The Pay Equity Triple Threat: Law, Litigation, and Regulatory Hurdles!
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1 The Pay Equity Triple Threat: Law, Litigation, and Regulatory Hurdles! Kathleen McLeod Caminiti, Esq. (908) Cheryl L. Behymer, Esq. (803) Margaret P. Ferrero VP, Assistant General Counsel ADP, LLC Pay Equality! Triple Threat! Law! Federal and State Litigation! Collective and Class Actions Regulation! Updated EEO-1 Requirements 1
2 Law! Equal Pay Act (EPA) 29 U.S.C. 206(d)! Equal Pay Act requires that men and women in the same workplace be given equal pay for equal work.! Prima facie case:! Lower wages paid to employees of the opposite sex in the same establishment Employees perform substantially equal work Jobs performed under similar working conditions Key: no intent to discriminate required Law! Jobs must be substantially equal : compare job duties, not job content.! Skill! Effort! Responsibility! Working Conditions! Establishment 2
3 Law! EPA! Equality in pay includes all forms of compensation, Including wages, salary, overtime pay, and perks such as bonuses, stock options, profit sharing and bonus plans, life insurance, vacation and holiday pay, cleaning or gasoline allowances, hotel accommodations, reimbursement for travel expenses, and benefits Law! EPA: Exceptions for unequal pay! A seniority system A merit system A system which measures earnings or quantity or quality of production A differential based on any other factor other than sex Key: These are Affirmative Defenses 3
4 Litigation! EPA Claim! May proceed directly to court Statute of Limitations: 2 years/3 years if willful violation Damages Salary differential Liquidated damages Attorney s fees and costs Collective Actions Under the EPA! Same Two-step process as classification for Wage and Hour Collective Actions under FLSA Step 1: Conditional Certification of employees similarly situated Notice and Opportunity to Opt-in Precursor to Rule 23 Class Action under other Federal (e.g., Title VII) and state laws Step 2: Action can proceed to trial as a collective action 4
5 Collective Actions Under the EPA! Campbell v. Chadbourne & Parke LLP, No. 1:16-cv (S.D.N.Y. class complaint filed 8/13/16): female partners at top law firm seeking over $100 million for claims of discrimination and retaliation under Title VII and EPA! Smith v. Merck & Co, Inc., 2016 WL (D.N.J. Apr. 27, 2016): conditional certification in a lawsuit brought by 5 former female sales representatives bringing a $250 million gender bias suit Barrett v. Forest Laboratories Inc., 2015 WL (S.D.N.Y. Sept. 2, 2015): conditional certification in a lawsuit brought by 10 past and present female sales representatives Kassman v. KPMG, LLP, 2014 WL (S.D.N.Y. July 8, 2014): conditional certification in a lawsuit brought by 10 KPMG female employees from the tax and advisory functions for $350 million proposed class consists of women employed in KMPG s Tax and Advisory functions in the positions of Associate, Senior Associate, Manager, Senior Manager/Director, and Managing Director State Law! Pay Equity Laws! New York - Achieve Pay Equity Law, Labor Law 194 (Effective January 19, 2016) California - California Fair Pay Act, California Labor Code (Effective January 1, 2016, Amended September 30, 2016) Massachusetts - Massachusetts Equal Pay Act, Massachusetts General Laws Chapter 149 (Signed August, 2016, Effective July 1, 2018) Maryland - Equal Pay for Equal Work Act, Maryland Labor and Employment Code Section et seq., (Effective October 1, 2016) Other states pursuing legislation at an alarming rate! 5
6 State Laws Common Requirements! Prohibit pay disparity based on gender or sex Pay equality goes beyond base compensation and includes bonus, commissions, etc. Pay Transparency: Anti-pay secrecy requirements No Retaliation Damages Wage Differential Liquidated Damages and/or interest Attorney s Fees California! California Fair Pay Act, California Labor Code (Effective January 1, 2016)! Pay Equity:! Broader than federal law Comparison not based on location Comparison based on responsibility so employees compared do not have to hold same or substantially equal job Employers required to justify pay differentials September 2016 amendment Includes prohibition on pay inequity based on race and ethnicity Prior salary cannot justify pay disparity 6
7 Massachusetts! Massachusetts Equal Pay Act, Massachusetts General Laws Chapter 149 (Signed August, 2016, Effective July 1, 2018) Pay secrecy prohibition Affirmative Defense: Employer self-audits (but should be privileged) New York! Achieve Pay Equity Law, Labor Law 194 (Effective January 19, 2016) Prohibits employees from being paid less than an employee of the opposite sex that requires equal skill, effort and responsibility and is performed under similar working conditions. Employers must justify pay differential: BFOS (bona fide factor other than sex) Requires work in same geographic region 300% damages for willful violation 7
8 Maryland! Equal Pay for Equal Work Act, Maryland Labor and Employment Code Section et seq. (Effective October 1, 2016)! Covers sex and gender identity Same county New EEO-1 Reporting Requirement! EEOC collects workforce data from employers! Generally, employers with 100 or more employees are required to file an EEO-1 report annually Employer Information Report (see sample report) Submitted to the EEOC and the Department of Labor s Office of Federal Contract Compliance Programs (OFCCP) Regulations require employers to provide detailed information about pay practices to address gender discrimination effective March
9 New EEO-1 Reporting Requirement! Employers will have to include data on pay ranges and hours worked on the EEO-1! Data will encompass more than 63 million workers Pay information comes from Box 1 on the employee s W-2 form (W-2 income) Employees must be reported by job category and further broken down across 12 pay bands within each job category Goal of the additional data-gathering is to identify businesses that might have pay gaps, and then target those employers who are discriminating on the account of gender (enforcement actions) The purpose of the additional data is to help identify possible pay discrimination and assist employers in promoting equal pay in their workplaces EEO-1 Report Format Prior to Pay Report Change! 9
10 New EEO-1 Report Format with Pay Reporting (Pay)! New EEO-1 Report Format with Pay Reporting (Hours Worked)! 10
11 EEO-1 Reports: Time to Act is NOW! Due date for the EEO-1 survey moved to March 31, 2018! This is supposed to simplify employer reporting by allowing employers to use existing W-2 pay reports, which are calculated based on the calendar year However, even though the first EEO-1 report will be submitted by March 31, 2018, the data in that report will start with salaries employees receive as of January 2017 Workforce snapshot: one pay period from October 1-December 31, 2017! Preparing for a Pay Equity Analysis Requirements! Conduct a privileged audit of pay practices using the EEO-1 or workforce categories Re-evaluate systems used to aggregate pay data Re-evaluate job classifications 11
12 Example Pay Analysis! Example Pay Analysis! 12
13 Consider Ramifications of EEO-1 Data in Pay Equality Litigation! The data provided to the EEOC may be used by the EEOC to support claims of discrimination in enforcement actions related to gender pay disparities Publicly available data will be used by litigants EEOC will follow FOIA requirements and only release EEO-1 reports consistent with FOIA disclosures Timeline for Preparing for EEO-1 Report! Today 1/1/ /1/ /31/2017 3/31/2018 Start Planning (Internal Audit, Budget, Update Policies and Handbooks, Training) 2017 Compensation Period Begins Workforce Snapshot for EEO-1 Report (One Pay Period) EEO-1 Report Due 13
14 How Can Employers Protect Themselves?! Conduct a privileged audit! Step 1: Create a plan Identify team importance of lawyers Determine scope Set expectations Not a simple data collection exercise Plan, budget and buy-in Step 2: Collect the data How Can Employers Protect Themselves?! Conduct a privileged audit! Step 3: Determine which employees are doing equal or similar work Step 4: Analyze pay data by job grouping Calculate the average pay for each job grouping Identify disparities and consider a more sophisticated analysis 14
15 How Can Employers Protect Themselves?! Step 5: Evaluate and Document Bona Fide Factors to Justify Differences Skill Effort Responsibility Working conditions Experience Performance How Can Employers Protect Themselves?! Step 6: Develop an action plan Partner with legal counsel to minimize risk documents created in developing the plan are discoverable Determine how and when disparities will be remedied Train managers Develop a policy for setting starting salaries (pay grades, mid points) Update existing policies and handbooks Develop a communications plan 15
16 Final Questions?! Kathleen McLeod Caminiti, Esq. (908) Cheryl L. Behymer, Esq. (803) Margaret P. Ferrero VP, Assistant General Counsel ADP, LLC Thank You! Kathleen McLeod Caminiti, Esq. (908) Cheryl L. Behymer, Esq. (803) Margaret P. Ferrero VP, Assistant General Counsel ADP, LLC 16
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