The Ledbetter Fair Pay Act has been on the books for about 18 months. In terms of living up to the hype, it's fizzled. Employment attorneys and experts were predicting a tidal wave of lawsuits that just didn't happen. In fact, nothing much happened at all. You may be retaining your records longer and (hopefully) documenting your pay decisions better, but for the most part nothing has really changed.
Does this mean you're off the hook? Not by a long shot. There's two little words in the Fair Pay Act that keep me awake at night: other practices. Officially, the Act says it's unlawful to make compensation decisions based on discriminatory decisions or other practices. But what are these "other practices"?
Let's look at an example. Assume that employees in Pay Grade 9 are paid between $40,000 and $45,000, regardless of gender, age, race, etc. And when we statistically look at people in Pay Grade 9, we see no evidence of discrimination. If there's no evidence of discrimination, then we're safe, right?
Wrong. What if someone in Pay Grade 9 claims she should be in Pay Grade 10? She could claim that she was hired into the wrong pay grade (9 instead of 10) because of discrimination. In this case, the pay decision at issue is not pay at all, but initial assignment. Initial assignment becomes the "other factor". Assignment decisions - not typically thought of as pay decisions - can be challenged under the Fair Pay Act.
It doesn't have to be pay grade. It could be department, location, shift, or any other factor that creates seemingly legitimate, non-discriminatory differentials in pay. This makes examining pay equity more difficult. "Other factors" not directly related to compensation come in to play.
This is still a relatively new area, and it's not really clear what kinds of "other factors" claims people are going to make. It's also not clear how successful these claims will be. While it may be difficult to prove, it's pretty easy to claim that you were hired at the wrong pay grade or assigned to the wrong department or shift because of discrimination. And once this claim is made, employers have to defend themselves. Defending against an employment discrimination claim is costly- in terms of time, money, and reputation.
What all of this means, from a risk management perspective, is that you can't look at compensation in isolation anymore. All of these "other factors" are in play and are fair game. And don't forget - any kind of decision at all, anywhere in the organization, is going to have a compensation component. Make sure you take the big picture view and consider all of those "other factors".
Stephanie R. Thomas is an economic and statistical consultant specializing in EEO issues and employment litigation risk management. For more than a decade, she's been working with businesses and government agencies providing expert EEO analysis. Stephanie has published several articles on examining compensation systems with respect to equity. She is the host of The Proactive Employer, and is the Director of the Equal Employment Advisory and Litigtion Support Division of Minimax Consulting.
This may be good news to many, but it may also be bad news. Good news if employers are not faced with the Armageddon of litigation on pay equity issues. Bad news if the lingering pay gap between men and women doesn't close, leading to more aggressive big government intervention.
Posted by: Paul Weatherhead | 06/24/2010 at 07:08 AM
Compelling thoughts, Stephanie.
It's these nettling little details that can catch companies off guard. Reminds me a bit of my accounting/finance classes many years ago; it was the footnotes that could throw you off. And yes, you needed to read all of them.
Your post is a reminder of factors that we - as compensation professionals - need to keep our eyes on.
And as to Paul's comment, I agree. Could be that there are those out there that need time to get their ducks in a row; I hope not, but now there is no need to be hasty because the taxi meter keeps ticking.
Posted by: Vita Taylor | 06/24/2010 at 10:11 AM