Hot-Button Compensation Rules Take Center Stage

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After varying periods of waiting in the wings, several big regulatory issues – from controversial topics just gaining traction to updated regulations moving rapidly toward adoption – stand to significantly impact U.S. employers. These rules affect employee compensation, pay equality, rights to privacy, and even the very boundaries of the employer/employee relationship. Here is a summary of three of these issues, including their statuses and trajectories (current as of this writing, but always subject to change), and what’s at stake for employers and employees alike:

Paycheck Fairness Act

The Issue:

The Paycheck Fairness Act, recently reintroduced in both the U.S. Senate and the U.S. House of Representatives, is the latest attempt among many dating back to 1997 to update the Equal Pay Act of 1963 and “to end gender pay disparity by barring discriminatory practices and holding employers accountable for wage equity,” according to the Society for Human Resource Management, or SHRM.

The Status:

The bill introduced in the Democrat-controlled House recently passed, largely along party lines. A similar bill introduced by minority-party Democrats in the U.S. Senate has not progressed.

What’s Next:

The House bill is unlikely to pass in the Republican-controlled Senate. However, if the Act passes both houses of Congress and is signed into law, employers would face more stringent recordkeeping and reporting requirements. This would probably force many employers to conduct or sanction compensation studies, reviews or audits, and potentially change compensation policies to avoid regulatory penalties.

Ban on Salary History Questions

The Issue:

Included in the stalled Paycheck Fairness Act is a prohibition that would keep employers from asking job applicants about their salary histories or from using such information as a factor in establishing the hired employee’s compensation. Why do salary history questions matter? Because past compensation often influences present and future compensation. For example, because past gender-based pay inequities have kept women at an earnings disadvantage which the Equal Pay Act has not corrected, using salary history to determine current compensation perpetuates the gender pay gap. Because the Paycheck Fairness Act is unlikely to pass into law, this important issue will probably continue to stand on its own.

The Status:

The U.S. Supreme Court recently overturned a 9th U.S. Circuit Court of Appeals ruling that would have prohibited employers from paying women less than men because of their compensation history. The lower court ruling was overturned by the nation’s highest court on a technicality – the 9th Circuit ruling was written by a judge who subsequently passed away before the final decision was issued. Meanwhile, several states have passed legislation banning salary history questions, including California, Delaware, Louisiana, Massachusetts, New Jersey, New York and Oregon. Bans are also in effect in certain U.S. cities including Chicago and Cincinnati.

What’s Next:

Expect the wave of local and statewide salary history bans to continue to gain steam while the Paycheck Fairness Act remains stalled and the Equal Pay Act remains unchanged. In the meantime, employers should recognize the risks involved with asking applicants about salary history and consider eliminating this practice internally.

EEOC Pay Data Collection

The Issue:

Obama-administration Equal Employment Opportunity Commission (EEOC) requirements for pay data collection via a revised EEO-1 Report have been in flux, with the current administration’s Office of Management and Budget (OMB) having issued a stay. The revised regulation in question would require employers with 100 or more employees to report W-2 wages and hours worked for all employees within 12 pay bands by race, ethnicity and gender.

The Status:

The U.S. District Court for Washington D.C. reinstated the pay data collection reporting requirement, calling the stay an “‘illegal’ arbitrary and capricious decision that lacked a “reasoned explanation’,” according to a recent WorldAtWork article. The reporting deadline, originally set for March 31, 2018, has been set now for September 30, 2019. Per the EEOC, both 2017 and 2018 data must be reported.

What’s Next:

Employers with 100 or more employees must identify and report pay and hours worked within the required pay bands and segments by the new deadline. This may require an audit of compensation structures and reporting capabilities far enough in advance of the deadline to ensure compliance. Companies without the necessary internal resources to accomplish this should consider external consulting resources to avoid possible penalties for non-compliance.

Still to Come…

In addition to these volatile issues and updates, other key compensation issues loom large for employers, including proposed minimum wage hikes, changes to the Fair Labor Standards Act, and the “Right to Disconnect” bill. Stay tuned!

Cassandra Faurote is President of Total Reward Solutions, a compensation consulting firm.

  • Perspectives

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