Organizational Protections Begin with Equity Pay Audits

From the World-Cup Champion U.S. Women’s National Soccer Team filing a lawsuit for equal pay commensurate with that of their male counterparts, to the latest U.S. sanctions imposed against the international group behind the Sony hack exposing pay disparity between male and female lead actors, pay equity tops today’s news headlines.

Long before Carli Lloyd, her teammates and A-list Hollywood actresses used their clout to propel equal pay to the forefront, there was the Equal Pay Act of 1963, Title VII of the Civil Rights Act of 1964 and Equal Pay Day (April 2nd) created in 1996 by the National Committee on Pay Equity. With each of these milestones laying a solid groundwork, employers must pay even closer attention and keep pace with the flurry of new local, city, state and federal legislation that has been sweeping the nation to level the playing field by mandating greater employer transparency.

In order to understand where the U.S. is today on equal pay, it is important to familiarize oneself with the history of this very real, white-hot issue. Established to make it unlawful to pay men and women different wage rates for equal work as well as illegal to discriminate based on race, religion, color or sex, the 55+-year-old Equal Pay Act and Title VII were considered extremely groundbreaking for their era. However, despite their once-revolutionary mandates the United States still has a very serious wage gap.

The data speaks for itself. In addition to the lack of women at the very top of U.S. business organizations, only 15.2% make up Fortune-500 corporate boards. In this modern-day era of 2019, a woman working full time earns 80.7 cents for every dollar her male counterpart earns. The gap among white men and women of color is even more divergent. Adding to this disconnect is the prediction by the Institute for Women’s Policy Research that pay equality might still be out of reach until 2059 – 96 years after passage of the Equal Pay Act.

New Era Shifts Employer’s Equal Pay Responsibilities

Recent signs point to measures designed to narrow this gap. As of this year, 11 states have enacted or will soon enact new pay-equity legislation – including New York State and New Jersey, which ban salary-history questions in job applications. Alabama, Maine, Nebraska and Maryland will be joining these ranks to advance pay equity laws already in place in California, Connecticut, Hawaii, Illinois, Oregon, Vermont, Washington and Wyoming. Among these states’ expanded protections are categories that extend beyond gender, including gender identity and marital status, as well as age, race, creed, color, national origin and sexual orientation.

One very unique component that has emerged – thus dramatically altering the landscape for employers – is the implementation of an “equal pay for substantially similar work” clause. The latter three words now have employers considering – and documenting – factors such as skill, effort, responsibility and in some cases working conditions.

As a result, many employers are – and should be – taking action to ensure compliance with applicable and rapidly evolving pay-equity laws. This includes – but is not limited to – instituting equal-pay audits, enacting periodic upper-management reviews of compensation structures and revisiting the systems utilized to document and maintain detailed records. All of these activities are best undertaken in the interest of the company and to combat litigation, should it occur. In short, the ramifications of equal pay legislation extend to so much more than just updates to job titles and descriptions.

Unlike past initiatives, many of these new measures require employers to compile and maintain data spanning several years. In New Jersey, for example, the requirement is six years. Long gone are the days of reviewing data for a single year to evaluate risk. Multi-year analyses yield patterns or commonalities among individuals in a group, including those who fall under the “protected categories.”

Professional digital expertise cannot be underestimated when it comes to formulating and implementing data-retention policies. In addition to serving as an invaluable resource, these advisors are integral to educating companies and developing highly advanced customized data solutions that can help ensure proactive industry- and government-regulation compliance as well as content retention over the course of the mandated minimum time period.

For example, Withum’s Digital Services professionals can help reduce organization risk in the event of litigation or a security breach by permanently deleting old content that an organization is no longer required to keep. These industry leaders work with companies to ensure organizations share knowledge effectively and can be more agile in accessing only the most current and relevant content.

In this new era of pay equity, employer transparency is rapidly becoming the rule rather than the exception. Consequently, employers need to consider casting a wider net to meet the latest requirements. More and more are scrutinizing their compensation policies and procedures; internal hiring-practice education and training; and standardization of their performance-evaluation processes. Contemporary and future pay parity laws – and their ensuing violations – is one area in which nothing short of best practices will do.

Authors: Matthew Walsh, CPA, MS | [email protected]; Michael D. Yarrow, CPA, CGMA | [email protected] and Arya Parsee | [email protected]

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