With all of the attention focused on healthcare reform and the economy it is easy to lose sight of the important labor-related items on the Obama agenda. However, there is a lot looming on the legislative horizon that employers should pay attention to. For example, as the President and Congress marked the one year anniversary of the Lilly Ledbetter Fair Pay Act earlier this year, talks resumed on another major employment law, the Paycheck Fairness Act. Originally introduced in March 2007 and passed by the House in July 2008, the Paycheck Fairness Act has largely flown under the radar and, so far, has languished in the Senate. However, the potential ramifications of the Act are very significant, because if it passes employers will face additional record-keeping burdens; increased potential damages; and more difficult, expensive litigation.
The Paycheck Fairness Act seeks to amend (or, as supporters put it, update and strengthen) the Equal Pay Act, which requires employers to pay equal wages to men and women who perform equal work. Among the broad range of proposed revisions, several major changes stand out:
Punitive and Compensatory Damages. The current version of the EPA limits monetary damages to back pay and liquidated damages, but the Paycheck Fairness Act seeks to do away with these damages limitations and permit potentially uncapped punitive and compensatory damages for EPA plaintiffs.
Dramatically Reduced Employer Defenses. An employer can defend itself against a claim under the current version of the EPA by showing that a pay differential was caused by “any factor other than sex,” which employers have found invaluable because it allows them to articulate the myriad factors that could go into an individual compensation determination. The Paycheck Fairness Act, however, would effectively eviscerate this defense by requiring an employer to meet a much higher burden to avoid EPA liability. Moreover, even if an employer meets this burden, a plaintiff could still prevail by showing that the employer refused to adopt an alternative employment practice that would have served the same business purpose without producing a pay differential.
Class Actions for EPA Plaintiffs. Multiple plaintiffs already can proceed collectively under the EPA, but anyone that wants to join a collective action must affirmatively opt-in to the lawsuit. The Paycheck Fairness Act seeks to allow Rule 23 class actions under the EPA, which would automatically include all class members in the action unless individuals opt-out of participating. Although the difference is subtle, the net effect would be that class litigation would be easier, making EPA claims even more attractive to plaintiffs’ attorneys.
New Breed of Retaliation Claims. The Paycheck Fairness Act would also introduce new provisions to the EPA that would, except in limited circumstances, prohibit an employer from taking any adverse action against employees for inquiring about, discussing, or disclosing compensation information. This sort of retaliation is already prohibited under federal labor law, but the Paycheck Fairness Act would give the prohibition much bigger teeth.
Additional Record Keeping Requirements. If the Paycheck Fairness Act becomes law, the Equal Employment Opportunity Commission would be required to collect pay information from employers and the Office of Federal Contract Compliance Programs would be directed to use its “full range of investigatory tools” to uncover compensation discrimination by government contractors. At bottom, these changes would impose greater record keeping requirements on employers and expose them to more aggressive, intrusive audits.
Proponents of the Paycheck Fairness Act note, correctly, that the disparity between male and female wages persists across the country, and they argue that the new law is necessary to eliminate that disparity. However, the current version of the EPA and Title VII already provides mechanisms to combat unlawful sex discrimination, and the Paycheck Fairness Act would do little to aid that effort while dramatically increasing the burden for employers in an already difficult economic environment. By allowing uncapped damages and facilitating class-litigation, the Paycheck Fairness Act would make EPA claims all but irresistible to plaintiffs’ lawyers. Moreover, by making EPA cases easier to advance and defenses harder to prove, more lawsuits would survive summary judgment, increasing the financial burden of litigation regardless of the merits of the underlying claims.
So, what is the good news? First, the Paycheck Fairness Act is not yet law. Although it passed in the House of Representatives, the Sentate has twice refused to vote on the Bill. Second, Congress appears to have a number of other political priorities on its plate. Nevertheless, the Obama administration has made clear that it intends to push a pro-employee agenda and so long as the Democrats control the Congress there is a very good chance that the Act will regain its legs. Thus, employers should act now to educate themselves on the current EPA and the changes proposed Paycheck Fairness Act in order to effectively examine their compensation practices and minimize their legal exposure. Employers should also reach out to their congressional representatives and let them know how they feel about this proposed law.