What Does State’s Amended Equal Pay Act Mean for Employers?
By: James P. Sikora
Washington’s Equal Pay Act (EPA) has prohibited discrimination in compensation on the basis of sex since it was enacted in 1943. Despite the existence of similar laws for many years at the state and federal levels of government, studies continue to find a persistent pay gap of approximately 20 percent between men and women in the United States. Several states have expanded equal pay laws in recent years to address this persistent gap.
Washington joined this trend when it amended the EPA, effective June 7, 2018, to expand equal pay protections and promote pay transparency. Washington’s amended EPA contains three key provisions – equal pay protections that prohibit gender-based discrimination in compensation; limitations on an employer’s ability to use pay history to set current compensation; and pay transparency protections for employee discussions of and inquiries into compensation.
The equal pay provision of Washington’s amended EPA prohibits gender-based discrimination in compensation between employees who are similarly employed. Compensation is broadly defined to include all wages and benefits paid to an employee. Employers should be mindful that this broad definition probably encompasses bonuses, paid time off, vacation pay and other employer-provided benefits.
Employees are similarly employed if the employees work for the same employer, the jobs require similar skill, effort and responsibility, and the jobs are performed under similar working conditions. Job titles are not determinative in assessing whether employees are similarly employed. For example, a janitor and a housekeeper for a hotel may be similarly employed, despite having different job titles, because the jobs require similar skill, effort and responsibility, and are performed under similar working conditions.
Not all wage differentials are discriminatory under the amended EPA. A wage differential between employees who are similarly employed will not be discriminatory if it is based in good faith on bona-fide job-related factors that are (1) consistent with business necessity, (2) not based on or derived from a gender-based differential and (3) account for the entire difference. Bona-fide factors include:
Education, training, or experience;
A seniority system;
A merit system;
A system that measures earnings by quantity or quality of production; or
A bona fide regional difference in compensation levels.
An employee’s wage or salary history is not a bona-fide factor upon which an employer can justify a wage differential.
The amended EPA also prohibits employers from limiting or depriving an employee of career advancement opportunities on the basis of gender. The EPA does not define the phrase “career advancement opportunities,” but possible examples include internal job opportunities and training provided by or sponsored by the employer.
By amending the EPA, the Washington Legislature sought to promote pay transparency and make it easier for employees to discuss wages. Employers may not do the following: require an employee not to disclose his or her wages as a condition of employment; or require an employee to sign an agreement that prevents the employee from disclosing his or her wages.
The amended EPA further prohibits employers from discharging or retaliating against an employee for the following: inquiring about, disclosing or discussing his or her wages or the wages of another employee; asking the employer to provide a reason for the employee’s wages or lack of opportunity for advancement; or aiding or encouraging an employee to exercise his or her rights under the amended EPA.
Employers should consider several steps in response to these developments. A good starting point is to review job applications and interview questions to eliminate inquiries into pay history or questions that may elicit pay history from job applicants. This will help reduce the possibility of an employer considering pay history in setting compensation in violation of the amended EPA.
Employers should also review criteria used to set compensation for employees to ensure those criteria comply with the amended EPA. This includes ensuring that pay differentials between similar positions are based on business necessity and bona-fide factors. Any differences based, even in part, on an employee’s pay history warrant particular scrutiny. Employers should be careful when determining compensation to that compensation is broadly defined to include benefits.
Employers should revise policies and practices that restrain an employee’s ability to discuss his or her wages or the wages or subject employees to discipline for those activities. This includes updating employee handbooks to revise any that restrain those activities. Finally, employers with employees in other states, including Oregon, should be mindful of any changes to pay equity laws in those states to ensure compliance. Taking proactive steps to ensure compliance provides employers with the dual benefit of reducing the risk of claims and promoting pay equity for employees.
(The above should not be construed as specific legal advice and is intended for general information purposes only).