By Keisha Ward, courtesy of SBAM Approved Partner ASE
We’ve discussed impending changes in the way salaries are approached in today’s market. It is understood that many states are banning and have banned the practice of using salary history as a factor during salary negotiations. On Monday, a federal appeals court ruled that salary history cannot be considered as a factor to justify wage inequalities between men and women. To put it plainly, employers can no longer justify paying a man more than a woman based on what she earned in the past.
When confronted with this disparity in the past, employers have depended on salary history as the scapegoat. However, this practice can no longer be considered after Monday’s ruling, which took place just one day before Equal Pay Day, a movement created to raise awareness on gender pay inequality.
This ruling was a brought about after Aileen Rizo, a math consultant for Fresno County sued the county after learning that her male counterpart earned over $10,000 more than she was being paid. After being told by management that the wage gap was a result of her past salary history, she sued. The Fresno County Office of Education argued starting salaries are based on prior salary, and Rizo was paid less than her male colleagues because she made less than them in her last job.
The court documents state that the school district argued prior salaries fall under the Equal Pay Act’s “factor other than sex” exception that makes a wage difference lawful. However, the 9th Circuit court said that this is limited to legitimate job-related factors like a prospective employee’s experience, educational background, ability or prior job performance, but not their pay. In fact, Judge Stephen Reinhardt called the gender pay gap an embarrassing reality despite the Equal Pay Act of 1963.
On the heels of this breaking news development, we would like to highlight a few suggestions that we shared in an October 2017 EPTW article: Salary History Bans – How to Handle Them. Companies can focus efforts in these areas to avoid wage disparities and future pay inequality:
- Conduct an HR audit that includes your organization’s pay and hiring practices
- Implement pay practices that are clear, with structured and realistic salary levels
- Create defined and measurable pay criteria; so that starting salaries, awards, and raises are part of a fair and well thought out formula
- Clearly document the factors used to determine salary, promotions, bonuses, etc.
- Make sure documents are user-friendly and archived properly
It is good practice to set clear salary perimeters for all positions and make hiring and salary decisions based on candidates’ skills only. If there is a well-defined salary benchmark for each role internally, hiring managers can simply plot new hires into the appropriate category eliminating the need to visit past salary history.
ASE Resources
Compensation Plan Design – This course provides participants with background and theory to design develop and implement robust compensation plans/structures for their employees. The next class takes place Wednesday, May 16, 2018. Click here to learn more or to register.
2018 Compensation and Benefits Conference – ASE’s annual Compensation and Benefits Conference is Michigan’s premier total rewards event and will take place on May 23rd at The Henry in Dearborn. The 2018 Compensation and Benefits Conference will offer valuable and timely insight on the unique challenges facing today’s Total Rewards professionals and includes a session on pay equity. Learn more or register here.