The New Rules of Equal Pay: It’s Not Just Gender Any More
This activity has been APPROVED for SHRM Re-Certification Credits.
The chant, “Equal Pay for Equal Work!” was ringing outside the White House as John F. Kennedy signed the federal Equal Pay Act of 1963. Making it illegal to pay men and women different wages for the same jobs, the Equal Pay Act was followed a year later by the more broadly protective Civil Rights Act. Together, these laws require equal opportunity and reward without regard to gender. Unfortunately, laws alone cannot change decades of intentional and unintentional practices that create pay disparity, and state legislatures are responding with laws designed to put all workers—not just men and women—on equal footing.
The challenge for employers is that states aren’t just trying to respond—they are trying to break the mold. For example, the Oregon Pay Equity law has created a pay equity requirement for 10 protected classes that is nearly impossible to meet, let alone accurately analyze, without a fixed pay scale. With the prospect of countless lawsuits when the law goes into effect in 2019, Oregon employers and their attorneys are trying to figure out how to defend wages that vary widely and lack documentation.
This one-hour session is a high-level review of relevant pay equity laws, including the federal Equal Pay Act and groundbreaking recent revisions to California and Oregon state laws. Washington’s recently passed Equal Pay and Opportunity Act will also be discussed as Washington attempts to keep pace with its West Coast neighbors. After setting the legal background, the session will turn its attention to common pitfalls and best practices to avoid pay equity lawsuits, as well as ideas on how to identify pay vulnerabilities that may be lurking in the corners of your business structure.
After reviewing federal and relevant state laws on pay equity, as well as anticipated Washington pay equity amendments, participants will be able to:
- Understand the history and relevant requirements of the federal Equal Pay Act;
- Understand recent changes in California and Oregon that will affect multi-state operations, as well as legislation signed by Washington’s Governor that modifies the Washington Equal Pay Act and creates new liabilities;
- Identify areas of vulnerability in your existing pay structure, including a review of protected categories, job titles, and wage documentation;
- Follow a checklist of best practices to proactively discover and avoid common pay equity issues; and
- Accurately articulate your pay structure to create a more defensible position to a pay equity claim.
Jodi Slavik proudly provides counsel to Washington State businesses on employment issues, including training of HR professionals, managers, supervisors, and employees on a range of liability and leadership issues. As Vigilant’s Strategic Services Director, Jodi is also responsible for stability and growth of major accounts in Washington and Idaho, as well as ensuring unparalleled service for Vigilant member companies. Before joining Vigilant in 2011, Jodi served 15 years as an in-house trade association counsel, including roles as general counsel, environmental lobbyist, and class instructor. It is in the classroom that Jodi is at her best—distilling and conveying complex, controversial information in an immediately useful, entertaining way.
Read the Full Transcript of “The New Rules of Equal Pay: It’s Not Just Gender Any More”
JoAnn: Hello and welcome to TERRA Staffing Group’s HR Hotspot Webinar, The New Rules of Equal Pay: It’s Not Just Gender Anymore. My name is JoAnn Xydis. I am the vice president of administration with TERRA Staffing Group and I’ll be your host and moderator for today’s webinar. I will be introducing our presenter here in a moment, but first I’d like to review a few housekeeping items. First of all, the timeframe for today’s webinar is 60 minutes. Due to the time frame, we will be limiting questions and discussion during the webinar. But please, if you do have a question during the webinar, go ahead and use the question box. You should see that in the control panel on the right-hand side of your screen. And as time allows, we’ll address questions at the end of the webinar as all participants are currently muted.
Regarding the SHRM credits participation in the webinar, we’ll give everyone one recertification credit for SHRM. But to receive that credit, you do need to remain logged into the webinar for the entire 60 minutes. We are currently recording the webinar today and we’ll be sharing a link to the webinar recording. Also, we’ll be sharing all of these slides today in an email later on this afternoon. So do please feel free to share that with anyone that you think that the information would be beneficial to receive if they weren’t able to attend today.
So at this time, I am pleased to produce our presenter, which is Jodi Slavik. Jodi proudly provides counsel to Washington state businesses on employment issues. She trains HR professionals and managers, supervisors, employees on a huge wide range of liability and leadership issues. As Vigilance Strategic Services Director, Jody is also responsible for the stability and growth of major accounts in Washington and in Idaho, as well as ensuring really strong, unparalleled service for all of the Vigilant member companies.
Before she joined Vigilant in 2011, she served 15 years as an in-house trade association counsel and her role has included general council, environmental lobbyist, and a class instructor. She’s an excellent speaker. She’s very good at distilling and conveying really complex, controversial information in a fun, entertaining but immediately useful way. So without further ado, please welcome Jodi Slavik.
Jodi: Thank you, JoAnn. Whenever I sit back and get to listen to one minute of someone talking about me, it’s like, “Wow. I am pretty awesome, aren’t’ I?” So now I get to try to live up to that in a mere 60 minutes. And we are going to tackle a trending issue, which is equal pay. As JoAnn mentioned, Vigilant counsels employees, excuse me, counsels companies across the West Coast on complex employment-related issues. So when I talk about the West Coast, what I am saying is Washington, Oregon, California, Idaho, and Montana. We deal with sticky employment-related issues and pay equity is one of them. So one moment. I’m having a few problems with my slide advancing. There we go. Okay.
So let’s talk about our agenda today. Three big things we’re gonna cover. First of all, is there really a pay gap? We hear a lot about it, but what are the numbers behind it? And then the law. What’s going on in the law? What’s going on at a federal level? What’s going on at a state level. And then I’m gonna give you a boatload of best practices, everything that you can and should be doing right now to anticipate and prepare for pay equity. So let’s get going with the questions.
Is there really a pay gap? So some of the stats on this. First of all, women make up 40% of the American workforce. [inaudible 00:04:34] You know, we are here in force. And when you look from the Bureau of Labor Statistics, when you look to the wage information, and this is from 2017, and we are talking about women’s earnings as a percentage of men’s for the full-time wage and salary workers, you often hear women make 80 cents on the dollar. Well, here it’s showing it is an 82% to 100%, meaning 82 cents that women make for every male dollar.
So also from the Bureau of Labor Statistics, it’s showing that hey, all races are earning less than their male counterparts. And then if you’re comparing, here’s the white female to the… You know, this is the 82 cents to about the dollar, African-American is making about 60 cents to the white male dollar and Hispanic, even less, of 55 cents to the white male dollar. So where are women kicking butts and taking names? Well, here are the few professions that women are actually making more than men right now. And number one on the list, sewing machine operators. Woohoo. We’re rocking it in the sewing machine operator world, as we are in food prep, teacher assistants, counselors barely edging out the men. And then we’re about at equal at storage distribution and then we start falling below the average wage. And for those professions where there’s the greatest disparity, women are making far less than the men, number one on the list are personal financial advisors. Well, when you look down this list, the surgeons, the financial agents, marketing managers, these are all the professional fields. And this is where the greatest disparity lies.
What’s happening in your state? So there are a lot of great interactive maps available online right now. In fact, I went to the AAUW sites just yesterday and they have an updated map. This one’s only from a year ago. Interestingly, in the updated map, Washington had a little bit of a greater disparity of 78.5. The point here being is you can kind of see where the disparity lies and then there is a correlation between the number of pay protections. For example, I think California has… It’s down. It’s to a 91. Women are making 91% to men’s dollar and California has a lot of equal pay protections in that state.
The thought is, okay, maybe we’ve got some disparity in the U.S. Well, we’re not so bad in the global. Like America, well, when you look at this chart, and this is from the Organization for Economic Cooperation and Development headquartered in Paris, about 35 member countries. So last year, they released a comparison of women’s wage versus the male wage. And so I’m looking down here. The dark black is the median and I’m like, okay, where’s the U.S.? Where? Huh? The U.S. isn’t over here. Ack. The U.S. is way over here to the right. This is about at the 82 cents to a dollar, the 82%. So, you know, Costa Rica and Slovenia are kicking our butts as far as pay disparity goes. Very, very little pay disparity. But at least we’re better than Canada. Yay. We’re beating out Canada. So it shows that we have some work to do.
Let’s spend a moment on why. Why do we have the pay disparity? Well, first what you hear is like, “Well, women haven’t received as much education as men over time,” or, “Women have to leave the workforce in blocks of time. They lose that experience that gives them higher-paid careers.” Yes, but that is changing significantly. Since the 1990s, women have been awarded the majority of all undergrad and graduate degrees. So it’s really not an education issue anymore. And while the women are more likely to leave the workforce, the Bureau of Labor and Statistics last year said, “Hey, guess what? We found out that the majority of mothers with infants are still in the workforce.”
Another factor that people point to as the reason for the disparity, but at the same time, it’s a big argument that there isn’t really a disparity because women are choosing lower-paid occupations or industries that have lower-paid occupations. So yes, women do tend to pick more jobs, you know, counseling jobs, nursing jobs, teaching jobs that are lower paid. But the why of that is what is hotly debated. Do they really prefer these jobs or do these jobs provide specific hours that they need because they’re raising a family? Is there an inherent bias in the schooling that drives them towards those careers and drives them away from some of the other professional financial management careers or is there rampant discrimination in those higher-paid fields?
Hey, think technology, think law, think finance. You know, everything we’ve been hearing in the news, is there discrimination that is keeping women from moving into those careers or forcing them out? Even if we consider that, okay, women just want to work in lower-paid careers, look at this from the U.S. Census Bureau. Well, if you look at the under $50,000, women are still making less than men in all almost all, well, yeah, all of these careers. Oh, here’s that food prep that we were talking about. Unfortunately, they don’t have our sale or sewing machine operators on here. We could actually outstrip the men in this chart. So no matter what, there remains a pay disparity in all of the professions chosen.
Now, moving back to the why family responsibilities, as I mentioned earlier, a lot of times women leave the workforce or have to not necessarily be on the same leadership track because of their family responsibilities. I’ve even seen in working with a lot of production and manufacturing companies that there’s kind of an inherent bias that the male is the primary wage earner, meaning, oh, you know, we’ve got the male and the woman. We’re gonna give the overtime hours to the male because this guy has got a family to feed. And so that automatically reduces the take-home pay for the woman.
We can see the impact of family responsibilities because if you delay childbirth for a year as a professional woman, well, as a working woman, it will increase the woman’s total career earnings and experience by 9%. I think I generally knew this. I had my first child at 35 and I’m like, “I want to get established and entrenched in my career before I have children.” It also means now that I’m old enough that when my kids are up in the middle of the night, I want to kill myself because I’m so tired. So moving away from that, getting into negotiation tactics, women, even highly-educated women, are less likely to negotiate than men. And when they do, if they do, they’re more likely to be penalized for doing so because it comes across as demanding. Again, an inherent bias in our hiring system.
And then finally, we have a distinct lack of executive leaders and role models. Catalyst released a study from 2014 saying, “Hey, in 2014, only 4% of the CEOs in S&P 500 companies were women.” And women only held 19, I think it was 19.2% of board seats. Remember that women are 47% of the workforce. So these numbers are shockingly low. What does this all mean for HR? No big surprise for all of you on the phone. Six out of 10 women in this Thomson Reuters study said, “Hey, equal pay, one of the most important issues facing us.” And then more so in those other countries, which is consistent with that chart that we looked at, is there’s a lot of countries that have less pay disparity than we do.
I also liked this Randstad survey. It had some interesting numbers in it. Kind of not surprising. Of the 783 respondents, you know, 31% say, “Yeah, I have the same opportunities,” but a lot more said, “But pay’s the number one problem.” Oh, in fact, more said lack of promotion to leadership roles was a leading problem. What I like are these last two numbers. Forty percent said, “Oh yeah, we discussed salary. I know you tell us not to, but we discussed salary and half of us would leave if we learned that the male employees are making more.” And an impressive 80% said they would switch employers if another employer had greater gender equality, which means that we have some big employers figuring this out from an HR, PR perspective, and from a global retention strategy.
So what did our friends at Starbucks bring us this last year, in addition to the slightly scary but also wonderful Unicorn Frappuccino? Well, in March 2018 Starbucks announced pay parity. We’ve got it. One hundred percent pay equity. Now, you can’t just announce this. Starbucks had to do some real things to get there and they will have to do some real things to stay there such as they have to have transparency. You know, they have to be absolutely transparent about, “Here’s our pay range for the positions. We are conducting internal audits. We have a calculator to figure out starting pay based on experience. We’re not gonna ask about salary history. We’re gonna have a review committee analyze the pay raises.” A lot of these are best practices that I’m going to tease out a little bit later.
Okay. Time for the legal section. I know. I know. This can be a bit of a snooze. I’m an attorney and I even think it’s a snooze, but it’s really important to get a lay of the land and kind of where could your claims be coming from. So first of all, let’s talk federal. The Equal Pay Act of 1963. Interestingly, the Equal Pay Act came out the year before civil rights in 1964. The bottom line is, hey, pay the same amount without regard to gender for performing equal work, skill, effort, responsibility, and working conditions. We don’t care about your intent. We don’t care about how you value the job. What we care about is what you allow someone to do. So, for example, if you have a female administrative assistant that’s slowly taking on more and more job responsibilities until she’s doing the same job as one of the male sales employees, that is going to create an equal pay problem for you because we’re looking at her duties.
So the Equal Pay Act provides some defenses if you do have a disparity in pay. So how long have you been there? Seniority merit. How well have you performed? Quantity or quality of work. So how many reports do you produce as compared to this other employee or how many customers are you responsible for? And then the fourth defense is this catchall or any other factor other than sex. So EPA says, “As long as it’s not sex, gender-related, okay. If you can show a reason aside from gender that caused the disparity, then you have a defense.” An example of this would be let’s say an employer… You’re trying to hire somebody, but the male employee was…or let’s say you have an existing male employee and someone’s aggressively trying to recruit them, this male employee, by a competitor, and you need to increase his salary to retain him. Okay, so this would be a factor other than sex.
Notice, I have the caution sign in here because even though this is a factor other than sex, if you don’t resolve this disparity within a reasonable period of time, then that could create a claim for you. The big movement on this that happened in the last year was the question of, “Hey, what about their former salary? If the difference in pay is because they came to us and we just gave them a bump in salary or they only asked for so much more than their previous salary, is that a factor other than sex?” So I’m happy to say the federal courts differ on this. But the federal courts, the Ninth Circuit, covers California, Washington, Nevada, Arizona, Oregon, Alaska, Hawaii, Idaho, and Montana just ruled this last year that taking a new hire’s prior salary into account when setting pay is not okay under the Equal Pay Act. So that is not considered a factor other than sex.
And this is the Rizo v. Yovino case. And so in this case, we had a math consultant coming into the school district. The school district said, ”Hey, we just have an automatic, we add 5% to the prior salary. We think it’s cool because it’s objective. It encourages people to leave their jobs. It keeps favoritism out of it. We’re wisely using taxpayer dollars.” That argument actually made it through at lower levels. But, ultimately, the Ninth Circuit Court said, ”Whoa. No, because you’re perpetuating prior pay disparities.” So the Court, Ninth Circuit, said, ”If you’re using any other factor other than a sex defense, it has to be legitimate job-related factors such as experience, educational background, ability, prior job performance.” Okay. So for those of you on the line that may be or are listening to this a webinar later, if you are in a different circuit court, so I think it’s the 7th and the 11th Circuit Courts, those courts are still saying, “Nope, you can consider prior salary.” And this is going to be an issue considered by the U.S. Supreme Court at some point because there’s a split in the courts. I think it’s a far better practice, particularly if you have multi-state operations, to not consider prior salary whatsoever.
Okay. Moving on, what type of claims could you see? Federal claims. You could get just a violation of the Equal Pay Act. Disparate treatment. Sally’s paid less than John. Disparate impact. You know, the policy at your company, although neutral, such as let’s say, okay, to get into…to be considered for a management role, you have to have an unbroken five-year service record. It appears neutral, but it has an impact on women because women who take maternity leave or are gone for childbirth suddenly wouldn’t be eligible for management. And let me put a little asterisk. For those of you in Washington State, you need to pay attention to these policies that could have this impact because there is now a state claim against preventing opportunity to women in growth roles. Okay.
So one thing, the last thing, to mention is that EPA claims to really have teeth because of the Lilly Ledbetter Fair Pay Act, which came about under Obama. And this allows employees to… Basically, it restarts the clock every time you issue a paycheck that has a disparity. So even though there’s a time limit saying, “Hey, you only have one year to file a claim or three years to file a claim,” that clock restarts every time you issue a paycheck. So it can really create a much larger exposure timeframe for you if you’ve been goofing up and continue to goof up. And it’s worth noting too that we’re seeing an increase of federal claims being filed. For the sixth year in a row, the EEOC has put pay disparity on its top hit list of what we’re looking to do and they’re bringing more suits on this issue than ever before. Now that being said, I would still probably be less worried right now about the federal than the state laws or state claims, particularly if you’re on the West Coast.
So let’s talk about what are our crazy neighbors doing. Now, when I created this slide originally, I was talking exclusively to a Washington audience. And it always seems like Washington, California, and Oregon are competing with each other to see who can be the most crazy and expansive when it comes to employees. And so it’s really important, even if we’re talking about Washington, that we’re looking at what is the West Coast doing because the West Coast is essentially leading the charge on a lot of pay equity legislation starting with California.
So California was the leader on the West Coast in expanding its Equal Pay Act. It did so in 2016 and 2017. In 2016, it beefed up the act by saying, “Hey, we’re going to compare jobs that requires substantially similar work, not just equal work. Remember, the Equal Pay Act is equal pay for equal work. Well, now we’re kind of loosening that to say substantially similar work and we’re gonna compare employees across locations. So if you have multiple locations within California, we’re looking at all of the machinists in those locations. We’re not just looking at the pay between the machinists in one location.” So this has plaintiff attorneys just licking their chops at, you know, the money we could get from this.
Your defenses are reasonable application of a seniority system, merit system, quantity, quality, some other bonafide factor such as education, training or experience. Okay, this should sound very similar to the Ninth Circuit case I was talking about. And these defenses must account for the entire difference in pay. In 2017, California rolled out a few more changes, including pay protections for two more protected classes. This was pretty ground-breaking. It’s like, “We’re not just talking about pay parity between men and women. We’re talking about pay parity between all races and ethnicities at your locations. And by the way, you can’t use prior salary as your sole justification for the pay disparity.”
Taking effect in 2018, California also said, “Hey, you can’t ask about salary history. You can’t rely on it in deciding whether to offer a job. And if someone asks, you have to disclose a pay scale.” So of our member companies in California, we’ve had a lot of applicants. We’ve had a lot of requests for the pay scale, and it’s created some really interesting conversations between our attorneys and the companies because the company can turn to us and go, “They asked for a pay scale. What do we give them?” And we’re like, “Well, what do you have?” So we work with the company to help develop their pay scale.
And then, notably, there were some clarifications that California just passed to the salary history ban. I’m not gonna go through them right now. You can ping me if you’re curious about them later. They don’t change the substance. They just kind of tweak the edges of salary history. Oregon. Okay. So Oregon basically was like, “Oh yeah, California, you think you’re so tough. Well, watch this.” Boom. And Oregon amends its Equal Pay Act in 2017. We’re not only gonna prevent people from asking a salary history, we’re gonna compare work of a comparable character. So we’re gonna make it even a little broader than substantially similar work. Oh, yeah, and we realize you added two protected classes. Well, we’re gonna add nine. So Oregon says, “You have to have pay parity between 10 protective classes and you only get 8 reasons. Count them, eight, to explain the differences in pay. And there is no flexibility on that. You have to account for the entire difference in those eight reasons. Oh, and by the way, if you have a pay parity issue, you can’t drop anybody’s wages to comply with this. Hugs and kisses, Oregon.”
Oregon also said, “Hey, we also think you can’t ask for salary history. And the salary history provision, interestingly, was effective on October 6th of 2017, but the enforcement agency bully won’t start enforcing this until January 1st, 2019 and civil lawsuits aren’t allowed on this until January 2024. I do not. And I’m wondering that’s a typo that I wrote, January 2nd, 2024. My guess is that it’s January 1st, 2024. But yeah, you know, it… Why? The salary history and enforcement of that feels like a nonissue as compared to the pay issue that we’re talking about here.
So the pay equity protected classes, here’s just a visual of those protected classes. This is the best I could find. It just means I took out genetic information, political affiliation because those are not, but marital status is a protected status. So here’s Oregon’s eight, count them, eight, acceptable pay differences. I’m not gonna read through them. You can see them. I italicized system for a reason because I’m going to get to that when I talk to the Oregon rules that were just released. Pay equity enforcement, effective January 1st. Okay, so very similar to a federal law. There is a one-year statute of limitations to bring your action, but guess what? Like Lilly Ledbetter, each paycheck restarts that clock. The important thing on this slide is the good faith pay analysis because there is a limited safe harbor that protects your company from compensatory punitive damages if you can conducted a good faith pay analysis in the three years prior. Again, there are a lot more details about that. And so there is a little bit of protection and a little bit of encouragement to do some of your homework internally.
And BOLI, the enforcement agency for this, just issued draft rules on August 28th. And I think the comment deadline is in seven days for those of you that are Oregon folks that are just dying to go comment on these. It was a pretty big, underwhelming moment reading through these rules because from the business community we’re always looking for like, “Oh, will this help us figure out how to comply?” For the most part, no. There were nine sections in the rule. A helpful section, it was specific examples of what BOLI considers work of a comparable character. So a good job on that.
The bonafide factors. When they’re talking about the eight reasons you can have a difference in pay, the only interesting part in that section was that they defined what a system is. Remember, you could have a merit system, seniority system, production quality/quantity system. And I think a lot of people will try to use the merit system as, “Hey, you know, this disparity is because of our merit system.” Well, BOLI came and said, “Oh, by the way, to be qualified, your system has to be a devised coherent, consistent, verifiable, and reasonable method that was in use at the time of the alleged violation to identify, measure, and apply appropriate variables in an orderly, logical, and effective manner.” Oh, my God. I don’t know who can prove their system or feels comfortable about proving their system in this definition. Again, these aren’t final rules. They’re just draft rules. We can hope that this gets a little bit refined, but not good right now.
The last thing I’d like to point out is the employer community was excited to see, “Okay, tell us more about these good faith pay equity analyses we can do to get the safe harbor.” And the only thing the rule said about the surveys, it didn’t say, “Here’s what we consider reasonable,” in detailed scope or, “Here’s what we think is a good faith.” No, the only thing is, “Hey, if you do a survey, so you’ve gotta tell your employees about it and make sure they can fill it out without including their name,” which for any of you that have done these types of analyses or surveys before doing so, without their name it’s kinda difficult. So not so helpful, BOLI.
This is what Oregon employers are doing right now, anticipating the rule, implementation, and the potential of civil lawsuits starting on January 1st. And it’s the reason why also in Washington it’s like, “Whoa. We don’t have it so bad now, do we?” Washington, in March of this year, the governor signed amendments to our Equal Pay Act and it became the Equal Pay Opportunity Act effective on June 7th, 2018. Pretty good news because our equal pay law hadn’t been revised since 1943. I’ve listed out all of the key things about the law. You know, we’re looking for equality and compensation and benefits. This is important because previously there was…you had to have parody in compensation, not, you know, wages only, not compensation and benefits. So it’s broader. Washington got into the mix like, “Hey, we don’t wanna do a similarly situated or work of a comparable character. We’re gonna say employees similarly employed,” which is super duper frustrating for all of you employers that have locations in multiple states. We understand that, particularly, when you’re figuring out what groups are you comparing to, should they be similarly employed or substantially similar work or work of a comparable character? This is where you can engage your attorney to help figure out which comparison group you should be using.
Okay. So getting back to this, Washington creates a limit of its defenses saying, “Hey, if it’s a good faith decision based on job-related, bonafide factors, which include education, training, experience, seniority system, merit system,” all the things that you have heard, Washington adds regional market differences. But notice that it’s not these factors and only these factors, okay? So it allows a little bit more flex in that. So long as it’s not gender-related, job-related, bonafide, and account for the entire differential, you may not consider prior wage or salary as a defense, but local minimum wage differences are a defense to salary differences or wage differences.
More in Washington, interestingly, the bill or the law removed all male and female references and replace sex with gender, which suggests that this is protective of gender identity, transgender employees, not just men and women. Some, not surprising, additions. Hey, employees get to freely talk about their wages. And as we saw from that study early in the slide deck, don’t worry about it. They’re already talking even if you tell them not to. So employees have to be able to freely talk about wages. And you can’t have mandatory nondisclosure agreements regarding wages. You can’t have policies and systemic actions that prevent career advancement. So this is why it went from Equal Pay Act to Equal Pay and Opportunity Act. Not surprisingly, there’s a forbid retaliation.
L&I is the one that’s going to investigate. L&I has indicated that it’s like, “Well, we’re going to investigate a complaint, try to resolve it by conference or conciliation. If there’s no agreement, you might have a citation. You know, you might have to pay actual damages, statutory damages, interest.” At any time, the plaintiff or the claimant can say, “Oh, you know what? This isn’t going well. So I’d actually rather go to court.” And so the claimant can turn and bring a civil action.
Okay, so let’s get into the final part. You’re now going, “But I don’t wanna get into this.” You know, who does? Let’s talk about some best practices, shall we? Okay. And as soon as we talk about pay equity best practices, a lot of folks immediately go, “Well, I guess we have to do pay equity analysis.” Who is out there that can do a pay equity analysis? Not so fast. You may need to, but there are a lot of things you can and should be doing right now to fix your system to make sure you don’t have problems moving forward and to fix the existing problems. And that will establish you, in case you do need to do an internal pay equity analysis. So we’re gonna hit these three areas, hiring, advancement, and pay.
Hiring. Okay. Here’s your number one practice. This is a pretty easy one to go back and scrub. Stop asking about prior pay in the hiring process. So this includes your applications, your interviews, your reference checks. Now, Washington doesn’t prohibit asking about salary. It says you can’t defend yourself for a pay disparity on salary. It doesn’t prohibit you from asking. But because our neighboring States do, California and Oregon, like don’t ask, don’t rely, stop doing it, you know. And even all you from other states, it’s a really great practice to stop now because it is going to go national at some point.
The problem also about asking about prior pay is it just makes continued wage disparity more likely. And then a lot of people, what they do is like, “Whoa, what if we just ask, ‘What would you like to be paid?'” Yes, you can ask that, but people tend to ask for a little bit more than what they’re making right now. So you still have this bias towards whatever disparity is built into their history. Plus, then you have a lot of, as I mentioned earlier, women that don’t ask for as much. So they’re not gonna inflate their number of what they’re asking for to their prior pay as much as men will.
So here’s some other hiring practices to work on. So if you’re not going to ask salary, instead, do your homework and know what you’re willing to pay for that job before you post it, not like, “How low can we get this in and save some of the payroll costs to get to somebody else?” No. Know what you’re willing to pay and stick to it. So to know what you’re willing to pay, define the job attributes and skills. This, by the way, is going to help in your market research and this is going to come up later when we talk about pay equity analyses. You’re going to need this information. Plus, for a great job description and that legally protects you in other areas, you need to define the job attributes and skills.
So create that viable job description, include all the essential functions and, more importantly, revise them when they change. And I know a lot of you guys are shrinking down in your chairs right now like, “I know that’s one of the things that I’m supposed to be doing, but I don’t have time to do.” It’s so very important to have a current job description. If you don’t have one right now, use the free resources out there like onetonline.org. Vigilant members can use job descriptions.com through our member…as part of your membership package. You know, find one of those resources. Work with an attorney if you can. Find those job descriptions, make sure they have the essential job functions, and then calendar them to send them to your managers every six months saying, “Hey, here’s the job descriptions for your direct reports. Are these duties still actual duties, still the same for what they’re doing right now?”
Conduct your legal market research. Know what that job is getting paid for out there. And don’t call your company. Don’t call the people. You know, we don’t need an antitrust, but use your resources like a few of them that I’ve listed here to do some market research on pay for those positions. And then consider creating salary and wage ranges. You know, do your internal research. Fall in love with your internal statistician. You know, like what are the incumbent salaries? Can we put a numerical value to the job attributes? And this goes back up to the number one, define the job attributes and skills for each of those positions. Can you assign numerical values to them? This is a great area to work with a compensation expert. This is the, “Have a range and stick to it. Consider a no-haggle/low-haggle practice.”
If you do pay a premium on hire, you have to adjust the wage and salary for others who perform the same job. So you can’t just say, “Hey, we had to pay more to get this qualified person,” or, “Harry has more potential.” You know, that’s great. If that’s the case, then just give Harry a bonus with documented reasoning. So if you give a sign-on bonus to Harry, who is the top employee of the competitor, then you give, put that little narrative in the file of why that bonus was there. And it also doesn’t alter the ongoing salary for Harry.
Make sure you train your hiring and management on what they can and can’t ask. The New York AG’s Office has been holding employers responsible for what supervisors have said at job fairs. So, you know, make sure they’re not asking about prior salary. You know, make sure they’re there, you know, out saying what they can and can’t. Train them. Get those sign-in sheets from the training and save those sign-in sheets because if someone raises a claim against you based on a manager’s mistake, you can show it’s individual, not a pattern in practice or some failure within your company.
Check the language in your handbooks. So add some language that you prohibit inquiry into an applicant’s pay history at former jobs. Add compensation practices to the EEO. We don’t discriminate, including pay, compensation, including wages and bonuses are based on bonafide factors related to each position. And also, while you’re updating your handbook, make sure there aren’t any prohibitions about employees talking about their wages.
Next, the next bucket of things you can do about pay equity. Review your advancement opportunities. So how do people get ahead at your company? You know, do you have a practice of limiting who can apply for jobs or, you know, anything that would unintentionally affect employees? Review where are females clustered or for those of you in Oregon and California, some of your other gender groups. Are they clustered in low-paying jobs? Do you have documentation to show that you encouraged women or these other protected classes to apply for the better-paying jobs or gave them sufficient opportunity to apply for those jobs? Documentation, documentation, documentation.
Next, create a sponsorship/mentorship program. So match executives with your promising leaders. They can help, and I’m speaking here particularly, with your promising female leaders, with your promising protected classes that you are trying to encourage to in those higher-level, higher-paid positions. So the mentorship program is phenomenal for succession planning, is phenomenal for attraction, retention of talent, and to pass along wisdom. And so these mentors can help coach or encourage individuals on how do you showcase your talents. How do you ask for a raise for those women that are hesitant to speak up for themselves? How can you develop your business acumen?
And steer stereotypes. This picture I really like because there aren’t a ton of pictures or images on social media, newsletters in the hallways of companies of women comfortably in executive roles. And the more human beings see images, the more it normalizes. And then we can counter some of our stereotypes about women being in leadership positions.
Continuing on with the advancement opportunities, almost all performance evaluation systems have some degree of implicit bias. Your goal is to remove that bias but still give some flexibility. So a lot of times we see there’s a technical compliance bias for men, an interpersonal warmth bias for women. So review your process. What skills, effort, and responsibilities are you rewarding? And are your job descriptions in line with your end of game evals? Have you linked each of these two-year defined business goals? So if a woman who serves as the responsive, helpful glue of our project team and meets all deadlines, is she valued and given the same pay as the tech whiz who has great ideas but has poor responsiveness and social skills? So is responsiveness given a value on a matrix? Are social skills and teamwork skills given a value on a performance matrix with ultimate pay impacts?
And then create a compensation committee to review pay and bonus decisions. It’s great internally for people to say, “Hey, are we considering all the factors? What hasn’t this person do? What has this person done? Has someone else done an equal amount of work that’s been unnoticed?” So create a check system to that. And then, finally, on our bucket, refresh your pay practices. So a reminder about some of our legal changes. You should consider parody with all compensation, not just wages. So think about your benefits, bonus, overtime opportunity. Think broader than just men and women. So, you know, don’t forget that we’re talking about multiple protected classes. Think about if you’ve had a downsizing issue. Reconsider pay because usually job duties have been shuffled. And so if the male had more job duties before this downsizing but the woman takes on more after the downsizing and isn’t paid more, you could have problems. And always analyze your pay after a merger or acquisition because the successor company is gonna have liability for historical inequities and, you know, those other challenges created during the merge.
And then finally, think before you leap before you get into a pay equity analysis. I don’t know how many of you watch ”The Simpsons” and love Sideshow Bob, but this is what goes on in my head every time I think about pay equity analysis. I’m not gonna get into the ton of details because honestly, it’s outside of my area of expertise. But what I want to tell you is about what you can do to prepare for a pay equity analysis and what you need to think about. Interestingly, the majority of large companies in North America have dedicated teams doing pay equity analysis. But I think only 40%, 46%, 47% think they’re statistically robust. So, basically, yeah, we’re doing it. We’re just not sure we’re doing it really well. So you need to start by what is your goal with this analysis? Are you just trying to avoid lawsuits or are you looking at a broader integrated standards strategy? And build your team based on that.
This is the props for attorneys. Use an attorney to get attorney-client privilege and protect the work product that you get from your equity analysis because you don’t wanna do an internal analysis and then somebody files a claim against you. And then without the attorney-client privilege, they immediately can get access to all of the disparities that you found and that you haven’t taken action on. If you are large enough, if your group’s performing similar work or large enough, you may want to invest in a labor economist or statistician. This can get really, really pricey. It can go up to $100,000, you know, or more. It really depends on your numbers. But smaller employers can probably do targeted salary comparisons, more of the internal eyeball test. But again, involve an attorney to protect what you do internally from disclosure.
And then, finally, what are you willing and able to do based on what you find? So what if there are disparities? What are you going to do? Is leadership on board? Do you have a budget to fix it? You know, increasing pay for women and minorities can run 0.5% to 0.8% of payroll. And so, you know, run some of those numbers before you jump. And how are you gonna communicate adjustments? Sorry. I jumped ahead there a little bit. You know, are you putting in a performance release? Are you doing a press release like Nike just did saying, “Hey, we’re increasing pay for 7,000 employees?”
And then if you’re doing the pay equity analysis, the homework you do before you actually get your experts in to start is what groups are you going to analyze? This is what I mentioned earlier. This is a great use of your attorney is to figure out your comparison groups and then prioritize the jobs with the greatest risk. This is typically going to be your salaried jobs and your comparison groups with large numbers of people. Salaried jobs are the ones where there is a lot of discretion and not a lot of records or documentation of why there is that disparity.
Figure out how many protected classes and what compensation you’re considering and identify the factors that affect pay. You can do this right now without ever getting into a pay equity analysis, okay? So these are examples, but remember you’re putting the state filter of what are the bonafide factors, non-gender, non-protected class-related that, are you using to affect pay. But as you look at this list, how many of you actually have data or proof on these in your records? Are these in your HRIS system? So if you hire someone with 20 years of experience in your industry and you’re ultimately asked, “Why is that person being paid more than the person who’s been with you five years,” and you say, “Oh, it’s their industry experience,” is that captured and retained somewhere? It needs to be. If you haven’t, fix it now moving forward.
This picture is an example of why some of the attorneys I work with hate using my slide text because these pictures come up and they’re like, “What in the world is this about?” Okay, so the funnel. It’s just the analysis itself is funneling. And so I Google images, funnel, and this one made me laugh. So when you’re funneling, you’re figuring out what groups have disparities. Use the factors to explain what you can. Then what’s kind of coming down through, you take another run at the data and personnel docs and then you figure out what is your final list of actual disparities and then tackle them that way.
The final note is that what’s everybody else doing? For those of you that are like, “I don’t even know where to start.” Yes, I just hit you with a ton of things. Take a bite, one bite of the elephant. Tackle one practice at a time. The common barriers are how much it costs or determining what criteria to evaluate, what’s fair. And what most employers are doing is looking for the biases internally, which that would be a lot of the performance reviews, the evaluations. But if it makes you feel better, I love this second on the list. Oh yeah, we’re doing nothing. And there’s even a proud 1%. It’s like, “I’m not even sure if we have any. I don’t even know if I’m in HR.” So there are a lot of companies in your position trying to figure out what do we do and how do we move forward.
This link, you can go here for a free download. It’s a very robust legal guide that Vigilant attorneys have written to help you. And it includes a lot of the information that I just talked about. I see that once again, I have cut us incredibly short on time for questions. Please know that at the end of this, for my email address, I’m more than happy to field your questions at the end and I will hand it over to JoAnn.
JoAnn: Thank you, Jodi. This was a great presentation. I do have one question but I think it came up before you started talking about the work that somebody might be doing without working with an attorney. It says, “Regarding documentation of pay post-hire to determine if there’s a problem with protected classes after a hire, is all of this work discoverable? Many employers would be hesitant to have this post-hire work done on a routine basis by their comp area if every bit of it could be discoverable.”
Jodi: Absolutely, which is why this does sound like very self-serving, like, “Hey, keep your business as an attorney.” But this is a legitimate area. And particularly, if you do have a lot of concerns about exposure points, it’s an opportunity to engage counsel. So if you use a law firm right now, you could talk to them about how you can use them to direct your work. It doesn’t mean they need to do all the work. It doesn’t mean they need to be involved. And this is what we work with our members on, on a daily basis. And then we do all of our work on a attorney-client privileged basis to protect those records.
JoAnn: Nice. Okay. One other question that I’ll squeak in here. It’s kind of an interesting one. With the tight talent market that we have right now, people are asking about how do you deal with when somebody comes in and you wanna make them a counteroffer, that really kind of throws a wrench in things too because, you know, again, as you mentioned, perhaps it’s men that are asking for more money more than women do. What are your thoughts on that?
Jodi: So, JoAnn, do you think that’s a counteroffer from the employer who wants to come back and counter or…?
JoAnn: Exactly. How I see it is a, you know, a current employer. So, you know, somebody goes, they get recruited away or whatnot, and they’re gonna get offered $10,000 more at the new company. And they go to give their notice to their current employer and that current employer’s like, “Ah, no, no, no, we really want you here. What if we matched that offer?” So how does that change?
Jodi: Which you absolutely can do. So you might want to do it in a strategic sense of making it a bonus or different package that doesn’t affect ongoing salary. If it is an ongoing salary, you have to make a decision of, “Am I going to make sure that everyone is paid equitably if they’re doing the same work?” Again, this is assuming that work… Well, it depends on what state you’re in. But if they’re doing the similar work, are they paid similarly? So you have to figure out who you’re comparing to. And for those competitors that do match, you need to increase their salary if you’ve just done that to keep someone from being hired away. Otherwise, yes, you’re just sitting there with an opportunity for pay disparity.
JoAnn: Yes. Interesting. Oh, the fun, unique challenges of being employers, right? All right. Well, I think that’s all our time for today. I appreciate you advancing the slide too. What you see on your screen now is the SHRM recertification credit. So do use that. And then the next slide we’ll show our HR topic for next month, “Analyzing and Managing Risks: How Risky Do You Like It?” So another risk management topic for everyone. But the registration link is now live, so everyone can go ahead and register for that. As I mentioned at the beginning, we will be sending out the recording for today’s webinar along with Jodi’s slide deck to everyone. It had her contact information in there and she was so very generous to include her contact information. So any other questions that we were not able to get to today, she’d be happy to address those. So thank you again so much, Jodi, for your time. The information was fantastic. And everyone else, thank you for your time as well. Make it a great day.