When asked “How much do you make?” people may respond in one of two ways. The first is to openly share salary information because the person may perceive a balanced pay equity. Other individuals regard this as an uncomfortable question and avoid answering by steering the conversation in another direction. In a professional environment, though employers are unable to prevent employees from discussing their wages, they may soon be required to reveal pay information for their employees to the federal government. This new requirement is the result of a Presidential directive to the Equal Employment Opportunity Commission (EEOC) and the Office of Federal Contract Compliance Programs (OFCCP) to develop a reporting tool that would require employers to submit pay data on employees nationwide so the agencies can target investigations to address the gender “pay gap.”
According to the White House, full-time working women earn 79% of what their male colleagues earn. To address this pay disparity, on January 29, 2016, the Obama administration announced that employers with 100 employees or more may be required to provide detailed wage information for all employees, including earnings, gender, race, and ethnicity.
Historically, pay as it pertains to gender discrimination has been addressed in the passing of three key pieces of legislation: The Equal Pay Act, Title VII of the Civil Rights Act, and the Lilly Ledbetter Fair Pay Act.
- The Equal Pay Act was enacted in 1963, as an amendment to the Fair Labor Standards Act of 1938, to prohibit gender-based discrimination in the payment of wages for individuals that are performing work requiring equal skill, effort, and responsibility in similar working conditions. Employers may compensate individuals differently with respect to pay differentials resulting from a bona fide seniority, merit, or pay-for-production system in place.
- Title VII of the Civil Rights Act of 1964 prohibits employment discrimination, including the payment of wages, on the basis of race, color, religion, gender, and national origin.
- The Lilly Ledbetter Fair Pay Act of 2009 ensures that individuals subject to pay discrimination are able to assert their rights under federal anti-discrimination laws by resetting the 180-day limit to file a claim with each discriminatory paycheck issued.
Currently, eligible employers with 100 employees or more and federal contractors with 50 employees or more with contracts greater than or equal to $50,000 submit EEO-1 forms annually. These employers are disclosing employment data categorized by race/ethnicity, gender, and job category. If the proposed pay transparency regulations become final, gender and salary will be added as data reporting requirements.
If the proposed regulations are pushed forward, draft revisions will be available for review and public commentary now through April 1, 2016, with the rules going into effect in September 2016. Starting in 2017, filers with 100 or more employees (both private industry and federal contractor) would submit the currently approved EEO-1 data (i.e., employee ethnicity, race, and sex by job category) and data on employees’ W-2 earnings and hours worked. Contractors with 50 to 99 employees would only be required to submit currently approved EEO-1 data.
If you are an employer that will be impacted by this proposed change, what should you do now? Your first priority should be to identify any pay gaps in your current compensation structure. Next, prioritize comparing those positions in question to any internal and external salary data. If any disparate wages are not defensible after comparing the position’s wages to the internal and external comparative data, you as an organization may face potential identification of wage discrimination. It is critical to identify any potential cases of wage discrimination so action can be taken now to recognize areas of exposure and provide you with the information necessary to adjust your compensation structure.