Recent Developments in Compensation Analysis

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Are you up-to-date on the changes in compensation analysis? There are a number of recent developments that have changed the way we study compensation: the Ledbetter Fair Pay Act, the OFCCP's announcement of recision of compensation standards and guidance, and the National Equal Pay Enforcement Task Force. Find out what these all mean for the way you analyze compensation.

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Recent Developments in Compensation Analysis

  1. 1. Recent Developments in Compensation Analysis<br />Stephanie R. Thomas, Ph.D.<br />Stephanie@TheProactiveEmployer.com<br />
  2. 2. Creation of National Equal Pay Enforcement Task Force<br />OFCCP announces Compensation Standards and Guidelines will be rescinded<br />Renewed support for the Paycheck Fairness Act<br />President Obama signs Ledbetter Fair Pay Act<br />August 17, 2010<br />January 29, 2009<br />January 27, 2010<br />
  3. 3. Ledbetter Fair Pay Act<br />Ledbetter Fair Pay Act, signed into law on January 29, 2009, reversed the Supreme Court’s decision, stating that the 180-day statute of limitations for filing an equal pay lawsuit regarding pay discrimination resets with each new discriminatory paycheck<br />“application of a discriminatory compensation decision or other practice, including each time wages, benefits or other compensation is paid”<br />
  4. 4. Ledbetter Fair Pay Act<br />What does this mean for employers?<br />Increased need for documentation<br />How were the compensation decisions made?<br />How did the employer arrive at the specific compensation figures?<br />What metrics and criteria were used to evaluate employees’ performance?<br />What compensation surveys or industry statistics were used to determine compensation?<br />
  5. 5. Ledbetter Fair Pay Act<br />What does this mean for employers?<br />Increased complexity of analysis<br />What do “other factors” mean?<br />Pay grade<br />Department<br />Location<br />Shift<br />“Other factors” can be any factor that creates seemingly legitimate, non-discriminatory differentials in pay<br />
  6. 6. Employees in Grade 9<br />No statistical evidence of discrimination. We’re safe, right?<br />
  7. 7. Employees in Grade 9<br />WRONG!<br />What if someone claims that she was hired into the wrong pay grade (9 instead of 10) because of discrimination?<br />No statistical evidence of discrimination. We’re safe, right?<br />
  8. 8. Ledbetter Fair Pay Act<br />What does this mean for employers?<br />“Other Factors” is still relatively new area :<br />Not clear what kinds of “other factors” claims will be made<br />Not clear how successful these claims will be<br />Easy to claim, difficult to prove<br />What all of this means, from a compensation analysis perspective, is that you can't look at compensation in isolation. All of these "other factors" are in play and are fair game.<br />
  9. 9. National Equal Pay Enforcement Task Force<br /><ul><li>Created as a result of Obama’s pledge in State of Union Address to crack down on violations of equal pay laws
  10. 10. “Cross-Agency:
  11. 11. U.S. Office of Personnel Management
  12. 12. U.S. Department of Justice
  13. 13. U.S Department of Labor
  14. 14. U.S. Equal Employment Opportunity Commission</li></li></ul><li>National Equal Pay Enforcement Task Force<br /><ul><li>Identified persistent challenges to enforcing equal pay laws
  15. 15. Government’s ability to understand full scope of wage gap and to identify and combat wage discrimination can be improved by access to more data than are currently available</li></ul>Solution: Collect data on the private workforce to better understand the scope of the pay gap and target enforcement efforts<br />
  16. 16. National Equal Pay Enforcement Task Force<br />Solution: Collect data on the private workforce to better understand the scope of the pay gap and target enforcement efforts<br /><ul><li>NEPET recommendations:
  17. 17. Reinstatement of the OFCCP Equal Opportunity (EO) Survey (or similar survey)
  18. 18. better identification of those employers likely to be out of compliance with respect to compensation discrimination;
  19. 19. narrowing of the issues on which the resulting review will focus;
  20. 20. identification of employers for corporation-wide and industry-focused reviews.</li></li></ul><li>National Equal Pay Enforcement Task Force<br />Solution: Collect data on the private workforce to better understand the scope of the pay gap and target enforcement efforts<br /><ul><li>NEPET recommendations:
  21. 21. Revamping EEO Reports
  22. 22. Only one of four versions collects wage data;
  23. 23. EEOC has concluded “no federal data source that contains private sector employer-specific wage data broken down by demographic category”;</li></li></ul><li>National Equal Pay Enforcement Task Force<br /><ul><li>Identified persistent challenges to enforcing equal pay laws
  24. 24. Existing laws do not always provide federal officials with adequate tools to fight wage discrimination</li></ul>Solution: The Administration will work with Congress to pass the Paycheck Fairness Act<br />
  25. 25. Paycheck Fairness Act<br />Equal Pay Act prohibits employers from paying a female employee less than a male employee for “substantially equal” work<br />Employers liable for pay differential unless discrepancy is attributable to:<br />Seniority system;<br />Merit system;<br />System which measures earnings by quantity or quality of production;<br />Any factor other than sex.<br />
  26. 26. Paycheck Fairness Act<br />Equal Pay Act prohibits employers from paying a female employee less than a male employee for “substantially equal” work<br />Employers liable for pay differential unless discrepancy is attributable to:<br />Seniority system;<br />Merit system;<br />System which measures earnings by quantity or quality of production;<br />Any factor other than sex.<br />Under the Paycheck Fairness Act, employer must show that the pay differential is not only caused by something other than sex, but also is related to job performance and is consistent with business necessity.<br />
  27. 27. Paycheck Fairness Act<br />Under the Paycheck Fairness Act, employer would have to show that the difference in pay was based on:<br />“Bona fide” factor other than sex<br />Job related<br />Consistent with business necessity<br />
  28. 28. Paycheck Fairness Act<br />Under the Paycheck Fairness Act, employer would have to show that the difference in pay was based on:<br />“Bona fide” factor other than sex<br />Job related<br />Consistent with business necessity<br />If passed in its current form, each element factoring in to a compensation analysis will need to be not only bona fide and job related, the employer will also have to demonstrate that each element is consistent with business necessity.<br />
  29. 29. Rescinding of OFCCP’s Compensation Standards and Guidelines<br />In 2006, OFCCP issued Interpretive Standards for Systemic Compensation Discrimination and Voluntary Guidelines for Self-Evaluation of Compensation Practices<br />
  30. 30. Rescinding of OFCCP’s Compensation Standards and Guidelines<br />Standards:<br />OFCCP focus on systemic pay discrimination<br />Described the methodology used by OFCCP in deciding to file an agency lawsuit for pay discrimination<br />Guidelines:<br />Outlined a voluntary self-evaluation process to enable contactors to avoid OFCCP investigation of compensation practices<br />Similarly situated employee groupings<br />Multiple regression analysis<br />Investigation of statistically significant disparities<br />Contemporaneous creation of data and documentation<br />
  31. 31. Rescinding of OFCCP’s Compensation Standards and Guidelines<br />Guidelines:<br />Outlined a voluntary self-evaluation process to enable contactors to avoid OFCCP investigation of compensation practices<br />Suggested methodology:<br />Similarly situated employee groupings<br />Multiple regression analysis<br />Investigation of statistically significant disparities<br />Contemporaneous creation of data and documentation<br />ON AUGUST 17, PATRICIA SHIU ANNOUNCED THAT STANDARDS AND GUIDELINES WILL BE RESCINDED<br />
  32. 32. Rescinding of OFCCP’s Compensation Standards and Guidelines<br />The recommendation for rescission came from the National Equal Pay Enforcement Task Force<br />New Wage Data Collection Tool<br />
  33. 33. Wage Data Collection Tool<br />Some think the “new wage data collection instrument” will be the old EO Survey morphed into a different format<br />From 2000-2005, OFCCP utilized EO Survey to collect information on personnel data and compensation by EEO-1 category<br />The hope was that the EO Survey would identify non-compliant federal contractors and assist OFCCP in identifying contractors for further evaluation<br />EO Survey was discontinued in 2006<br />
  34. 34. Wage Data Collection Tool<br />Part of The Paycheck Fairness Act is the reinstatement of EO Survey<br />If passed in its current form, one half of all federal contractor establishments (or about 100,000 employers) would have to complete the EO Survey every year.<br />
  35. 35. Wage Data Collection Tool<br />The reinstatement of the EO Survey is part of the Paycheck Fairness Act, which is stalled in the Senate. If that Act passes in its current form, one half of all federal contractor establishments (or about 100,000 employers) would receive and have to complete the EO Survey every year.<br />Even if the Paycheck Fairness Act is never passed, I predict we will see the EO Survey revived in some form. <br />
  36. 36. What does all of this mean for compensation analysis?<br />
  37. 37. What It All Means<br />Compensation cannot be analyzed in isolation<br />
  38. 38. What It All Means<br />Documentation and retention of compensation decision information is critical<br />
  39. 39. What It All Means<br />If you’re not statistically examining your compensation practices, you should be (because someone else will be!)<br />
  40. 40. What It All Means<br />Federal contractors and subcontractors may be on their own for a while<br />
  41. 41. What It All Means<br />The Paycheck Fairness Act is a HUGE wild card<br />
  42. 42. Recent Developments in Compensation Analysis<br />Stephanie R. Thomas, Ph.D.<br />Stephanie@TheProactiveEmployer.com<br />

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