Pay Equity: What It Is And Why It’s Important
discussing equitable pay

Pay Equity: What It Is And Why It’s Important

Pay equity is a method of eliminating gender and race discrimination when establishing and maintaining wages. Still today, many workers are separated into various jobs which are historically underpaid because of their gender or race.

Federal pay equity laws have been in existence for decades, but over the past few years, states and local municipalities have begun to closely examine their own laws in an effort to close the gender pay gap. Nearly all states have equal pay laws, but many were enacted some time ago and lack any emphasis on discriminatory pay practices. California, New York, Maryland and Massachusetts are examples of states that have strengthened their laws, and in September 2019, Alabama became the 49th state to adopt equal pay legislation (Mississippi is the only holdout). But even as momentum picks up at the state and local levels, movement on the federal level lags behind.

Here’s an overview of the changes being made at state and local levels:

  • Eliminate salary-history inquiries.
  • Offer pay transparency so workers can understand how their wages compare to target ranges.
  • Provide specific reasons for pay disparities, e.g. education or tenure.
    • California revised its pay equity law, requiring fair pay for men and women who perform “substantially similar work, when viewed as a composite of skill, effort and responsibility.” It was also the first state to take the idea of equal work and expand it to include substantially similar work. And in California, employers must compare employees that are located anywhere in the state, not only the same establishment.
    • In New York state, employers must compare workers in the same geographic region, but not an area larger than a county.

What laws govern pay equity?

Numerous laws exist today to protect workers from wage discrimination. Two of the most significant are the Equal Pay Act of 1963 and Title VII of the Civil Rights Act of 1964.

Equal Pay Act of 1963

The Equal Pay Act of 1963 states that men and women must be given equal pay for equal work in the same establishment. According to the Equal Employment Opportunity Commission (EEOC), it’s job content, not job titles, that determines if jobs are equal. The Equal Pay Act (EPA) was created as an amendment to the Fair Labor Standards Act, and because the EPA is related to the FLSA’s wage laws, most of the same coverage and exemption rules that apply to the FLSA also apply to the EPA.

Title VII of the Civil Rights Act of 1964

Title VII of the Civil Rights Act of 1964 prohibits wage discrimination on the basis of race, color, sex, religion or national origin. Title VII is broader than the EPA, allowing claims for any type of discrimination, whereas the EPA is limited to unequal pay between men and women for substantially equal work. Additionally, a 1981 Supreme Court ruling established that claims for wage discrimination between men and women that did not quite fit under the EPA could be brought under Title VII. Title VII has “a more relaxed standard of similarity between jobs.”[1] However, unlike the EPA, Title VII requires proof of discriminatory intent.

pay-equity-graph-tablet

EEO-1 Wage Reporting

Today, one of the most frequently discussed topics in pay equity policy revolves around whether employers should be mandated to provide employee pay data directly to the government. Employers with 100 or more employees have been required to submit information to the EEOC, including the gender, race and ethnic makeup of employees by job category ((Component 2 data). Armed with this additional data, the EEOC could work to enforce gender discrimination laws and investigate any pay discrimination charges.

Collection of this Component 2 data was originally set to begin in 2017 but was stayed by the Office of Management and Budget (OMB) before the data was collected that year. Since the court’s decision effectively voided the stay since 2017, the court gave the EEOC the option to choose to collect 2017 and 2018 or 2018 and 2019 pay data. On May 1, 2019, the EEOC announced their decision to collect 2017 and 2018 pay data. On October 29, 2019, the court ordered the EEOC to “take all steps necessary to complete the EEO-1 Component 2 data collection for calendar years 2017 and 2018 by January 31, 2020.” Due to this order, the data collection system will remain open indefinitely.

Note: It’s not a matter of “if,” it’s a matter of “when.” Applicable employers will still be required to submit Component 2 data for the EEO-1 report, so it’s critical that you have the right technology to help you efficiently gather and report on the employee data you need. Paycor can help you streamline data collection with unified HR, payroll and time solutions that don’t require duplicate entry or file imports.

What’s next?

As with any new compliance regulation or update to a current law, we will provide the latest information so you can prepare for what’s required. View our compliance section for best practices and insights on compliance along with the latest articles on recruiting, benefits, people management and employee engagement.

About Paycor

More than 30,000 medium-sized and small businesses trust Paycor to help them manage their most valuable asset—their people. Paycor’s personalized support and user-friendly, scalable technology streamlines every aspect of people management, giving our clients the peace of mind to focus on what they know best, their business and their mission.

To speak to our expert team about how we can help you stay ahead of compliance regulations, contact us today.


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