March 30, 2010

SENATE HEALTH, EDUCATION, LABOR & PENSIONS COMMITTEE (HELP) HOLDS HEARING ON PAYCHECK FAIRNESS ACT (PFA)

by Art Gutman Ph.D., Professor, Florida Institute of Psychology

The meeting, held on March 11, 2010 was chaired by Senator Harkin, with testimony from Congresswoman Rosa DeLauro, an original sponsor of the bill in the House, EEOC Acting Chairman Stuart Ishimaru, Heather Boushey, Senior Economist for the Center for American Progress, Deborah L. Brake, Professor of Law at the University of Pittsburgh, Deborah L. Frett, CEO of the Business and Professional Women’s Foundation, and Jane McFetridge, Partner at Jackson Lewis LLP, a major law firm that represents management in employment discrimination cases. The written text from these contributors is available here.

To refresh your memory, the House passed the PFA in 2008 and it died in the Senate. It actually had more votes in the House (256) than the Ledbetter Act (250). There were five major points in the House’s version of the PFA.

First, the House bill would rename the factor other than sex (FOS) defense to “bona fide factor other than sex (BFFOS) — such as education, training or experience.” Additionally, the BFFOS defense borrows from the Title VII adverse impact defense, mandating that it is:

(i) not based upon or derived from a sex-based differential in compensation;
(ii) job-related with respect to the position in question; and
(iii) consistent with business necessity.

Consistent with the Title VII adverse impact cases, BFFOS does not apply “where the employee demonstrates that an alternative employment practice exists that would serve the same business purpose without producing such differential and that the employer has refused to adopt such alternative practice.”

Second, the House bill would broaden the definition of “establishment” so that individuals are deemed to work for the same employer “at workplaces located in the same county or similar political subdivision of a State.”

Third, the House bill would incorporate the “opposition clause” (complaining about a practice) and the “participation clause” (filing an actual claim) from Title VII statutory language on retaliation. It would also proscribe retaliation by employers if an employee “has inquired about, discussed or disclosed the wages of the employee or another employee.”

Fourth, the House bill would the remedies in the EPA to be consistent with those in Title VII and the ADA. These include compensatory damages for pain and suffering and punitive damages “where the employee demonstrates that the employer acted with malice or reckless indifference.” However, there is no apparent statutory cap on damages as there is in Title VII.

Fifth, the House bill would change the rule for class action lawsuits from currently existing “opt in” rules to “opt out” rules used in the Federal Rules for Civil Procedure, as well as in Title VII.

A blow-by-blow description of the hearing is provided here by AAUW, and woman’s rights group, albeit a source favoring the FPA. A sample of an opposing view may be found here. Clearly, Democrats (most notably Harkin & Dodd) favor the PFA and Republicans (most notably Enzi and Isakson) oppose it. All witnesses but one (Jane McFetridge) favored the FPA in their testimony.

Chairman Ishimaru focused on PFA’s pay data provisions. He emphasized that the EEOC has no way of knowing about private-sector pay data because of the pressure on employees not to talk about their pay. He emphasized that the PFA would better enable the EEOC to help employees and provide data standards to help employers

In general, the opposing view is that:

  • PFA threatens employee bonus or incentive pay that, by definition, provides some employees a higher wage than others
  • It prohibits employees from negotiating higher pay either before being hired or during employment,
  • It allow employees’ wages to be disclosed to peers, friends, family and competitors,
  • It requires employers to submit pay data on their employees to the Federal government,
  • It forces the Labor Department to reinstate a flawed and duplicative pay grade survey that has proven ineffective at enforcing civil rights laws among federal contractors,
  • It makes it easier for trial lawyers to file large class actions against employers, and
  • establish unlimited punitive and compensatory liability under the Equal Pay Act against employers of every size.

There are several good sites for recommendations for employers to cope with the PFA, should it pass. One that I particularly like is by Huntington Law & Employment, which recommends the following proactive steps:

  • Establish a well organized plan for identifying vulnerabilities, assessing employment policies and practices, monitoring outcomes of decisions on a statistical basis, and identifying solutions to address risk,
  • Establish this plan under the protection of attorney-client privilege.
  • Establish systems and tools to help ensure the most informed and defensible decision making.
  • A privileged compensation audit can help employers meet all of these needs.

We at DCI Consulting Group will continue to monitor and report any future developments on the PFA.

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