Gender Pay Equality: Prepare for Change

Coauthored by Carmen Saginario, Jr., Esq. and Bruce L. Harrison, Esq.

Recent actions at both the federal and state level demonstrate an increased political urgency about addressing perceived gender pay inequality.  This development was highlighted on January 29, 2016 when the EEOC announced a proposal that the EEO-1 form, completed and filed annually by firms employing 100 or more personnel, be substantially revised to include gender pay information.  Speaking in support of this proposal, President Obama pointed to data which shows that the median yearly income for women working full time is only 79% of the median income for full time males.

The text of EEOC’s proposal was published in the Federal Register on February 1, 2016.  In broad brush, the proposed amendment to the EEO-1 form will require employers to report wage by gender in 10 different job categories applying 12 different wage bands.  The data source for these reports are to be Form W-2.  The EEOC has clearly acknowledged that it will use the data collected from the revised EEO-1 forms to prompt investigations of employers and proceed with enforcement actions per their discretion.

There will be a 60 day public comment period on the proposal ending April 1, 2016.  Employer groups are expected to oppose the proposal with opposition based, in part, on the belief that  factors other than gender often trigger pay differentials which will not be shown by W-2 information.  That said, it is believed that after the close of the public comment period, and before the elections in November, a final rule will be published requiring reports beginning September 30, 2017 to include the gender pay data.  Should this happen, a challenge to the rule in the federal courts would be unsurprising.

In addition to supporting EEOC’s initiative, President Obama encouraged states and cities to implement new requirements directed toward addressing gender pay inequality.  Less than a week after the President spoke, New Jersey Senate No. 92 was proposed, with Senate President Steve Sweeney as one of its co-sponsors.  The bill has already passed the Senate and has be sent to the Assembly.

If passed by the Assembly and signed into law by Governor Christie, Senate Bill No. 92 will amend New Jersey’s Law Against Discrimination (“LAD”).  Likely its most important change will be to prohibit unequal pay for “substantially similar work”.  The bill continues to permit different rates of compensation “pursuant to a seniority system” or a “merit system”.  Additionally, Senate Bill No. 92 recognizes that “bona fide factors other than sex, such as training, education or experience, or the quantity or quality of production” may justify pay differences.  However, the “other factors” defense is limited in such a manner as to be of questionable value to an employer.  Most significantly, non-gender factors “must be job related with respect to the position in question and based upon a “legitimate business necessity”.  Business necessity is a well recognized concept in the law and requires its proponent to satisfy a quite high standard of evidence.

There is, of course, a legal history which places these recent initiatives in context.  The principal historical source is the Equal Pay Act (“EPA”) of 1963.  This law amended the federal wage and hour law, the Fair Labor Standards Act (“FLSA”).  Under EPA, an employer cannot pay unequal wages to men and women who perform jobs that require substantially equal skill (experience, ability, education and training), effort (physical and mental) and responsibility, performed under similar working conditions.

In passing EPA, the Congress explicitly rejected pay equality based upon what is known as “comparable worth”.  Under this doctrine, men and women who perform work of the same value to the organization should receive identical pay, whether or not their jobs are at all similar in content.  Neither the revision to EE0-1 nor Senate No. 92 appear to go as far as incorporating the doctrine of comparable worth.  However, in 2015, in H.R. 1619 and S. 862, in bills captioned the “Paycheck Fairness Act” (“PFA”), attempts were made to minimize the affirmative defenses to the EPA.  The PFA did not pass in either the House or Senate, but on January 29, 2016, President Obama stated his support for it.

While H.R. 1619 and S. 862 are more broad in overall in scope than Senate Bill No. 92, there is a basis to believe that those federal bills served as the seed for the New Jersey proposed legislation.  Simply stated, the two federal bills and Senate Bill No. 92 seek to restrict defenses available to employers which are provided for in the EPA.

It is probable that both the federal and state path forward will be impacted by the 2016 federal election and the state elections next year.  That said, it is reasonably likely in the foreseeable future that New Jersey employers will be required to comply with a new and enhanced standard for gender pay equity.  An uptick in gender pay litigation claims will almost surely follow. Whatever the future holds, New Jersey employers should consider reviewing their own payrolls and check whether anything jumps out at them regarding pay differentials between their male and female workers.  It is probable that legislative changes are coming from state and /or federal authority, and being ahead of this issue might be wise.