Paycheck Fairness Act Bad for Business, Employees
Have you ever felt like Washington is creating obstacles for you to hire more employees, or to make employment/business decisions without the Equal Employment Opportunity Commission or the courts questioning the basis of your decisions? Unfortunately, in this time of high unemployment, uncertainty about taxes, and the economy, and increased budgets for the EEOC and the Office of Federal Contract Compliance Programs the U.S. Senate is flirting with yet another risk for businesses—the Paycheck Fairness Act.
The House passed a version of the Act in January 2009 and Hillary Clinton introduced the Senate companion bill before being confirmed as Secretary of State. It had been stalled in committee, but the push for a vote on it began anew this month, arguably to help increase voter turnout by stirring up a particular voting bloc. The act would create significant issues for employers and, while its goal of ferreting out discrimination and ending the wage disparity between men and women is important and fundamental to our American ideal of fairness, the bill would create a windfall for certain groups and fail to end the wage gap. If enacted, the legislation would amend the Equal Pay Act or other Federal employment laws in the following ways:
Limitless compensatory and punitive damages: The Equal Pay Act, in its current form, would permit recovery of back pay and liquidated damages, which are capped at an amount equal to an award of back pay. Pursuant to the act, compensatory and punitive damages would be uncapped, permitting limitless damages potential and increasing the incentive to pursue allegations of sex-based pay discrimination.
Class actions: The act would change class-action litigation for sex-based pay discrimination from classes in which an employee has to affirmatively state that they want to be a part of the class to employees affirmatively stating they do NOT want to be a part of the class. This serves only to increase the size of the class of employees who claim discrimination in a class-action lawsuit.
No retaliation: The act would prohibit an employer from retaliating against an employee who inquires about or discusses their pay with co-workers and supervisors, including the disclosure of that employee’s pay or his/her co-workers’ pay. The act does not permit employees who, as part of their essential job functions, discuss pay or disclose other employee’s pay.
Modify an employer’s defense: The act would increase the burden on employers by changing an employer’s defense. Currently, an employer may defend against a claim of wage disparity by proving that the disparity was caused by “any factor other than sex.” The act would require that the employer prove that the disparity was caused by “a bona fide factor other than sex, such as education, training or experience,” that is not based on gender and it is job-related to that position, and is consistent with business necessity. Even if the employer is able to show a bona fide factor, the employee need only show that the employer refused to adopt an alternative employment practice that would have eliminated the wage disparity but still served the same business purpose.
Increased reporting: The EEOC would be required to issue regulations regarding the collection of information from employers and the OFCCP is instructed to use “its full range of investigatory tools” to investigate and enforce equal pay.
In addition to changes that increase the burden and risk for employers, the premise upon which politicians argue the necessity of this bill is faulty. Several key backers of the act continually cite the statistic that women earn 77 cents for every dollar earned by men for the idea that the wage gap must be because of discrimination. A 2007 study by Francine Blau and Lawrence Kahn, however, suggests that the 23-cent difference is largely caused by reasons other than discrimination. That wage gap could be attributable to negotiated salaries, career choice, chosen industry, experience, declining overtime, etc. The act, however, presumes that the entire pay disparity is caused by discrimination and that employers are the villain.
There is no doubt that paying an employee less than her male counterpart because of her gender is wrong. The act, however, would not eliminate that discrimination, but rather increase the reporting burden on employers, permit government agencies and courts to decide whether a business could have done something else or something more to eliminate pay disparities, and encourage trial attorneys because of limitless damages and increased classes in class action lawsuits. In short, the Paycheck Fairness Act is a bad law and a bad time.
Adam Pankratz is associate with the firm of SNR Denton in Kansas City.
P | 816.460.2443
E | adam.pankratz@snrdenton.com
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