Letter to House on Paycheck Fairness Act

April 9, 2021
House of Representatives
RE:  Paycheck Fairness Act, H.R. 7

Dear Members of the House of Representatives:

The HR Policy Association represents the chief human resource officers of more than 380 of many of the largest corporations in the United States and globally. Collectively, our member companies employ more than ten million employees in the United States – nearly 9% of the private sector workforce. Our Association members are committed to providing equal pay for equal work, and we strongly support the objectives of the Equal Pay Act (EPA) and Title VII of the Civil Rights Act of 1964. These statutes provide considerable protection for employees with respect to gender-based pay disparity issues. Specifically, under the EPA, a plaintiff does not bear the burden of proving that the employer intentionally committed wage-based gender discrimination. Further, successful plaintiffs can receive back pay, liquidated damages in an amount equal to their back pay, and other relief that the court may grant.

The Association does not support, however, H.R. 7, the Paycheck Fairness Act (PFA).  Notwithstanding the laudable objectives of the sponsors of this legislation to address gender pay disparity issues in the workplace – objectives which we also support – the bill does not address the underlying causes of wage and equity issues in the workplace and will only create unnecessary litigation, particularly in the class action area.

The PFA has been considered for over 24 years by various Congresses, and for good reason, has not been enacted into law. The current version of this proposal to address gender pay issues in the workplace contains even more deficiencies than the earlier legislative proposals in this area and also fails to contain any cost estimate as to its impact on employers. Specifically, the bill includes the following ill-advised provisions:

• Prohibitions on salary history discussions: Applicants for employment are totally foreclosed from disclosing or discussing their present or past compensation history, even on a voluntary basis, in the pre-hire process. Such an approach is an unwarranted federal government overreach into the employment application process and inappropriately interferes with meaningful discussion between applicants for employment and employers regarding compensation expectations. Moreover, the bill establishes new federal prohibition on salary history discussions while leaving in place several state and local laws, which often contain conflicting and imprecise prohibitions which inhibit the ability of applicants and prospective employers to even discuss the former’s salary expectations.
  
  
• Removal of nondiscriminatory defenses: H.R. 7, as a practical matter, also removes important substantial nondiscriminatory defenses that have been well-established and upheld by the courts in EPA litigation. For example, if the pay system being challenged relied on bona fide factors other than sex such as education, training, or experience such defenses are effectively nullified by the insertion of a new statutory four factor test that would also have to be met to establish a legally acceptable defense. One of these four factors is a requirement that the employer establish “business necessity” for the pay system in question – as a practical matter this is virtually an unattainable standard to meet. Further, the elimination of defenses approach contains a “catch all” provision that states that no employer defenses “….shall…apply where the employee demonstrates that an alternative employment practice exists that would serve the same business purpose without producing such differential and that the employer has refused to adopt such alternative practice.” This provision will lead to conflicting expert testimony, result in confusion in the courts, and ultimately may exclude any meaningful defenses from employers.
  
  
• Unlimited damages, even in the absence of intent to discriminate: This legislation permits the recovery of unlimited compensatory damages even where there is absolutely no showing that any pay disparity was the effect of intentional discrimination. Accordingly, liability could be placed on employers for even technical or nonintentional errors in their pay compensation system. H.R. 7 also amends the EPA by including the ability of plaintiffs to recover punitive damages.
  
  
• Pay data reporting requirements significantly expanded, but with limited utility in identifying discrimination: H.R. 7 also significantly increases the type and amount of employer data that will have to be filed on an annual basis with the Equal Employment Opportunity Commission (EEOC). For example, the legislation requires employers to report hiring, termination, promotional, and other unidentified employment-related data – this is an unprecedented requirement. The EEOC has never had unlimited access to this type of expanded information. The bill also requires employers to provide employee pay data for artificially created pay bands and separate such information by sex, race, and national origin. Such a data collection approach has been widely criticized as this type of aggregated information will be of little utility to any reviewer in that it does not identify job duties associated with the pay bands or the skill, ability or experience of the employees included in such a required information response.
  
  
• Adds mandates where government resources better spent elsewhere:  The U.S. Department of Labor (USDOL) will also be required by this proposal to engage in unneeded, costly studies and reports and provide “awards” to certain recipients based on questionable standards – this is simply not a good use of government resources as such money could be better spent for job training and related employee skill-building initiatives.

We strongly urge you to consider and support, however, an alternative to H.R. 7 that will be offered by Congresswoman Stefanik, the WAGE Equity Act. The Stefanik bill has the following positive attributes:

• Reasonable applicant salary information disclosure limitations: While applicants for employment could not be forced to disclose their present or past compensation history to prospective employers, applicants would be permitted to voluntarily provide such information and employers would be allowed to ask applicants about their salary expectations.
  
  
• Incentivizes employer good faith efforts to combat pay discrimination: Employers would be provided a “safe harbor” to protect against litigation in the equal pay area if they have undertaken a good faith internal self-audit of their pay system and taken verifiable steps to correct any unlawful pay disparities. This approach has already been adopted by the states of Massachusetts, Oregon, and Colorado, and should also be adopted at the federal level. Indeed, this approach of encouraging employers to continue to do what is right in the compensation area is a win, win approach for all stakeholders and is the correct direction in which Congress should proceed.
  
  
• Defenses align with established legal standards: The following well-established defenses contained in the EPA would be preserved in the Stefanik bill, including the defenses of seniority systems, merit systems, and compensation systems, which measure earnings by quantity or quality or production standards. The Stefanik bill would add a bone fide business related test to the current EPA defense of factors other than sex. This approach reflects the majority of U.S. circuit courts of appeals holdings that the “factor other than sex” defense must be based on legitimate business reasons. This important proposed statutory change rebuts the central argument being advanced by the proponents of H.R. 7 that the EPA does not contain strong enough enforcement language.
  
  
• Unneeded reporting requirements not included: The onerous EEOC reporting requirements placed on employers by H.R. 7 are not included in Congresswoman Stefanik’s proposal.
  
  
• Continues government oversight that works:  The USDOL and Office of Federal Contract Compliance Programs (OFCCP) would continue their current regulatory approach and the OFCCP would continue to be the primary regulator of federal contractor and subcontractor issues in the EPA area – the Stefanik bill will not add unnecessary and duplicative EEOC oversight to such employers.

H.R. 7 does not address, in any meaningful way, the reasons that gender and sex-related pay disparity issues may exist in certain workplaces and inappropriately puts courts in the position of essentially writing employer compensation systems. The approach taken in this legislation is also punitive and will only increase class action litigation and divert important employer resources to litigation defense expenditures. The only individuals that will benefit from this approach are plaintiff’s trial attorneys.

We, therefore, respectfully request that you vote “Nay” on H.R. 7 and support Congresswoman Stefanik’s alternative legislative proposal. We particularly urge you to give close attention to the safe harbor approach contained in her bill that provides employers an incentive to do self-pay audits and make any needed corrections in their pay system without the threat of expensive, unneeded, and protracted litigation.

Sincerely,

Timothy J. Bartl
President and Chief Executive Officer
HR Policy Association