Preparing for a Pay Equity Audit. Neil Dickinson, SPHR Managing Partner, HudsonMann

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1 Preparing for a Pay Equity Audit Neil Dickinson, SPHR Managing Partner, HudsonMann

2 What s Happening with Pay Equity in the News?

3 Pay Equity in the News

4 Google o OFCCP Compliance Review in 2015 with focus on pay equity o Provided hundreds of thousands of records o OFCCP requested further salary history which Google refused and was upheld in court o Google estimated it would cost over 1 million to comply with additional requests. Google s federal contract was $600,000 o Shortly after OFCCP announcement Google was sued by three women for pay bias with the potential for class action suit

5 Equal Pay Report o Pay data reporting of EEO-1s suspended indefinitely o Labeled as the poster child for the kind of regulation that the President campaigned against by EEOC Chair o Three of the five EEOC Commissioners will be appointed by President Trump

6 State Equal Pay Regulations Massachusetts, Oregon, Delaware, New York City, San Francisco laws bar employers from asking for an applicant s pay history California forbids using prior salary as the sole factor for setting starting pay California requiring Equal Pay Report in 2020 California uses Substantially Similar standard for comparing pay

7 Why the Focus on Pay Equity?

8 The Pay Gap for Women: 79%

9 Wage, Gender and Race Equity 1200 Weekly Median Earnings Q , Total White Black or African American Total Men Women Asian Hispanic or Latino Source: Bureau of Labor Statistics, October 2015

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11 Social Reasons For Pay Disparities oeducational Opportunity ofamily Choices o Unmarried women with no children earned 90% in comparison to males otypes of Jobs Chosen otype of Education Chosen (Sociology vs. Engineering) EMPLOYER REASONS FOR PAY DISPARITIES obargaining Skills osteering omanager Discrimination olack of formal or consistently applied compensation systems

12 What Pay Equity Laws Apply to My Organization?

13 Pay Equity Compliance Laws oequal Pay Act- Covers all employers otitle VII 15 or more employees oexecutive Order $50,000 in federal contracts and 50 or more employees opay Transparency Act (2015)- $10,000 in federal contracts o46 States have Equal Pay Statutes (California!)

14 Equal Pay ACT ocovers Gender only oequal Pay for Jobs with: osubstantially equal skill, effort and responsibility, and that are performed under similar working conditions within the same establishment ounless the difference is based on seniority, merit, quantity or quality of production, or a factor other than sex. opay may not be lowered to reduce inequity

15 Title VII, ADEA, ADA oprohibit compensation discrimination on the basis of race, color, religion, sex, national origin, age, or disability. oaffected employees do not have to be in the same establishment oa neutral compensation policy or practice that has an adverse impact on employees in a protected class can be found unlawful

16 EEOC Pay Discrimination Cases Market Burgers, LLC EEOC alleged that the franchise was paying female shift managers, cashiers and sandwich-makers less than their male counterparts and also scheduling them for fewer hours. EEOC announced a $100,000 settlement with the franchise owner. NFI Industries $45,000 settlement when a manager discovered that she was being paid less than her male counterparts when she came across a former co-worker s pay stub.

17 Executive Order o Federal contractors must maintain affirmative action plans o Compensation should be annually reviewed for pay equity o OFCCP can audit and analyze compensation for pay discrimination

18 How is the OFCCP Handling Pay Equity in Compliance Reviews?

19 Recent OFCCP CASES State Street State Street Corp agreed to pay a combined $5 million to more than 300 women and 15 black employees who were paid less than their white, male counterparts VP and Director level positions, included base compensation and bonuses Labcorp $150,000 to Asian Lab Assistants who were allegedly paid less than their White counterparts, even after controlling for non-discriminatory business pay factors. Must perform regression analysis for Asian employees going forward

20 OFCCP Compensation Submission oemployee level compensation for all employees on payroll including contract workers odata should coincide with Workforce Analysis (1 st day of new plan year) oemployee ID ogender orace/ethnicity ojob Group ojob Title ohire Date

21 Required Compensation 12 month period preceding the date of the analysis: obase Salary/Wage Rate ohours Worked in Typical Week obonuses oincentives ocommissions omerit Increases oovertime

22 Optional Additional Pay Factors oeducation oexperience olocation operformance Ratings odepartment/function omerit Increases opay band/level/grade* oothers not listed: Job Status, Shift Differential, Time in Position, Work Contract, People Managed, Certifications

23 Required Compensation odocumentation and polices related to compensation oexamples: Pay structure guides, job descriptions, market surveys Recommendations For Compensation o Provide as many additional pay factors and as much supporting documentation as possible on front end o Do not provide pay groupings (Pay bands, levels, job groups) that combine multiple independent job titles

24 Compensation Interview owhen discrimination indicators exist a telephone interview will be scheduled obroad questions on companies pay practices odoes a compensation system exist? owhat pay factors are used? opromotion practices owho has oversight?

25 Compensation Interview owhen discrimination indicators exist a telephone interview will be scheduled obroad questions on companies pay practices odoes a compensation system exist owhat pay factors are used opromotion practices owho has oversight

26 How Should My Organization Ensure Pay Equity Now?

27 Recommendations For Internal Pay Equity Audit oensure well-defined, consistently applied compensation system otrack all relevant business factors that influence pay opay gaps normally begins at time of hire odo you document business factors that influenced pay at time of hire? odo you have a bargaining culture? odo we consider prior salary history (if allowed)? oconsider setting a salary range for each position, and then place applicants within the range using business factors, such as education, experience, training

28 Recommendations For Internal Pay Equity Audit owell-defined job titles and descriptions opay analysis at job title level otrain hiring managers on company pay policies and importance of pay equity for compliance and business productivity odo not allow for the opportunity to steer applicants to jobs

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30 Cohort Analysis Sort your workforce by job title and then by pay. Can you explain and document why protected employees are being paid less than peers? Are certain groups consistently showing up at the top or bottom of pay in a job title?

31 Regression Analysis Builds a statistical model of pay to determine if gender/race have an impact on pay Highest standard of pay equity analysis Requires accessible data points to build valid model

32 Regression Analysis Builds a statistical model of pay to determine if gender/race have an impact on pay Highest standard of pay equity analysis Requires accessible data points to build valid model

33 Considerations Before Running Pay Equity Analysis Work with legal to ensure attorney-client and work product privileges Ensure you have support from leadership to perform analysis and correct any potential issues

34 Thank You For Being a Valued Client! Please contact your Compliance Specialist or myself if we can answer any further questions on pay equity or provide additional support. Neil Dickinson ndickinson@hudsonmann.com