Pay Equity In the Era of COVID and the Black Lives Matter Movement

The Black Lives Matter movement and the COVID-19 pandemic have increasingly prompted employers to consider workplace fairness issues from a value-based perspective rather than from a standpoint motivated by legal compliance.

By Michelle Rauschenbach and Brian D. Murphy | October 23, 2020 at 11:47 AM

Most employers traditionally consider issues of workplace fairness from the perspective of legal compliance rather than from the viewpoint of a commitment to a principled, moralistic, and value-based system. Employers often approach matters by “checking the box” as identified by in-house or outside counsel. Required anti-harassment and anti-discrimination training? Check. Equal Employment Opportunity statement at the front of our handbook? There it is. Employment law posters? Yep, right there in the breakroom.

The COVID-19 pandemic and the national dialogue on race have given rise to unique circumstances that are causing employers to re-evaluate their commitment to workplace fairness and drive sustainable change. Specifically, many employers are prioritizing their efforts towards establishing an ongoing approach to fair pay through the implementation of best practices discussed below.

Historical Approach for Legal Compliance

Employers are, by now, quite familiar with the federal Equal Pay Act of 1963 (“EPA”), which requires nothing short of equal pay for equal work performed under (substantially) similar circumstances. Employers are also gaining fluency with the patchwork of state and local laws, which have both broadened the concept of comparator groups and tightened the justifications that may be permissibly advanced to explain identified pay disparities. State and local laws are paving the way for an increased focus on pay equity and transparency.

Indeed, just three weeks ago, California became the first state to require employers with 100 or more employees to annually provide a “pay data report” to the government to increase transparency, perhaps in response to the Equal Employment Opportunity Commission’s (EEOC) abandonment of its plan to do so.

The effort to achieve compliance with the foregoing laws as a means to avoid crippling financial liability has historically dominated many pay equity initiatives. Employers have endeavored for compliance through a variety of means, but most often, through audits and analyses of existing compensation disparities and pay practices affecting similarly situated persons grouped by gender and/or race. These audits are traditionally conducted once per year and focus on simply grouping like employees together and accounting for legitimate explanations for pay gaps.

This process, for those employers that have embraced it, has generally allowed employers to remediate some existing issues, but has been less successful in preempting future recurrences of issues or identifying root causes that led to pay disparities in the first place. The returns are thus temporary and necessitate periodic visitation.

A New Perspective

The adverse employment decisions that have been forced by COVID-19 — layoffs, pay freezes, position reassignments — have only heightened the scrutiny with which employees evaluate the circumstances of their employment. The same people who are most impacted by existing wage inequities (people of color and women) are also those who are experiencing the brunt of the negative consequences of the COVID-19 pandemic due to layoffs and increased caretaking duties and responsibilities.

In addition to the economic conditions that have resulted from the COVID-19 pandemic, there are other important social and environmental factors at play. The racial violence across the United States has been undeniable and the responding activism and support for the Black Lives Matter Movement has forced many employers to consider workplace fairness issues through a different lens — the lens through which their workforces now evaluate these issues. A moral lens. a lens that requires an ongoing, intentional, and transparent commitment to fairness. A female or racial minority employee is no longer concerned with whether there is a “bona fide factor other than sex” (or race/ethnicity) that explains a pay gap, but instead, is concerned with whether other similar colleagues within the organization are treated “fairly” in all terms and conditions of employment.

Additionally, the future holds many unknowns that could have dramatic impacts on pay equity. As many employers are evaluating remote work policy changes and considering giving employees the “option” to return to work, there are serious socioeconomic implications that must be considered. For example, what will be the impacts on career trajectories for those who elect to remain home? If employers support long-term remote work — how will pay equity be impacted by those who leave higher paying markets for lower costs of living?

Likewise, early in the pandemic, many diversity, equity and inclusion initiatives (DEI) and resources took the backseat for many companies and were some of the first personnel and funds to be eliminated. In the last six months, there has been a promising and dramatic shift and reprioritization of DEI to a critical business function.

Without intentional action, problematic trends and existing disparities may not only worsen, but recent progress may be reversed. Accordingly, achieving workplace fairness in pay requires employers to approach the matter differently.

Best Practices

To achieve sustainable fairness in pay, best practice recommends incorporating pay equity assessments into ongoing total rewards practices; committing to ongoing communication and reviews; and conducting diagnostic analyses across the lifecycle of employees and throughout business changes. For employers who share the commitment and pursuit of workplace fairness, there are several important considerations of building an ongoing pay equity program:

Grouping schemas: A first step in assessing pay equity is grouping employees based on those doing substantially similar work. The best practice is to evaluate multiple grouping schemas and to create diagnostic composite groups. This ensures risk and fairness are being assessed narrowly and broadly; adopts an outsider view to minimize bias, and supports analyzing potential pay concerns at a structural level.

Integrated and ongoing: There are many steps across an employee’s lifecycle that result in the disruption of pay equity — starting pay, promotions, off-cycle pay changes, transfers, lay-offs, reclassifications — to name a few. Employers should adopt an approach that enables a proactive review of impacts and results before the decisions are made. These assessments should be integrated with the broader total rewards cycle and conducted pre- and post- major compensation changes.

Root cause analysis: Sustainable change is made by analyzing the policies and behaviors that perpetuate or create pay disparities due to gender and/or race. Analyzing the root cause(s) empowers employers to make non-monetary changes to their pay programs and will minimize the resources and negative impacts over time.

Measure and repeat: For lasting success, it is critical to foster stakeholder support and determine protocols to measure and communicate progress. For example, an increasing number of employers tie executive compensation to broader diversity-related initiatives as a form of accountability.

Conclusion

The recent current events have increasingly prompted employers to consider workplace fairness issues from a value-based perspective rather than from a standpoint motivated by legal compliance. By expanding the focus of pay equity assessments beyond compliance, employers have the opportunity to earn the trust of employees during a time of scarcity and fear, improve productivity while the way people work is being completely redefined, and most importantly become a desired employer during the most uncertain of times. Employers should consider partnering with legal counsel and leveraging powerful pay equity software that can assist them with integrating on-going pay equity programs into their business strategy and culture.

Michelle Rauschenbach is a senior account executive at Syndio Solutions, an HR analytics and pay equity technology company. Brian D. Murphy is a partner in the labor & employment practice group at Sheppard, Mullin, Richter & Hampton.

Reprinted with permission from the “October 23, 2020 edition of the New York Law Journal” © 2020 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or reprints@alm.com.