Here is the testimony submitted by NFIB’s Legislative Director, Neal Lesher on a bill to amend the current Equal Pay Law. NFIB is opposed to those changes:
Testimony on
HB 1890 – Equal Pay Law
House Labor
and Industry Committee
September
18, 2014
Good morning Chairman Scavello, Chairman Keller, and members of the Committee. My name is Neal Lesher and I am the Pennsylvania Legislative Director for the National Federation of Independent Business (NFIB). Joining me today is Beth Milito, Esq. Beth serves as Senior Executive Counsel with the NFIB Small Business Legal Center. In this position, she works frequently with small employers facing employment discrimination charges, wage and hour claims, wrongful termination lawsuits, and in most other areas of human resources law.
NFIB is the premier small business advocacy organization with over 15,000 members in Pennsylvania and over 350,000 members nationwide.
We appreciate the opportunity to be here today to discuss HB 1890, which amends the Pennsylvania Equal Pay Law to limit factors that may be used as a basis for pay disparity between genders, prohibits an employer from discharging or discriminating against an employee who files a complaint or participates in any action under the Equal Pay Law, and prohibits an employer from barring employees from disclosing or discussing wages with other employees.
First we want to make it clear that NFIB and our members support equal pay, in that we agree with the principle that an equal day’s work deserves an equal day’s pay. The existing legal framework already protects employees from wage discrimination based on gender. We do not support the changes proposed in HB 1890 for a variety of reasons which we have outlined below.
Unsupported Statistics
Supporters of legislation like HB 1890 often cite statistics that say that on average, women earn 77 cents on the dollar as compared to men. This often leads to the assumption that there must be wide spread wage discrimination by employers. Unfortunately, this statistic is misleading as it does not take into account a number of factors that have no relationship to employer discrimination. According to 2009 report prepared for the U.S. Department of Labor, the factors include the fact that a larger percentage of women work in part-time jobs, a larger percentage of women leave the work force at some point for child birth or to care children or elderly relatives, and women tend to value “family friendly” employment policies, including better benefits such as health care, with a trade off in salary. The study concluded that after adjusting for these variables, remaining unexplained wage gap is only between 4.8 percent and 7.1 percent. The report also states that additional non-discrimination factors, for which there is limited data, should reduce the remaining gap even further.
1 U.S. Department of Labor, Consad Research Corporation, An Analysis of Reasons for the Disparity in Wages Between Men and Women. (Jan. 2009)
Sufficient Legal Framework
As we have noted, it is already against the law for an employer to discriminate in setting employee wages based on gender. At the state level we have the Equal Pay Law, which clearly states that no employer shall discriminate based on gender when setting wages. The Human Relations Act provides additional protections for employees from discrimination based on a number of factors, including gender.
At the Federal level, The Equal Pay Act says that employers must pay equal wages to women and men in the same establishment for performing substantially equal work. Additional protections are afforded under Title VII of the Civil Rights Act, which prohibits employers with at least 15 employees from discriminating against their employees based on a variety of factors, including gender. In 2009, Congress passed the Lilly Ledbetter Fair Pay Act, which extended the statute of limitations for filing an equal pay lawsuit.
We believe these laws already cover the issue of gender wage discrimination, and have not seen any credible evidence that these laws are not sufficient to prevent wage discrimination outside of misleading statistics.
No Due Process for Employers
HB 1890, as drafted, starts with the presumption that the employer is guilty of wage discrimination, and puts the burden of proof on them to prove their innocence. The bill amends the Equal Pay Law to limit allowable “bona fide” factors for wage differentials to education, training or experience, and further requires that that the “employer demonstrates that the bona fide factor (1) is not based upon or derived from a sex-based differential in compensation; (2) is job-related with respect to the position in question and (3) is consistent with business necessity.”
This stacks the deck substantially against the employer and seems to turn due process on its head. Small employers will become targets for trial lawyers seeking substantial settlements without even having to prove that a business intentionally discriminated against women.
Lawsuits (threatened or filed) have a substantial impact on small business owners. We have heard story after story of small business owners spending countless hours and sometimes significant sums of money to settle, defend, or work to prevent a lawsuit. And while our members are loath to write a check to settle what they perceive to be a frivolous claim, they express as much, if not more, frustration with the time spent defending against a lawsuit. In the end, time is money to a small business owner.
We must remember that small business owners generally do not have in-house counsels to inform them of their rights, write letters responding to allegations made against them, or provide legal advice. Small business owners are more vulnerable to lawsuits, as they often delay seeking counsel – for financial reasons – until a lawsuit has already been filed. In many cases, the business simply lacks the resources needed to hire an attorney or the time and energy that may be required to fight a lawsuit. These factors make small business particularly vulnerable targets for plaintiffs seeking to extract an easy settlement.
Subjective Terms
The amendments proposed in HB 1890 also introduce new and largely subjective terms that provide little to no clarity for employers who are trying to make the best business decisions they can to support their families and their employees.
For example, the amendments introduce a new “business necessity” test, which requires an employer to prove that a differential in pay is based on business necessity. Ultimately, should this bill become law, it would be up to the courts to determine what is and what is not a business necessity. For example, consider a small retailer who might have multiple locations, and separate managers for each location. This employer pays one of the mangers more because the employee has a bachelor’s degree. This seems reasonable, right? Under this test, a court could decide that there is not a business necessity for a manger to hold a bachelor’s degree and hold the employer liable.
The bill also adds a provision that states that an employer is guilty if an employee demonstrates an alternative employment practice exists that would serve the same business purpose and the employer refused to adopt the alternative practice. It is unclear what a reasonable alternative employment practice might be and who determines whether in fact it does meet the same business purpose. An employer may have a host of reasons for not wanting to change their employment practices, none of which are based on gender discrimination. Simply not acting on an employee recommendation should not open an employer up to litigation. We should not be taking wage and employment decisions out of the hands of small business owners and putting them into the hands of the courts.
Too Restrictive In Terminating Employees
HB 1980 also adds a provision forbidding employers or labor organizations from discharging or discriminating against an employee who files a complaint or participates in any action under the Equal Pay Law. We believe this could lead to employees, who may suspect they will be terminated for poor performance, filing frivolous claims under the Equal Pay Law in order to make it impossible for the employer to terminate them. Under HB 1890, as worded currently, that employee could not be discharged for any reason, because the language does not specify that the employee may not be discharged because they filed a complaint.
Closing
In closing, while we agree with the principle of equal pay, we believe this legislation would ultimately impose enormous burdens and risks on employers; devalue important factors in establishing wages, such as training, education, and skill; and expand litigation opportunities for plaintiffs’ lawyers seeking millions of dollars from employers without even having to prove that a business intentionally discriminated against women.
Thank you again for the opportunity to testify today.
