Today marks Equal Pay Day and 53 years since the passage of the Equal Pay Act. Nonetheless, we still see wage discrimination and pay inequality in various industries. The issue recently gained nationwide attention when five members of the US Women’s World Cup and Olympic champion national soccer team filed a complaint with the EEOC claiming that despite their worldwide success, they are paid about 40% less than the players on the men’s national team. Similarly, female actresses and directors in Hollywood have alleged rampant gender discrimination in hiring as well as wage discrimination.
Nevertheless, some progress is being made. For instance, California and New York have dramatically expanded the reach of their equal pay laws. These new laws will make it easier for individuals bring wage discrimination claims and more difficult for employers to defend them. And states such as New Jersey, Maryland and Colorado have legislation in the works.
Also, the EEOC is committed to eradicating pay discrimination as part of its Strategic Enforcement Plan and is in the process of revising the EEO-1 Form to collect pay data from employers with 100 or more employees, making it easier for the government to identify and remedy wage discrimination. But there is still a long way to go.
So what are some practical steps an employer can take to minimize the risk of a pay discrimination claim? Here are seven golden rules:
1. Create a Policy Prohibiting Wage Discrimination
Implement and enforce a policy prohibiting wage discrimination based not only on sex, but also on race, national origin and other protected classes. A prudent employer also should put in place a multichannel internal complaint procedure that will allow employees to bring any issues or complaints regarding wage differentials to management’s attention. In addition, the policy should notify employees that they will not face retaliation for complaining.
2. Do Not Prohibit Employees from Discussing Wages
It’s a mistake to prevent employees from freely discussing or disclosing their wages and compensation. Under the National Labor Relations Act, employees have a right to discuss their wages, hours and working conditions without employer interference. In fact, a number of states have passed laws banning employers from prohibiting employees from discussing their own wages or the wages of another employee, including:
• Michigan; and
• New York.
3. Review and Audit Pay Practices
Frequently review your pay practices, job descriptions and salaries of all employees to make sure wage discrimination is not occurring. And in doing so, make sure to take not just salaries into account, but also bonuses, equity, benefits and any other forms of compensation. There should be clear guidelines for salaries, pay and bonuses and employees should know if this is tied to merit, productivity, performance, sales or some combination of factors. The criteria should be objective, predictable and measurable – meaning no surprises so that employees are keenly aware of the employer’s expectations and how compensation decisions are made.
Wage differentials based on gender or other protected class status should be based on legitimate, nondiscriminatory factors and supported by written documentation. If they are not, an employer should correct them and readjust for any pay differences unless a seniority system, merit system or a bona fide factor other than sex, such as education or training, can explain those differences.
4. Maintain Comprehensive Documentation About Employment Decisions
An employer should make sure to maintain clear records regarding employment decisions and document how they were made and the legitimate, nondiscriminatory factors taken into account. This will provide evidence in the event of a lawsuit.
5. Keep Wage Records
Revise recordkeeping policies and procedures and be sure to retain wage records for at least three years. The recordkeeping provisions extend not only to wage records, but to records of job classifications and other terms and conditions of employment.
6. Provide Timely and Effective Performance Evaluations
Employees should receive yearly or biannual performance evaluations. As part of this process, an employer should clearly set out its expectations and show the employee how she is meeting them or not meeting them. Thus, if there are any wage differentials when compensation decisions are made, employees will understand that the differences are based on merit, performance or other legitimate, nondiscriminatory reasons.
7. Provide Training to Supervisors and Managers
Finally, make sure to provide comprehensive training to supervisors and managers on avoiding wage discrimination and making employment decisions based on legitimate nondiscriminatory criteria such as merit, skill and performance. Supervisors and managers should be thoroughly familiar with the employer’s policies regarding salary increases and bonuses and know what authority they have. They also should be encouraged to provide solid examples of good and bad performance to support compensation decisions and maintain documentation.