Compensation Cafe

Leaning in, Weisure and Work Life Balance

Have you read Shery Sandberg's new book Lean In? If not, you've probably heard about it. It's receiving rave reviews and generating a lot of conversation. Oprah Winfrey referred to the book as "honest and brave... The new manifesto for women in the workplace."

The book - and the author - have created quite a stir. In a PBS interview, Sandberg stated "there's no such thing as work-life balance. There's work, there's life, and there's no balance." The book encourages women to challenge assumptions about themselves and the workplace, and urges us to give up the myth of 'having it all.'  

In her review of the book, Carey Goldberg argues that Sandberg has missed the mark:

Our greatest obstacle is not any girly self-doubt. It is a rigid workplace culture that won't let us ratchet down. It is employers who do not offer flexible alternatives that drive parents out, by offering only a binary choice between full-time-plus or the highway.

Could the problem really be as simple as workplace (in)flexibility? It might be. But flexibility isn't a 'women's issue' - it's a 'worker's issue.' All of us, irrespective of gender, suffer from workweek creep. Our workweeks are expanding because we're performing work-related activities during non-work time. We live lives of weisure, a term coined by sociologist Dalton Conley. 

Conley notes that "activities and social spaces are becoming more work-play ambiguous" and it's becoming increasingly difficult to segregate the work aspects from the non-work aspects of our lives. The source of this ambiguity? Technology. 

It should come as no surprise then that Sandberg, the COO of Facebook, doesn't think that work-life balance exists. In an always-on, always-connected world, the boundary between work and life is significantly blurred, if not altogether erased.

Our workdays have also been reshaped by the kinds of work we're doing. The rise of the "creative class" means we're working differently, manufacturing ideas rather than widgets. It may be the case that a weisure lifestyle is the best fit for this creative class. 

I'm not sure if work-life balance is possible, at least in the conventional sense. But I do think that if it is, flexible workplaces will help us achieve it. It's up to each individual to find their own balance, and workplaces that embrace a variety of options for these balancing acts will be the ones that lead us into the 21st century.

Stephanie R. Thomas is an economic and statistical consultant specializing in EEO issues and employment litigation risk management. Since 1999, she's been working with businesses and government agencies providing expert quantitative analysis. Stephanie's articles on examining compensation systems for internal equity have appeared in professional journals and she has appeared on NPR to discuss the gender wage gap. Stephanie is the founder of Thomas Econometrics Inc., the host of The Proactive Employer radio show, and author of the upcoming book Compensating Your Employees Fairly: A Guide to Internal Pay Equity. Follow her on Twitter at @proactivemployr. 

Further Federal Furors

When the Federal Government brags about cutting spending, check your pockets.  What is given from one hand tends to be taken by the other.  Let's take time to re-examine existing proposals that could increase the employer cost of doing business. 

There has been no further action by the Department of Labor on the status of RIN 1235-AA04 as of today.  The regulatory tweak to require all employer exempt determinations to be documented and communicated to the subjects and the record retained for examination is still held under the “long term action” category.  Any change on this would be signaled by a notice in the Federal Register. A Notice of Proposed Rule Making (NPRM) then triggers a 60 to 90 day comment period before DOL reacts.

There is action on RIN 1235-AA05, dealing with domestics employed as companions, as reported in the December publication of the Agenda.  That NPRM was in a prior Federal Register.  Comments were collected; then the comment period was extended a year ago so with an effective deadline for comments now shown as 4/00/13.  It seems to focus more or less on retaining exemptions for personal friends but denying it for employees of home-care services. 

A number of other separate initiatives on worker misclassification are also being pursued. One deals with whether contractors are really employees.  Keep a close eye on that one, because someone in D.C. is thinking long term. 

A Worker Classification Survey has been commissioned, probably to generate buzz about the evils of status quo employer practices.  Challenges to contractor status have major implications due to the impending implementation of the healthcare reform act with its requirements and penalties dealing with the health benefits companies provide to employees.  Some companies have simply declared workers to be contractors and thus washed their hands of responsibility for their overtime and health care. Continued attempts by companies to carve out overtime-eligible non-exempts or workers with potentially high benefit costs from employee status by hiding them under contractor status could be blocked. Closing the contractor escape route assures that employers will continue to pay for health care and exposes them to substantial fines and severe penalties as well.  Keeping medical benefit costs as an employer duty rather than a government obligation may be essential to assure the actuarial survival of PPACA.

In addition, OFCCP’s recent abandonment of their prior guidance communications adds more confusion to employers struggling to decipher discrimination rules. 

Despite the regular impressions of chaos in Washington DC, nothing happens there without a reason.

E. James (Jim) Brennan is Senior Associate of ERI Economic Research Institute, the premier publisher of interactive pay and living-cost surveys. Semi-retired after over 40 years in HR corporate and consulting roles throughout the U.S. and Canada, he’s pretty much been there done that (articles, books, speeches, seminars, radio/TV, advisory posts, in-trial expert witness stuff, etc.), and will express his opinion on almost anything.

Creative Commons image "U.S. Capital" by cliff1066

Gone With The Wind (Your Guidance, That Is)

"Take a good look my dear. It's an historic moment you can tell your grandchildren about."

-Rhett Butler, Gone With The Wind 

On February 26, the Office of Federal Contract Compliance Programs (OFCCP) officially rescinded the "Standards" and "Voluntary Guidelines", two enforcement guidance documents on pay discrimination (read the News Release here).

In short, the Standards established analytical procedures followed by OFCCP when issuing a Notice of Violation alleging systemic compensation discrimination. The Voluntary Guidelines provided a methodology for contractors' self-evaluation of their pay practices.

The rescission, effective February 28, 2013, clears the way for OFCCP to use "broad Title VII principles" in its enforcement of equal pay laws. In her blog post about the rescission, Director Shiu stated the Standards forced a "narrowly defined, cookie-cutter approach to evaluating contractor pay practices" that "prevented [OFCCP] from detecting evidence of illegal pay discrimination."

The practical implication of the rescission is that contractors are now left with minimal guidance on equal pay compliance. Director Shiu acknowledged the importance of providing guidance to contractors, noting that "[the contractor community] asked, quite reasonably, that if we rescinded the old guidance, we also provide clarity on how we would evaluate their compliance."

The Notice of Rescission outlines a five-step process the agency will use when reviewing contractor pay practices:

1. Determine the most appropriate and effective approach from a range of investigative and analytical tools;
2. Consider all employment practices that may lead to compensation discrimination;
3. Develop appropriate pay analysis groups;
4. Investigate large systemic, smaller unit and individual discrimination;
5. Review and test factors before including them in the analysis. 

The lengthy discussion is non-specific, referring to tools and techniques could be used and how this new open-endedness will benefit OFCCP in detecting all forms of pay discrimination. Based on my review of the Notice of Rescission, Directive, Fact Sheet, the Compliance Assistance page and Frequently Asked Questions, the guidance available right now boils down into the following: application of broad Title VII principles on a case-by-case basis.

The Notice also indicates that the types of questions addressed by OFCCP will be expanded to include assignment and selection decisions:

Pay discrimination can be easy to spot, like a clear pattern of paying women less than men in the same job, where they are just as qualified. But it can also be complex, like a practice of discriminating against African-American sales workers in handing out territory assignments - so that no matter how well they perform, they can never have the same earnings opportunities as their white counterparts. Title VII addresses all forms of compensation differences, including those that come from channeling a favored group into the better paying entry level jobs with better long-term oppotunities, or where glass ceillings or other unfair promotion practices wrongly block advancement of talented workers on the basis of illegal criteria like race or gender.

It seems as though OFCCP pay investigations will now be akin to TItle VII compensation discrimination litigation in both content and form. This means that contractors will be facing more uncertainty. How will you prepare?

Stephanie R. Thomas is an economic and statistical consultant specializing in EEO issues and employment litigation risk management. Since 1999, she's been working with businesses and government agencies providing expert quantitative analysis. Stephanie's articles on examining compensation systems for internal equity have appeared in professional journals and she has appeared on NPR to discuss the gender wage gap. Stephanie is the founder of Thomas Econometrics Inc., the host of The Proactive Employer radio show, and author of the upcoming book Compensating Your Employees Fairly: A Guide to Internal Pay Equity. Follow her on Twitter at @proactivemployr.

image courtesy of Wikimedia Commons

Surprise! Pay Equity a Top Priority for EEOC

After reviewing the EEOC's newly-approved Strategic Enforcement Plan, there are no surprises for employers when it comes to identifying where to concentrate their EEO compliance efforts for the next four years.

But one of the areas the EEOC intends to focus on did come as a surprise: enforcement of equal pay laws.

Why was it a surprise? Enforcement of equal pay laws was added to the strategic plan at the last minute. As noted by Barry Hartstein, an attorney in the Chicago office of Littler Mendelson, the inclusion of enforcing equal pay laws to target practices that discriminate based on gender did not appear among the priorities listed in the EEOC's draft plan. But it's Number 2 in the finalized and approved plan.

Was it a big surprise? Not really. After all, gender pay equity has been a flagship issue of the Obama Administration since 2008. From the Lilly Ledbetter Fair Pay Act to the creation of the National Equal Pay Enforcement Task Force to the Paycheck Fairness Act, many of us saw it coming and figured it was only a matter of time.

It isn't clear when the EEOC will begin its enforcement efforts in earnest. Surprisingly, the agency has filed only two Equal Pay Act lawsuits in the last two fiscal years. It's likely we will see that number increase over the next four years as a result of pay equity being specifically prioritized in the Strategic Enforcement Plan.

What surprises does the EEOC have in store for employers? Surprise visits and showing up at your door without a complaining party. Under the agency's new Equal Pay Act Directed Investigation Pilot Program, the EEOC is no longer waiting for a formal complaint of discrimination before launching pay investigations.

Right now, three district offices are participating in the program. It's likely that the program will be expanded nationwide - the Strategic Enforcement Plan specifically encourages these directed investigations. As a result, more employers could find themselves discussing their pay practices with the EEOC over a cup of coffee.

Want to prevent surprises? Start examining at your compensation policies and practices using quantitative tools. It's important to know what story your data tells, and whether there are potential problem areas with respect to internal equity. You don't want any surprises if/when the EEOC starts reviewing your compensation data.

It's important to not only look for the possibility of disparate treatment (intentional discrimination) but also disparate impact (unintentional discrimination). There are indications that disparate impact lawsuits may be on the rise. It remains to be seen whether compensation practices will be challenged, but it is a possibility. No surprises - you've been warned!

Stephanie R. Thomas is an economic and statistical consultant specializing in EEO issues and employment litigation risk management. Since 1999, she's been working with businesses and government agencies providing expert quantitative analysis. Stephanie's articles on examining compensation systems for internal equity have appeared in professional journals and she has appeared on NPR to discuss the gender wage gap. Stephanie is the founder of Thomas Econometrics Inc., the host of The Proactive Employer radio show, and author of the upcoming book Compensating Your Employees Fairly: A Guide to Internal Pay Equity. Follow her on Twitter at @proactivemployr.

Disparate Impact... in Compensation?

Now that the elections are over, the speculation about the next four years has begun. My news reader has been full of stories hinting that the Department of Justice may be gearing up to file disparate impact lawsuits if minorities don't get their "fair share" of jobs, housing, loans, educational opportunities, etc., based on demographics.

As a compensation pro. you may think that your department is home free in terms of avoiding discrimination complaints. After all, your pay decisions are based on a set of clearly defined factors that are applied equally to everyone. Your processes are blind to gender, race, religion, disability status, and every other protected characteristic. You're transparent, and employees understand exactly what is expected of them in order to achieve that bonus payment, merit increase, etc. But are you really home free?

Yes, and no.

Under the theory of disparate impact, if a policy or practice that appears non-discriminatory has a negative impact on one group (and not on the other group), it can be discriminatory. It doesn't matter whether the employer intended to discriminate - in most cases of disparate impact, employers had no idea that they were doing anything wrong, and may have adopted the policy or practice to prevent intentional discrimination.

Let's say that you have a bonus program based on production, and in order to qualify for the bonus, employees must generate a certain amount of production. Seems straightforward, right? The highest-producing employees get the bonuses, and the lowest-producing employees don't. 

Here's where disparate impact comes in - what if someone makes a claim that production is infected with discrimination? A group of women could argue that they didn't receive bonuses because their production was lower, and their production was lower because the things that generate production were distributed in favor of men: men received better client leads, men had better networking oportunities, men were provided with training and development programs. Even the quality of assigned support staff favored men. Are you guilty of discrimination under the theory of adverse impact?

A New York DIstrict Court said no. In a case similar to the scenario laid out above, U.S. District Judge Shira A. Scheindlin said a "production-based compensation system is 'bona fide' if it applies equally to all employees in the same way. Even if the compensation system perpetuates the effect of other acts of discrimination, ...as long as the compensation system was adopted without discriminatory intent, it is immunized under Section 703(h)" of Title VII.

In short, compensation based on seniority, merit, or the quantity or quality of production is not discriminatory as long as it is bona fide, meaning (a) it was adopted without discriminatory intent, (b) is an established system based on predetermined criteria for measuring seniority, merit, or productivity, (c) has been communicated to employees, and (d) has been consistently applied to all employees, regardless of gender, race, religion, etc.

The good news is that while claims of disparate impact regarding compensation are in fact possible, I don't think we're going to see the surge predicted by some, and even if we do, compensation is not likely to be the focus. Make sure your program is bona fide - document the business reasons for adopting the program and that the criteria used in the system. Communicate the program to the employees in writing, and make it clear to them exactly how their compensation will be determined. Most importantly, once you have the program in place, apply it consistently, without fail.

Stephanie R. Thomas is an economic and statistical consultant specializing in EEO issues and employment litigation risk management. Since 1999, she's been working with businesses and government agencies providing expert quantitative analysis. Stephanie's articles on examining compensation systems for internal equity have appeared in professional journals and she has appeared on NPR to discuss the gender wage gap. Stephanie is the founder of Thomas Econometrics Inc., the host of The Proactive Employer radio show, and author of the upcoming book Compensating Your Employees Fairly: A Guide to Internal Pay Equity. Follow her on Twitter at @proactivemployr.

The Presidential Election's Impact on Compensation

We're only a few days away from the Presidential Election, and this past campaign season has been a wild ride. We've talked about everything from firing Big Bird to "binders full of women" - but where do the candidates stand on compensation issues?

Aside from some campaigning about the gender pay gap, compensation has taken a back seat to the mathematics of tax plans, foreign policy successes and failures, and job creation strategies. The outcome of the elections - both Presidential and Congressional - could have sweeping implications for the regulatory climate of federal agencies. This, in turn, will have an impact on how companies pay their employees. 

For example, the future of the Wage and Hour Division's "Right To Know Under the Fair Labor Standards Act" depends on who wins the Presidential election. "Right To Know" would require employers to disclose their classification of individuals as exempt or non-exempt employees or independent contractors. Employers would also have to explain the implications of their particular classification decisions to workers. Employers would also have to provide information to employees regarding how their pay is calculated.  

If President Obama is re-elected, "Right To Know" is likely to be passed and will become a final regulation in early 2013. On the other hand, if Governor Romney is elected, "Right To Know" is likely to die. This is the relative fate of much of the currently proposed legislation.

Generally speaking, a second term for President Obama means more regulation: more wage and hour regulation, more regulation for federal contractors from OFCCP (let's not forget that the compensation data collection tool is still on the table), more regulation on how employers deal with differing employee salary histories and demands (i.e., The Paycheck Fairness Act), etc. These regulations could prove burdensome to employers, but they also could provide protections for vulnerable workers and help ensure a level playing field for employers who are following the laws. The National Labor Relations Board will continue to play a significant role in shaping the workplace of the 21st century, and the EEOC will remain on the forefront of worker protection.

In contrast, a Romney Administration will likely take a very hands-off approach. The role of worker protection agencies like the Wage and Hour Division and OFCCP will be reigned in, along with significant changes at the National Labor Relations Board in terms of policy and enforcement.

And let's not forget about the Affordable Care Act. A second term for President Obama means that the ACA will be rolled out as planned. Governor Romney has promised that on day one of his presidency, he would act to repeal Obamacare; he also said that he would keep some key provisions involving pre-existing conditions and young people. Mr. Romney's ability to repeal Obamacare depends on a variety of factors, including the post-election composition of Congress (yes, there ARE Congressional elections taking place too!)

I'll leave it up to you to decide where you stand with respect to government regulation of the workplace... after all, it's YOUR choice, and nobody (not even employers!) should be telling you how to vote.

The bottom line is, we all have a lot riding on what happens next Tuesday. Everyone has to do their part: educate yourself on the candidates and the issues, and get out there and vote!

 

Stephanie R. Thomas is an economic and statistical consultant specializing in EEO issues and employment litigation risk management. Since 1999, she's been working with businesses and government agencies providing expert quantitative analysis. Stephanie's articles on examining compensation systems for internal equity have appeared in professional journals and she has appeared on NPR to discuss the gender wage gap. Stephanie is the founder of Thomas Econometrics Inc., the host of The Proactive Employer radio show, and author of the upcoming book Compensating Your Employees Fairly: A Guide to Internal Pay Equity. Follow her on Twitter at proactivemployr.

It's Not Fair!

"Mom!!! She has more marshmallows than I do - that's not fair!!!"

It's the classic complaint we've heard over and over. We've all been there - sometimes we're "Mom", sometimes we're "she" and sometimes we're the one whining.

We've scooped up half-melted marshmallows from "her" cup of cocoa in an effort to redistribute them "fairly" between the two cups (this often leads to more complaints and whining). We've ignored the complaint. We've been ignored when making the complaint. Sometimes we pout, and sometimes we relish in our self-justification that we got more because we deserve more.

Whether it's "Mom and marshmallows" or "Manager and money" the argument - and the underlying feeling - is the same. It's about being fair. But what does it really mean to be fair?

According to organizational justice theorists, at its core fairness has four dimensions:

1. Distributive Justice
2. Procedural Justice
3. Interactional Justice
4. Informational Justice

Distributive justice is our perceived fairness of the actual outcome - the number of marshmallows in our cup of cocoa, the amount of our bonus check, the percentage increase in our base salary, and the size of our promotional increases. Distributive justice focuses on the outcome and addresses the question "did I end up with what I should have gotten?" When we talk about internal pay equity and disparate treatment, we're typically referring to distributive justice: are the dollars distributed among the employees equitably, given our policies and procedures?

Procedural justice is our percieved fairness of procedures used to arrive at the outcomes - how did Mom decide how many marshmallows to give in each cup, what criteria were used to determine my bonus payment, how was the percentage increase in base salary determined, and so forth. Procedural justice focuses on the processes and procedures that led up to the outcome. "Fair" processes and procedures are free from bias and are applied consistently. Procedural justice addresses the question "was what I got fairly determined?" When we talk about adverse impact, we're typically referring to procedural justice: do the rules we use to distribute dollars affect different groups of employees differently?

Interactional Justice is our perceived fairness of the treatment we receive in the application of the actual outcome. It refers to that "warm fuzzy / cold prickly" feeling we get based on the way the outcome is presented to us. It's all about presentation. Did Mom roughly throw the marshmallows into the cocoa and shove the cup across the table to us? Or did she take care in preparing it, gently presenting the cup to us on a saucer so we didn't burn our fingers or spill it in our lap? Interactional justice addresses the question "was I treated with politeness, dignity and respect?" It's a critical, yet often overlooked, aspect of fairness.

Informational Justice is our perceived fairness or adequacy of the information we're given about the actual outcomes. In compensation-speak, it refers to transparency. Without informational justice, there can be no fairness. Your pay decisions could be internally equitable, based on objective and well-defined factors, and communicated with the utmost courtesy and respect. But if you only communicate "your bonus is $X" or "your merit increase is Y%" and provide no supporting information, the decisions may be interpreted as unfair. Fairness doesn't reside in a black box; it's only revealed through the lens of transparency. Even if employees disagree with the ultimate decisions, they are more likely to see the decisions as "fair" if they understand how those decisions were made.

"Fairness" is both science and art. We can statistically test our policies and practices for adverse impact and our pay outcomes for disparate treatment. Only a true artist can incorporate just the right amount of transparency and communicate the decisions in just the right way, every time she drops marshmallows into cups of cocoa.

Stephanie R. Thomas is an economic and statistical consultant specializing in EEO issues and employment litigation risk management. Since 1999, she's been working with businesses and government agencies providing expert quantitative analysis. Stephanie's articles on examining compensation systems for internal equity have appeared in professional journals and she has appeared on NPR to discuss the gender wage gap. Stephanie is the founder of Thomas Econometrics Inc., the host of The Proactive Employer radio show, and author of the upcoming book Compensating Your Employees Fairly: A Guide to Internal Pay Equity. Follow her on Twitter at proactivemployr. 

What is "Fair Pay"?

It is frequently said (by me, if no one else) that the phrase "fair pay" generally means "I want more money."  Therefore, it is a very popular slogan raised by people whenever they wish to press management for higher pay. 

Let’s explore the volatile topic, because it comes up so often and it can be difficult to handle.

Simply claiming that “my pay is unfair” places management on the defensive.  No reason for the accusation is really required, but there are numerous standard popular arguments.

An aggressive posture adopted by a valued worker creates pressure on the supervisor to either immediately accept or reject the contention of unfair pay.

Giving in is the easy solution for well-funded departments.  Granting more money pleases the employee, wins favor for the supervisor, eases future recruiting and often even increases the size of next year’s payroll budget allocation.  Griping costs the individual nothing and can produce great benefits, because many managers have little understanding of their own pay systems and therefore find it easier to give the complainer a raise rather than look stupid by being unable to explain a program they don't understand themselves.  Executives typically are unwilling to lose face by exposing their ignorance. 

Tough-minded managers may offer valid reasons why the pay is proper; but the listening employee just hears excuses.  A debate can ensue that is difficult to resolve because (unfortunately) there is no hard and fast rule that defines “fair pay.”

Legal precedents addressing "fair pay" in the United States are the Fair Labor Standards Act of 1938, the Equal Pay Act of 1963, the Civil Rights Act of 1964, and the Lily Ledbetter Fair Pay Act of 2009, to mention a few. The Fair Pay Act and the Paycheck Fairness Act  are different proposals that have never passed; they would have provided equivalent legal protections on pay in the U.S. as are found in Canada.  In the meantime, American federal agencies are attempting to implement a variety of protective pay enhancements administratively, as seen in programs from the EEOC, the DOL and the WHD.

The conventional mantra for "fair pay" in the U.S. is that pay is determined by competitive open market forces reflecting the skill, effort, responsibility and working conditions of the position.  Of course, there are no universally accepted standards for any of those job evaluation category measures, and pay classification is left up to the (nondiscriminatory) choices of each employer.  Since each enterprise is different in some way, it is logical and proper that each employer will have its own unique value system for paying workers "fairly" according to its particular standards.

Here are some potentially helpful links to writings on the subject:  This summarizes the academic studies on the topic.  Eliott Jaques has done most of the best original research, documented in his 1961-1964 books.  This offers the best arguments an employee can muster and present in support of "fair pay."  This addresses Comparable Worth, one approach to determine “fair pay.”  Here are arguments for gender pay equity.  This discusses “unfair pay” for one occupational group.  This treats perceptions of equity.  This shows how pay might not be the real issue in dispute.  Here are proofs that all rewards don’t jingle.

Practical experience (and other research) tells us that:
1.    employees are more sensitive to internal equity relationships than to external market competitive realities;
2.    when people feel that they are being paid fairly, they are frequently being overpaid compared to objective measures of the external competitive marketplace; and
3.    when workers cease to complain about unfair pay, they are generally extremely overpaid and reluctant to call management's attention to the fact.

The topic is so constantly popular that any internet search under the phrase "fair pay” will produce many hits.  There probably will never be a full and universally acceptable answer to the question, but the total rewards tradecraft continually deals with the subject of pay equity and new observations are always emerging.

What are your thoughts and experiences?

 E. James (Jim) Brennan is Senior Associate of ERI Economic Research Institute, the premier publisher of interactive pay and living-cost surveys. Semi-retired after over 40 years in HR corporate and consulting roles throughout the U.S. and Canada, he’s pretty much been there done that (articles, books, speeches, seminars, radio/TV, advisory posts, in-trial expert witness stuff, etc.) and will express his opinion on almost anything.

Creative Commons image "Balance Scale" by winifredxoxo

Check Your 6 - EEOC's Pilot Project on Pay Discrimination

If you're the Pilot In Command of compensation or EEO compliance, pay discrimination is on your radar. But are YOU on the radar of the EEOC?

You might think that if no claim of pay discrimination has been filed, you're in the clear. Historically, the EEOC typically launched an investigation only after a complaint of pay discrimination. But under a new pilot project, the EEOC is now engaging in proactive audits of employer pay practices.

Earlier this year, the National Equal Pay Enforcement Task Force recommended that the EEOC use its authority under the Equal Pay Act to begin agency-driven directed investigations into employer pay practices. The result of this recommendation is the Equal Pay Act Directed Investigation Pilot Project.

Under the pilot project, the EEOC isn't waiting for complaints of discrimination to start an investigation. The Agency is targeting employers for investigation and beginning a compensation audit of employer pay practices on its own.

Even though the EEOC has had the authority to engage in these kinds of investigations for years, they've focused on complaint-driven investigations. That focus could change in the future, depending on the outcome of the Directed Investigation Pilot Project.

Right now, three district offices  - New York, Chicago and Phoenix - are actively auditing employers under the pilot project.

Here's how the investigation works. The audit starts with a meeting between the EEOC and the employer. At this meeting, the EEOC gathers information about the employer's compensation practices - background information on the pay system(s) used, compensation and review methods, retention and management of compensation data, etc.

After this initial meeting, the EEOC constructs discovery and data requests specific to the employer, and the employer responds with its data and document production.

The EEOC then reviews the data and document production, and performs the audit. If the audit reveals violations, the EEOC then determines what enforcement measures (if any) will be pursued against the employer.

A lot of the details are still under wraps. We don't know how employers are selected for a directed investigation. We don't know what methodology the EEOC is using for the audit. We don't know the kinds of enforcement actions the EEOC would be prepared to take if disparities are found.

What we do know is that as of June, only a handful of audits have been performed. We also know that if the project is successful, the EEOC may expand it nationwide. Unfortunately, we don't know how the Agency is defining "success."

I've heard that the initial meetings that have been done under the pilot project have been relaxed and low-key. In a recent interview, Former EEOC Vice Chair Leslie Silverman said that based on what she's heard, the tone of the pilot project meetings have been cooperative and non-adversarial.

While the pilot project skies seem pretty friendly, you still need to check your 6 and make sure you're Code 1 on internal pay equity.

Stephanie R. Thomas is an economic and statistical consultant specializing in EEO issues and employment litigation risk management. Since 1999, she's been working with businesses and government agencies providing expert quantitative analysis. Stephanie's articles on examining compensation systems for internal equity have appeared in professional journals and she has appeared on NPR to discuss the gender wage gap. Stephanie is the founder of Thomas Econometrics Inc. and is the host of The Proactive Employer. Follow her on Twitter at proactivemployr. 

Newton’s Three Laws of Compensation Motion

Earlier this week, fellow Comp Café-er Stephanie Thomas, wrote an article titled The ‘God Particle’ of Total Rewards. In it, she discusses the Higgs boson particle that seemingly holds the key to why things have mass and the secret ingredient in compensation programs - people - and how they hold things together. This got me thinking about how some of the most basic laws of physics control some of the most profound aspects of life. Given the fact that my last physics class was almost 30 years ago, I thought I’d take us back to basics. Sir Isaac Newton was a pretty smart guy. He developed three laws of motion that have historically worked well for most humans. With a little (OK, a lot) of poetic license I reframed these three laws below.

I. Every compensation program in a state of uniform motion tends to remain in that state of motion unless an external force is applied to it.

Basically, this says that once something is moving it will continue moving in the same manner unless, of course, something acts to stop or change that movement. Consider your average compensation program implementation.  Even the best implementation and roll-out has a few flaws, but it would be great if whatever movement we created at kickoff would remain constant for a while. However, nearly everything that happens at a company and to each individual directly impacts the movement of your program. Changes in goals scrape off a little of your speed. Strife with a boss pushes back against your well-designed program. Little and typically unnoticed distractions slowly drain away even more speed.

Handling this Law requires always being behind your plan pushing, or in front of your plan clearing a path. The push comes from understanding your program goals and being able to translate that into the goals of each key stakeholder and influencer. Clearing the path is mainly about communication.

Law I states: things will not change unless you make them change. In other words, don’t expect change to happen just because you want it to.

II. The relationship between an object's mass m, its acceleration a, and the applied force F is F = ma. Acceleration and force are vectors (as indicated by their symbols being displayed in slant bold font); in this law the direction of the force vector is the same as the direction of the acceleration vector.

This Law explains how velocities change when forces are applied. The greater the mass, the greater the force needed to create acceleration. Also, a greater mass requires more force to slow it down. This is the argument for both rigorous testing before any plan change and small pilot programs when the final number of people involved will be large. It is fairly easy to redirect, speed up or slow down a small group. Large groups, on the other hand, take enormous amounts of effort to get moving, to change direction or to slow down or stop. It is easier to stop a toddler on a trike than a fully loaded locomotive.

Often people wonder why compensation programs at very large companies tend to remain fairly constant regardless of popular trends. This law explains this.  While it is possible to make fairly quick movements with even the largest plans, the force (staff size and budget) required to execute and control the movement is seldom within the range of what compensation departments are allocated. The only hope for achieving quick movements here is to show how the quick movement of the compensation program can lead to an equally quick movement in company success.

Law II states: making changes becomes harder the bigger the group or issue gets.  In other words, don’t wait to make changes and when you do make changes make sure they work small before you try them big.

III. For every action there is an equal and opposite reaction.

This law is the tricky one for compensation professionals. Basically, it translates into: “Every time you do something great, expect to deal with something bad. I often hear this referred to as the “Law of Unintended Consequences.” In truth, if the action taken was deliberate, the opposite reaction should also have been fully expected.

The place I see this happen most often is in pay for performance programs. The performance award goal says to maximize revenue, but there is no mention of controlling costs or risks. The sales commission programs says you get paid a bonus on what you close in Q3, but does not specify that the deals need to stay closed through a given date in the future. The raise is given to keep an important person who would have been happy with half as much had they just not been “forced” to go interview somewhere else.

Law III states: that there should be no unintended consequences if you plan and design with forethought. In other words, every time you work to motivate an action or feeling, determine exactly how that motivation may also result in exactly what you don’t want.

While the ‘God particle” may still up be for debate, these basic laws are proven. Use them to your advantage or spend most of your time dealing with their consequences.

Dan Walter is the President and CEO of Performensation an independent compensation consultant focused on the needs of small and mid-sized public and private companies. Dan’s unique perspective and expertise includes equity compensation, executive compensation, performance-based pay and talent management issues. Dan is a co-author of “The Decision Makers Guide to Equity Compensation” and “Equity Alternatives.” Dan is on the board of the National Center for Employee Ownership, a partner in the ShareComp virtual conferences and the founder of Equity Compensation Experts, a free networking group. Dan is frequently requested as a dynamic and humorous speaker covering compensation and motivation topics. Connect with him on LinkedIn or follow him on Twitter at @Performensation and @SayOnPay