Pay Equity Legislation Creates Stir Among Business Leaders

The legislation—the Ledbetter Fair Pay Act (H.R. 11) and the Paycheck Fairness Act (H.R. 12)—sailed through the House Jan. 2 with significant majority votes. If they pass the Senate, the bills would amend several employment laws, including the Equal Pay Act and Title VII of the Civil Rights Act. Some business and HR groups say the measures could become law in a matter of weeks—especially given the new makeup of Congress.

But many business officials like Michael Eastman believe that the legislation is misdirected.

“We think this is a significant overreaction . . . and we certainly hope that this isn't a sign of things to come,” said the executive director of labor policy for the U.S. Chamber of Commerce. “From a very big-picture perspective, this is a time when we should be creating an environment that makes it easier for employers to create jobs.”

The U.S. Chamber of Commerce and the Society for Human Resource Management (SHRM) say they're all for equal pay but believe that the legislation as written is troublesome for businesses.

The Paycheck Fairness Act would amend the Equal Pay Act of 1963, which addressed gender-based pay discrimination. The measure would impact employers in a number of ways, business leaders say.

In addition to the Paycheck Fairness Act provisions, the Ledbetter Fair Pay Act would overturn a 2007 U.S. Supreme Court decision requiring employees who receive disparate treatment based on gender or race to file claims within 180 days of the original discriminatory action—not within 180 days of their last paycheck.

If passed by the Senate and signed into law, both bills would represent “a monumental change to employment law,” said Michael K. Layman, manager of labor and employment with SHRM. “It's hard to imagine the effect this will have on employers' compensation practices.”

Particularly troubling to Layman and Eastman is the fact that lawmakers in the House passed both bills without a hearing or much consideration. And based on past history, the Ledbetter Fair Pay Act could become law in the next few weeks, they say.

President-elect Barack Obama ran in support of the measure during his campaign, and the measure was just shy of having enough votes to be considered in the Senate last year. Now, it is expected that the Senate will have enough lawmakers in support of the legislation. And while the Senate has never considered the Paycheck Fairness Act before now, Layman and Eastman say it also could become law in a few short weeks.

SHRM opposes unlawful pay discrimination in the workplace, Layman said. But it is opposed to the Ledbetter Fair Pay Act because of the way it would open employers up to “endless liability.” Under the legislation, the statute of limitations for filing pay discrimination claims would continue indefinitely—even after an employee's death. Similarly, the Paycheck Fairness Act would expose employers to unlimited compensatory and punitive damages awards and would automatically include similarly affected employees in class actions.

If enacted, both measures likely would increase the number of lawsuits filed against employers, Layman and Eastman said.

 

And both measures also would raise the bar for employers by increasing the burden of proof for pay and compensation decisions, Layman said.

 

“It's just going to reset everything for HR professionals in the way they think about their pay systems,” Layman said. “It could be very challenging.”

 

But Jim Thelen, a Lansing-based labor and employment attorney for the Miller Canfield law firm, says the measures don't really change anything from a practice standpoint.

 

“Equal pay is the law,” said Thelen, also the past president (2007–2008) of the HR Management Association of Mid-Michigan.

 

What has changed, however, is the risk associated with not having equitable pay practices between genders and other groups, Thelen said. If the legislation passes, employers are at greater risk for more lawsuits and greater compensatory and punitive damages.

 

With both measures on the table, business and HR professionals need to take some steps now to prepare for passage of one or both of these bills, he said.

 

If you're an HR professional, business owner, or manager, Thelen has a few suggestions:

 

-       Read up on both pieces of legislation and carefully consider the impact that these might have on your organization.

 

-       If you have any existing legal disputes regarding pay differences or pay discrimination, talk to your attorney about the potential impact that this could have on the case. The legislation could very well change the time period under consideration and/or increase penalties.

 

-       Review your compensation practices and pay scales to make sure there are no pay discrepancies between genders and other protected classes. For example, it is recommended that you do an audit of pay scales in your company to find out if you have any situations where a female is getting paid less than a male counterpart even though she does the same work or has the same job title. Such a case would represent a litigation risk.

 

-         Make sure that supervisors and managers understand that under the Paycheck Fairness Act, an employee cannot be retaliated against in any way for discussing or disclosing his or her wages, or for discussing the wages of another employee. While such retaliation is prohibited now, it is specifically outlined in the new legislation as a violation.