Hunton Employment & Labor Perspectives

For those who thought the proposed Paycheck Fairness Act had faded away, here is a wake-up call.  After more than a year since the bill was passed by the House of Representatives and introduced in the Senate, the Senate Committee on Health, Education, Labor and Pensions is holding a new hearing on March 11 to focus on equal pay issues.

The Paycheck Fairness Act would amend the Equal Pay Act of 1963 (prohibiting wage discrimination on the basis of sex) and significantly alter the proof and enforcement provisions of that long standing federal law.  The proposed amendments would provide additional remedies for claims of pay discrimination, including uncapped punitive damages, and would increase the burden on employers to prove that pay differences resulted from factors other than gender.  It also would prohibit retaliation against employees who inquire about, discuss, or disclose their own wages or the wages of other employees.

Although it is difficult to predict whether the Senate will ultimately vote on and pass the Paycheck Fairness Act, the fact that a Senate committee is turning its attention to bill in today’s financial and political environment should signal to employers that the legislation is not likely to go away any time soon.  Indeed, President Obama mentioned the issue in his State of the Union address in January, stating,  “We are going to crack down on violations of equal pay laws -- so that women get equal pay for an equal day’s work.”  True to his words, the President created the National Equal Pay Enforcement Task Force in January.  In addition, the U.S. Equal Employment Opportunity Commission, which administers Title VII and Equal Pay Act claims, added more than 150 new hires by the end of 2009 and received an additional $23.9 million in funding for the current fiscal year for enforcement.  It is seeking $18 million on top of that for fiscal year 2011.

In light of the growing threat of legislative action, regulatory enforcement, and civil litigation (including class actions alleging systemic discrimination), employers should take proactive steps now to position themselves optimally for a legal challenge.  This may involve a privileged audit of the employer’s pay practices, including a review of policies and procedures and a statistical analysis of compensation data.  Because these are steps that undoubtedly would be taken in the event of a government audit or private lawsuit, employers should not wait until a legal proceeding to identify and address any problems that might exist.

Proactive steps such as these can have substantial benefits in risk reduction.  Employers need a well organized plan for identifying vulnerabilities, assessing employment policies and practices, monitoring outcomes of decisions on a statistical basis, and identifying solutions to address risk, all under the protection of attorney-client privilege.  In addition, employers need systems and tools to help ensure the most informed and defensible decision making.   A privileged compensation audit can help employers meet all of these needs.