[co-author: Joy Merklen]*
New York State
As part of a broad agenda to protect and advance women’s equality, New York Governor Andrew Cuomo signed the Achieve Pay Equity Law (S.1/A.6075), which expands and changes New York’s equal pay act, N.Y. Labor Law § 194. New York has the narrowest wage gap in the United States, with women currently earning about 89 cents to each man’s dollar. The Achieve Pay Equity Law attempts to further narrow this gap.
Before this October 2015 amendment, employers were required to pay their employees equal pay for equal work, defined as work requiring equal skill, effort and responsibility. However, an employer could justify pay differences if they were based upon a seniority system, a merit system, a system that measures earnings by quantity or quality of production, or any factor other than sex.
Under the Achieve Pay Equity Law, employers may no longer justify a pay difference between male and female employees by using the “any factor other than sex” defense. Unless one of the other justifications applies, employers must instead demonstrate a “bona fide factor other than sex,” such as training, experience or education. The bona fide factor must be job-related, consistent with business necessity (i.e., it must bear a manifest relationship to the employment) and not be based upon or derived from a sex-based differential in payment. Even if the employer can meet this standard, a bona fide factor will not justify a pay difference if an employee demonstrates three things: (1) the employer’s practice has a disparate impact on the basis of sex; (2) an alternative employment practice exists that would serve the same business purpose; and (3) the employer refused to adopt the alternative practice.
In an effort to increase wage transparency—an important factor in helping to achieve equal pay—the amended state law prevents employers from prohibiting or penalizing employees from discussing their wages with each other. Employers may, however, establish reasonable limitations concerning the time, place and manner of such wage discussions in a written policy.
The Achieve Pay Equity Law also broadly defines what is considered the “same establishment” for the purpose of determining whether a female employee is paid less than her male counterpart in the same establishment. Under the new law, employees are considered to work in the “same establishment” if they work for the same employer, even if the two employees whose wages are being compared work in different locations, if the different locations are in the same geographic region no larger than a county.
New York City
In 2016, New York City Mayor Bill de Blasio signed an executive order prohibiting city agencies from inquiring about the salary history of job applicants. Because women have historically earned less than men, the earnings gap compounds over time if subsequent wages are based upon previous earnings. The executive order aims to break the cycle of suppressed wages for women. In April 2017, the New York City Council passed legislation extending this policy to all employers in New York City, both public and private.
Pursuant to the legislation, employers may no longer:
Ask for salary history information on employment applications;
Ask applicants questions about current or past salary (including wages, benefits and other compensation);
Request salary information from an applicant’s current or former employers;
Search public records to find an applicant’s salary information; or
Rely on information about an applicant’s salary history to determine compensation.
Together, the New York amendments increase pressure on employers to justify pay disparities between men and women doing equal work not only by making it easier for employees to establish claims for unequal pay but also by raising the amount of liquidated damages available to an employee for willful violations of the law. The Achieve Pay Equity Law increased liquidated damages available to employees for willful violations of the law from 100 percent to 300 percent of the wage differential.
Given the significant increase in liquidated damages potentially available to employees, the Achieve Pay Equity Law presents a substantial risk to employers. Employers should therefore take steps to closely evaluate their pay scales and compensation practices to ensure compliance with the amendments, such as the following:
Update policies and procedures to ensure that they do not prohibit employees from discussing compensation.
Train employees with responsibility for setting compensation levels on the legal standards to ensure that they neither set salaries in a discriminatory manner nor penalize employees who exercise their legally protected right to discuss their compensation with coworkers.
Examine payroll to determine whether pay differentials exist, and if so, ensure that they are either eliminated or have a legally valid basis. (If this careful review is undertaken, it would be wise to coordinate with counsel to ensure the analysis is protected to the extent possible by the attorney-client communication privilege and attorney work-product doctrine.)
*Additional reporting provided by Shook Summer Associate Joy Merklen.