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The Paycheck Fairness Act: Are you ready for this?

“Giving women my Lilly Ledbetter Fair Pay Act without the Paycheck Fairness Act is like giving them a nail without a hammer.”  Lilly Ledbetter (AAUW.org) 1/28/13

If you don’t already have the compensation structures, policies and administrative processes in place to ensure fair and equitable pay within your organization, this may be a good time to do so.  The Paycheck Fairness Act (PFA), which has been rejected twice by the United States Congress, was reintroduced by Senator Mikulski & Representative DeLauro earlier this year.  Additionally, in his recent inaugural speech, President Obama highlighted equal pay for women as a priority for this next term.  The PFA, if passed, would close ‘loopholes’ in the historic 1963 Equal Pay Act (EPA) and build upon The Lilly Ledbetter Fair Pay Act which was signed by Obama four years ago.  The Lilly Ledbetter Act most significantly stated that the 180-day statute of limitations for filing an equal-pay lawsuit regarding pay discrimination resets with each new paycheck affected by that discriminatory action.

The PFA’s objective is to further narrow the pay gap between men and women by limiting employer defenses and removing the caps on punitive and compensatory damages from pay discrimination lawsuits.  The Paycheck Fairness Act would apply to all businesses that must comply with the FLSA and would have widespread implications for businesses and their employees.  The PFA would amend the Fair Labor Standards Act of 1938 and the Equal Pay Act of 1963 in the following ways:

  1. Broadens the definition of the term “establishment” from the same job site to any location owned by the same firm within the same county.  The new definition would no longer permit pay differentials on the basis of different working conditions.  For example, the PFA would no longer permit pay differentials for employees doing the same work in different locations owned by the same fast food establishment within a county.  Currently, pay differentials may be permitted for reasons such as the different competitive markets in each location.
  2. Only wage differentials that can be proved to be caused by something other than gender, truly related to job performance and consistent with “business necessity” will be defensible.
  3. Includes all female workers within an establishment in class-action lawsuits, unless they specifically opt out.
  4. Lifts the cap on punitive and compensatory damages and leaves it up to the courts to decide what appropriate damages are.
  5. Protects employees who discuss, or disclose their wages with another employee.
  6. Authorizes subsequent regulations that require employers to collect and report pay information data on their employees’ sex, race, and national origin.
  7. Creates a new grant program for training girls and women how to negotiate.

The PFA, if passed has the potential for numerous new lawsuits exposing employers to far greater liability.  It is critical for employers to continually manage and monitor their compensation practices.  Managing internal and external equity is a dynamic process requiring human resources to remain vigilant on changes in market conditions and business demands. HR must also continually ensure internal compensation structures, policies and administrative practices are achieving their intended goals.  The WageWatch Compensation Consulting Team is available to conduct internal equity audits to address employer concerns and add creditability to pay practices.  Additionally, the WageWatch PeerMark ™ Salary Survey reports the most current data available which forms the basis of the external analysis. To learn more about our compensation surveys, salary reports and other market compensation data, please call 888-330-9243 or contact us online.