What is the Paycheck Fairness Act? Everything You Need to Know
True or not, you hear about the pay gap between men and women, but what steps are we taking to close it? Here’s what you need to know about the paycheck fairness act and how it impacts company payroll.
There’s a fair argument that the gender wage gap can be justified by things like life choices, career selections, and hours worked. The purpose of this article is not to take a side, but rather to explain what the act is. The #MeToo movement has generated renewed interest in and support for gender equality in business, especially in the area of pay equity. The movement has drawn attention to inequities in the workplace for women and rallied support for the campaign for equal pay.
48 percent of companies in the U.S. now say they’re reviewing their policies to close the gap between salaries for male and female employees. The push for gender equality in pay has already gotten a boost from the U.S. House which recently passed the Paycheck Fairness Act.
We’ll take a closer look at the legislation and what it could mean for both men and women in the workplace.
The Paycheck Fairness Act
The Paycheck Fairness Act was approved by the U.S. House in March 2019. It’s designed to supplement the landmark Equal Pay Act (EPA) which required that men and women receive equal pay for equal work.
Despite the passage of the EPA in 1963, women who work full time are paid 80 cents for every dollar paid to men. That results in a gap of $10,169 every year. The number has changed less than a nickel during the 21st century.
The numbers are even worse for women of color. African American women earned 64 cents and Latinas earned 56 cents for every dollar earned by a white male.
The Paycheck Fairness Act is supposed to:
- Prohibit employers from using salary history to determine current salary.
- Protect against retaliation for discussing pay with colleagues.
- Ensure equal pay for equal work. It would require employers to prove that any pay disparities that exist between men and women are a business necessity and job-related.
- Equalize discrimination claims based on gender, race, and ethnicity.
- Support employers and employees to achieve fair pay practices. The act would provide assistance to employers, require wage data collection and offer salary negotiation training programs to give women the tools to advocate for higher wages.
The current wage gap costs women more than $900 billion every year. Those lost wages mean families have less money to spend on things that help drive economic growth. They also have less money to spend on education, homes and their retirement.
Why Do Some Think the Paycheck Fairness Act Needed?
Supporters of the Paycheck Fairness Act say it’s critical to closing the salary gap because the Equal Pay Act simply doesn’t go far enough. They point to studies that show women still earn less than men who perform the same jobs in the 20 most common occupations.
That wage gap appears to start right from the beginning of a woman’s career, too. The American Association of University Women found that women are paid 6.6 percent less than men in their first jobs, even when considering factors like job location, occupation and college major.
What Are the Key Elements?
There are a couple of provisions in the Paycheck Fairness Act that close some loopholes in the EPA. First, the Paycheck Fairness Act would allow both men and women to talk to each other about their salaries, without fear of repercussions from their employers.
This is important because wage data has historically been difficult to unearth. Employees are often contractually-forbidden from discussing their salary. Under the Paycheck Fairness Act, employees could get better information from their colleagues to help them evaluate the relative fairness of their salary.
Employers would also be required to share salary data with the Equal Employment Opportunity Commission, so that agency could compile the information and keep an eye out for discriminatory actions. Employers wouldn’t be allowed to ask a job candidate for his or her salary history.
Interestingly, recent data suggests that when the law requires companies to disclose gender wage disparities, the wage gap shrinks. More women are hired and promoted to senior roles.
Are There Exceptions Under the Current Law?
Yes. The Equal Pay Act (EPA) allows unequal pay for equal work in certain circumstances.
A seniority system.
A seniority system essentially recognizes the length of time a person has been with a particular company. For example, if a man has been with the company longer than his female counterpart, the company may pay him more money for the same job.
A merit system.
A merit system allows employers to reward their employees for outstanding work or for meeting other specific goals. If a male and female employee are doing the same job but the male employee consistently receives higher customer satisfaction scores, for example, the employer may pay him a higher salary.
A system that measures earnings by quantity or quality of production.
One common example of this can be found in sales. Let’s say a male and female employee have the same sales job. They’ve been with the company the same amount of time. They also have the same level of experience and education. If the male employee sells more products or lands more clients, he could be paid more than his female colleague.
Any factor other than sex.
This is the tricky one and one the Paycheck Fairness Act would attempt to clarify. The way the law stands now, an employer can justify paying a man more than a woman if, for example, the higher salary was necessary to recruit him away from another company.
The employer wouldn’t need to demonstrate anything further to justify the higher salary. The Paycheck Fairness Act would tighten that up, so the employer would have to prove the higher salary was also appropriate because of a difference in education, training or experience. Time-tracking software can be an important tool to prove both employees put in equal time.
The Paycheck Fairness Act also sets out the penalties for violations. An employer could pay a civil penalty of $5,000 for a first offense. That would increase by $1,000 for each subsequent offense, not to exceed $10,000.
The future of the Paycheck Fairness Act is unknown as of this writing. It passed the House in 2008 and 2009 but failed in the Senate the following year. It is unlikely to pass the Senate in 2019.
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