In my last Insight, I explained the basics of the new Lilly Ledbetter Fair Pay Act of 2009 (the Ledbetter Act) and how it can affect your company.
In order to understand and comply with the Ledbetter Act, employers must be proactive in identifying and eliminating pay inequities, and from a defensive standpoint, also be aware of how best to retain relevant documents and conduct related internal training.
Here are some steps you can take:
- Evaluate your company’s records, record retention policies and retention schedule for records of terminated or retired employees—This is extremely important in light of the fact that the new law makes it possible for a company to be sued at almost any time for pay inequities, no matter how far back the pay inequity occurred.
- Analyze all your pay data—Doing this will help you to identify problem areas that require further investigation (such as pay disparities based on race, age, gender, etc.) and to outline a solution that addresses the problems.
- Review the amount of discretion given to managers/supervisors when making pay decisions—It’s important to determine how much more pay employees with high performance ratings receive and how those pay levels compare to other employees with similar jobs and performance ratings, to ensure that no pay inequities exist.
So even performance appraisals can trigger a disparate treatment here.
- Audit past decision-making actions in regard to compensation packages—Employers need to do this in order to determine if there were good reasons why employee salaries were set the way they were. This would include hiring rates that were set at the time of employment, promotional increases or anytime new pay is set for a position—anything that could lead to discriminatory practice.
This could allow companies to identify and deal with problems before they result in a claim being filed.
Auditing is one of the key factors recommended for all employers.
- Monitor pay policies and performance management processes—This can help employers avoid future problems.
- Train and educate managers/supervisors to ensure pay and performance evaluations are done objectively and with adequate documentation—Ongoing training and communication can help emphasize the importance of pay inequity issues and the risks for pay-related decisions.
It’s critical for employers to be aware of the Ledbetter Act in order to remain in compliance and avoid costly litigation.
An Example of What Companies Have Done to Better-Comply
I’ve worked with several companies to conduct fair pay audits. The audit included preparation and review of a Workforce Analysis Report to identify any potential pay inequities.
There are several factors, such as race, gender, disability or ethnicity that may suggest pay discrimination. So I actually sat down with these companies and went through their different job categories and looked at applicable factors.
I also reviewed the companies’ retention schedule for records that affect pay decisions, as well as performance appraisals that affect pay and job classification decisions.
Since proper documentation is important to defend a company’s position, I helped the companies create a well-documented compensation communication philosophy, including a pay philosophy statement and a salary administration manual that supervisors could use when making pay decisions.
We also looked at the discretion of hiring managers to ensure that offers made to applicants were fair and equitable, while still maintaining the ability to attract and retain good talent.
No pay decisions should ever be made in “a vacuum.”
For instance, when a new hire pay decision is made, it should require at least one level of review so the company can ensure there is nothing that could lead to a discriminatory practice in the future.
After my initial review with these companies, I was able to determine that no pay disparities existed, based on the discriminatory factors mentioned above, and that any differences in pay could be attributed to defensible reasons, such as an employee’s role, experience, education, industry or location.