What Should Employers Know About the Paycheck Fairness Act?
Shortly after President Biden assumed office, he announced that “closing the gender pay gap is more than just an economic imperative — it’s a moral imperative as well.” The Biden administration approached this priority by backing the Paycheck Fairness Act, a bill that would create new regulations in support of pay equity.
Paycheck Fairness was based by the House of Representatives but failed in the Senate. But that’s not the end of the road for this bill, a version of which was first proposed in 1997. Not only is it bound to return in some form, but some of the provisions in the bill already exist on a state and local level.
So, what does all of this mean for employers? First, let’s talk about the concept of pay equity.
What’s the difference between pay parity and pay equity?
Critics of the Paycheck Fairness Act argue that we don’t need further legislation, as we already have the federal Equal Pay Act (EPA). This law guaranteed that everyone receives equal pay for equal work, regardless of gender.
The EPA gives us pay parity, meaning that everyone in the same position earns the same wage. For example, imagine a large company with 100 salespeople. If the average salesperson’s base salary is $50,000, then the women on the team will also have an average of around $50,000.
But pay parity only works when you make a like-for-like comparison between roles. What happens when you look at all positions within the organization? How do all female employees compare to all male employees?
When we look at data on a national level, we can see a huge difference along lines of race and gender. Current studies suggest that for every $1 that a white man earns:
- A woman earns 84c
- A Black woman earns 63c
- A Native American woman earns 60c
- A Latinx woman earns 55c
Pay equity is the idea that we need to dig deeper and attack the underlying reasons for the gender pay gap. Sometimes, this means looking at major societal changes. But it also means that employers have to look at their hiring and human capital management processes.
How would the Paycheck Fairness Act affect employers?
Right now, there seems to be little chance of the act passing in its present form. But it’s worth knowing what’s contained in the act. These proposals echo concerns of state and local legislators – and employees themselves.
The main provisions of the act include:
- Revisions of exemptions: Employers can differentiate based on education, training or experience. However, if there is a reasonable alternative business structure or practice that removes the necessity for pay differentials, then employers must adopt that that structure of practice.
- Strengthening of current EPA rights: Give employees more support when making a complaint about unfair salary structures.
- Class-actions suits: New provisions to support plaintiffs who want to launch a class action suit against employers.
- Burden of proof: Employers would have to prove that any pay discrepancies are valid under EPA rules, i.e., that they’re clearly rewarding seniority or performance
- Salary history: New rules to prevent employers from asking about a candidate’s previous salary.
- Salary transparency: Employers would no longer be able to prevent staff from discussing salaries with colleagues.
- Analysis and reporting: Employers would have to provide salary data broken down by race and gender.
This federal law has not yet passed, but there are dozens of state and local laws that create many of the same requirements. Two of the main types of law include:
- Equal pay: Extensions of the current EPA rules. For example, some states define “equal work” as any role at the same level of skills or seniority, meaning that a sales manager and an HR manager might be considered similar roles. There are equal pay laws in every state except Mississippi.
- Pay transparency: These laws generally protect the rights of workers to discuss their salary with others. Pay transparency laws exist in states such as Virginia, Maryland, and in the District of Colombia.
The Department of Labor website has an interactive map of equal pay and pay transparency protections in each state.
What’s next for pay equity?
Whatever happens next with the Paycheck Fairness Act, it’s clear that pay equity is a concern for every employer.
Taking action on pay equity now has many advantages, including:
- Improved staff retention and loyalty
- Better engagement as employees feel more valued
- Enhanced employer brand as candidates see your commitment to fair pay for all
- Less stress in the future if you face new local, state, or federal pay equity rules
For an in-depth look at what you can do to tackle pay equity and the gender gap, take a look at this article: How to Best Approach Reducing the Gender Wage Gap at Your Organization.