Pay equity continues to be a complex and evolving issue for employers. Although the Equal Employment Opportunity Commission (“EEOC”) recently ended its Component 2 pay data collection, employers still face substantial challenges and developments relating to pay equity, including state law developments, public pressure, and litigation. This article briefly summarizes some of the recent developments.
EEO-1 Component 2 Pay Collection Over. In 2019, employers scrambled to comply with a surprising court order resurrecting a requirement to submit employee pay data to the EEOC for calendar years 2017 and 2018, known as “EEO-1 Component 2.” Please see our prior client alerts for more details on what employers were required to submit. On February 10, 2020, the U.S. District Court for the District of Columbia approved the EEOC’s request to deem this collection completed. The February 10 order ends, for now, the federal government’s first-ever broad-based collection of pay data. While this collection is complete (for now), the EEOC and the Office of Federal Contract Compliance Programs (“OFCCP”) (which covers federal contractors), still place a high priority on compensation discrimination in compliance activities directed to individual employers. In fact, the EEOC continues to pursue compensation discrimination claims, including settling an EEOC lawsuit as recently as January of this year. The OFCCP, in its 2018 Directive, explicitly states that OFCCP’s priority is eliminating pay discrimination.
New Legislative, Litigation, and Public Pressure on Employers. Even without Component 2 pay data collection, employers face increasing legislative, litigation, and public pressure regarding pay equity. On the legislative side, state and local jurisdictions have been active. For example, New York recently amended its law which previously required equal pay for women and men performing “equal work.” The new law now extends to “substantially similar” work and to protected classes beyond sex, such as age, race, or sexual orientation. Colorado became the first state to pass legislation requiring employers to include a compensation range in every job posting. And Alabama passed its first pay equity law.
Several state and localities have also banned asking applicants about salary history, believing that consideration of past pay perpetuates disparities among women and minorities. California, Massachusetts, New Jersey, and New York, among others, have some form of salary history inquiry ban in effect. On February 6th, the U.S. Court for Appeals for the Third Circuit reversed a lower court injunction that prohibited the City of Philadelphia from enforcing its salary history inquiry ban. In doing so, the court reasoned that the ban advanced a substantial government interest in closing wage gaps, and rejected an argument that this interest should yield to an employer’s asserted right, under the First Amendment, to discuss the issue of pay.
Employees have also continued to bring wage discrimination claims against an array of industries, including well-known technology, media, legal services, manufacturing and retail companies, as well as universities.
Likewise, following the #MeToo and Time’s Up movements, which have not lost their strength, activism on gender and diversity has driven many public companies to report their gender pay gap. To date, companies such as Amazon, Apple, Bank of America, Citigroup, Goldman Sachs, Intel, Microsoft, UnitedHealth Group, and Wells Fargo, among many others, have shared their pay equity numbers. Such disclosures serve as a reminder that amid growing pressure from various constituencies, including investors, employees, boards and the public, pay equity issues are in the forefront.
Conclusion. Addressing pay equity is an important objective, but not a simple exercise. It involves judgments concerning company pay structures, processes and policies, whether, when and how to conduct pay equity analyses, how to use the results, and whether any analyses are conducted under attorney-client privilege for the purpose of legal advice. And the answers to these questions may be different from case to case, depending on the location(s) where the employer operates, changes in the law, as well as practical goals and considerations. Internal management, counsel, statisticians, and compensation consultants all have a role concerning the issue, and their roles should be carefully considered and integrated as appropriate.
For more information on pay equity or other employment law issues, please contact one of the authors of this article or the Hogan Lovells lawyer with whom you work.