The COVID-19 pandemic has impacted many areas of the employment landscape. Job descriptions, essential functions, ADA accommodations, undue hardship, and Title VII religious accommodations are all areas that have been substantially impacted by the virtual work environment and the availability of mechanisms such as Zoom to substitute for physical attendance. Pay equity analyses are just the latest area to be impacted by the virtual environment. Employers may need to rethink how they conduct their pay equity analyses going forward.
Many employers have pay practices based in part on the employee’s job location. Employers typically pay a premium for employees who reside in locales with higher costs of living and/or higher wages and pay rates. For example, wages are higher in New York and San Francisco than Topeka and Fargo, and employers pay their employees accordingly.
In conducting pay equity analyses, employers typically use work location as a control variable due to these pay practices. Employers reason that because their compensation decisions are based on work location, that location should be considered a factor in the pay equity analysis. Moreover, the federal Equal Pay Act (EPA) endorses the comparison of employees to one another based upon job location, which supports using this variable in the analysis. Even new state laws such as those in California and New York have accepted locations as an explanatory variable. Similarly, courts analyzing gender and race pay equity claims have used job location as either an explanatory variable or a limitation upon which employees are similarly situated to one another. As a result, employers routinely conduct pay equity analyses of employees with a particular state or other geographic locale and/or use work location as an explanatory variable in their pay equity analyses.
All of these practices are potentially at risk given the virtual work environment. Employers now are permitting employees to work from home and also to work from other locations on a virtual basis. These new practices, some of which are designed to comply with other employment statutes and regulations, demand reconsideration of an employer’s pay equity practices. In conducting a pay equity analysis and evaluating whether to limit the analysis based on geography and/or use geography as an explanatory variable, the employer should first examine whether the employer is actually enforcing geographic restrictions. If the employer does not require employees to work within particular locations, the employer should reevaluate the use of location as an explanatory variable.
Employers should also reevaluate their state pay equity analyses to ensure that they are capturing all employees located within the appropriate geography. Employees working virtually from California, New York, Oregon, and other states with pay equity statutes can raise claims under those state statutes; an employer should capture those employees in state-specific analyses to ensure that there are no pay equity issues for those employees.