When the Equal Employment Opportunity Commission (EEOC) settles a case involving gender-based pay discrimination, they routinely publicize the results.

A recent case highlighted by the EEOC (EEOC v. Gilbert Foods, a food service distributor) was brought by a seasoned female “order selector.” When she learned she was being paid less than newly hired and less experienced men doing the same work, she told coworkers she planned to file a discrimination case. However, before she filed, word of her plans reached a senior manager. The manager then informed her direct supervisor that the female order selector would be terminated “without making it appear unlawful,” according to an EEOC description of the case.

By this attempt at retaliation, Gilbert Foods compounded its basic violation of the Equal Pay Act. As a result, the company was required to:

• Give the female order selector back pay,

• Provide her with compensatory damages,

• Pay her attorney fees, and

• Agree to regularly report to the EEOC concerning its compliance practices.

“Substantially Equal”

Illegal pay discrimination isn’t always that blatant, however. For one thing, paying a woman less than a man (or vice versa) for a job that isn’t identical can be deemed discriminatory if the two jobs are only “substantially equal,” perhaps a subjective standard. “Job content, not job titles, determines whether jobs are substantially equal,” says the EEOC.

The agency also states that “all forms of pay” are covered by the Equal Pay Act. That includes not just salary or wages, but overtime pay, bonuses, stock options, profit sharing and bonus plans, life insurance, vacation and holiday pay, other employee benefits, and reimbursement for travel expenses.

Hidden Discrimination

The EEOC is concerned that there’s a lot of gender-based pay discrimination occurring that victims are unaware of — and therefore the practice is not confronted. Typically, the discovery of a pay inequality (by the party earning less) happens inadvertently. For example, that person may stumble across a discarded pay stub.

Employers need to be aware that, if they do find their pay practices are discriminatory, the company cannot remedy the imbalance by reducing the pay of the higher paid worker to match that of the lower-paid one.

Employers also should know that an employee who discovers he or she has a pay discrimination case may have up to three years from the time of a willful violation (or two years if not willful) to file a claim with the EEOC.

Going Forward

The EEOC proposed a remedy for hidden discrimination, which, if enacted without changes, will greatly increase the reporting burden on employers. The proposal, made on February 1, applies to employers having at least 100 employees.

The additional reporting would require employers to segment certain workers based on gender, race and ethnicity. The workers in question are those who fall within 12 pay bands for each of the 10 job categories described in the regulations. This information would be added to employee census data supplied annually on a form known as EEO-1.

If adopted as proposed, the rule would apply to EEO-1 forms submitted for the year ending Sept. 30, 2017.

New Compliance Cost?

The National Federation of Independent Business (NFIB) complained that the expanded EEO-1 form would grow to “over 3,500 data cells,” and require covered employers to spend “significant time and money figuring out what and how to report.”

The EEOC justifies the proposal this way: “Collecting this pay data will help fill a critical void in the information we need to provide [us] with insight into pay disparities across industries and occupations … [and] more effectively focus investigations, assess complaints of discrimination, and identify existing pay disparities that may warrant further examination.”

The EEOC says it will also publish data “in aggregate form” to help employers determine “if they are paying employees fairly, and if their pay is in line with regional and industry practices.”

Here are several of the concerns about the proposal, raised by the NFIB in a March 16 hearing:

• The reporting period for the data would be October 1 thru September 30, instead of the calendar year. Because employers use the calendar year for compiling W-2 data, the data gathering would be burdensome.

• A requirement to report the number of hours employees worked would be difficult because hours worked by exempt employees are not generally tracked.

• Although reported data is supposed to be kept confidential, the NFIB is worried that some of it will leak out, compromising sensitive company information.

• There is a potential for EEOC misuse of employer reports. “The data will not provide sufficient information to identify discrimination among similarly situated individuals,” the NFIB states. For example, “pay disparities can occur for many, many legitimate reasons, including experience, relevant and related education and training, part-time work, and breaks in employment, none of which will be reflected in the data collected.”

What Should Your Company Do Now?

Whatever the fate of the proposed regulations, a prudent response to this issue is to conduct at least a basic internal review. The focus of such a review should be to ensure that conditions don’t exist that could support allegations of pay discrimination.