Paycheck Fairness Act: How Fair Are Your Practices – The Sequel

At the beginning of this year, I introduced you to Lilly Ledbetter and the Lilly Ledbetter Fair Pay Act. As early as this Wednesday, November 17, 2010, I might be introducing you to Lilly’s bigger and more formidable sister, the Paycheck Fairness Act. This is the date that the U.S. Senate is currently scheduled to vote on this legislation which, if passed, will have drastic effects on wage and hour laws. Regardless of its passage, it raises a good question as to how fair and equitable your current pay practices are.

The Facts

Why employers should be concerned about this Act is because it significantly increases employer exposure to gender-based wage discrimination claims and decreases the defenses typically available for employers to protect themselves from such actions. This Act would:

  • Allow for potentially unlimited compensatory and punitive damages.
  • Prohibit retaliation against employees who share compensation information with other employees.
  • Makes it easier to bring class action lawsuits in such cases.
  • Shift the burden of proof onto the employer to show that wage differences are caused not by just “any factor” other than sex, but by “bona fide” factors that are consistent with business necessity.

The combination of the Lilly Ledbetter Act along with the Paycheck Fairness Act all but guarantees the likelihood that employers will see an increase in wage and hour lawsuits in the coming year.

So What Should Employers Do?

Regardless of whether this legislation passes, employers should take appropriate steps to validate that their compensation policies and practices can withstand the revised burden of proof standards. More simply put, if your current policies and practices cannot pass the sniff test, now is a good time to do the following:

  • A uniformly applied compensation philosophy should be developed that will inform/guide all pay-related decisions (e.g., new hire, annual review, bonus, promotion, demotion, etc.,) based on bona fide business factors.
  • Current workforce compensation data should be scrutinized to determine if there are any variances or patterns of inequitable pay.
  • Past compensation pay decisions should be analyzed to see if there are any inequitable trends with regard to pay-related decisions.
  • Pay procedures and practices should be validated to ensure that a check and balance exists on all pay-related decisions.

As many companies wrap up the calendar year, many are in the process of preparing for annual performance evaluations and accompanying compensation adjustments. Now is the perfect time to review and assess your pay-related policies, practices and procedures to ensure that you’re not making an existing problem an even bigger one. The more effort and diligence you apply now to get your house in order will certainly help to ensure that you won’t get any unwelcome visits.

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