Is your company vulnerable to employees’ claims that they weren’t paid the right amount due to company policy or discrimination? Now’s a dangerous time to answer “yes” or “I don’t know.”
Reason: A perfect storm of trends—including a newly minted law, high-profile lawsuits and a flood of disgruntled layoff victims—is prompting more U.S. workers to pursue their pay-related claims in court.
Latest development: The first bill signed by President Obama, the Lilly Ledbetter Fair Pay Act, will alter the landscape for pay discrimination lawsuits. The law effectively eliminates the statute of limitations for filing pay-bias claims.
Previously, employees could only pursue discrimination claims based on company pay decisions reaching back up to 300 days. Now, workers can point to paychecks from years ago to prove their cases. Legal experts say this will lead to a rash of new pay-bias lawsuits.
In addition, the recession’s layoff tsunami has left millions of Americans bitter and looking to strike back at their former employers. Employee lawsuits typically spike during economic downturns and this one seems to be no exception. Discrimination claims filed with the EEOC have climbed 26% in the past two years.
Plus, the lawsuit fire is being fueled by several high-profile cases, which inspire people to find wage violations in their own workplaces.
Advice: Conduct a self-audit to find out whether your organization is unintentionally paying less to members of one gender, race or other protected class for doing the same job.
Having that information at hand will also help you if you’re currently being sued.
Key point: Don’t be paralyzed by all this fair-pay talk. Employers still have plenty of leeway in setting pay rates. If you’re prepared to offer solid business-based reasons why one employee earns more than another, chances are good that a court will conclude the differentials aren’t discriminatory, as in the case below.
That’s why it’s vital to document pay decisions when you make them so you can easily explain any differences later (either to the worker or to a jury).
Online resource: To see which factors courts would view as legally differentiating factors, go to www.eeoc.gov/types/epa.html.
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