PAY EQUITY UPDATES for 2017 More Obligations How Do We Comply?
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1 [add logo of sponsor] PAY EQUITY UPDATES for 2017 More Obligations How Do We Comply? January 17, Universal City, California Susan E. Groff, Esq. GroffS@jacksonlewis.com Mickey Silberman, Esq. SilbermanM@jacksonlewis.com Moderator: Harrison Perla, Esq. CEVA, Inc Jackson Lewis P.C. #IHCC ACC-SoCal In-House Counsel Conference 1
2 About The Firm Represents management exclusively in every aspect of employment, benefits, labor, and immigration law and related litigation 800 attorneys in 56 locations nationwide Current caseload of over 6,500 litigations approximately 650 class actions Founding member of L&E Global A leader in educating employers about the laws of equal opportunity, Jackson Lewis understands the importance of having a workforce that reflects the various communities it serves _2 2
3 Susan Groff Susan is a Principal in the Los Angeles office of Jackson Lewis P.C. She advises and counsels management on various employment related issues, including the California Fair Pay Act, disability and leave management, wage and hour laws, harassment and discrimination complaints, workplace investigations, reductions in force, and discipline and termination questions. She also conducts training and seminars on employment related issues, including new laws facing employers (such as the CFPA), disability and leave management, wage and hour requirements, and sexual harassment prevention _3 3
4 Mickey Silberman Mickey is Co-Chair of the firm s Pay Equity Resource Group and Chair of its Affirmative Action & OFCCP Practice Group. He is a national expert on pay equity. Mickey oversees pay equity projects conducted on a proactive basis and in response to EEOC investigations, OFCCP audits, internal complaints, and litigation. He conducts mock audits assessing compliance with pay equity, EEO, and affirmative action. Mickey and the Practice Group each year prepare thousands of affirmative action plans and defend hundreds of EEOC and OFCCP investigations _4 4
5 Agenda Awareness About Equal Pay Has Arrived Growing Wave of Aggressive State Pay Laws How to Explain Pay Differences under CFPA What Can We Do To Be Pro-Active? Review of Job Descriptions and Other Practices Conducting a Pay Equity Analysis Questions & Answers _5 5
6 California This Just Got a Lot Harder 2016 Amendments to CFPA effective January 1, 2017 Expanded to include race and ethnicity Exponentially increases the exposure Now, not just claims between men and women, but between people of all different races and ethnicities within gender (i.e., Asian female employees can claim unequal pay compared to Hispanic female employees) Salary history can we ask? Attorneys fees for prevailing plaintiffs CA robust wage-hour class action plaintiffs bar jumping in High Level Take Away you need to conduct privileged proactive pay analyses _6 6
7 First, Setting the Stage The Pay Gap For every $1.00 paid to men, how much is paid to... Group Nationwide California Women African-American Women Hispanic Women _7 7
8 First, Setting the Stage The Pay Gap For every $1.00 paid to white men, how much is paid to... Group Nationwide Men Women Asian $ African-American Hispanic _8 8
9 Why Not More Claims? People Just Don t Know Employees don t know what they don t know about pay Applicants don t know what they don t know about pay The government doesn t know what it doesn t know about pay You don t know what you don t know about pay _9 9
10 Shareholder Pressure to Achieve and Announce Equal Pay Activist investor pressure to achieve equal pay CEOs are telling HR and in-house counsel: This is going to get done. Silicon Valley and other Fortune 500 companies feel increasing pressure to quickly conduct pay equity analyses and publish the results I'm proud to share that at Facebook, men and women earn the same - Lori Matloff Goler, Facebook, Inc. Black employees earn $1.003; Hispanic employees earn 99.9 cents; and Asian employees earn $1.006 for every $1 earned by White employees - Kathleen Hogan, Microsoft Corp _10 10
11 EEO-1 Pay Reporting _11 11
12 EEOC Pay Data Reporting Adds W-2 earnings and work hours for all employees to EEO-1 reports starting in 2018 Filing deadline now March 31 of every year instead of Sept. 30 Workforce snapshot pay period between Oct. 1 and Dec. 31 of reporting year instead of July - Sept. EEOC will publish pay data by industry and geography for employers to benchmark against Who else can use the pay data? Unions, plaintiffs counsel, competitors, the press _12 12
13 EEOC Underestimates Employer Burden Employers typically do not house W-2 earnings, hours worked, job, race/ethnicity and gender data in the same system HRIS, Payroll, Timekeeping Systems EEOC expects employers will write software programs to aggregate data across systems Reporting burden will increase by 1,933% From 180 cells to 3,600 cells per establishment _13 13
14 How Will Trump Administration Impact EEO-1? Trump has said he supports equal pay for women, Trump s daughter Ivanka is a big equal pay advocate Given that context, what can EEOC do? Options: 1. Rescind the EEO-1 pay data reporting requirements 2. Leave as is with its significant burdens 3. Change pay data reporting from W-2 earnings to annualized pay This would eliminate the need for hours reporting and allow employers to pull the information from one system HRIS significantly reducing the burden Republican congress could also defund EEOC s reporting rule _14 14
15 Growing Wave of Aggressive State Pay Laws and International Obligations _15 15
16 California Leads The Way California Fair Pay Act effective January 1, 2016 Compares substantially similar employees broader than federal standard of similarly situated Compares employees across locations Employers must explain entire wage differential Attorneys fees for prevailing plaintiffs CA robust wagehour class action plaintiffs bar jumping in 2016 law focused only on differences between the sexes _16 16
17 California Leads The Way 2016 Amendments to CFPA effective January 1, 2017 Expands CFPA to include race and ethnicity Exponentially increases the exposure employers should revisit policies and re-run pay equity analyses to consider race and ethnicity Cannot use salary history as sole justification for pay disparity Codification of language found in the legislative history _17 17
18 Massachusetts Out California s California Equal pay for comparable work Arguably more expansive than any other federal or state law Cannot ask applicants or current/former employers for salary history Proactive Pay Audit as a Safe Harbor If company completed proactive analysis in good faith within past 3 years must be reasonable analysis And, made reasonable progress towards eliminating pay disparities _18 18
19 States with Current Proposals for New or Expanded Equal Pay Laws Alaska Arizona District of Columbia Georgia Hawaii Indiana Iowa Kentucky Michigan Nebraska New Jersey Ohio Oklahoma Pennsylvania Tennessee Washington West Virginia _19 19
20 Prohibition on Asking for Salary History Prediction - This is the Big One Massachusetts first state to ban asking for salary history effective July 2018 CA quickly amended CFPA to say salary history cannot, by itself, explain pay disparity NY Governor signed an E.O. prohibiting state entities from asking for or evaluating applicants based on salary history NYC Mayor signed an E.O. prohibiting NYC agencies from asking for or searching publicly available records for salary history _20 20
21 Other Jurisdictions that have Proposed Similar Bans on Requesting Salary History Los Angeles conducting feasibility report on prohibiting asking for salary history PA similar to MA Philadelphia city council passed bill, likely to be signed by mayor NJ bill would prohibit asking for salary history as well as setting a min or max salary history as a condition of being interviewed/considered for job DC similar to NJ NYC would apply to private sector Fed Gov t House bill in committee _21 21
22 Growing International Obligations UK companies with 250+ employees subject to compulsory gender reporting by April 2018 Germany proposed Equal Pay Act Companies with 200+ employees have to document pay gap Companies with 500+ employees must conduct pay equity review at least every 5 years Sweden since 2008, companies with 25+ employees have had to conduct survey of gender pay differences every 3 years _22 22
23 How Do Employers Explain a Wage Differential Under the CFPA? _23 23
24 What Must Employers Show to Defend These Claims? Employers need to be able to explain wage rate differences Between men and women, different races and ethnicities For substantially similar work regardless of establishment Should we include comparators from outside of California? _24 24
25 What Must Employers Show to Defend These Claims? How do we know who is substantially similar? Similar skills, effort and responsibilities Under similar working conditions (environmental) _25 25
26 How Do We Explain Wage Rate Differences? If there is a wage differential, then it is the employer s burden to demonstrate the difference is based on one of the following factors A seniority system; A merit system; A system that measures earnings by quantity or quality of production; and/or A bona fide factor other than sex, race or ethnicity, such as education, training or experience _26 26
27 How Do We Explain Wage Rate Differences? Seniority system tenure, time in position Merit system pay for performance Problem personnel evaluations can be subjective or biased Is scoring reasonable and honest? Are increases tied to score? Is there consistency? If using merit, consider re-training managers on evaluations _27 27
28 How Do We Explain Wage Rate Differences? Quantity or quality of work piece rates, commissions A bona fide factor other than sex such as education, training, or experience that is job related and consistent with business necessity But is there really a business necessity? _28 28
29 How Do We Explain Wage Rate Differences? Business Necessity Defense applies, unless the employee demonstrates an alternative business practice exists that would serve the same business purpose without producing the wage differential Many open questions _29 29
30 The Million Dollar Question Can We Ask for Salary History? While you can ask for it, easier to argue you didn t rely on it if you didn t ask Better to rely on value of job than what applicant was paid at prior employers For multi-state employers corporate consistency? Create different applicant processes and pay administration systems state by state? Or develop a consistent approach? _30 30
31 How Best to Prepare? _31 31
32 Attractive Tack On Claim for Plaintiffs Definition of substantially similar work is untested Burden is on employer to explain the entire differential Many employers won t have data to support their explanations Those who have data probably haven t analyzed under new law (or at least considering race/ethnicity) Liquidated damages available Attorneys fees available Under Labor Code , criminal penalties _32 32
33 Job Descriptions As the First Line of Defense Consider a review of job descriptions to determine whether different jobs do substantially similar work If there are two positions we don t want compared for pay purposes, are the job descriptions different enough? Do we include details on skill requirements, effort, level of responsibility, or working conditions? Consider updating job descriptions _33 33
34 Review Current Pay Practices Consider reviewing current practices and whether consistent Note can t decrease someone s pay; violation of Cal. Labor Code sec Should pay be more formulaic or lock-step? Should we reward performance with bonuses or other incentives instead of pay raises? _34 34
35 Review Current Pay Practices Consider training for managers and recruiters Are they basing hiring decisions on defensible reasons? Are they documenting those reasons? What do your handbook and policies say about pay discrimination and pay discussions? _35 35
36 Documentation for Explaining Wage Differentials Employers have the burden of explaining any wage differential Big Question do we have data available to do so? Prior related experience, education, skills, evaluations Should we begin documenting basis of pay decisions? Should we start collecting data during hiring process? Employers must show the entire difference is explained by these factors Open question whether we must explain to 0.0% gap _36 36
37 Conducting a Pay Equity Analysis Consider privileged proactive pay analysis On meaningful pay groupings Control for factors that influence pay Not all pay differences are a problem, most aren t But, when they are, plan to make pay adjustments No lump-sum, off cycle adjustments Do as part of regular pay cycle incrementally over a few years Review pay system and processes _37 37
38 Protect Your Analyses With Attorney-Client Privilege Plaintiffs/DLSE will likely ask for internal pay analyses Nothing worse than handing over a road map to exposure CRITICAL FOR THESE ANALYSES TO BE AT THE DIRECTION OF COUNSEL TIP Establish privilege protocols at start of project Identify team of need to know participants Prepare memo outlining protocols and tips to avoid waiver Mark documents Privileged & Confidential If using non-attorney consultants or statisticians, must take certain steps to extend privilege over their work _38 38
39 The Sliding Scale of Privilege Not Privileged Argument for Privilege Privileged No Attorney Involvement In-House Counsel (on surface) In-House Counsel (substance) Outside Counsel (on surface) Outside Counsel (substance) _39 39
40 Take Aways Review job descriptions for substantially similar work Investigate current pay practices/train Hiring Managers Are we basing pay decisions on bona fide factors? Are we documenting factors when decisions are made? Evaluate whether and what type of a pay analysis makes sense for the company Ensure you re conducting privileged proactive pay analyses _40 40
41 Questions? Susan E. Groff, Esq Mickey Silberman, Esq _41 41
42 13 th Annual In-House Counsel Conference January 17, 2017 (Universal City, CA) #IHCC _42
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