The equal pay movement gained significant ground in 2015, with new equal pay legislation enacted in two large states, new pay equity rules issued for federal contractors, and equal pay legislation introduced in several states. President Obama discussed the need for equal pay during his 2015 State of the Union address and Hollywood drew attention to the equal pay issue as well with two high-profile actors speaking out publicly against pay inequality.

Equal pay is sure to continue to be a hot button issue in 2016 as the presidential election approaches and state legislators around the country consider pending bills. Retail and hospitality employers, which frequently employ a heavily female workforce, will want to pay particular attention to this issue in 2016 and stay ahead of the curve. Not only is equal pay a hot issue in the legislative and political arena generally, but organizations like the Retail Action Project, Demos, and the Center for American Progress are spotlighting retail and hospitality in reports discussing what they believe is a dramatic wage gap in those industries.

Below is a summary of the key legislative and regulatory developments with which retail and hospitality employers should familiarize themselves and some tips for equal pay compliance.

Legislative and Regulatory Developments to Know About

Two states—California and New York—passed new equal pay legislation in October 2015. Common to the new legislation are rules that prohibit employers from requiring pay secrecy or penalizing employees for discussing and sharing information about their wages. The theory behind the pay secrecy prohibition is that women cannot challenge wage discrimination that they do not know exists. In addition, the new laws in both states are designed to ease the requirements  for demonstrating pay discrimination and enhance the available remedies for violations.

Under the federal Equal Pay Act of 1963, on which many of the state equal pay laws are based, employers can avoid liability for pay discrepancies if they can show, among other things, that a pay disparity is based on a “bona fide factor other than sex.” Equal pay activists contend that court decisions have interpreted this defense in an overly broad way, allowing employers to escape liability for pay discrimination. Therefore, they seek to tighten the available defenses under both federal and state law to make it easier for equal pay plaintiffs to make out their cases.

In California, the new law allows an employee to prove that he or she received lower wages for “substantially similar” work, easing the previous requirement that employees demonstrate that they performed “equal work on jobs the performance of which requires equal skill, effort, and responsibility.”  The law also eliminates the requirement that employees compare themselves to other employees in the “same establishment,” instead allowing them to compare themselves to employees at other worksites, and tightens the defenses an employer can use to defend its pay practices by narrowing the circumstances under which a “bona fide factor other than sex” can justify a pay disparity. Employees in California have a private cause of action to remedy violations of the new law and can recover liquidated damages and attorneys’ fees.   

In New York, the new law tightens the defenses available to employers by replacing the broad “any other factor other than sex” justification for a pay disparity with more narrow language—“a bona fide factor other than sex, such as education, training, or experience.” The new law also requires that pay discrepancies be job-related and consistent with business necessity. Under the new law, employers will be unable to avoid liability where it can be shown that the employer’s practice causes a disparate impact on the basis of sex, and the employer specifically rejected an alternative practice that would have served the business purpose without causing such impact. The law also adds a liquidated damages provision, allowing for treble damages in the case of willful violations.

In Massachusetts, the legislature is considering amending the state’s equal pay law through An Act to Establish Pay Equity (S.983H.1733). The proposed legislation seeks to tighten the defenses available to Massachusetts employers, prohibit pay secrecy policies, and enhance the remedies available to employees who are the victims of pay discrimination. The Massachusetts Attorney General has spoken out in favor of the measure, and many observers predict that some type of new equal pay legislation will be passed in 2016. 

In addition to Massachusetts, Florida, Hawaii, Michigan, and New Jersey also have equal pay/pay equity bills pending in their state legislatures according to the Society for Human Resource Management’s (SHRM) Legislative Tracking System. As with the legislation passed in California and New York, and now pending in Massachusetts, these proposed bills also seek to prohibit pay secrecy, ease the requirements for employees to make out equal pay claims and enhance the available remedies.

While equal pay activists have not yet been able to make much progress in Washington in amending the Equal Pay Act of 1963 through the Paycheck Fairness Act, a bill which includes measures designed to make it easier to prove pay discrimination, they have made progress at the executive and agency level. On September 10, 2015, the Office of Federal Contract Compliance Programs (OFCCP) published its final rule on pay transparency. The purpose of the rule is to prohibit “pay secrecy policies” to make it “possible for workers and job applicants to share information about their pay and compensation without fear of discrimination.” This rule implements Executive Order 13665, Non-Retaliation for Disclosure of Compensation Information, which President Obama signed on April 8, 2014.  In May 2015, the U.S. Department of Labor (DOL) published proposed guidance addressing the controversial Fair Pay and Safe Workplaces Executive Order 13673, which President Obama signed on July 31, 2014. Under the proposed guidance, government contractors that violate several enumerated federal laws, including Title VII of the Civil Rights Act of 1964, which prohibits pay discrimination based on gender, can essentially be “blacklisted.”

Tips for Equal Pay Compliance

While compliance with the new laws in California and New York, and the rules applicable to federal contractors, may require more specific measures, below are several basic steps retail and hospitality employers should consider taking now to ensure they are prepared for any challenges to their pay practices in the future:

  • Eliminate policies that prevent workers from discussing compensation.
  • Update policies to ensure that employees are not discriminated against for discussing or inquiring about compensation.
  • Include a nondiscrimination provision addressing pay transparency in company manuals, policies, and handbooks.
  • Consider disseminating a pay transparency policy to applicants and employees.
  • Update the company’s equal opportunity policy, as well as clauses in any applicable federal contracts and subcontracts, to prohibit discrimination against employees and applicants who discuss compensation.
  • Review pay practices to ensure that pay decisions are not based on gender.
  • Train managers and supervisors regarding nondiscriminatory pay practices.
  • Conduct a pay audit and determine the rationale for any pay differentials.