Pay Equity is a Key Issue for Employers to Watch in 2021

With a new administration and Congress in place, there will undoubtedly be some significant changes to employment laws, and pay equity is likely to be key issue for employers to watch in 2021 and beyond. During his campaign, President Biden indicated his support of the Paycheck Fairness Act (H.R.7) as the next step in building upon a pay equity law passed by the Obama-Biden administration, the Lily Ledbetter Fair Pay Act of 2009.

Passed by the U.S. House of Representatives in March 2019, the Paycheck Fairness Act (H.R.7) addresses wage discrimination on the basis of sex. It amends equal pay provisions of the Fair Labor Standards Act of 1938 (FLSA) to (1) restrict the use of the bona fide factor defense to wage discrimination claims, (2) enhance nonretaliation prohibitions, (3) make it unlawful to require an employee to sign a contract or waiver prohibiting the employee from disclosing information about the employee’s wages, and (4) increase civil penalties for violations of equal pay provisions.

Potential Changes to the Equal Pay Act

Under the Equal Pay Act of 1963 (EPA), employers are prohibited from discriminating “between employees on the basis of sex by paying wages to employees in such establishment at a rate less than the rate at which [it] pays wages to employees of the opposite sex in such establishment for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions . . . .”  

The EPA identifies four affirmative defenses: (1) a seniority system; (2) a merit system; (3) a system which measures earnings by quantity or quality of production; or (4) a differential based on any other factor other than sex. 

If passed into law, the Paycheck Fairness Act would potentially make a number of changes to the EPA, including:

  • Significantly restricting the “factor other than sex” defense
  • Restrictions on employer inquiries about salary history and the use of it in setting pay rates
  • Expansion of employee protections against retaliation for inquiring about or publishing other employees’ pay information
  • Expansion of available damages and permitting EPA class action lawsuits
  • Expansion of the statutory definition of “establishment”
  • Imposition of new data reporting requirements
  • Making changes to how the Office of Federal Contract Compliance Programs (OFCCP) identifies cases of pay discrimination

One particular area of concern for employers is H.R.7’s expansion of the meaning of “establishment” under the EPA. Currently, wage comparisons among employees can only be made within the same establishment, which the EEOC has said refers to a physical place of business. H.R.7 would expand this meaning to cover pay disparities between employees working in the same “county or similar subdivision of a state,” which could significantly increase an employer’s litigation risk since employees would be permitted to compare their wages against other workers based on geographical factors alone.

The Obama-Biden administration made pay equity a priority and it remains to be seen if the Biden-Harris administration will do the same. Employers should continue to monitor developments in pay equity legislation in 2021 to prepare for a potential shift to more employee-friendly regulations.

Hall Benefits Law has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 678-439-6236.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.
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