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Advancing Your Company's DEI Efforts Through Pay Equity

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Advancing Your Company's DEI Efforts Through Pay Equity

The coronavirus pandemic has drawn attention to the long-term existing inequalities in the American workforce. As a result, more employers are beefing up their Diversity Equity and Inclusion (DEI) efforts to help address and remedy these inequalities. However, one piece that is frequently missing from a corporate DEI program is a review of pay practices. In this presentation, we will provide an overview of federal and state pay equity laws, review how a pay equity audit can help close pay gaps in the workplace and elevate financial stability of diverse employees, and the best practices for achieving a diverse and inclusive workplace.

Transcript

- Hello. My name is Sarah Wieselthier and I am an attorney at the law firm of Fisher Phillips where I specialize in pay equity matters, and I'm a member of the firm's pay equity practice group. Today, we're here to talk about advancing your company's DEI efforts through pay equity, a crucial step in building a diverse, inclusive workforce, and about the role we as attorneys can play in assisting our clients to achieve these lofty and necessary goals of workplace equality. Tackling pay equity is a critical element of building a diverse and inclusive workplace. As the US crawls out of the pandemic, companies are at a pivotal moment to undertake steps to tackle the ever-growing gender pay gap that has been widening because of the pandemic, as well as step up dormant diversity, equity, inclusion efforts, or DEI. A diverse and inclusive workforce is a critical piece of a thriving business, and employers play a vital role in building a more flexible, empathetic, and inclusive workplace. The actions or inactions that our clients take will undoubtedly shape the economy and the workplace for women and minorities for decades. Today, I will discuss the importance of advancing a company's DEI efforts through pay equity and offer tangible solutions that attorneys can assist their clients in taking to create a more equitable and inclusive workplace and work towards closing the gender pay gap. Now, to start, let's go back to basics. What is pay equity? Pay equity means providing employees who do the same or similar job with equitable compensation. If compensation is unequal, it must be explained by a legitimate business factor. And if it cannot be explained by a legitimate business factor, then the employer must fix the inequality. Now, there are key federal and state laws that govern pay equity. The most critical is the Federal Equal Pay Act. 29 USC 206 D was enacted in 1963 and requires that men and women in the same workplace be given equal pay for equal work. That means that individuals who perform work that requires the same level of skill, effort, or responsibility must be paid the same compensation. However, there are some exceptions, such as when a payment or the inequality or the inequity, the difference in pay is based on a seniority system, a merit system, a system which measures earnings by quantity or quality of production, or a differential based on any other factor other than sex. Another key component of the Equal Pay Act is that an employer cannot decrease somebody's pay in order to meet their obligations under the law. Now, when it comes to litigation in the Equal Pay Act context, there is no intent to discriminate required for an employee to succeed on a claim under the Federal Equal Pay Act, or EPA. All the employee needs to show as their prima facie case is that there are lower wages paid to employees of the opposite sex in the same establishment, that the two employees perform substantially equal work, and that the jobs were performed under similar working conditions. That's it. Now, there are also various state laws that impose similar or more significant requirements for there to be equal pay in the workplace. At this point, almost every state in the United States has its own law that provides for equal compensation for equal work. And the trend that we've seen over the last five years or so is to expand the classes of employees that are covered by the pay equity laws to include not only gender, but also race and other protected categories. We're also seeing that state laws are not using the word or phrase "Equal pay for equal work," but rather, "Equal pay for substantially similar work." State laws, and we'll unpack this later on in the presentation, but state laws prohibit restricting discussions about wages or retaliation against an employee who asks about their wages or the wages of others. There are also state laws that prohibit employers from asking applicants about their salary history. Now, let's take a few steps back. What are we talking about when we're talking about compensation? Equal pay for equal work under the Equal Pay Act is interpreted very broadly. It includes not only base salary, but all forms of compensation. This includes commissions, stock options, bonus plans, bonus awards, profit sharing. It also includes benefits and perks, expense accounts. We're talking about insurance benefits, car allowances, access to the company car, participation in a retirement plan. When we're looking at pay and evaluating compliance with the equal pay laws, we're looking at all of these forms of remuneration, the total compensation package. And that also goes for state laws as well. They're viewing compensation broadly. Now, what is considered equal or substantially similar work is going to be dependent on the federal law and the state laws that operate in the state where the employee works. Generally speaking, we're looking at what a comparison of the skill, effort, and responsibility for the positions. When I say skill, I'm talking about experience, training, education, ability to perform the job. If someone has more years of experience or a higher level of education that is relevant to the field, that might be somewhere where there could be an explainable difference. But if somebody has a master's degree in accounting, but they're working as a teacher, an English teacher, that really doesn't make a difference. So, we gotta look closely at what the skills are for those specific positions if we're trying to see what can explain the difference between two roles. When we're talking about effort, we're looking at the amount of physical or mental exertion needed to perform the job. And then responsibility, we're looking at the degree of discretion or accountability involved in performing the job. What duties are regularly required to perform the job? What level of supervision does the job receive? Does the employee supervise others? What degree of involvement do they have in decision-making? These are all factors that we're looking at and evaluating to see whether jobs are equal or substantially similar. We're not restricted to job titles or official job descriptions. You need to look at, what is the employee actually doing? Federal law compares the compensation of employees working in the same workplace, the same establishment. However, under certain state laws, it may be necessary to compare the compensation of employees at all facilities or locations, either within that state or throughout the country. There may not be limitations on employees who work within a specific geographic area or region. Now, state laws, we see different standards like "Similarly situated." That might be work that requires equal skill, effort, and responsibility, and is performed under similar working conditions. We see the phrase "Substantially similar." That might be work that is mostly similar when reviewed as a composite of skill, effort, and responsibility under similar working conditions. We've seen the phrase "Comparable work," again, work that requires substantially similar skill, effort, and responsibility, and performed under similar working conditions. We've seen the phrase "Work of a comparable character." These phrases, regardless of how it's phrased in the state law, what's clear and the theme that we see from the state laws in general is that it is broadening the Federal Equal Pay Act to encompass individuals who you may not ordinarily think are performing substantially similar work or equal work to bring them into the fold, to be a comparator for an equal pay analysis. As I alluded to earlier, there are lawful justifications for pay disparities. The Equal Pay Act specifically permits unequal pay if it's based on a seniority system, a merit system, a system which measures earnings on quantity or quality of production, or a differential based on any other factor other than sex. Now, the first three that I just mentioned, a seniority system, a merit system, a system that measures earnings or quantity or quality of production, system, this means something that's established in place, not something that is come up with, conjured up after the fact to try to explain a differential, but rather a real system in place where, based on seniority, people earn slightly more. There needs to be documentation for these things. It can't be something that is just pulled out of thin air to try to defend against an equal pay claim. Now, the differential based on any other factor other than sex is something that is also referred to as the catchall under the Equal Pay Act. And with this catchall, it's pretty broad and has really led to the Equal Pay Act not having much teeth. I mean, it's been on the books since '63, yet you don't really see much action in the equal pay arena for the last few decades. It's only really been since this wave of state law legislation that we've seen more of a strengthening of the equal pay laws. Because you won't see this catchall in a lot of the state laws, because it was the reason that employers were oftentimes getting away with not providing equal pay for equal work, because they could just point to really anything to say, "Oh, this is the reason why." Now, one thing to think about with this differential based on any other factor other than sex is whether salary history falls within the exception. There's currently a split among the circuits as to whether salary history can fall under this catchall, but the Ninth Circuit most recently held that it does not, so that at least under that jurisdiction, an employee's salary history is not a differential based on any other factor other than sex that could justify unequal pay for equal work under the Equal Pay Act. The trend in the state laws is to replace the catchall, the "Any other factor other than sex," with the phrase, "A bonafide factor other than sex." You see this language in New York and New Jersey where I practice, as well as other states that have very robust pay equity laws. A bonafide factor must not be based upon or derived from a sex-based differential in compensation, and must also be job-related with respect to the position in question and consistent with business necessity. A lot more narrow than "Any factor other than sex," right? And in states that use the bonafide factor language, they typically also include language in the statute that allows or provides for an employee to overcome the bonafide factor by showing that the employer's practice causes a disparate impact on the basis of sex and that there exists an alternative practice that would serve the same purpose and not cause a disparate impact, and that the employer has to refuse to adopt the alternative practice. In addition to the bonafide factor exception, and also the exceptions that we see in the Federal Equal Pay Act, certain states will spell out certain justifications for unequal pay, like the geographic location, education, training, or experience. Certain states also carve out whether travel is a regular and necessary condition of the particular job. So, it's important to look at the specific state laws because they may provide similar or different exceptions as compared to the Federal Equal Pay Act and as compared to other states, especially when you have a multi-state employer. There's a lot to think about when it comes to pay equity compliance because the laws are just a little bit different. Another thing that we see in the state pay equity laws that is different from the Equal Pay Act under federal law is this idea of no more confidentiality. The majority of state laws make it unlawful to prohibit wage employees from inquiring about, discussing, or disclosing their wages or wages of other employees. Employers can, however, impose reasonable limitations on the time, place, and manner of these kinds of discussions. But even if an employer wants to do that, it needs to be set forth in some sort of policy. So, even though you can't prohibit your employees from discussing wages, it is still a workplace, and the conversation about compensation shouldn't distract them from their work. There are also exclusions for employers or employees who have access to compensation information as part of their job, such as HR professionals. But basically, we cannot require employees to be silent. We cannot have policies in our handbook that say you cannot discuss your wages or ask questions about other employees' wages. That is no longer permitted under most state laws, and as a best practice, should be removed from a handbook for employees in any state. Similar to that, many state laws are prohibiting retaliation against employees who inquire about their salary or the salary of others, employees who discuss compensation with other employees, employees who raise complaints with the company about their compensation or the compensation of other people, or against employees who participate in investigation or file a charge of discrimination or a lawsuit raising an equal pay issue. It's really important that if somebody makes a pay inquiry, that we address their inquiry and do not treat them any differently because they've made this inquiry, they've made a complaint. That is not allowed under most state laws and will cause significant issues and can expose the company to liability. Over the past few years, we have also seen salary history bans enacted throughout the country. Salary history legislation prohibits employers from asking a job applicant about their salary history during the application or interview process, and it also prohibits employers from relying upon salary history in deciding what compensation to offer the applicant when they extend the job offer. Now, it varies from state to state and sometimes even county to county or city to city what types of questions employers can ask. Some states will allow certain questions to be asked after an offer is made that includes salary or to confirm certain things. Most states will allow employers to ask questions about salary expectations, so you can ask somebody what they're looking for to be paid for the role. But it's a little bit different state to state, and a lot of cities and localities and counties have their own requirements about salary history. The rationale behind these types of salary history laws is to stop perpetuating prior pay discrimination. For example, if earlier in their career a woman was subjected to discriminatory pay practices, now that woman goes to their next job. If the new employer is basing their compensation off of the prior salary, the practice will perpetuate the prior discrimination. By prohibiting these types of discussions, the determination of what to pay, what pay to offer a job applicant is gonna focus on what pay the position warrants, as well as that person's skill, education, training, and experience. These salary history bans are a big change for a lot of employers and have had a very real and immediate effect on hiring practices. For example, it is quite common for employers to have a job application which asks the applicant to list their prior employers, maybe the address, how long they were there, as well as what was their compensation. That practice is now prohibited in any jurisdiction with a salary history ban, which is a lot, a good portion of the country. Similarly, employers cannot ask interview questions about salary history. That dreaded question of, "How much do you currently make," it's off the table. Employers cannot ask, go reach out to the employer directly to see what the salary history is, and in many states are specifically prohibited from searching publicly-available records to try to ascertain that information. As a best practice, you wanna remove that type of question from a job application. You wanna remove that question from the list of interview questions and that will keep the companies, our clients, out of trouble, and will also go a long way to promote pay equity in the workplace. Now, a few years ago, the salary history bans were, I'd say, would say the biggest trend that we were seeing in legislation in the pay equity arena. Within the past few months, we've seen the next wave of legislation focusing on salary ranges on job posts. What I'm talking about is when, is a statute that requires employers to post a salary range for a position or an anticipated salary range when they are creating the job posting for the job. So, just like you would say the location or the job duties or the level of education required, you would also need to include this salary range. For example, in Colorado, employers must disclose in each job posting the compensation range, a description of bonuses, commissions, and other compensation and benefits offered. The Connecticut law requires applicants to be provided with a wage range either at the applicant's request or at the time an offer of compensation is made, whichever comes first. They must provide employees with a wage range at the time of hire, a change in the employee's position, or at the employee's request. New York City recently enacted a law requiring employers to disclose expected salary range for a position on internal and external job listings. And actually, as of the date of this taping, there was also a recent law for statewide in New York as well. California says, under their law, "Upon a reasonable request by an applicant, "an employer must provide the pay scale." This would be at some point after the initial interview comes, occurs. Nevada requires employers to provide current employees seeking a promotion or transfer to a new position with the wage rate or salary range for that position if the employee replied for the job and completed an interview and requested it. Rhode Island has a law going into effect January 1, 2023 requiring wage ranges for positions, including open positions upon request. They need to provide the wage range before discussing compensation. Washington has a new law requiring employers with 15 or more employees to provide information about the minimum wage or salary for the position upon request and after extending an offer. This is just a handful of states where these laws have already been enacted. It's the next wave. It is so important for all employers to start thinking about these things. We need to help our clients to rethink how they are determining compensation and really making compensation based on the actual job duties that are being performed. Even in a state where there is not a wage disclosure requirement in place, it is a best practice to start thinking about that and at least internally coming up with these wage ranges, because your state may be next and it is best to be prepared. And it also is a best practice to just try to ensure pay equity. When pay decisions are being made, it is also important to just document everything because the more documentation you have, the more clear it is of what the rationale was for a certain compensation decision and to show why Mary is being paid less than John for that position. Well, what was the wage range for that position? What skill do they have? What level of responsibility? Are they actually performing similar jobs? Are they similarly situated? Well, if you have it documented, you have something to show, something contemporaneous to explain why there may be a difference, and explain, "Oh, well, John has 10 more years of experience, "relevant experience in the industry than Mary does, "so that's why he's being paid more." That's typically a lawful reason for there to be a pay disparity. But it is so important to document these things because litigation is on the rise and damages can be significant. Now, under the Federal Equal Pay Act, an employee who is successful at establishing their prima facie case that they are earning, that a woman is earning less than a man who's performing equal work in the same establishment, they would be entitled to the unpaid wages, so, that wage differential, 100% in liquidated damages, attorneys' fees and costs. Now, the statute of limitations under the Equal Pay Act is the same under all claims under the Fair Labor Standards Act, which is a two-year statute of limitations or a three-year statute of limitations if the employer's conduct was willful. Now, state laws oftentimes have even greater damages available than under the federal law. Depending on the state law, an employee may be entitled to not only unpaid wages, but anywhere between 100% and 300% as liquidated damages and punitive damages, if willful. There are also provisions for attorney's fees and costs, as well as extended statute of limitations. In certain states, such as where I practice in New York and New Jersey, there can be a six-year statute of limitations for an unequal pay claim. These salary differentials can become really costly if there is litigation and the employer is unable to demonstrate that there is a lawful justification for the pay disparity. For example, using Mary and John from earlier, let's say Mary makes $5,000 a year less than John. Well, under the Federal Equal Pay Act, that could be up to 15,000 if there's a three-year statute of limitations applied. Double it for liquidated damages, you're at $30,000. And attorneys' fees and costs, you're probably closer to $45,000, $50,000 on a minimum for that $5,000 a year difference. Now, let's say this lawsuit is filed as a class or a collective action, I should say, under the FLSA. Now, let's say there are 10 women who are in the same position as Mary and are similarly paid $5,000 a year less. Multiply that by 10. Let's say there's a class of 500 women, multiply it by 500. These damages can add up exponentially. A small pay differential can become an enormous liability for a company if there is one employee in the position and if there are many employees in the position. Now, if you have state law claims, there could be a state where an employee can get 300% liquidated damages, go up to a six-year statute of limitation. You can just see how gigantic these numbers can become, especially if you have, you are assisting a client with people who are higher wage earners. a $5,000 a year difference, $1000 a year difference, whatever it is can really blow up and be costly. And that is why it is so important to make sure that we are working with our clients to evaluate these pay issues, evaluate applicable state laws, and try to make sure that everything is in legal compliance before some sort of a lawsuit is filed. There are also, multi-state employers will have a headache with this. There are compliance challenges because all of the state laws are going to be a little bit different. The protected classes might differ based on the state law. The justifications for pay disparities can differ. It's challenging. There's no other way to say it. It's challenging. And that's where attorneys come in. We can guide our clients as to what the relevant laws are and evaluate whether or not there are any compliance issues looking at the state level, looking at certain positions, whatever is needed. It can be tough to keep up with all of these different state laws. I will share that as part of my practice at Fisher Phillips, I have started this pay equity map, which is an interactive map on our website. If you go to fisherphillips.com/pay-equity-map/index.html will get you there. And basically, it is a free resource that will link you to the specific state law on pay equity and provide some of the highlights. Is there a salary history ban, is there a wage range requirement and things like that. And I invite you to use that resource when you're working with your clients, because it really is so helpful when you're dealing with these multi-state employers or even just a single state employer, because these pay equity laws are, they're just different in each state, and it's just a helpful tool that I wanted to let everyone know is out there to just help get our arms around the various pay equity requirements that we have. Now, switching gears a bit, I wanna talk about diversity in the workplace, and we'll tie that into pay equity as well, of course, as we move forward through this presentation. Now, the pandemic has certainly had an impact on all aspects of life, including pay equity. As you would imagine, women, particularly women of color, have been adversely impacted by the pandemic with an estimated 2.5 million women leaving the US workforce since the pandemic began, perhaps even more as time continues to go on. There are two groups of women that have been impacted. The first are those who lost their jobs because they were employed in high contact industries like hospitality, travel, and restaurants, which were the hardest hit, especially at the very beginning of the pandemic with shutdowns. And of that group, there has been a greater impact on Black and Latino women because they are disproportionately represented in low wage and high contact service sectors. The other group of women are those who have either downsized their career or completely left the workforce as a result of the burden of childcare, virtual school, or other caregiving reasons. The pandemic's disproportionate economic toll on women is estimated to create an even larger gender wage gap during and following the economic downturn than we were previously experiencing. We're seeing statistics saying that the pandemic and the loss of jobs is costing women around the world at least $800 billion in earnings. And of course, needless to say, this has impacted efforts towards pay equity. Pre-pandemic, the average US female employee earned only 81 cents for every dollar the average male employee made. The pandemic's disproportionate economic toll on women is estimated to create an even larger gender wage gap than we had been experiencing. Recessions historically moderately decrease the wage disparity, since they tend to have a greater impact on men. Normal recessions actually tend to close the gap by an approximate two percentage points because men are usually the ones who statistically are losing their jobs when there is an economic downturn. But here, because of the pandemic, economists are projecting that the average female worker will earn 76 cents for every dollar the average male worker makes, and it will take more than 10 years for the wage gap to get close to what it was before the pandemic. Which is just, we have these pay equity laws that have been enacted in the last, really robust laws that have been enacted in the last five, 10 years to try to close this wage gap, and now the pandemic has set us back even further than we were. A key factor for women who have actually stayed in the workforce has been the ability to work remotely or have some flexibility in their job. Now, studies show that diversity and inclusion are a powerful enabler of business performance. Companies with 30% women executives are more likely to outperform companies where the percentage range from 10% to 30% female executives. Companies that are in the top quartile for ethnic and cultural diversity outperformed companies in the bottom quartile by 36% in profitability. With a diverse workforce, employees have different backgrounds and experiences that are shaping the development of ideas and decision-making, and this is leading to greater creativity and innovation, as well as profits. We see a widening gap between companies that are leaders in diversity and inclusion and those that have not embraced it. And when managers support employee wellbeing, employees are happier, less burned out, and less likely to consider leaving. However, even though we're seeing that diversity and more female and diverse leadership is actually increasing profitability, there's still this broken rung at the first step to manager. It's making that initial step for women or people of color to get to that first management, that first leadership job that we're seeing a trend that women are promoted to manager at far lower rates than men. And this is something that makes it nearly impossible for companies to lay the foundation for sustained progress at the more senior levels. Additionally, unfortunately, the gains and representation for women overall have not translated to women of color. Women of color continue to lose ground at every step of the pipeline between entry level and the C-suite. The representation of women of color drops off by more than 75%. As a result, women of color account for only 4% of C-suite leaders, a number that hasn't moved significantly in the past few years. Now, diverse, inclusive, and equitable workplaces thrive economically, as we're saying. Shareholders and investors are rewarding diversity. Investors have become increasingly more interested in pay equity data and information about diversity that goes beyond the disclosures in the EEO-1 report. Companies are seeing shareholder proposals asking for key metrics on diversity-related issues. It's just, it's become really important, which is another reason why these pay equity, diversity, and inclusion efforts should really be at the forefront of a company's initiatives. There's also been public outcry in response to numerous public killings of Black people that have caused a heightened awareness, understanding, and expectation for companies to take action. Also, having a diverse and inclusive workplace enhances the ability to attract and retain talent. Now, what are some solutions for employers who are trying to make sure that they are in pay equity compliance, trying to embrace a diverse and inclusive workforce, but don't really know where to start? Commit to pay equity. Pay equity is a key action item for many employers, with 60% of North American organizations addressing pay equity in their workplaces. How do we do that? Well, one way to do that is to train our decision-makers, the people who are making decisions on pay. We need to make sure that the HR professionals and managers and hiring managers, the people setting compensation, are making proper pay decisions that comply with organizational policies and the applicable law. They need to be trained on the appropriate factors to consider when making pay decisions, and that that may vary state by state. They need training on how to apply the organizational policies and the guidelines so that they exercise any discretion properly. And as I mentioned before, it is critical that decision-makers understand that they need to document compensation decisions. Employers should review their policies and make sure that they're adhering to the law. You need to make sure that salary history is not considered. Again, many states have laws which prohibit, explicitly prohibit employers from inquiring about an applicant's salary history as part of the hiring process, and using prior compensation as a factor in determining pay can perpetuate a pay inequality. Companies need to review job applications and policies related to hiring, promotions, and conduct to ensure that applicants are not asked about their compensation history and that prior compensation is not a factor considered in setting future compensation. Additionally, it's time to start thinking about salary ranges for a job. As I said earlier, certain states and localities are now starting to require it, but even where it's not required, it's a good practice. And why is that? Because when a company sets compensation, a range of compensation based on the job, the duties, the skill, the level of responsibility of that position, it has nothing to do with gender or another protected category. The more objective a pay decision is, versus subjective, the better position the company will be in to defend against their pay practices and to show that they are in compliance with the applicable pay equity laws. Job postings is another thing to think about. We need to ensure that our clients have the correct and up-to-date federal, state, and local posters in the physical workplace and that these posters are available electronically on the company's intranet, especially when they're remote workers. And if there's no intranet, you email them. Make sure that people who are not physically working in a office setting have the postings available. When it comes to personnel documents, you want to ensure job applications meet the state and local requirements and remove improper inquiries concerning past compensation. However, it is permissible to ask an applicant about salary expectations. Also, wanna ensure that data is captured in the HRIS system. We need demographic data to be used for future pay audits. We wanna make sure that all of the components that went into place to considering what this person's compensation was to the extent possible is captured in that human resources system, that there's some documentation, that we've got all the information we need to make sure that we are in compliance with the federal and state pay equity laws. Another thing to consider is a pay equity audit. Now, a pay equity audit is something that, first and foremost, an attorney should be conducting or at least directing, because we want a pay equity audit to be privileged to the extent possible so that it is not something that can be sought out in discovery, in a litigation, or that a company would necessarily need to require to disclose to employees. Because a pay equity audit is an opportunity for the company to essentially do a checkup, take the temperature, do an overall review of compensation and see whether there are any issues, and if there are any issues, take steps to address them. And we want this to be a privileged, attorney-client privileged exercise. Now, the first step of a pay equity audit is to gather relevant data. What do I mean by that? Well, first we need to determine, what set of positions are we reviewing? Maybe you're doing a review for an entire company or a certain division or a certain position or whatever it is. But once you figure out who the people are, what the universe is, we need to get all information about this person's compensation and their background and their experience, because these are all factors that go into an evaluation of compliance or to the pay equity laws. When I'm doing an audit, I typically send my clients with a spreadsheet that just has a column for just anything and everything you could think of. Base salary, commission, bonuses, do they take a leave of absence, like a family leave of absence? Do they get a car allowance? Is there a 401k plan? What are their benefits package? You need all this information, as well as what their gender is, or if you're doing a pay equity audit that involves race or ethnicity, you wanna collect that information. You want to pull resumes, you wanna pull job descriptions. You wanna see what the, get information, perhaps, if a job description isn't up to date, information from a manager or someone on the ground about what the position is. Really, anything that could be considered part of this compensation equation, we need to gather. Once that information is gathered, then, as attorneys, we assist our clients in determining what are the similar positions. As we discussed at the top of this presentation, state laws vary as to what is considered, is it similar, is it equal pay for equal work, equal pay for substantially similar work, for comparable work? We need to see what state laws are in play to determine what is a comparable job. Now, in an organization, a larger organization, let's say you have a secretary in the accounting department versus a secretary in the payroll department. Now, they're both secretaries, but are they doing substantially similar work? Perhaps, right? Just because someone is in a different department or different organization doesn't mean that they're not in a proper comparator. So, it is important to identify comparable jobs based on the data that the clients provide us, and some of it is based on just conducting interviews or talking with managers to sort of figure out, what are the comparable jobs? Once you've got all of this data and you figure out who are the people who are similarly situated that we're evaluating, we need to calculate, run some calculations to see, what's going on, here? Are people who are in this position doing the substantially similar work or the equal work getting paid the same? And depending on the scope of the audit, you may need the assistance of an expert, an economic expert. Accountants are all good partners in these types of audits who can help assist with just the number-crunching. Lawyers always joke that there's a reason we don't do math. And obviously, you're gonna do some math in a pay equity audit. But depending on the scope, using an outside economist, accountant, someone else who can assist with the number crunching is very helpful, because oftentimes they have systems and programs in place that can very easily digest all of this information and let you know where the problems are, identify the red flags. And then, once people get those red flags, whether an outside vendor or internally, you're able to see where the outliers are, then we need to look at whether any differences in pay are justified under the applicable law. The state laws are going to dictate what the lawful justifications are and the documentation that the employer has to show why certain compensation decisions were made is going to be key. Maybe Mary makes $5,000 more a year than John because John is an outstanding performer and Mary is a low performer, and you have a performance review from the end of the year in which the manager gave very clear and accurate feedback about performance and explained why John is a superstar and why Mary is barely keeping it afloat. And that the compensation, John got a $5,000 raise because of this performance and Mary did not get a raise. Something like that is helpful and it's why documentation is so key, because if we cannot justify the difference in pay by something that is permitted under the law and if we don't have real evidence to show why this pay was different, then there's a problem. Then we have an unlawful pay differential. Now, the reason we wanna do an audit is we wanna find this out before someone sues you. Before someone sues the company, we wanna be able to find out these issues and address them internally. If there's an unjustified pay differential, changes need to be happening. An employer cannot decrease somebody's compensation to level the playing field. Let's say John and Mary, there was that $5,000 differential, that example we've been using. But there's nothing, there's no real reason for it. We can't find any explanation for why John is making $5,000 more. We cannot decrease John's compensation $5,000, or maybe by 2,500 or whatever it is to make it more in line with Mary's. Nope, can only increase compensation. Now, increasing someone's compensation, what do I mean by that? Well, maybe when you've realized this problem, maybe someone gets a pay bump. Maybe someone gets an end-of-year bonus to bridge the gap and a pay bump going forward. Or maybe you realize from this process that people aren't really doing substantially similar duties. Maybe as part of this process, it comes to light that John actually has a lot more responsibilities than Mary. He's really more of a lead, he's a lead for that position, or he's really a supervisor. Maybe it's time to officially promote John, give him a new title, maybe give him some additional duties and responsibilities to justify that pay differential. So, there's some creative ways, as attorneys, we can assist our clients in how to make these changes to equalize pay or how to message it to the employees. But at the end of the day, we wanna make changes, because to address any inequity so that there's compliance, that there's no violations of the Federal Equal Pay Act or state law. Now, going back, what difference, is there any difference that, is there a range, is there, what are we talking about, is the difference? Does it need to be exactly the same? No, but can it be off by $1000 or $250? What numbers are we looking at? And the answer is there's no hard and fast rule. Oftentimes, when I'm doing these audits, we're looking at, is there a statistically significant difference? So, looking at the standard deviations from the mean, is there a statistically significant difference? And I would say, for the most part, if there's no statistically significant difference, then the employer's probably on decent footing. And if it's not statistically, and if it is statistically significant, then it's time to make a change. I recently attended a pay equity webinar or presentation, it was more like a panel from the EEOC where they basically said it doesn't need, any difference is not okay. I think that's a little extreme. Obviously, they're the ones that are implementing these laws and enforcing these laws. However, there are ways for employers to defend against their actions. And if you have a difference that is minimal or less significant, that doesn't necessarily mean that there's an equal pay violation. Every state's gonna different. Every position's gonna different. Every situation's gonna different, be different. But it's important to keep all of this in mind because pay equity, these audits are really helpful, but an audit is just capturing a moment in time, and then there's gonna be more pay decisions that come after that and after that. And that's why an audit is just part of the puzzle, because you need to make sure that the decision-makers who are making the next pay decision are making it in compliance with the law so that we're not, you might do an audit and correct things, and then end-of-year bonuses or end-of-year reviews come in, and all of a sudden that whole landscape that was equalized gets a little murky again. For that reason, it's a good business practice to do annual audits. If it can't be done annually, maybe every other year. It's an important checkup for our clients to do and we could really add value to that process by guiding them through the knotty legal issues and helping them to figure out the best way to, the best solutions to comply with the law. Conducting a good-faith pay audit can also serve as a strong defense to an equal pay claim. In certain states, it provides a safe harbor to a pay equity claim. Now, for example, in Massachusetts, there's an affirmative defense to liability under the Massachusetts Equal Pay Act and any pay discrimination claim under the Massachusetts state law if an employer, within the last three years prior to the commencement of the lawsuit, completed a good-faith self-evaluation reasonable in detail and scope of its pay practices and can demonstrate reasonable progress in eliminating gender-based discrimination differentials. Oregon, Puerto Rico, Colorado have similar safe harbors. And even if there's no codified safe harbor, if an employer can show in defense to a lawsuit that they've done a pay audit and took steps to either, to level the playing field, that's really helpful in terms of defense. It's very helpful to show that the employer's decisions, their pay practices were not in a willful violation of the equal pay law. So, it's really something that all businesses should be considering, regardless of the size. Another thing to think about in terms of solutions for employers is pay transparency. Surveys reveal that employees seek more pay transparency from their employers. 58% of employees would consider switching jobs for a company with more pay transparency than their current employer. We're also seeing as the next generation, the Gen Z workforce, are coming into the workforce, they're continuing to demand more transparency. This emboldens non-Gen Z coworkers to demand the same. Many state laws promote pay transparency. They prohibit policies that don't allow employees to discuss wages. They prohibit retaliation against employees who ask about their compensation, their compensation and others. And laws are requiring employers to disclose wage ranges for vacant positions. The need for transparency and its impact on pay equity is clear. Another thing to think about, an effort to embrace DEI is to normalize flexibility. After more than a year or two years, whatever we had, two, two and a half years, whenever you're listening to those presentation of remote work, employers should consider their stance on flexible work arrangements, including remote work, and how that impacts gender parity for their organization. Women are more likely than men to elect to continue remote work because of the flexibility and because of childcare and caretaking needs. Nearly 60% of women polled in a recent survey said that they would look for another job if they were not allowed to continue remote working or having a flexible workplace. That same survey found that nearly seven of 10 workers believe that remote work policies will benefit gender equality in the workplace. It's important to develop remote work policies under a lens of diversity, equity, and inclusion, because this can broaden and deepen the talent pool of potential workers, which is only gonna benefit the business in the end. Remote work options diminish burnout, especially, the studies show, especially when it comes to women of color who are more likely to be caregivers. We need to guide our clients to understand that promotions and other career-advancing opportunities need to be available to all employees, regardless of their physical presence in the workplace. Tracking who is getting advancement opportunities is critical to countering the bias towards the necessary face time. Employers also need to empower diverse talent. The goal should be to create an environment where diversity is viewed as a strength. It needs to be embraced at all levels of management. Employees should feel comfortable presenting diverse perspectives, and these perspectives and opinions should be considered by all levels of management. Valuing and respecting these different perspectives leads to a more positive company culture, and employees are gonna be more engaged and motivated if they feel that they're accepted and that their diverse perspectives and talents are embraced. And that is going to lead to increased retention. And finally, training, training, training. Leaders at all levels must receive training in diversity and inclusion. They need to understand implicit bias, the benefits of a diverse workplace, the benefits of diverse perspectives. They need to develop inclusive leadership skills and learn how to empower diverse talent. You need to set the tone for the organization that diversity and inclusion are accepted, are embraced. The studies show that embracing diversity is going to lead to better business output and profitability. It's really a win-win-win for everybody, and pay equity is a big piece of that puzzle. These pay equity and diversion, diversity and inclusion, these are complex topics. As attorneys, we have the opportunity to advise our clients on how to navigate the federal and state laws, how to work towards developing a workplace culture that promotes equality and inclusion, and also explaining to them how this will help their bottom line. This will help them become more profitable and more successful. I appreciate everyone's time with me today. If you have any follow-up questions or would like to discuss some of issues further, my contact information is on the slides. Please don't hesitate to contact me. I'm always happy to discuss these issues. I have a special place in my heart for pay equity and continue to keep track of these laws. Work with your clients to ensure compliance, because, it's just, these pay equity initiatives are not going away. These diversity initiatives are not going away. They are increasing, they are becoming more expected for our employers, and as attorneys, we wanna do all we can to assist them. I thank you for your time today. Take care.

Presenter(s)

SWJ
Sarah Wieselthier, JD
Of Counsel
Fisher Phillips

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