Sunday, January 11, 2009

House passes pay equity bills

In case you missed it, the U.S. House of Representatives passed two pay-equity bills as part of the first acts of the new Congress.

H.R. 1338, the Paycheck Fairness Act, amends the portion of the Fair Labor Standards Act of 1938 (FLSA) known as the Equal Pay Act to revise remedies for, enforcement of, and exceptions to prohibitions against sex discrimination in the payment of wages. It passed 256-163.

While touted by many, including the National Organization of Women, as necessary to protect women in the workplace, it will make it harder for employers to hire and pay women and men based upon their qualifications.

You're probably wondering how I, as a woman, can object to a law which is supposed to prevent me from being compensated differently because of my gender. But I look not at just how this could benefit me, but also how it could prove detrimental and/or burdensome to employers - which will make them NOT want to deal with the issue and maybe not hire me because of my gender.

The new law allows for civil penalties including both compensatory and punitive damages. The lawmakers, in their infinite wisdom however, exempted the federal government from the punitive damages. One rule for us - a more lenient rule for them.

It also allows the Secretary of Labor to seek additional compensatory and punitive damages in such actions. So now an employer can be penalized twice for the same action - once by the employee's lawsuit and a second time by the federal government.

The rules for defense against the claim were also tightened, pretty much ensuring that an employer spend tons of money just to provide a defense within the narrow constraints of the law.

"... the bill amends the broad affirmative defense previously available to employers that the pay differential in question is caused by a factor other than sex. Under the new legislation, an employer is required to show that any wage discrepancy is caused by a bona fide factor other than sex, such as education, training and experience, and that this factor is job-related and consistent with business necessity. An employee can rebut this claim by showing that there exists an alternative employment practice that would serve the same business purpose without resulting in the pay disparity, and that the employer has refused to adopt this alternative practice. It is this portion of the affirmative defense that will likely cause significant litigation, pitting the viability of an alternative work practice against the employer’s sound business discretion.

The Act also eliminates the “establishment” requirement that employees must work in the same place of employment for wage comparison purposes. Under this bill, an employer’s establishment would include workplaces located in the same county or similar political subdivision of a state."

When faced with such potential negative consequences from making a decision to pay a woman a different wage than a man who happens to work in the same area - or even in a different one, an employer will either chose an identical pay (thus negating the concept of being compensated for the value you provide the firm) or will seek men so they don't have to worry about the issue.

(Yes, I know it's not supposed to work that way, but it does. It's a simple matter of putting the price on the potential cost, something the private sector does on a regular basis that seems foreign to government.)

The problem is that the federal law has just interfered in my employment decisions. If I'm offered a position at a certain rate of pay and I accept that position, why would I suddenly be 'entitled' to more compensation just because another employee, who happens to be a man, has negotiated a better contract? If I'm more valuable to the company than the man, I can negotiate higher compensation based upon what I provide to the company. When government dictates the value of my services through mandated wages, it negates my ability to do something different. And I think I'm better than the government at negotiations.

The other piece of legislation was H.R.2831, the Lilly Ledbetter Fair Pay Act of 2007. Ledbetter, a 19-year veteran of Goodyear Tire & Rubber Co., sued the company when she learned that, for much of her career, male counterparts had been paid more for doing the same work. The case went all the way to the Supreme Court which ruled that she should have filed suit within 180 days of her first unfair paycheck, not 180 days from the time she learned of the difference in pay. They dismissed her case, ruling on the way the law was written, thus setting up the 'need' for Congress to change the law.

This bill, which passed 247-171, was to make that 'correction':

"Amends the Civil Rights Act of 1964 to declare that an unlawful employment practice occurs when: (1) a discriminatory compensation decision or other practice is adopted; (2) an individual becomes subject to the decision or practice; or (3) an individual is affected by application of the decision or practice, including each time compensation is paid. Accrues liability, and an aggrieved person may obtain relief including recovery of back pay for up to two years preceding the filing of the charge, where the unlawful employment practices that have occurred during the charge filing period are similar or related to practices that occurred outside the time for filing a charge. Applies the amendments of this paragraph to claims of compensation discrimination under the Americans with Disabilities Act of 1990 and the Rehabilitation Act of 1973.

Amends the Age Discrimination in Employment Act of 1967 to declare that an unlawful practice occurs when a discriminatory compensation decision or other practice is adopted when a person becomes subject to the decision or other practice, or when a person is affected by the decision or practice, including each time compensation is paid."

The bill expressly states that an individual is affected by the discriminatory compensation decision or practice each time the individual receives a payment of wages, benefits, or other compensation. Thus, the applicable 180- or 300-day time period for filing an EEOC charge challenging an allegedly discriminatory compensation practice would begin to run anew with the receipt of each paycheck or benefit reimbursement check reflecting the discriminatory compensation action, no matter how long it has been since the discriminatory practice began.

Under the Lilly Ledbetter Fair Pay Act, employers could be scrutinized – and made liable for – acts and decisions made years earlier. Moreover, a worker or retiree could seek damages against a company run by employees and executives who had nothing to do with the initial act of alleged discrimination that occurred 5, 10, or even 20 years earlier. Trying to reconstruct ancient alleged acts of discrimination in order to defend these lawsuits could prove challenging for employers.

Don't misconstrue my position. Employers should not discriminate against me just because I happen to be a woman. Employers should compensate me based upon my contribution and value to the company - not because of, or in spite of, my gender. But both of these bills increase regulations on employers, increase the damages for violating the law, and increase the likelihood of lawsuits. They raise the costs and consequences of hiring women - and Congress thinks this is supposed to 'help'?

There are always unintended consequences of good intentions.


Timothy W Higgins said...


You are 110% correct on what will inevitably happen with the application of these legal revisions. The only good things that any of this will have proved, and that by the negative, is that government should stop trying to create victims at every turn and should likewise stop trying to intrude in business as little as possible.

Jill said...

Maggie, I respectfully disagree with your position on these bills.

I agree with your analysis of the potential penalties of enacting such legislation, however, I believe that the situation they address requires such regulation. If employers did not discriminate and did not do so with such disregard for laws already in place, then these changes would not be necessary. Sadly, the employers have continued to take advantage of not being regulated.

I do not believe that the tsunami of tzuris is going to hit the employers. My expectation would be that, much as with the ADA, employers will recognize what they need to do to be in compliance - make pay equitable among qualified individuals who are similarly situated on all relevant metrics.

I also respectfully disagree with Tim's more general statement about the gov't creating victims. These bills seek to address the decision-making of the employers who, in their opposition to these bills, are trying to make themselves look like the victims. I don't buy it.

Maggie said...

Jill - that we disagree on the issue does not surprise me, considering our philosophical beliefs. :)

However, you are probably correct on the outcome - as employers just adjust to the new regulations.

I don't pretend that some employers would take advantage of a lack of regulation to 'discriminate' as some like to characterize it. However, in today's environment and global competition, these rules do not make U.S. businesses more competitive, nor are they as required as some would have us believe.

A company that doesn't provide good compensation packages to all its employees quickly gets a reputation and, especially with today's communciation tools, has trouble attracting good employees. Bad PR is much more effective at changing behaviors than government regulation is.

I just don't believe that every perceived injustice requires a federal law, especially a law that increases a company's likelihood of being sued and stacks the odds against them winning.

Do you support the ability of the government to seek penalties in addition to those imposed by an employee who sues? I think that provision is the most onerous one in the bills, as it inflicts double damage for a single violation.

In the end, though, the big winners will be the attorneys.

Jill said...

I write also as a lawyer (albeit on inactive status since 2005) and a woman who spent three years as an ombuds. I met a lot of EEO folks during those three years as well and this issue of compliance is just huge, in a variety of areas - not just pay equity.

From the legal standpoint, this is a deterrent. The likelihood of litigation is very low, there are multiple steps that employers - and employees - can take to redress the situation long before any attorneys get involved. The only additional legal work will come from counsel interpreting the new laws and providing guidance for how to behave within the law. But other than that, we should not see an increase in litigation or attorneys retained and seeking redress - so long as employers act with integrity and good faith.

I don't anything about why the gov't penalty-seeking provision is in there from the drafters perspective. My first thought is only that it's an additional deterrent but whether it's necessary or not? It's hard to know for sure. My suspicion is that the drafters of the bill felt that so long as they were going to have at it and most likely get approval, they'd put it in to be sure that employers are paying attention.

So - as a legislative and political ploy, I have a problem with it. If, however, there was some backup that showed that such clauses improve compliance, I'd reconsider but no, I don't know that I'd be okay with it.

The sad fact for me is, obviously, that employers have been taking advantage of something they shouldn't be doing in the first place because 1) the law doesn't enforce whatever already exists in it to prevent that discrimination and 2) the profit motive presses the employers to do whatever they can get away with to improve their bottom line. I don't take it personally against women, per se - I imagine employers seek to pay people as little as possible all the time. So what you wrote about negotiating is incredibly important - I know this as a freelance writer.

But one potential employee, versus a corporation, esp. in times of economic stress, can use all the help they can get in knowing that there are regulations that must be followed or else there will be severe penalties.

Frankly, immigration law is very much the same, probably worse, in this regard for the bottom line. And we need to be honest with ourselves, regardless of party affiliation, about that.

Maggie said...

Lisa - I appreciate your perspective, especially from a legal standpoint.

But you can clearly see where our philosophical differences influence our positions on this.

You see government as an aid to help ensure that people act appropriately. There is certainly agreement between us on government's proper role in doing so.

Where we begin to depart is on how far government should go in this role. I believe that the market will provide the proper regulations, if allowed to act freely.

I disagree that employers seek to pay people as little as possible. Having been an employer, I am very willing to pay people based upon their value to the company, knowing that some have more value than others. And the more valuable an employee, the more I'm willing to pay to keep that person. People always think they're worth more than they're being compensated - I think that's human nature.

I'm also inclined to believe that the number of companies NOT treating employees differently based upon their gender far exceeds the few who do.

Here's another issue to consider: you want to buy a firm so you make an offer, negotiate and purchase. Then you begin to review employees, wages, benefits, etc. You discover some employees appear to have been paid based upon gender and you want to correct the situation. However, in bringing the issue to light, you are now subject to lawsuit for the past discrimination. Will such potential scenarios make it more difficult to buy and sell businesses? Or will it just provide one more thing for the lawyers to get paid to examine?

I don't know, but I stand by the 'unintended consequences of good intentions.'

Again, thanks for the perspective!

Jill said...

Hi Maggie - a few thoughts:

1. You wrote, "You see government as an aid to help ensure that people act appropriately. There is certainly agreement between us on government's proper role in doing so."

Not government - law enforcement. Legislation made by gov't leads to laws that must be enforced. That's how our system works. Criminal and civil law, doesn't matter - it's all drafted by and passed by gov't - there's no way around that. If we figure out how to encourage desirable behavior without using laws and the enforcement of them, so be it but for now, it's what we've got as far as influencing behavior on a variety of levels.

2. Now - you point to the free market as being the better regulator, however, by your own admission, it doesn't always work.

(You wrote, "I believe that the market will provide the proper regulations, if allowed to act freely." The market has not been providing the proper regulations - while acting freely, the pay inequities have remained and persist.)

I am not persuaded that we should not encourage employers to do better at pay equity simply because more employers are in compliance than aren't. More people don't commit murder than do, but that doesn't mean that we don't change criminal laws to further deter murder - or drug use, or safeguarding kids with booster seats, etc.

3. As for the buying of a business, I find it hard to believe that the pay inequities that are involved in an already existing company that someone desires to purchase could not be the subject of negotiation between all parties involved. I also do not know how the law will function regarding past discrimination and tolling etc., but I certainly would be in favor of favoring the one who wants to buy the business and come into compliane by somehow setting up a waiver for the illegal acts of the previous owner.

Of course, this means that the tactic of guilt by association, as a general rule, really must be dropped. :)

Maggie said...

Jill...Interesting points...

1) government can only do what it does because it has the ability to use the force of government - law enforcement. Some of this is good - like capturing and penalizing murderers, etc... Some of this is bad - in that government takes on roles that were never intended because of the ability of a free people to act on their own.

2. A government that interferes in the free market sets up rules and eliminates the conditions that would normally exist to sanction employers who don't behave as some would like.

If there were no laws governing how much you could pay a person, the decision would be up to the individual seeking compensation and the business owner providing it. Companies with good track records would have the best employees and companies without such good reputations would either have employees willing to accept such conditions or would find themselves out of business as the market (customers, etc) reacted.

Murder and other crimes are not a good comparison as criminal acts are not a voluntary arrangement while employment is.

Basic distinction: I believe government should protect my liberties and these types of laws do not do so. Instead, I see them as attempting to protect me from myself, that is, my decision to engage in a voluntary transaction of exchanging my work for pay.

3. I would agree that some sort of waiver or exclusion should be granted to a new owner of a company, but could find nothing like that in the law. Perhaps they didn't think of that aspect as they were writing it? Would that be an unintended consequence? LOL!

Maggie said...

Clarification on point #2:

We really don't have free markets...that may be both good and bad, but since they really don't exist, it's hard to say if they would work better or worse than what we have now...

Jill said...

RE: "I would agree that some sort of waiver or exclusion should be granted to a new owner of a company, but could find nothing like that in the law. Perhaps they didn't think of that aspect as they were writing it? Would that be an unintended consequence? LOL!"

Maybe there will be rule promulgation from DOL? Commerce? I don't know - but yes, it would be good to promulgate rules to encourage the sale and purchase and not penalize the buyer.

Hot Dog Man said...

I have a question regarding unfair pay practices, if an employer routinely pays women less than a man for the same job/work...why would men EVER be hired? As an employer if I have to pay a man $10.00 an hour to make my widgets and I can "get away with" paying a woman $9.00 why on earth would I even consider hiring men? it makes no logical sense.

if women are in fact paid less than men, then there has to be some logical, business related reason for it. This is the government again jumping into a situation before it has all (or any) necessary facts. The Federal government just reminds me so much of Carty...ready, shoot, aim!

Get Off My Back said...

The last commenter (word?) hit the nail on the head--just hire women for everything. Another solution is to use different job titles and descriptions for every position (if that's possible) and make sure everyone's responsibilities are enough different that no comparisons can be made. But of course, they would be anyway.

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