How to Navigate Pay Equity Regulations

How to Navigate Pay Equity Regulations

Over the last several decades, the US has been fighting workplace discrimination and minimizing pay discrepancies. The passage of the Equal Pay Act of 1963 and Title VII of the Civil Rights Act of 1964 brought bold efforts to remove pay disparities and improve fairness.

In the last decade, states have been moving to tighten laws to promote better pay practices. These regulations are complex and varied, especially as new legislation on all levels of government move toward defining what pay equity means and how it comes to bear in the workplace.

In addition to addressing issues of justice and legalities, a workplace with equitable pay practices is more likely to attract top talent, retain qualified team members, and have a company culture of productivity, engagement, service, and teamwork. It’s important for companies to understand these practices and implement them for compliance and positive morale.

Here’s a general sense of what types of laws are out there and what the rules cover.

  1. Salary History Ban: This law disallows employers from asking candidates about previous compensation. During a meeting, interviewees might be allowed to offer this information, but this must come without prompting from the hiring side. This targets ending the cycle of pay discrimination and. Seventeen states plus 20 cities have implemented this requirement for employers.  
  2. Wage transparency and pay discrepancies: These laws allow employees an understanding of how their earnings compare within a range   This regulation provides for shared compensation data. Some states require that employers explain pay disparities, like for merit-based programs, tenure or education. Other components of these laws, offer employees protection when their workplace fails to meet the pay equity laws. 

Laws and practices regarding pay equity vary greatly by state and even sometimes by city. This is an excellent chart by AAUW that offers a broad summary of laws by state and color-codes states with good, moderate and poor regulations. The law firm Fisher Phillips developed this interactive map with overviews by state. Some states have gone deeper than others regarding protections and procedures to ensure compliance in pay equity.

What’s an employer to do?

Pay equity is a broad and complex issue. Because the topic is momentous, it’s easy to get lost in the legalities. The laws apply most when interviewing prospective employees, and so is also relevant for current employees. Here are three steps to simplify compliance. 

  1. Familiarize yourself with the latest laws and requirements for your company. Assess how they may impact your workplace. Educate managers and engage team members to understand the criteria. Being informed and communicating openly is the best way to stay on the right side of pay equity issues.  
  2. Once you have a solid understanding of what applies to your organization, you should audit your current practices and see how they match up. 
  3. Make the necessary adjustments to your internal processes and be sure to educate everyone involved in pay decisions. 

Failure to comply

While most of the ramifications of violating these laws are left to the states, there is some federal oversight. There is no nationwide standard on reporting pay practices, yet the penalties from violating pay equity regulations can be high.  

Some checks are already in place. States with wide-reaching laws have bodies to govern and monitor implementation. The US Department of Labor’s Office of Federal Contract and Compliance Programs oversees ensuring that employers who work with the federal government comply with equity and nondiscrimination laws

Pay equity is important in principle. When a company conducts pay inequity, the consequence can include hefty fines, unpleasant audits, and bad publicity. 

More to the point – companies want to attract and retain the best people.  Pay equity is a key component to assuring you foster a culture of fairness and transparency.