Employers beware: Pay gap regulations blossom across the country

A $0.20 pay difference could cost employers millions as more states continue to pass regulations to shrink the gap between what men and women are paid in the absence of any formal federal legislation.

There is a lot of publicity and attention on workplace pay equity, says Lynn Clements, director of regulatory affairs at Berkshire Associates, an affirmative action consulting firm. And there is a patchwork of laws being created by states and local municipalities, as lawmakers begin broadening and narrowing defensible explanations employers can use on wage differences.

“It is confusing, especially for multistate employers because these new requirements are not always the same,” she says. “Very few have the same requirements or defenses. In most cases, requirements vary state by state and this really poses unique challenges.”

California state capitol building sacramento

pEmployers must to be careful, she advises. These laws “may not be just for multi-state employers. Some laws may also apply if you recruit nationwide, or recruit across state boundaries,” she says.

For example, she points out that Berkshire Associates is a Maryland-based employer and will obviously need to comply with Maryland laws. “But what if we decide to employ a remote employee in California,” she asks. “Do we have obligation to comply with all California requirements and do they work together or against the Maryland requirements? This is a puzzle employees have to keep piecing together.”

Several states already have created or amended laws paw equity laws, including California, Massachusetts, New York and Puerto Rico. Additionally, Clements adds, more than half of the other states around the country have passed or have pending similar laws, like Nebraska, Pennsylvania and Louisiana.

In Oregon, for example, their pay equity law expands protected classes to include gender, race, religion, sexual orientation, national origin, marital status, disability, veteran status and age. The state further expanded the definition of compensation, are bonuses or stock options also being paid fairly, she asks

But if an employer is challenged on pay practices, what defensible actions can they take? “The trend,” she says, “is that the states are limiting the types of affirmative defenses or legitimate reasons employers can use.”

She cautions employers will need a bona fide factor other than gender, and that often defenses are limited to certain clearly defined factors, such as education, training or experience.

One positive action employer can do now though, is to conduct a pay equity analysis. “One thing you have to figure out when conducting a pay analysis,” she notes,” is who am I going to compare? What factors will I use to explain the pay? What unit am I looking at — base pay, total compensation, merit increases?”

When you take these pay equity laws springing across the country with a similarly popular salary history ban, for employers this will be where rubber hits road, she says.

“There is also a growing trend toward prohibiting employers from asking salary histories through most or all the hiring process,” she adds, evident in cities states and cities like Delaware, Oregon, Philadelphia and Albany.

While these policies play out, Clements suggests employers just stick with asking applicants instead on salary expectations.

If you’re in a state that bans the question, or you’re making the switch from history to expectations, she offers a few tips to successful incorporate a new process:

· Ask applicants for expectations
· Provide applicants a salary range/scale for position
· Set a fixed starting salary or set of salaries by position
· Use a “matrix approach” that takes into account job-related attributes
· Rely on data-driven “predicted starting salary” approach.
Train managers to avoid verbal requests for salary info

For reprint and licensing requests for this article, click here.