and certain government contractors are now required to report compensation data to the Equal Employment Opportunity Commission (EEOC) annually.

While the federal Equal Pay Act prohibits employers from paying employees less for equal work because of gender, these second wave pay equity laws revise this standard – prohibiting unequal pay for “comparable” work as opposed to “equal” work. The newly enacted salary history inquiry bans restrict employers’ ability to inquire into the salary history of applicants. Finally, wage transparency measures prohibit employers from banning pay disclosure in the workplace or from retaliating against employees who discuss their wages. Employers must comply with federal law and this growing patchwork of state and local laws.

The plaintiffs’ bar also has gotten in on the action. Since 2016, over 250 pay equity cases have been filed in the United States. High profile pay equity cases are in the news frequently – the proposed class and collective action filed in California federal court by all 28 members of the U.S. Women’s soccer team is just one example. Law firms and technology companies also have been targets. Indeed, to a large extent, the cases target professional services organizations and professional positions: lawyers, engineers, professors, scientists, managers and doctors. In addition to an equal pay claim, these lawsuits frequently include claims of discrimination, sexual harassment or wrongful termination. These lawsuits have been filed in state and federal courts across the nation as both single plaintiff cases and class or collective actions.

This white paper provides a discussion of the nuts and bolts of the various existing pay equity laws, including:

  • the elements a plaintiff must establish to prove a claim;
  • the defenses available to employers;
  • the damages available; and
  • the procedural mechanisms that allow for these cases to be brought as class or collective actions – increasing the exposure for employers.

New York Expands Pay Equity Law Beyond Equal Work and Gender and Bans Inquiries into Salary History

On July 10, 2019, New York Governor Andrew Cuomo signed legislation significantly expanding the protections of New York’s Pay Equity Law, which previously required equal pay for women and men performing “equal work.” The governor also signed a law imposing a ban on inquiries into an applicant’s salary history.

New Pay Equity Law

The new pay equity law now mandates equal pay among employees who perform “substantially similar” work, when considering skill, effort, responsibility, and working conditions. This means that employers cannot rely on comparisons among those who share the same title to ensure pay equity.  The analysis must encompass the wage rates among employees who hold different, though “substantially similar,” roles.  Employers should look at groupings or classes of jobs, rather than individual positions.

The law also now requires equal pay among all protected groups—not just between members of the opposite sex. Protected status includes age, race, creed, color, gender identity or expression, military status, disability, genetic characteristics, familial status, marital status, domestic violence victim status, or other status protected by law.2

Employers can still pay employees working in the same position differently based on their different geographic location, e.g., employees working in New York City might earn more than employees working in Buffalo.  However, employers cannot create geographic classes representing areas smaller than counties.

The new law retains the following prior permissible factors for wage differentials: differences based on (i) a seniority system, (ii) a merit system, (iii) “a system which measures earnings by quantity or quality of production,” or (iv) “a bona fide factor” other than the protected status, such as education, training, or experience.  The employer has to be able to show, however, that the “bona fide factor” is job-related, satisfies a specific business purpose, and is consistent with business necessity. In addition, the employer may not rely on any of these factors if a pay practice disparately impacts any of the protected classes and the employer has refused to adopt an alternative that would not produce a differential.

The new law takes effect on October 8, 2019.

Salary History Ban

The new salary history law prohibits employers from asking applicants or current employees for their wage or salary history as a condition of consideration for employment or promotion, and from asking other employers for that information. Employers also cannot refuse to consider, employ or promote an applicant or current employee based on their salary history or their refusal to provide their salary history. While New York State law is similar to New York City’s salary history ban, New York City law only covers applicants, not current employees.

The law also forbids employers from relying on salary history in setting an applicant’s pay rate, but does not prohibit individuals from voluntarily disclosing such history, including for the purpose of negotiating their wages.  The law allows an employer to verify an individual’s history if the applicant rejects an existing offer of compensation while citing to his or her prior salary.

The salary history ban takes effect on January 6, 2020.

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