5 things about Obama's new pay mandate that all businesses should know

The White House's move last week to require employers with 100 employees or more to compile and submit gender-based pay data with the goal of identifying discrimination has many business owners wondering how this will work in practice.

The executive order from the Obama administration would complement the Fair Pay Act in California, which went into effect Jan. 1 and requires employers to be able to prove they pay both genders equally for “substantially similar” work.

The California law is already causing employers to grapple with compliance. But the federal order is a familiar problem for many of the major tech companies that have implemented similar programs in the past – to varying degrees of failure.

SumAll and Buffer are two startups that shared information among employees, while Google (NASDAQ: GOOG) also had an internal spreadsheet where employees could enter salary information. Companies that announced internal audits include Salesforce (NYSE: CRM) and Pinterest – but like their predecessors before them, almost all attempts at making pay structures transparent have failed.

Now, the new federal order has many companies in the Bay Area taking notice, as they attempt to prepare for a slew of new paperwork and regulatory requirements.

So what's next? The Business Times asked Danielle Hultenius Moore, partner at Fisher & Phillips LLP, about what businesses need to have ready so they can be prepared for the new mandate.

Moore shared the top five things that employers need to know about the proposed upcoming EEOC changes.

  1. What are the many issues about this plan that could affect both tech- and non-tech employers. The plan will affect most private employers with 100 or more employees as well as federal contractors, including tech employers.

  2. What about employees? The plan will not impact employees directly, but will result in greater scrutiny of employees' wages which could indirectly result in increased wages for some. Also, employees will likely have heightened awareness right now about all things compensation. Companies should expect to hear more conversations by employees in the workplace and need to remember that these discussions are protected by federal and state laws.

  3. What are some other, similar programs that have been use in the past? The EEOC has not previously employed any similar requirements. Years ago the Labor Department's contract compliance program employed an “EO Survey” to federal contractors in an attempt to establish national compensation standards for benchmarking purposes, but discontinued it. Now, the new broader regulations move this same concept beyond the federal contractor community into the entire business workforce.

  4. If this does become implemented, what do employers need to know to be prepared Employers need to know the new requirements, the implications of those new requirements, and what they need to do to minimize risk. Requirements: Beginning in 2017, large employers will be forced to disclose pay data for employees (wages and hours worked) on their EEO-1 forms. Implications: The purpose of the disclosure is to allow the Equal Employment Opportunities Commission to more easily spot differences in pay between male employees and female employees, so that they can bring discrimination claims against employers. Prevention: In order to prevent discrimination claims, employers should audit their pay practices and current pay systems to identify and meaningfully address any pay disparity issues, so that they can resolve any disparities in advance of the requirements going into effect. By fixing those issues now, a company may minimize its exposure once the new reporting requirements are in place September 2017.

  5. Will this have significant costs for this business (i.e. lawsuits, raising wages, etc.)? Practically, employers already must file EEO-1 Reports, so in theory there are no hard costs. However, there will be an additional burden on employers to collect the new required information. The proposed regulations say that it will not be difficult for employers to comply because they can import the data into their human resources information systems (HRIS) and incorporate it into their electronic EEO-1 filings.

However, if employers need to pull the data from multiple systems, we do envision that employers may have difficulty obtaining the required data. Additionally, employers face a greater likelihood of gender discrimination claims. California’s new Equal Pay Act also increases the likelihood of such claims. Employers should strongly consider taking preventative steps now.


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