In my last post at the Cafe, I talked about the two words in the Ledbetter Fair Pay Act that keep me awake at night: "other practices". Once I get to sleep, I have nightmares about another aspect of this Act. I dream of being locked in a file room, desperately searching for the one piece of paper that will save my company from going bankrupt as a result of a pay discrimination claim. The nightmare: all of the shelves contain empty boxes. There's nothing inside.
What's in your file room? Do you have empty boxes, or do you have the compensation documentation you need to save the day?
Under the Fair Pay Act, an employee can file a lawsuit for discriminatory pay decisions every time that the decision is applied. This includes each time wages, benefits, or other compensation is paid, even if the decision occurred twenty or thirty years ago.
What do your compensation documents from thirty years ago look like? Do you even have any? If you had to explain how the pay increases for John Smith and Jane Jones were determined in 1980 and why they were different, would you be able to? You're not alone - most employers can't.
It's hard enough to remember how last year's decisions were made. As time passes, memories fade. Imagine trying to remember how pay increases were determined even five or ten years ago without documentation. Are the people who made those decisions still with your organization?
Now is the time to start a serious document creation and retention program. And compensation documents include a lot more than time sheets and pay stubs. Philip Miles, an employment attorney at McQuaide Blasko, urges you to retain your compensation decision documents:
When you, as an employer, decide your employees' wages, salaries, pay increases... how do you arrive at a specific figure? I'm talking about performance reviews - what metrics were used? Signed copies of the completed review, signed copies of the criteria at the start of the review period. Often companies will conduct or purchase industry statistics to ensure that they're paying people in the expected range for their industry. Employers are not 'dart-boarding' compensation decisions. Record where these figures are coming from.
The sure-fire method to eliminate any concern over this issue is to retain everything indefinitely. If you maintain these documents electronically, you can store a lot of stuff pretty cheaply (maybe even for free). It's not so practical if you have a paper-based system (if you're storing reams of paper, now might be a good time to consider moving to an electronic system).
Like any decision, weigh the pros and cons. How much will storage cost? What level of risk are you, as an employer, willing to accept? As Mr. Miles notes:
For every document you destroy, ask what decision will go unsupported in a lawsuit. How will that affect your defense?
I think it's better to err on the side of caution - retain more than you think you'll need. It's better to have it and not need it than to need it and not have it. Don't set yourself up for a nightmare.
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 Litigation Support Division of Minimax Consulting.
Image: Creative Commons Photo "Documents" by Marcin Wichary
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