Regulations

Pay Equity Audits Can Help Organizations Address Equal Pay Liabilities

Pay Equity Audits Can Help Organizations Address Equal Pay Liabilities

While there remains a continuing wage gap between men and women, the movement to create a business world in which equal pay is provided to workers undertaking comparable work, regardless of gender, is gaining traction around the world. Add to that list a growing recognition that equal pay is an issue beyond gender. It also should apply to race, color, age, disability and other protected classes.

The Equal Pay Act was passed by Congress in 1963 and remains the driving philosophy for pay discrimination issues enforced by the U.S. Equal Employment Opportunity Commission (EEOC) and the U.S. Department of Labor’s Office of Office of Federal Contract Compliance Programs (OFCCP), which monitors adherence to the Equal Pay Act among federal contractors.

The consequences for failing to comply could result in negative press, increased legal liability, and damages in the millions of dollars, as companies like Uber, Google and Nike have already experienced.

In the last 12 months, 35 states have proposed new legislation to push employers towards providing equal pay for all of their workers. Many of these legislative changes ban the use of salary history to determine future pay for new hires. This has added new complexity to complying with equal pay regulations and heightened the potential liability of organizations not providing their workers with equal pay.

Encouraging organizations to conduct equal pay audits has been a focus of many of the new state regulations with several states incentivizing organizations to conduct self-audits by offering safe harbor protections in the event of an equal pay claim. For instance, in Massachusetts a provision has been codified in state law that encourages organizations to voluntarily conduct a pay-equity audit. The law provides that “an employer…who, within the previous 3 years and prior to the commencement of the action, has both completed a self-evaluation of its pay practices in good faith and can demonstrate that reasonable progress has been made towards eliminating wage differentials based on gender for comparable work…shall have an affirmative defense to liability…”

In Oregon, a similar safe harbor has been amended into the state’s equal pay law. It provides providing the employer with a defense if they have completed an equal pay analysis within the last three years, and can demonstrate they have made substantial progress toward eliminating the wage differential for the protected class asserted by an employee in a lawsuit.

It is important to note, however, that these state safe harbors do not act as defenses to claims brought under federal law, or other non-pay-equity-related state law claims.

There are benefits to conduct a pay equity self-audit that go beyond managing regulatory and legal liabilities. Identifying and correcting unjustified pay disparities within your organization boosts the morale of your workforce, which in turn can boost performance. If employees feel valued, it’s good all around. A step like self-auditing that improves pay transparency “helps employees feel they are valued and sets a better tone for everyone,” Kate Nielson, state policy manager at the American Association of University Women, told Bloomberg Law.

Organizations that are considering performing an equal pay audit should ensure that they are legally protected. They should consult with in-house general counsel, or outside counsel, and accountants about legally protecting the information obtained in an audit. Organizations that don’t feel they have the in-house capability to conduct an equal pay audit should consider the data quality management expertise of the outside experts retained to help conduct the audit. Working with outside vendors with specific expertise in data cleansing and validation will ensure that the results of your pay audit will be accurate. As the saying goes, garbage in, garbage out (“GIGO”)—a meaningful review of pay practices depends on the integrity of your employment data.

Take action to be a leader in the effort to provide equal pay to your workers and reap the rewards of a more enthusiastic workforce, positive PR and avoiding costly regulatory penalties. This is one effort for which you don’t want to be standing on the sidelines for long.

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Pay Equity Audits Can Help Organizations Address Equal Pay Liabilities
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Pay Equity Audits Can Help Organizations Address Equal Pay Liabilities
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While there remains a continuing wage gap between men and women
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First Capitol Consulting.Inc
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