“How much were you paid at your last job?” This common, seemingly innocuous question that is routinely asked during an employer’s pre-hiring process, could lead to disparities in salaries between men and women. But, for many employers, the salary disparities between men and women performing substantially the same responsibilities may already exist. In Philadelphia, the prohibition on asking about an applicant’s salary history has become a hotly debated topic. And, administrative agencies are continuing to investigate pay equity in the workplace. The time is now for employers to analyze potential pay inequities and to revisit their hiring practices that implicate pay equity.
While the Equal Pay Act (EPA) was passed over 50 years ago, pay equity remains a complicated and often divisive issue. The EPA requires that equal wages be paid to men and women who perform jobs that require substantially equal skill, effort and responsibility. However, current statistics show that income inequality persists between women and minorities, and their Caucasian male co-workers. For example, studies have shown that for every dollar earned by Caucasian men in Pennsylvania, women are paid 79 cents, African-American women are paid 68 cents, Latinas are paid 56 cents and Asian women are paid 81 cents. For years, courts, administrative agencies and employers have struggled to reconcile these significant disparities in pay.
In September 2016, the Equal Employment Opportunity Commission (EEOC) announced a new wage data collection rule, which was supposed to take effect in March 2018. In short, the rule would have required private employers, as well as federal contractors and subcontractors, with 100 or more employees to report summary employee pay data in their annually filed EEO-1 Reports. The EEOC intended to use this data to enhance their ability to investigate potential pay discrimination. In fact, the EEOC has placed pay equity and transparency near the top of its agenda.
However, the Obama-era wage data collection rule was met with sharp criticism from employers, who argued that the burdens—such as excessive time and money spent compiling the required data—significantly outweighed the rule’s benefits. Specifically, opponents of the rule argued that the EEOC failed to identify any tangible benefit, since the rule required reporting for employees in broad occupational groups. These broad categories grouped together employees with different tasks, skill sets and job responsibilities. Consequently, the rule’s opponents argued that this data held little benefit because courts do not permit plaintiffs to group individuals with dissimilar job duties and skills for purposes of wage comparisons. Additionally, there were significant privacy and confidentiality concerns. Earlier this fall, the Trump administration announced that it was ending the data collection rule.
Even if the federal government does not pursue the data collection rule, private employers should still be concerned because there has been an increasing number of class action lawsuits based on pay disparity. For example, in September 2017, Google was sued by several female employees alleging that the company systematically pays women lower compensation than men who perform substantially similar work under similar working conditions, in violation of the California Equal Pay Act. The plaintiffs are seeking class action status to include all women employed by Google in California for the preceding four years.
Philadelphia has attempted to address pay equity in a different way. Last year, city council and the mayor passed legislation that bans employers from asking about an applicant’s salary history at any stage in the hiring process. Philadelphia is not alone—Massachusetts passed a law barring employers from requiring a prospective employee’s wage history in August 2016, and similar legislation is being considered statewide in Pennsylvania, as well as in New Jersey. The Massachusetts law goes one step further than the Philadelphia ordinance by prohibiting “pay secrecy policies,” which are policies prohibiting employees from asking about or discussing information about their own wages or the wages of their co-workers.
Supporters of the Philadelphia legislation cite to the importance of evaluating a candidate based on their qualifications and the job responsibilities of the position sought, and not based on prior wages or salary history. However, there has been significant opposition from employers. In June 2017, the Philadelphia Chamber of Commerce filed a motion in federal court for a preliminary injunction to ban enforcement of the ordinance. The chamber argued that there are legitimate reasons for employers to ask about an applicant’s salary history such as, for example, remaining competitive by offering the “market rate” for a potential employee. Various other entities have weighed in on the issue by filing amici curiae briefs, including other chambers of commerce and the ACLU. The Philadelphia ordinance has been stayed pending resolution of the motion.
This landscape leads to two conclusions. First, the discussion regarding how to investigate and remedy pay inequities will continue; and second, employers must get ahead of this issue by taking a closer look in the mirror at their salary statistics and pay practices. For now, the solution certainly is not an easy one, and the debate will undoubtedly persist in the months and years to come.
Amy C. Lachowicz is a senior attorney in Clark Hill’s labor and employment practice group.