FAIR PAY. We got this SENSE ON A DOLLAR: PAY EQUITY TRENDS AND STRATEGIES FOR COMPLIANCE AUGUST 27, 2018

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1 We got this FAIR PAY SENSE ON A DOLLAR: PAY EQUITY TRENDS AND STRATEGIES FOR COMPLIANCE AUGUST 27, 2018

2 Today s Presenter Holly Lake, Partner, Miller Law Group Holly is a skilled employment litigator who also advises clients on OFCCP compliance and affirmative action plan development. She acts as a partner to her clients, making it her business to understand their needs and goals, and then developing a legal strategy that s unique to the case or issue at hand. Her approach has resulted in successful compliance strategies, trial victories, summary judgment wins, and success in managing scores of single plaintiff cases filed after the defeat of class certification. Holly Lake 2

3 s dol.gov/equalpay 3

4 s 4

5 Equal Pay and the Legal Profession Full-time women lawyers are paid 77.4% of what their male counterparts are paid (2014 U.S. Census Bureau) Average compensation for male law partners is about 44% higher than that of female partners (2016 Major, Lindsey & Africa Survey) In 2015, the National Association of Women Lawyers found that the typical woman equity partner earns 80% of what typical male equity partner earns This is a wider gap than NAWL reported in its first annual survey in 2007, when it was 84 percent 5

6 Overview of Applicable Laws 6

7 Applicable Laws Federal Equal Pay Act (EEOC and DOL) Title VII (EEOC) Executive Order (OFCCP) California Labor Code Fair Pay Act (DLSE) California Fair Employment and Housing Act (DFEH) 7

8 Federal Equal Pay Act (EEOC and DOL) Part of the Fair Labor Standards Act (FLSA) Prohibits sex-based wage discrimination for equal work in an establishment Equal skill, effort and responsibility and performed under similar working conditions Unless wage differential is due to a seniority system, merit system, system which measures earnings by quality or quantity of production, or based on any factor other than sex Establishment = Distinct physical place of business rather than an entire business or enterprise consisting of several places of business 8

9 Title VII (EEOC) Makes it illegal to discriminate based on sex in pay and benefits An employee who has an Equal Pay Act claim will typically also have a claim under Title VII Just sex? Also covers race, national origin, religion and other protected classes under Title VII Wage discrimination also prohibited under Age Discrimination in Employment Act (ADEA) and Americans with Disabilities Act (ADA) Lilly Ledbetter Fair Pay Act of 2009 clarifies that each paycheck containing discriminatory compensation is actionable under Title VII 9

10 Executive Order (OFCCP) Prohibits federal contractors and federally assisted construction contractors and subcontractors who do over $10,000 in government business in one year from discriminating in employment decisions on the basis of race, color, religion, sex, sexual orientation, gender identity or national origin including with respect to rates of pay and other compensation Requires contractors to take affirmative action to ensure that equal opportunity is provided in all aspects of their employment On August 24, 2018, OFCCP issued DIR Analysis of Contractor Compensation Practices During a Compliance Evaluation, which outlines OFCCP s standard procedures for reviewing contractor compensation practices during a compliance evaluation. 10

11 California FEHA Prohibits discrimination based on sex and other protected classifications Enforced by DFEH Exhaustion of administrative remedies required Employer must have at least 5 employees to be covered Punitive damages available but no PAGA claims 11

12 California Fair Pay Act Prohibits paying any employee less than that paid to employees of the opposite sex for doing substantially similar work Substantially similar work is determined by a composite of skill, effort, and responsibility Employer must affirmatively demonstrate that wage differential is based entirely and reasonably upon: Seniority system, merit system, or system that measures earnings by quantity or quality of production, or Bona fide factor that is not based on or derived from a sex-based differential in compensation and that is job-related and consistent with a business necessity Work in same establishment no longer a criterion 12

13 Amendments to Fair Pay Act Additions to the California Fair Pay Act, effective January 1, 2017 S.B Fair Pay Act protections apply to race and ethnicity A.B Prior salary cannot, by itself, justify a disparity in compensation 13

14 What Wages Count? All payments made to or on behalf of employees as remuneration for employment Salary Overtime pay Shift differentials Commissions Bonuses Insurance and other benefits Vacation, holiday and sick Travel and entertainment allowances Retirement Stock options and profit sharing 14

15 California s Fair Pay Act: Breaking It Down 15

16 Substantially Similar Work Equal work Substantially similar work Prior: Equal pay for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions Now: Equal pay for substantially similar work Is this different from OFCCP standards? EPA standards? Substantially similar work = composite of skill, effort, and responsibility, and performed under similar working conditions No requirement that employees be in same establishment 16

17 17 Defenses Burden has shifted to the employer Any wage differential must be based upon one or more of the following: seniority system merit system system that measures earnings by quantity or quality of production bona fide factor other than sex, such as education, training, or experience must be job related and consistent with business necessity, and does not apply where employee demonstrates that an alternative business practice exists that would serve the same business purpose without producing the wage differential Factors must account for the entire differential!

18 18 Common Questions Who are the appropriate comparators? What if there is only one person in each job in question? Should part-timers be compared to full-timers? What if a candidate just happens to be a good (or poor) negotiator? Can salaries be different between, for example, Los Angeles and San Francisco?

19 19 Enforcement and Remedies DLSE suit or civil action (two year statute of limitations or three if willful violation) Remedies include: Wages denied to the employee An equal amount as liquidated damages Interest PAGA (Private Attorneys General Act) penalties = $100 for initial violation per employee per pay period and $200 per employee per pay period for each subsequent violation when Labor Code does not already provide for civil penalty 19

20 20 Retaliation An employer shall not discharge, or in any manner discriminate or retaliate against, any employee by reason of any action taken by the employee to invoke or assist in any manner the enforcement of this section New civil cause of action with one year statute of limitations Also possible Tameny claim, with two-year statute of limitations, for wrongful termination in violation of public policy 20

21 Auditing Compensation and Fixing Disparities 21

22 Compensation Audit Process Understand the objectives in the compensation audit process Conduct a Job Analysis Review compensation policies and procedures Review compensation for those performing substantially similar work which will include statistical analyses (where possible) and an anecdotal review (if necessary) 22

23 Objectives in the compensation audit process 23 Identify pay disparities Identify policies and practices that may contribute to the disparity Determine whether there are legitimate explanations/defenses that account for disparities Take steps to correct disparities not based on legitimate factors Identify and correct weaknesses in company systems to protect against pay disparity claims going forward

24 24 Conduct Job Analyses What is a Job Analysis? What type of information does a Job Analysis provide? What methodologies can be used? 24

25 25 Start by Collecting Relevant Data Skill Working conditions Effort Responsibility 25

26 Identify the Preferred Job Analysis Methodology Job Analysis questionnaires Structured Job Analysis interviews Observational studies 26

27 27 Analyze Job Analysis Data Compile data Analyze patterns Determine logical cutoffs for groups so that meaningful statistical analyses can be performed Assign those who perform substantially similar work to groups for compensation analysis

28 28 Review Existing Selection and Compensation Practices Review compensation policies and practices Develop clear understanding of pay practices and decisionmaking Review potential legitimate reasons for pay differences (e.g., location) 28

29 29 Analyze Compensation Data for Substantially Similar Employees Conduct statistical analysis to determine whether pay differences exist This includes controlling for legitimate compensable factors including time variables, department, collective bargaining agreement Multiple regression = statistical analysis that can allow the examiner to review a group of employees after controlling for legitimate factors to determine whether any disparity exists (i.e. the probably that they occur by chance otherwise known as statistically significant) Legitimate factors must not include those variables that can be considered tainted or biased 29

30 Key Takeaways and Best Practices 30

31 31 5 Key Takeaways 1. Conduct audit of compensation practices 2. Level compensation - fix historical disparities 3. Consider new compensation setting strategies and practices objective, simple 4. Form job comparator groups with elasticity for a changing job environment 5. Centralize compensation decisions 31

32 32 Best Practices Adopt clear guidelines for setting compensation Update job descriptions to ensure they accurately reflect the skill, effort and responsibilities associated with the job Keep records identifying each employee s job classification, duties and wages over entire course of the employment Designate team responsible for monitoring pay practices and reviewing compliance with federal, state and local anti-discrimination laws Review practices to ensure that pay and bonus decisions are not based on gender (or other protected classes) Review performance evaluation process to determine how it impacts pay

33 33 Best Practices Regularly train HR personnel, managers and anyone else involved in hiring, promotion or compensation decisions regarding company policies and nondiscriminatory pay practices Conduct a policy and pay self-audit and determine the rationale for any pay differentials Evaluate all forms of compensation and benefits - not just base wages Correct problems as soon as they are discovered Follow up - regularly review compensation, policies and practices

34 Thank You