Employers May Soon Be Forced To Reveal Pay Information By Gender

Businesses With 100 Or More Workers Would Be Subject To Proposed New Law Aimed At Combating Gender Discrimination

The federal government announced at the end of January 2016 its intent to gather additional pay information from larger employers, forcing all businesses with over 100 workers to provide detailed information about their pay practices in an effort to address gender discrimination. If the President’s plan moves forward as expected, employers will be subject to a heightened pay transparency standard by the end of this calendar year.

What Has Been Proposed?

The Obama Administration has proposed executive action through the Equal Employment Opportunity Commission (EEOC) to require certain businesses to provide detailed information about how much each of their employees is earning. Affected employers must break down pay information by gender, as well as race and ethnicity, after the law goes into effect in order to make it very easy to identify pay gaps.

Who Will Be Impacted?

This executive action will apply to all businesses that employ 100 or more workers. According to the White House, the proposal would cover more than 63 million Americans.

How Will Employers Report The Information?

Currently all employers with 100 or more workers already complete the EEO-1 form on an annual basis, providing demographic information to the government about race, gender, and ethnicity. Once the new revisions take effect, the EEO-1 form will also require that salary and pay information be included.

Why Has The Government Proposed This Change?

The federal government has specifically stated that the goal of this additional data-gathering is to identify businesses that might have pay gaps, and then target those employers who are discriminating on account of gender. It is no coincidence that this plan was announced on the seventh anniversary of the Lily Ledbetter Fair Pay Act, a federal law that overturned a Supreme Court decision and made it easier for employees to bring equal pay claims.

In other words, once this new law takes hold, the EEOC will have greater ease in identifying disparities and areas of potential pay discrimination to determine where it will take enforcement action.

When Will Employers Be Subject To The New Law?

If the proposal proceeds as scheduled, the draft revisions would be available for inspection and public comment between February 1, 2016 and April 1, 2016. The EEOC Chair has stated that she anticipates the rulemaking process to be completed by September 2016, when the new rules would officially go into effect. If this holds true, employers will have to submit their pay data for the first time in September 2017.

What Should Employers Do Now?

In light of these developments, affected companies should make it a priority to review current pay systems and identify and address any areas of pay disparity. It is critical to take steps now to minimize increased scrutiny once the data begins to be reported next year.

By conducting your own gender-specific audit of pay practices, you will be able to determine whether any pay gaps exist that might catch the eye of the federal government when you turn over this information next year. You will have time to determine whether any disparities that may exist can be justified by legitimate and non-discriminatory explanations, or whether you will need to take corrective action to address troublesome pay gaps.

Obama Proposes Shrinking White-Collar Exemptions under FLSA

President Obama has proposed expanding the availability of overtime pay, which would cause  the Department of Labor to do its first overhaul of Fair Labor Standards Act (FLSA) regulations in 10 years.

 

The President signed a memorandum on March 13, 2014, instructing the Department of Labor to update regulations about who qualifies for overtime pay. In particular, he wants to raise the threshold level for the salary-basis test from the current $455 per week in order to account for inflation. The threshold has been raised just twice in the past 40 years. The President did not specify the exact amount the threshold should be raised though.

 

“Unfortunately, today, millions of Americans aren’t getting the extra pay they deserve. That’s because an exception that was originally meant for high-paid, white-collar employees now covers workers earning as little as $23,660 a year,” Obama said in his remarks on overtime pay.

 

The memorandum also suggests that both the primary duties and pay of some exempted employees do not truly fit in the executive, administrative and professional employees exemptions, referred to as the white-collar exemptions under FLSA.

 

In a fact sheet on the President’s memorandum, the White House said: “Millions of salaried workers have been left without the protections of overtime or sometimes even the minimum wage. For example, a convenience store manager or a fast food shift supervisor or an office worker may be expected to work 50 or 60 hours a week or more, making barely enough to keep a family out of poverty, and not receive a dime of overtime pay.” The FLSA’s minimum wage would not protect a salaried worker because salaried workers’ pay must satisfy the weekly salary-basis test rather than the Federal hourly minimum wage, which is $7.25 per hour. The hourly minimum wage in Florida is currently $7.93 per hour.

 

The memo also pointed out that “only 12% of salaried workers fall below the threshold that would guarantee them overtime and minimum wage protections.“ The fact sheet also called the current FLSA regulations outdated, noting that states such as New York and California have set higher salary thresholds.

 

Small businesses will be hit particularly hard by a change in the FLSA regulations.

 

If the regulations shrink the current white-collar exemptions, employers would have two main options to hold down costs. They would have to either increase workers’ salary above the new salary-basis threshold (to avoid paying overtime) or leave employees in the nonexempt category and pay them overtime. Companies could also hire more employees, but the other two options are more likely. 

 

Implications for HR

Once tightened white-collar exemptions are implemented, which is not likely to happen for months now, it could result in far-reaching implications for HR, including wage and hour audits and layoffs. The money to pay for increased overtime wages has got to come from somewhere which might mean layoffs, reducing overtime and taking a fresh look at the fluctuating workweek.

 

When asked at a press briefing about the burden on businesses if the Obama administration succeeds in efforts to both increase the federal minimum wage and revise FLSA regulations, Betsey Stevenson, a member of the White House’s Council of Economic Advisers, said, “We think these two items are very different, but, obviously, they do feed into the same thing, which is people should be rewarded for fair work.” She suggested that some workers in the white-collar exemptions aren’t even earning minimum wage for all the work they do at low salaries.

 

Even though the president did not assign a number for the minimum salary-basis threshold, Stevenson said the overtime “protections have been eroded over time. This threshold in 1975 was nearly $1,000 in today’s dollars; today it’s $455.” Stevenson believes that the rule should be modernized as a matter of the “basic principle of fairness.”

 

We will continue to keep you abreast of any changes to FLSA as well as other regulations that can impact your business. If you have any questions about the current or proposed FLSA regulations, please contact our office.