House Holds Hearing on Paycheck Fairness Act

Seyfarth Synopsis: On Wednesday, February 13, Seyfarth Shaw’s Camille A. Olson testified at a joint hearing of the House Subcommittee on Civil Rights and Human Services and the Subcommittee on Workforce Protections on the Paycheck Fairness Act  (H.R. 7).  That bill, in summary, would radically amend the Equal Pay Act to virtually eliminate the ability of an employer to explain pay differences between employees based on job-related factors that are not specifically enumerated in the Equal Pay Act; prohibit an employer from seeking or relying on an applicant’s pay when extending a job offer; impose unlimited punitive and compensatory damages and expand class action rules to the benefit of the trial bar; and make numerous other changes to existing law.  In addition to highlighting significant concerns with H.R. 7, Camille also discussed certain opportunities to enhance the current protections against wage discrimination.

What Would H.R.7 “The Paycheck Fairness Act” Do?

Although couched in seemingly technical language, H.R. 7 would:  make sweeping changes to the Equal Pay Act making it extremely difficult for an employer to defend itself even when legitimate job-related factors explain differences in pay; impose unlimited punitive and compensatory damages and expand class action rules to the benefit of the plaintiffs’ trial bar; and impose numerous other changes.  There are a number of significant concerns with the H.R. 7, including:

• Defacto Eliminates the “factor other than sex” Defense.  Under the EPA, an employer must explain any pay difference is job-related.  If the employer cannot do so, the plaintiff prevails.  No showing of discriminatory intent is required under the EPA.  H.R. 7 requires an employer prove that (1) it paid more because of a business necessity, (2) the proven business necessity explains 100% of any pay difference, and (3) the business necessity was not derived from a sex-based differential in compensation.  Even if an employer meets this high burden, H.R. 7 provides that the employer will have liability if an “alternative employment practice” would have served the same purpose without producing a wage difference. 
• Prohibits Employers From Seeking Or Relying on Current or Prior Pay.  Under H.R. 7, employers cannot seek and must ignore an applicant’s current pay when making an offer.  Seyfarth highlighted that current pay often provides valuable information regarding a candidate’s actual experience, performance or expertise, and that the EEOC has described justifiable reasons for considering an applicant’s prior salary.  H.R. 7 essentially keeps both sides in the dark about the expectations that each party has with regard to the pay for the job at issue.
• Expands Available Damages and Class Actions Under the EPA.  While concurrently gutting the existing ability of employers to defend legitimate reasons for pay differences, H.R. 7 creates another layer of damages that allow for unlimited compensatory and punitive damages.  These damages far exceed the available remedies under Title 7 which require intentional discrimination for both compensatory and punitive capped damages and are in addition to the significant penalties that already exist in the EPA.  In addition, the changes to the class action methodology would significantly expand the class size because the  potential class members would be required to opt-out of the class as opposed to opting-in to the class under current law.  
• Definition Of “Establishment.” The Equal Pay Act requires equal pay for men and women who perform equal work in the same establishment. The proposed law 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.” 
• New Data Collection Obligations. H.R. 7 would mandate an EEOC-driven data collection process that would require employers to submit compensation data and other employment-related data (including hiring, termination, and promotion data) by gender, race/ethnicity and national origin.  H.R. 7 also requires that the data must be “disaggregated” (an undefined term).
• Changes to OFCCP Practice. H.R. 7 also proposes to direct the OFCCP to change its methodology regarding the identification of compensation discrimination.  The statute would reinstate the pay grade methodology, and would eliminate the requirement that the OFCCP prove discrimination by the use of multiple regression analyses, among other changes.  In addition, H.R. 7 creates a new mandatory reporting requirement for government contractors.

While highlighting these concerns in her testimony, Ms. Olson also highlighted that employers have a deep commitment to ensuring that their compensation systems effectively attract, motivate, reward and retain employees while complying with applicable laws. Ms. Olson also identified certain opportunities to improve the Equal Pay Act.  For example, (1) adding language to the EPA that expressly states that pay differences between workers performing the same work must be based on job-related reasons, (2) providing employees with an express protection within the EPA against retaliation for engaging in discussions and gathering information regarding compensation for the purpose of determining whether an unlawful wage disparity exists, and (3) providing employers with incentives to engage in voluntary self-critical compensation analyses that encourage self-evaluation to eliminate unjustified pay discrepancies without the need for litigation.  

H.R. 7 is based on the false premise that broad wage differences between men and women in equal jobs are necessarily due to wage discrimination by employers, and, taken as a whole, H.R. 7 is unworkable as a practical and legal matter in today’s workplaces.

Seyfarth was invited to provide substantive analysis and expertise regarding the implications of H.R. 7 on an employer’s pay practices as well as its impact on current litigation and class procedures under the Equal Pay Act.  The other hearing witnesses provided support for H.R. 7’s existing language without reservation. 

Numerous Seyfarth Shaw attorneys provided significant analytical contributions to the testimony presented, including Annette Tyman, Richard B. Lapp, Lawrence Z. Lorber, and Randel K. Johnson.  For further information, contact Annette Tyman, Pay Equity Group Co-Chair;  Randy Johnson, Government Relations and Policy Group Chair; or Camille Olson, Complex Discrimination Practice Group Chair.