"Don't Freak Out"
The Ledbetter law may trigger more questions from candidates. Just be clear about your policies and practices regarding compensation and performance.
One employment law specialist has blunt advice for staffing professionals who are concerned about a new era of openness and transparency—a new era created by a recently enacted law that some experts say could spark mounting pay discrimination claims.
"My main message is 'Don't freak out,'" says Richard Tuschman, a Miami attorney.
The historic Lilly Ledbetter Fair Pay Act, the first law signed by President Barack Obama in January, makes it easier for workers to file pay discrimination claims citing gender, age, race or other factors. But for staffing professionals involved in the recruiting and hiring process, the act changes very little, says Tuschman, who has specialized in employment law since 1991.
Prospective employees and passive candidates might be bolder during the interview process and inquire openly about employer compensation practices. Staffing professionals could be asked directly about whether pay differences in the company exist between men and women or between younger and older workers.
In an atmosphere of greater transparency and accountability, how should hiring managers and recruiters handle such inquiries?
"Ledbetter doesn't change the answer to those questions; the answers are the same as before," Tuschman says. "In general, prospective employees are not entitled by law to get information about an employer's pay practices; [an employer] would be wise to cite its Equal Employment Opportunity policy but not provide more detail than that.
"It's sufficient for employers to say they pay employees based on market value without regard to factors like race, sex, disability, age, etc., which the law prohibits," he adds. "Most employers would feel that they do follow those policies and the law."
Queries about a company's pay scale may be tricky to address. Recruiters and staffing professionals must be able to say, and ensure, that pay differences at the time of hire are based on factors such as experience—a defensible position against possible discrimination claims in the future, says Brian Levine, a principal at Mercer, a consulting firm specializing in human resources.
"Ledbetter increases the risk associated with hiring disparities" because it weakens the 180-day statute of limitations for filing claims, he says. "Consistent practices should serve to reduce risks of discrimination suits emanating from pay differences at hire."
Jeri Kubicki, vice president of human resource policy at the National Association of Manufacturers, says many of the association's 11,000 members are still weighing the implications of the Ledbetter Act and how it will impact their compensation policies. "The uncertainty of a situation, from an employer perspective, is daunting," she says.
But one thing is certain. To minimize the risk of litigation, Kubicki says, companies should develop clear policies and practices with regard to compensation and performance issues and train managers so they can answer questions from current employees and job applicants appropriately.
She says, however, that implementing such processes could be costly in terms of time and resources.
"Employers don't want to discourage current or prospective employees from asking questions. That's part of the [company's] self-audit and doing a thorough analysis of how to respond to those questions." But there might have been more flexibility in providing a response before the Ledbetter Act, she says. "Now we have to be very clear and provide a direct response."
When forthright inquiries do arise during job interviews, industry consultants say it's important for staffing professionals to be perceptive and to figure out what the prospective employees are really asking. Are they concerned about whether women earn the same pay as men for equal work, for example, or are they attempting to assess whether a company discriminates against minorities by offering few, if any, career development and promotion opportunities?
Have a Job Analysis Program
"Any recruiter wants to be in a position to represent a company's pay practices as fair and equitable," says David Wise, a senior consultant with Hay Group, a global management consulting firm in Philadelphia. "The way you do that is by having a pay scheme that's based on what people do, rather than what their gender is. Ideally, organizations have a job analysis program that has clear [pay] ranges for different roles and clear guidelines for how an individual will be paid within that range."
For employers, he says, "it really comes back to having a system that measures work and performance effectively and demonstrating and communicating that."
The Ledbetter Act was the first law addressing wage discrimination to be enacted this year. It was written to effectively reverse a 2007 U.S. Supreme Court decision so that workers could initiate claims of unfair pay, alleging gender or other factors, based on management decisions that might have been made years ago. Employees now have six months from their last paycheck to file a claim.
The law was named for Lilly Ledbetter, a supervisor at a Goodyear Tire and Rubber Co. plant in Alabama, who found out just before she was retiring that she had been paid less than her male counterparts during most of her 20 years there. Her case went to the high court, but the justices didn't rule on her discrimination claim because they said the statute of limitations had run out. Legislators took matters into their own hands and wrote the law.
Are You at Risk?
Though many labor lawyers and consultants predict that more pay discrimination litigation will result from the Ledbetter Act, workers still face an uphill battle to win such suits. Recent studies, including one published in February by the Harvard Law & Policy Review, show that employees who sued over discrimination lost at a higher rate in federal court than other types of plaintiffs.
But workers who won their pay discrimination cases walked away with bigger awards. In 2007, the median discrimination verdict rose to $252,000, a big jump from $147,000 in 2006, according to the American Bar Association.
Experts say employers can expect to see more legislation focusing on pay equity issues under the Obama administration. The Paycheck Fairness Act, which recently passed the House of Representatives, is one example. It would increase potential awards for successful pay disparity claims by providing uncapped compensatory and punitive damages. It would also put more of a burden on employers to justify reasons for pay inequities between male and female employees.
"This wave of legislation makes it much more important for organizations to have pay practices that are based on the content of their jobs and what people actually do," says Wise of the Hay Group, "because this is a different environment for pay than in the [Bush] administration."
Levine at Mercer says employers can minimize their risk of pay discrimination claims by identifying and correcting any pay inequities in their workforce and establishing long-term plans to mitigate future threats.
"Ledbetter significantly increases the risk of litigation for employers ... and eviscerates the statute of limitations for current employees so they can bring suit going back years and years on specific events that might've been discriminatory," he says.
"Suddenly, employers are on the hook for decisions that occurred maybe 20 years ago, and supervisors who were engaged in particular cases might have passed on or don't work for that employer anymore," he says. "It makes it much more important to look at the current state of your workforce and make sure there's basic alignment between employees, that people are paid equitably."
Levine touts a statistical approach called multiple regression for just that purpose. He says the methodology allows organizations to review pay decisions in an unbiased manner, accounting for job characteristics, market pay rates and other factors such as the length of time an employee has worked for the employer.
"Let's say you want to relate pay to tenure," he says. "Organizations tend to pay more-tenured employees better. You look at your people, their combinations of pay and tenure, and you draw a mathematical line that best fits through those combinations. Imagine doing that for multiple factors that give you a formula that can be used to predict whether pay is within standard bounds."
Tuschman, who writes an employment blog (www.flemploymentlawblog.com), is one of the few industry lawyers who doesn't believe that the Ledbetter law will trigger more pay discrimination claims. In his practice, wage discrimination allegations account for only a handful of cases.
Not only does it take guts for an employee to file suit against an employer, Tuschman says, it's a difficult charge to prove.
"It's hard for an employee to say that she is doing the same exact work as a man and getting paid less. Often times the work is somewhat different or the employee doesn't have the same qualifications," he says, adding: "There's a reason pay discrimination cases are rare."