The issue of pay disparity between men and women continues to persist, with women earning only 84% of what men earn on average. To address this wage gap, legislation has been introduced at both the state and federal level aimed at ensuring equal pay for equal work. One recent example is the proposed Pay Equity Bill in Congress. This article will provide an overview of pay equity laws, explain the major components of the bill, and discuss the debate surrounding its potential impact.
Background on Pay Equity Laws
There are currently federal and state laws that prohibit pay discrimination based on sex. At the federal level, the Equal Pay Act (EPA) passed in 1963 mandates equal pay for equal work. The EPA applies to employers with 15 or more employees and covers all forms of pay discrimination. Under the EPA, employers cannot pay men and women different wages for “equal work” which requires “equal skill, effort, and responsibility.”
In addition to the EPA, Title VII of the Civil Rights Act also prohibits pay discrimination on the basis of sex Many states have also enacted their own pay equity laws with similar provisions. However, advocates argue there are still loopholes in the laws that allow discriminatory pay practices to persist
Key Components of the Pay Equity Bill
To strengthen protections, a Pay Equity Bill has been introduced in Congress. The major provisions of the bill aim to:
-
Require equal pay for “equivalent” jobs, not just identical jobs. This expands protections beyond the EPA’s narrow definition of “equal work.”
-
Ban employers from asking job candidates for their salary history. This prevents past pay disparity from perpetuating.
-
Allow employees to discuss and inquire about pay information without retaliation. This enables discovery of pay discrimination.
-
Increase damages payable to victims of pay discrimination. This enhances deterrence of violations.
-
Provide government programs to train women and girls in salary negotiations. This helps counteract persistent pay gaps.
-
Direct the EEOC to conduct pay discrimination investigations. This bolsters enforcement of the law.
-
Commission a national study on pay disparities based on gender, race, and ethnicity. This would provide valuable data to guide policy.
Debate Over the Pay Equity Bill
Supporters of the bill say it provides much-needed updates to equal pay laws to reflect the modern workforce and economy. However, opponents argue it could impose burdens on employers, weaken merit-based pay, and lead to excessive litigation.
Proponents believe the bill will significantly reduce the gender pay gap by creating stronger incentives for employers to pay men and women equitably. They say pay secrecy perpetuates discrimination and more robust laws are needed to overcome bias.
Critics counter that the strict regulations may force employers to arbitrarily increase women’s pay in ways that are unrelated to performance and qualifications. They also claim applicants would have less negotiating leverage if they can’t disclose pay history.
On both sides, there seems to be agreement that pay equity is a worthy goal. However, there are differing views on whether the provisions of this legislation would be beneficial or detrimental in practice. The debate is sure to continue as the bill moves through Congress.
The Importance of Pay Fairness
Regardless of the disagreements over this particular bill, pay equity remains a relevant issue. Unjust pay disparities persist across gender, racial, and ethnic groups. This impacts economic security, especially for single mothers and women of color. Comprehensive solutions combining legislation, voluntary initiatives, education, and activism are still needed to close wage gaps and ensure fair compensation.
Who Is Affected by Pay Equity?
Pay equity affects all working people and their families as well as the greater economy. It is commonly understood that pay discrimination not only affects women, but members of racial and ethnic groups, among other backgrounds.
Pay equity also affects employers who have to comply with federal, state, and local pay equity regulations. Some of the potential risks for employers associated with disregarding pay equity laws include:
- Regulatory audits and penalties
- Lawsuits (individual and class-action)
- OFCCP enforcement and audits that may lead to lost government contracts
- Compliance challenges for multistate operations as more states and local jurisdictions pass pay equity laws with accompanying penalties for non-compliance
- Employee dissatisfaction, leading to lower productivity and higher turnover
- Adverse effect on talent acquisition and retention
- Poor public relations and brand
As discussed above, enforcement of pay equity varies greatly across the U.S. and around the world.
On a federal level in the U.S., the OFCCP, a part of the U.S. Department of Labor, is responsible for ensuring that employers that engage in business with the federal government comply with the laws and regulations requiring nondiscrimination, such as Executive Order (EO) 11246. EO 11246 requires various equal employment practices of government contractors with at least $10,000 in government contracts.
These businesses must periodically self-audit their pay practices to address disparities based on race or national origin and gender. If selected for a compliance evaluation by the OFCCP, contractors must provide compensation information to the government.
Part of the OFCCP’s oversight mission is to ensure that federal government contractors and subcontractors comply with the legal requirement to take affirmative action and not discriminate on the basis of race, color, sex, sexual orientation, gender identity, religion, national origin, disability, or status as a protected veteran. In addition, contractors and subcontractors are prohibited from discharging or otherwise discriminating against applicants or employees who inquire about, discuss or disclose their compensation or that of others, subject to certain limitations.
OFCCP requirements for employers can include:
- Preparation of Affirmative Action Programs (AAPs)
- Retention, documentation, and analysis of applicant, hire, promotion, termination, and compensation data
- Preservation of all personnel or employment records; time frame depending on size of workforce
- Inclusion of equal employment opportunity statement in job advertisements
- Posting of anti-discrimination and pay transparency notices
- Permitting access to compensation data to OFCCP for the purpose of conducting compliance evaluations and complaint investigations
The U.S. EEOC is responsible for enforcing federal laws that make it illegal to discriminate against a job applicant or an employee because of the persons race, color, religion, sex (including pregnancy, gender identity, and sexual orientation), national origin, age, disability, or genetic information. It is also illegal to discriminate against a person because the person complained about discrimination, filed a charge of discrimination, or participated in an employment discrimination investigation or lawsuit.
Most employers with at least 15 employees are covered by equal and civil rights laws, such as the Civil Rights Act of 1964, but other laws apply to virtually all employers, such as the Equal Pay Act of 1963.
The EEOC performs two core functions:
- Collecting equal employment data from employers throughout the U.S. via annual EEO-1 reporting, which collects employment data from employers throughout the U.S.
- Investigating equal employment complaints that are reported to the EEOC by employees
Beyond the activities of the EEOC, individual states and local governments also have agencies that enforce state and local pay equity laws. California for instance, just started issuing non-compliance notices to employers that didn’t meet the annual pay data reporting requirements.
Its clear pay equity can have serious, costly implications for employers, but more importantly it can drastically impact your brand, perception, and even business performance. Organizations that prioritize workplace equity are higher performers, and prospective employees, investors, and other key stakeholders demand that employees demonstrate their commitment to fostering this type of work environment with action.
Pay equity is a world-wide initiative, and it’s being demanded. Not answering the call will harm all aspects of your business, new research conducted by Harvard Business Review finds.
An Introduction to Pay Equity
“Pay equity” is an umbrella term that includes issues related to the fairness of compensation paid by employers to their employees for performing comparable work, without regard to gender or race/ethnicity or other categories protected by law (such as national origin or sexual orientation).
Pay equity includes fairness both in terms of base pay and in total compensation, including bonuses, overtime, employee benefits, and opportunities for advancement.
Pay equity does not mean that all employees are paid the same. Generally, pay equity focuses on ensuring employees performing comparable work are receiving comparable compensation and that any differences in pay can be explained by legitimate job-related factors, such as:
- Skills, effort, responsibility, experience, education, etc.
- Quality or quantity of production
- Location (depending on jurisdiction/locality)
Pay equity is strongly interconnected with issues surrounding workplace equity. It is also concerned with rectifying past injustices with respect to unequal pay. Pay equity is influenced by laws, policies, regulations, and internal practices around the world.
Pay equity is also strongly interconnected with the “social” element of environmental, social, and governance (ESG) criteria. Investors, employees, and other key stakeholders are assessing organizations’ commitments to advance these criteria. While organizations may say they are focusing on social criteria such as diversity and inclusion, pay equity is a way for organizations to prove their commitment.
Now in 2024, pay equity is taking center stage as the Biden administration and several federal agencies, such as the Equal Employment Opportunity Commission (EEOC) and Office of Federal Contract Compliance Programs (OFCCP) introduce workplace equity focused initiatives.
‘Pay Equity’ bill signed; employers no longer able to ask about previous job salary
FAQ
What does equity pay mean?
What is the pay equity law in Texas?
What is an example of pay equity?
Is pay equity legal?
What is the pay equity for all act?
The Pay Equity for All Act (H.R.6030), introduced by Rep. Eleanor Holmes Norton (D-DC-At-Large) on Sept. 14, 2016, amends the Fair Labor Standards Act of 1938 to prohibit employers from seeking or requiring previous wage information or salary history from job applicants. If we didn’t have a wage gap, we wouldn’t need this coupon! Gender Wage Gap?”
Why is pay equity important?
These jobs have historically been undervalued and continue to be underpaid to a large extent because of the gender and race of the people who hold them. Pay equity means that the criteria employers use to set wages must be sex- and race-neutral. What is the legal status of pay equity? Two laws protect workers against wage discrimination.
Does Pay Equity tamper with supply and demand?
No, pay equity does not mandate across-the-board salaries for any occupation, nor does it tamper with supply and demand. It merely means that wages must be based on job requirements like skill, effort, responsibility and working conditions without consideration of race, sex, or ethnicity. Doesn’t pay equity cost employers too much?