pay equity: what the latest legal developments mean for

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Wednesday, July 11, 2018 Noon–1:15 p.m.

1.25 General CLE credits

Pay Equity: What the Latest Legal Developments Mean for Monitoring and Evaluating Pay

iiPay Equity: What the Latest Legal Developments Mean for Monitoring and Evaluating Pay

PAY EQUITY: WHAT THE LATEST LEGAL DEVELOPMENTS MEAN FOR MONITORING AND EVALUATING PAY

OREGON STATE BAR LABOR & EMPLOYMENT SECTION EXECUTIVE COMMITTEE

Aruna A. Masih, ChairClarence M. Belnavis, Chair-Elect

Lisa A. Amato, Past ChairStephen L. Brischetto, Treasurer

Kyle T. Abraham, SecretaryJ. Ashlee AlbiesJanine C. Blatt

Amanda T. GamblinShirin Amir Khosravi

Jose A. KleinSally Ann LaJoieHaley Rosenthal

Shelley D. RussellElizabeth A. Semler

Jennifer SungDennis E. Westlind

Scott N. Hunt,Advisory Member

The materials and forms in this manual are published by the Oregon State Bar exclusively for the use of attorneys. Neither the Oregon State Bar nor the contributors make either express or implied warranties in regard to the use of the materials and/or forms. Each attorney must depend on his or her own knowledge of the law and expertise in the use or modification of these materials.

Copyright © 2018

OREGON STATE BAR16037 SW Upper Boones Ferry Road

P.O. Box 231935Tigard, OR 97281-1935

iiiPay Equity: What the Latest Legal Developments Mean for Monitoring and Evaluating Pay

TABLE OF CONTENTS

Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v

Faculty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v

Presentation Slides—Pay Equity: What the Latest Legal Developments Mean for Monitoring and Evaluating Pay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ivPay Equity: What the Latest Legal Developments Mean for Monitoring and Evaluating Pay

vPay Equity: What the Latest Legal Developments Mean for Monitoring and Evaluating Pay

SCHEDULE

11:30 Registration

Noon Pay Equity: What the Latest Legal Developments Mean for Monitoring and Evaluating Pay

F Legislative developments within Oregon and elsewhere

F Recent cases interpreting pay equity laws

F Pay audit considerations

F Legal and statistical issues when putting pay equity principles into practice

Amy M. Aukstikalnis, Ph.D., Welch Consulting, Los Angeles, CA

Kathryn G. Mantoan, Orrick Herrington & Sutcliffe LLP, Portland, OR

1:15 Adjourn

FACULTY

Amy M. Aukstikalnis, Ph.D., Welch Consulting, Los Angeles, CA. Dr. Aukstikalnis has been engaged as an expert witness and economic consultant on numerous labor and employment–related matters. Her practice includes the statistical analysis of claims in class action employment discrimination cases, the preparation of pay equity and employment practice audits for Fortune 500 companies, and the evaluation of claims in wage and hour litigation. She has prepared and testified about economic loss calculations in employment discrimination, wage and hour, and wrongful termination cases. Dr. Aukstikalnis has also prepared studies related to and testified about unemployment spells, job market opportunities, earnings, benefit valuations, and other issues relating to claims of economic damage. She has testified in single plaintiff, multiple plaintiff, and class action matters in both federal and state courts. Dr. Aukstikalnis holds a Ph.D. in Economics from the University of Houston with areas of concentration in Labor Economics and Applied Econometrics.

Kathryn G. Mantoan, Orrick Herrington & Sutcliffe LLP, Portland, OR. Ms. Mantoan focuses on high-stakes employment litigation, compliance counseling, and litigation avoidance measures. Her practice has a particular emphasis on complex class actions and developing areas of law including pay equity. She has defended clients in class actions and other systemic cases in state and federal courts and administrative forums throughout the county. Ms. Mantoan also writes and speaks regularly on employment law topics; recent presentations have addressed pay transparency in the workplace and harassment investigations in the #MeToo era, and her article “Mind the Gap: Pay Audits, Pay Transparency, and the Public Disclosure of Pay Data” (coauthored with Erin Connell) was recently published by the ABA Journal of Labor and Employment Law. Ms. Mantoan is a Ph.D. candidate in Philosophy at the University of California, Berkeley.

viPay Equity: What the Latest Legal Developments Mean for Monitoring and Evaluating Pay

1Pay Equity: What the Latest Legal Developments Mean for Monitoring and Evaluating Pay

Pay Equity: What the Latest Legal Developments Mean for Monitoring and Evaluating PayOregon State Bar Lunch & Learn SeriesJuly 11, 2018Amy M. Aukstikalnis, Ph.D., Welch ConsultingKathryn G. Mantoan, Orrick, Herrington & Sutcliffe LLP

Agenda

2

Pay Audits in Practice

Latest Legal Developmentsi. Whose Pay Must Be “Equal”?ii. What Constitutes a Defense?iii. Safe Harbor Provisionsiv. The Role of Prior Salary

Pay Gap vs. Pay Equity

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Pay Gap vs. Pay Equity

• In 2016, the U.S. Census Bureau estimated that women working full-time, year-round earned an average of 80.5 cents for every dollar men earned.

• This is often described as a “pay gap” of 19.5 percent.• The Census Bureau calculates this figure by:

– Dividing the median yearly earnings of women by

– The median yearly earnings of men

– For full-time, year-round workers

– https://www.census.gov/library/publications/2017/demo/p60-259.html

The Oft-Cited “Pay Gap”

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• In framing a 2009 report, the U.S. Department of Labor cautioned:

– “[D]ifferences in the compensation of men and women are the result of a multitude of factors” and accordingly “the raw wage gap should not be used as the basis to justify corrective action.”

– https://www.shrm.org/hr-today/public-policy/hr-public-policy-issues/Documents/Gender%20Wage%20Gap%20Final%20Report.pdf

• Thus, what does the “pay gap” really mean?

• And how does it relate to the legal requirement of equal payfor equal (or substantially similar) work – i.e., to pay equity?

Looking Behind the Numbers

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Latest Legal Developmentsi. Whose Pay Must Be “Equal”?


• Historically, laws required employers to pay equal wages to employees of the “opposite sex” who perform “equal work”

– See, e.g., 29 U.S.C. § 206(d)(1)

– “No employer … shall discriminate within any establishment … between employees on the basis of sex by paying wages to employees in such establishment at a rate less than the rate at which he pays wages to employees of the opposite sex in such establishment for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions.”

• Recent amendments in many states relax the definition, and require equal pay among certain employees whose work may not technically be “equal”

States are Redefining Pay Equity Obligations

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• Prior law

– Enacted in 1955

– OR. REV. STAT. § 652.220 (2016)

– No employer shall:

• (a) In any manner discriminate between the sexes in the payment of wages for work of comparable character, the performance of which requires comparable skills.

• (b) Pay wages to any employee at a rate less than that at which the employer pays wages to employees of the opposite sex for work of comparable character, the performance of which requires comparable skills.

Whose Pay Must be “Equal”? Oregon

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• House Bill 2005 (Laws 2017, c. 197, § 2)

– First revision of Oregon equal pay law since enactment

– Majority of changes effective January 1, 2019

– Law broadened to encompass pay differentials between employees distinguished by race, color, religion, sex, sexual orientation, national origin, marital status, veteran status, disability or age• OR. REV. STAT. §§ 652.210(5), 652.220(1)(b)

• “Veteran status” and “disability” added through amendment process, following testimony from advocates for these groups about the pressures they may face to accept lower pay in order to secure employment


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• House Bill 2005 (cont’d)

– As originally introduced, would have defined “work of comparable character” as “work that is substantially similar based on the needs of the employer, the value of the work to the employer and the level of knowledge, composite skill, effort, responsibility and working conditions required in the performance of the work, regardless of job description or job title”

• Arguably a “comparable worth” standard

• Amended in response to concerns from the Oregon business community


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– “Work of comparable character” will now be expressly defined as “work that requires substantially similar knowledge, skill, effort, responsibility and working conditions in the performance of work, regardless of job description or job title”

• OR. REV. STAT. § 652.210(12)

– Mirrors the federal Title VII standard


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Whose Pay Must be “Equal”? Other States

12

California• “Substantially

similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions”

Maryland• “Work of a

comparable character”

• Courts have interpreted consistent with the federal Equal Pay Act

Massachusetts• “Work of like or

comparable character”

• Defined as “work that is substantially similar in that it requires substantially similar skill, effort and responsibility and is performed under similar working conditions”

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Latest Legal Developmentsii. What Constitutes a Defense?

• Recent amendments may also alter the ways in which an employer may justify pay differentials between relevant comparators.

• Prior Oregon law

– Subsection (1) of this section [prohibiting pay differentials for work of comparable character] does not apply where:

• (a) Payment is made pursuant to a seniority or merit system which does not discriminate on the basis of sex.

• (b) A differential in wages between employees is based in good faith on factors other than sex.

– OR. REV. STAT. § 652.220(2) (2016)

What Constitutes a Defense? Oregon

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• House Bill 2005

– As originally introduced, would have expressly authorized pay differentials traceable to any of the four express federal Equal Pay Act defenses

• Including any “factor other than sex” (29 U.S.C. § 206(d))

– Would also have placed burden on the employer to demonstrate that the factor relied upon was not “based on or derived from” a prohibited characteristic or “perceptions of traditional or appropriate roles”


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– As enacted, authorizes paying employees differently for “work of comparable character” only if the differential is based on:

• A “bona fide factor that is related to the position in question,” and

• One of eight enumerated factors

– OR. REV. STAT. § 652.220(2)


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– Enumerated factors include:

– Or “any combination of the factors described … if the combination of factors accounts for the entire compensation differential”


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A seniority system Travel, if necessary and regular

A merit system Education

A system that measures quantity or quality of production

Training

Workplace location Experience

• Massachusetts

– Text of law also eliminates “factor other than sex” defense

• MASS. GEN. LAWS ch. 149, § 105A

– Attorney General guidance: “MEPA permits differences in pay for comparable work only when based upon” factors identified in text

• California

– “Factor other than sex” remains a defense

– But employer must prove that each factor relied upon is applied “reasonably” and that those factors, taken together, “account for the entire wage differential”

• CAL. LAB. CODE § 1197.5(a)(1)(D)

What Constitutes a Defense? Other States

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Latest Legal Developmentsiii. Safe Harbor Provisions

• House Bill 2005

– Authorizes a motion to disallow compensatory or punitive damages in any case brought under the new law, including class actions—meaning exposure would be capped at two years’ back pay and reasonable attorneys’ fees.

– Provides that such a motion to disallow “shall” be granted if the employer can demonstrate that it:

• (1) completed a good faith “equal-pay analysis” within three years prior to the filing of the complaint that was “[r]easonable in detail and in scope,”

• (2) eliminated the “wage differentials” for any named plaintiff, and

• (3) “made progress toward” eliminating wage differentials for the putative class.

– OR. REV. STAT. § 652.235 (2019)

Safe Harbor Provisions: Oregon

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• The “equal-pay analysis” required to trigger this safe harbor need not take any particular form.

– It is defined simply as “an evaluation process to assess and correct wage disparities among employees who perform work of a comparable character.”

– While the Oregon state executive branch completed a pay equity study back in 2015 and Governor Brown expressed her view that House Bill 2005 “encourages all employers to conduct a pay equity study, just as the state has recently done,” there is no requirement to conduct any particular type of analysis to qualify.

• But be mindful of limitations

– Oregon state law claims only – not Title VII, federal Equal Pay Act, OFCCP

– Implicates privilege considerations

Safe Harbor Provisions: Oregon

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• Massachusetts as contrast

– Affords employers a complete defense against an allegation of wage discrimination under the Massachusetts Equal Pay Act if:

• within the previous 3 years prior to commencement of the action

• completed a self-evaluation of its pay practices “in good faith”

• can demonstrate that “reasonable progress” has been made towards eliminating wage differentials based on gender for comparable work in accordance with that evaluation

– MASS. GEN. LAWS ch. 149, § 105A(d)

Safe Harbor Provisions: Other States

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Latest Legal Developmentsiv. The Role of Prior Salary

• House Bill 2005

– Adds a new prohibition on “[s]creen[ing]” applicants based on prior compensation or “seek[ing]” salary history of an applicant or employee.

• Neither term is defined, though the new law does expressly authorize an employer to request written authorization from an applicant to confirm prior compensation after an offer that includes a compensation amount has already been extended.

• Prohibition of “seek[ing]” salary history already in effect (as of October 2017)

– The law also prohibits employers from “[d]etermin[ing] compensation for a position based on current or past compensation of a prospective employee”

• Compare to Rizo v. Yovino, 887 F.3d 453 (9th Cir. 2018)

Inquiries About Prior Salary: Oregon

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• At least sixteen states and the District of Columbia have already enacted pay transparency legislation

• California: “pay scale for a position” must be provided to applicants “upon reasonable request” CAL. LAB. CODE §§ 432.3(c), 1197.5(k)

• Maryland: expressly prohibits retaliation against any employee for “[a]sking the employer to provide a reason for the employee’s wages” MD. CODE ANN., LAB. & EMPL. § 3-304.1(a)

• Are bans on salary history bans the next wave?

– WIS. STAT. ANN. § 103.36 (signed into law April 16, 2018)

– MICH. COMP. LAWS ANN. § 123.1384 (effective June 24, 2018)

Inquiries About Prior Salary: Other States

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Pay Audits in Practice


• First, determine what the data show

• Confirm accuracy and reliability

• Develop messaging regarding what the “pay gap”does (and doesn’t) indicate

– Generally does not reflect all legitimate factors that influence pay

Public Pay Gap Disclosures

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• Privilege issues

• Which employees should be compared?

– Focus on job content/duties

• Constructing accurate and appropriate analyses

– Statistical models

– Cohort analyses

• Interpreting and applying results– “An employer may not reduce the compensation level of an employee to

comply with the provisions of this section.”• OR. REV. STAT. § 652.220(4)

Structuring a Pay Equity Audit

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• An employee’s pay may consist of one or more components:

• Most common comparisons are average base pay (or salary) comparisons.

Analyzing Pay Differences

29

Base Pay or Salary Bonus Stock (Equity) Commissions

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Limitations of Average Salary Comparisons

30

Limitations of Average

Salary Comparisons

Limitations of Average

Salary Comparisons

Does not account for factors that reasonably may explain differences in pay or “business-related” factors used at the company

Assumes men and women are on averagesubstantially similar, i.e., job, qualifications, tenure

Can be heavily influenced by extreme (outlier) observations

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• Because multiple factors play a role in determining the pay of men and women, we need a statistical tool that allows us to simultaneously account for these differences

• Multiple regression estimates the average pay difference while “removing the effect of” or “adjusting for differences” in relevant factors that affect compensation

– Multiple regression can account for all of the differences above, as long as data is complete and accurate.

Multiple Regression AnalysisAccounting for Factors Other Than Gender

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• Must identify the appropriate comparator groupings

• Must identify and include legitimate, business-related factors (or determinants of pay) that differ between employees

• Vague language in the statutes makes this challenging

– In particular, for employers that operate in multiple jurisdictions or across state lines where equal pay laws may differ

Identifying Appropriate Groupings and Factors

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• A grocery store chain has men and women in three jobs:

– Assistant Manager, Grocery

– Assistant Manager, Produce

– Assistant Manager, Front End

• Operates 24-hour stores and non-24 hour stores statewide in Oregon

• Monthly pay data available for all men and women in Assistant Manager positions

Example: Assistant Managers

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$3,795

$3,581

$3,000

$3,100

$3,200

$3,300

$3,400

$3,500

$3,600

$3,700

$3,800

$3,900

Men Women

OregonAverage Monthly PayAll Assistant Managers

Oregon Stores: Average Pay Difference

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Average Pay, All Assistant Managers:

Men v. Women

Difference: $ - 213.75 /month

Q: Is This Difference Statistically Significant?


Null Hypothesis: Average Pay Difference = 0

Determining Statistical Significance

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Oregon Stores: Statistical Significance

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Average Pay, All Assistant Managers

Men v. Women



Yes, 2.96 Standard Deviations.

$3,795

$3,581

$3,000

$3,100

$3,200

$3,300

$3,400

$3,500

$3,600

$3,700

$3,800

$3,900

Men Women



$4,095

$3,578 $3,523

$3,000

$3,200

$3,400

$3,600

$3,800

$4,000

$4,200

Grocery Produce Front End

OregonAverage Monthly Pay

Assistant Managers, by Job Title

Oregon Stores: Job Title

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By Job Title

$3,795

$3,638

$3,000

$3,100

$3,200

$3,300

$3,400

$3,500

$3,600

$3,700

$3,800

$3,900

Men Women


Oregon Stores: Controlling for Job Title

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Predicted, Actual Pay, After Accounting for Job Title



Yes, 2.05 Standard Deviations.



Men v. Women

By Job Title

$4,103

$3,561

$3,719

$4,078

$3,608

$3,353

$3,000

$3,200

$3,400

$3,600

$3,800

$4,000

$4,200



Men Women

Oregon Stores: Analyzing By Job Title

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• Front End Managers show large differences in favor of men

– But when the data is divided into 24-hour stores and non-24-hour stores, the differential favoring men is only seen in 24-hour stores.

• Additional (omitted) variable: Key Person designation (additional job responsibilities for managers working certain shifts in 24 hour stores)

Observation: Focus on Front End Assistant Managers

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Predicted, Actual Pay, After Accounting for Key Person



No, 1.28 Standard Deviations.

$3,795

$3,698

$3,000

$3,100

$3,200

$3,300

$3,400

$3,500

$3,600

$3,700

$3,800

$3,900

Men Women


Oregon Stores: Controlling for Key Person Designation

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• Is Job Title a legitimate factor?

– Control within single model

– Running separate models

• Is the Key Person designation a legitimate factor?

• Do the factors relied upon “account for the entire compensation differential”?

– OR. REV. STAT. § 652.220(2)

Questions to Consider

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$5,183

$4,120

$3,506

$4,875

$4,178

$3,526

$3,000

$3,500

$4,000

$4,500

$5,000

$5,500


Average Monthly PayMen and Women, by Store Size

Oregon only

Men Women

Observation: Pay Varies by Store Size

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• Is Store Size a legitimate factor?

– Why or why not?

Large Medium Small

• Erin M. Connell & Kathryn G. Mantoan, Mind the Gap: Pay Audits, Pay Transparency, and the Public Disclosure of Pay Data, 33 ABA J. Lab. & Emp. L. 1 (2018)

• Amy M. Aukstikalnis, Ph.D. and Donald M. Deere, Ph.D., “The State of Pay: Pay Equity and Preemptive Audits,” ABA National Conference on Equal Opportunity Law, March 15, 2018

• Or feel free to contact either of us directly

– [email protected]

– [email protected]

For Additional Detail

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Thank you!