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Apr 3, 2014

In advance of an expected floor vote, the Senate Committee on Health, Education, Labor and Pensions held a hearing this week to discuss the merits of the Paycheck Fairness Act (S. 84).

Sen. Barbara A. Mikulski,D-MD, chief sponsor of the legislation, said the Senate needs to “finish the job started by the Lily Ledbetter” Fair Pay Act.

The bill, which has been introduced several times in the last few years but has failed to advance, would make the following changes to current wage law:

  • Expand damages under the Equal Pay Act (EPA) to include potentially unlimited compensatory and punitive awards for wage discrimination.
  • Weaken an employer’s ability to raise the “factor other than sex” affirmative defense in a wage discrimination case. Under the more stringent standard, an employer would have to prove that a pay differential was based on a “bona fide factor other than sex, such as education, training, or experience,” and that this other factor is job-related and consistent with business necessity. An employee would be able to rebut this claim by a showing that an alternate business practice exists that would not result in the disparity.
  • Ease the requirements for bringing a class action lawsuit under the EPA.
  • Prohibit retaliation against employees who made a complaint, filed a charge, testified, or otherwise assisted in an investigation or proceeding related to an unfair wage complaint.
  • Make it unlawful for an employer to prevent employees from discussing or comparing salaries.
  • Allow the Equal Employment Opportunity Commission (EEOC) to collect pay data from employers.
  • Reinstate the Equal Opportunity Survey, to be administered by the Office of Federal Contract Compliance Programs (OFCCP), and provide the agency with additional investigative methodologies to use in performing compensation analysis. The previously-abolished EO survey allowed the OFCCP to gather certain employment information from federal contractors and subcontractors related to their Affirmative Action Programs, personnel activity and compensation.

“Lottery-type damages?”

One witness, testifying on behalf of the U.S. Chamber of Commerce, said the measure “would impose harsher, lottery-type damages” on employers regardless of their size and whether there is evidence that any wage disparity is due to intentional discrimination.

The panelist said that the bill would “effectively eliminate the ‘factors other than sex’ defense,” constituting the “most significant substantive change” to the EPA. In essence, any pay difference that cannot be proven to be an absolute business necessity – which is a very high standard – would be presumed to be the result of intentional pay discrimination, thereby subjecting the employer to potentially unlimited damages and class action lawsuits.

According to the panelists, both the Equal Pay Act and Title VII of the Civil Rights Act already provide adequate remedies for pay discrimination, including back pay, injunctive relief, liquidated or double damages up to $300,000 per employee, and, if a federal contractor, certain sanctions.

The witness explained that today’s EEOC statistics confirm that aggrieved individuals are already taking advantage of multiple forms of redress.

Expanding the damages available under the EPA “ignores that it is a remedial, strict liability statute,” and that without intent, providing such damages runs contrary to the entire body of established employment discrimination law.

What employers need to know

If the bill were to become law, even if an employer were able to prove that a pay differential is due to a gender-neutral factor that is necessary to the business, it would still be liable for considerable damages if the complainant could point to an alternative practice that would not result in the pay difference. This stringent test, some panelists argued, would substantially weaken an employer’s ability to recruit applicants who might have more experience, education or training, and discourage employers from paying more for qualifications beyond those absolutely required by the job.

When asked by ranking member Lamar Alexander, R-TN,  whether the bill would increase litigation, the panelist said it would “not only increase it, but prolong it.”

Another witness explained that some federal circuit courts of appeal, such as the Seventh and Eighth Circuits, have interpreted the “factors other than sex” defense broadly to include pay differences stemming from market forces and an applicant’s prior salary. The Paycheck Fairness Act would make such justifications markedly more difficult for an employer to rely upon.

A complete list of panelists and links to their testimony can be found here.

This was originally published on Littler Mendelson’s Workplace Policy Update blog© 2014 Littler Mendelson. All Rights Reserved. Littler®, Employment & Labor Law Solutions Worldwide® and ASAP® are registered trademarks of Littler Mendelson, P.C.

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