What Do You Think About the Paycheck Fairness Act?

The Paycheck Fairness Act (PFA) introduced by Representative Rosa DeLauro (D-CT) and Senator Hillary Rodham Clinton (D-NY) was approved by the U.S. House Committee on Education and Labor on July 31, 2008, with a 247-178 vote.

The PFA closely follows the Ledbetter Fair Pay Act, which the House passed in July 2007, but the Senate voted down in April 2008. The PFA legislation would amend the Equal Pay Act of 1963 (EPA) in significant ways in an effort to end the historical pay differential between men and women whether intentional or unintentional on the part of the employer. There is an underlying tone to the bill that business is not taking the appropriate steps to eradicate this differential and the government must step into private business to close the gap.

Highlights of the Paycheck Fairness Act:

• Lifts the caps on compensatory and punitive damages for which employers would be liable; in addition to current liability for back pay, whether intentional or unintentional.

• Requires that employers seeking to justify pay differentials bear the burden of proving that their actions and pay results are job-related and consistent with a business necessity.

• Permits employee inquiries into the wages of other employees and prohibits employers from retaliating against employees who share salary information with their co-workers.

• Requires the Department of Labor (DOL) to enhance outreach and training efforts to work with employers in order to eliminate pay disparities.

• Requires the DOL to collect and disseminate wage information based on gender which may result in new recordkeeping and reporting for employers.

• Amends the EPA to allow an employee to raise a wage claim if the inequality exists between men and women who work at geographically different places of business under the company.

• Creates a new grant program to help strengthen the negotiation skills of girls and women in hopes that they will better negotiate promotions, salary increases and better starting salaries. Eligible to apply for the training grant are public agencies, educational agencies, private non-profit agencies, and community-based organizations.

• Creates a national award for recognized model employers working proactively to eliminate disparity. Application criteria are yet to be developed.

This act raises the bar and demands that employers prove their compensation practices legally justify paycheck differences between male and female employees. Although gender-based discriminatory pay practices are already illegal, PFA supporters believe there has not been enough government action or corporate punishment that has stalled gap-closing activity.

Though there is debate as to what the ‘real’ pay difference is between male and female workers today and why, it again brings forward the absolute business criticality of ensuring there are no inequities between male and female pay for equal work that can not be explained by business reasons—such as pay for performance and seniority.

Upon passing into law, the government will be able to reach further into the private business sector and determine acceptability of all compensation programs to include performance evaluation, job evaluation, and market pay practices (these systems must also be checked for disparate impact on protected classes as well as pay). Employers need to be aware of this possibility whether they agree or not, but it is already good business and corporate citizenship to ensure compliance and take action when necessary.

Established businesses should already have documented procedures that demonstrate fair pay decisions and results. Having clear, measurable, quantifiable systems used by trained decision-makers with systemic audit and review can help to ensure objectivity and equality for all. Pay factors and decisions should be reviewed at least annually to ensure program results are not having adverse effects on protected classes.

Managers should also be trained and reminded how to make the best pay decisions and evaluations free from bias in order to keep your business in legal compliance as well as to promote achieving business goals. It is also important to remember that employees today have unprecedented access to information via the Internet. This data source on the surface could increase the perception of inequality unless you have systems and methods to work with employees and respond to situations as they arise. American businesses need to be sure they have great compensation practices and systems that are free from illegal and/or unrecognized bias, and yet still be aware of this pending legislation.

The Senate will vote on the Bill after the August Congressional recess. The White House has threatened to veto the bill saying the proposal would make enforcement of current equal pay laws "more difficult and error-prone and invite a surge of litigation". I encourage you to use your American right and contact your Senator to voice an opinion on the topic.

Note: The House passed the bill after approving five amendments, including one from Representative Jason Altmire (D-Pa) that would delay the effective date of the bill by six months in order for the DOL to educate small businesses about complying with the requirements of the bill.

The Paycheck Fairness Act was approved by the U.S. House Committee on Education and Labor on July 31, 2008. The Senate will vote on the Bill after the August Congressional recess.