By Matthew J. Gagnon and Benjamin I. Han
Seyfarth Synopsis: As the transition to a Biden administration draws near, what pay equity developments can employers expect under his presidency? An analysis comparing pending federal bill H.R. 7, titled the Paycheck Fairness Act, against state equal pay laws may offer some guidance, particularly in light of the uncertainty surrounding whether the new administration will have a Congress aligned with its policy goals.
Transitions to a new presidency are pivotal times to prepare for and frankly, prognosticate significant changes to the law that may directly impact businesses and the workforce. In the pay equity realm, there are some indications that employers may see a significant shift on the federal level under the Biden administration. Not only was the President-Elect part of the Obama-Biden administration which saw the Lily Ledbetter Fair Pay Act of 2009 as one of its first legislative products, but the Biden Campaign has pledged to build on that piece of legislation and outwardly supports the Paycheck Fairness Act (H.R. 7).
Although uncertainty remains as to whether H.R. 7 will ever reach the Oval Office for presidential signature (some may even call it a long shot), it is a worthy exercise to analyze the pending bill against state equal pay analogs to predict what changes may be coming down the pike, either through H.R. 7 or some future variant. This article kicks off a series dedicated to such analyses, starting with a brief overview of the underlying law and a summary assessment of one of the many key changes that H.R. 7 brings to the Equal Pay Act regime, in relation to other state equal pay laws.
Overview Of Proposed Changes To The Equal Pay Act
The Equal Pay Act of 1963 prohibits employers from discriminating “between employees on the basis of sex by paying wages to employees in such establishment at a rate less than the rate at which [it] pays wages to employees of the opposite sex in such establishment for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions . . . .” The law recognizes four affirmative defenses: (1) a seniority system; (2) a merit system; (3) a system which measures earnings by quantity or quality of production; or (4) a differential based on any other factor other than sex. (Seyfarth’s annual publication, Developments in Equal Pay Litigation, provides a more extensive analysis of the EPA and current trends in EPA litigation.)
H.R. 7 would make sweeping changes to the Equal Pay Act, as discussed in detail in our previous article on the bill, along with the testimony provided by Seyfarth Shaw’s Camille A. Olson during a joint hearing of the House Subcommittee on Civil Rights and Human Services and the Subcommittee on Workforce Protections. In summary, H.R. 7 would result in the following key changes to the Equal Pay Act framework: (1) drastically restricting the “factor other than sex” defense; (2) prohibiting employers from inquiring about salary history and restricting its use in setting starting pay; (3) significantly expanding employees’ protections against retaliation for asking about and even publishing pay data about other employees; (4) expanding available damages and allowing EPA lawsuits to be brought as class actions; (5) expanding the definition of “establishment”; (6) imposing new data collection obligations; and (7) changing OFCCP methodology in identifying pay discrimination.
There are practical alternatives to some of the changes H.R. 7 would bring – many of which were discussed in Ms. Olson’s testimony – including the addition of language that expressly states that pay disparities must be based on job-related reasons, but eliminating the requirement that they also be consistent with “business necessity, and providing employers with incentives and legal protections that would allow them to more freely engage in voluntary self-critical compensation analyses without fear that doing so will put them at greater legal risk. Such proposals would further the goals of the EPA and avoid some of the more onerous characteristics of H.R. 7. We will analyze these proposed alternatives during the course of this series of articles as we discuss the other proposed changes of H.R. 7.
The Meaning Of “Establishment” Under The Current EPA, H.R. 7, And State Equal Pay Law Analogs
A good starting point to lead this new series is to analyze the issue of scope under H.R. 7, meaning how broad may a plaintiff look across a company to identify unlawful pay disparities. Currently, the EPA requires an employee to compare their wages against other employees within the same physical place of business in which they work. According to the regulations issued by the EEOC interpreting the EPA, the term establishment “refers to a distinct physical place of business” within a company.
H.R. 7 would significantly expand the meaning of an “establishment” under the EPA, as it would cover pay disparities between employees working not only in the same physical location, but also between employees working in the same “county or similar subdivision of a State.” In other words, under H.R. 7, an employee bringing an EPA claim could compare their pay to that earned by an employee who performs work at a completely separate place of business within the same county, without regard to factors such as variable commuting costs, among others. This shift increases risk and exposure for employers, as employees would have a wider pool of comparators from which to establish unlawful wage discrimination.
Analyzing scope in state equal pay laws reveals that H.R. 7 aligns with those that are more plaintiff-friendly. To date, state equal pay analogs fall into a few categories. First, the group of states that align most closely with H.R. 7 allows employees to compare wages across the same county, including states like Illinois, Maryland, and New York. A second group of states, including California and New Jersey, go so far as to permit comparison beyond county lines, allowing wage comparison across a company’s entire business or enterprise. The majority of states that have enacted their own equal pay law, however, align with the traditional meaning of “establishment” as defined in the EPA. (A complete, state-by-state list of critical equal pay statutory provisions is available in Seyfarth’s 50 State Pay Equity Desktop Reference.)
Based on these categories, it is apparent that H.R. 7 is drafted to give employees more latitude to find wage disparities to support a lawsuit, although the approach could arguably be characterized as a “middle ground” since it is not as expansive as the scopes applied in California and New Jersey. It is worth noting, however, that the state laws that define a scope that more closely resembles (or exceeds) what was proposed in H.R. 7 tend to be those that were more recently enacted or amended. In other words, the clear trend at the state level – perhaps to be replicated at the federal level – is to allow potential plaintiffs to look across wider swaths of a company to allege pay disparities.
Employers in many states must already grapple with the fact that pay equity comparisons are no longer contained within a single location or facility, but may be made across an entire county or state. If the incoming Biden administration chooses to make pay equity a top priority – as the Obama administration did in 2009 – it is possible that those changes could be coming for every employer nationwide. Of course, a new federal enactment could easily retain the traditional definition of “establishment” under the EPA, as many states have done, or such a new law may never come to pass. But with the Biden campaign’s clear approval of H.R. 7 in its current form, one could fairly expect his administration to find ways to tilt the playing field in favor of employees.
For more information on this or any related topics, please contact the authors, your Seyfarth attorney, or any member of Seyfarth Shaw’s Labor & Employment Team.