Getty Images

The Lowdown on Obama's New Equal Pay Rule

Feb. 10, 2016
Starting in Sept. 2017, all but the smallest companies will have to report pay to the EEOC by gender, race and ethnicity. Here's what manufacturing employers should expect. 

At the end of January, President Barack Obama rolled out a proposed federal rule requiring employers with more than 100 workers to break down pay data according to gender, race and ethnicity—a disclosure previously only demanded of federal contractors.

The new measure aims to highlight pay discrimination across industries and occupations, as well as give the Equal Employment Opportunity Commission additional enforcement data. Obama specifically called out gender pay disparity in his remarks on the proposal, noting that women working full-time earn 79 cents to men’s $1.

The proposed rule won’t go into effect for a while--it still must go through a comment phase that ends in April, after which the EEOC makes adjustments it deems necessary before it takes effect in September 2017.

So what should manufacturing employers be doing to prepare? First off, plan that it will happen, says Kevin Troutman, a partner at Fisher & Phillips’ Houston office who represents manufacturers. Troutman says that despite the time lag and a new administration taking office in 2017, he “fully expects” the rule to go into effect.

“If this were something that had to go through Congress, there would be a real serious question that something would happen during an election year,” he says. “But because it’s rulemaking by the EEOC, there’s nothing really I see stopping this process from going forward.”

Troutman says to comply with the new rule, employers should be prepared to commit additional resources to data collecting/crunching. “To assemble, prepare and submit all of this additional information is not going to be quick and easy,” especially for smaller companies that lack “sophisticated software to just push a button and spit out the data,” he says.

Marc Katz, the chair of the Labor and Employment practice at Andrews Kurth, advises that now is the time for employers to review their pay scales and job descriptions, consider how they would justify differences according to “legitimate business concerns” and gather documentation that rationalizes their distinctions.

Under the rule, employers would report data according to ten broad job categories--ranging from executive/senior level officials and managers to service workers-- race/ethnicity, gender and 12 “pay bands” starting at minimum wage and going up from there.

So, for instance, instead of reporting how much individual employees make, a company  would report it had, say, 15 African-American female and  12 white male manual laborers whose total annual full-time earnings are in pay band 4 ($30,680-$38,999). Part-time and seasonal workers make reporting more complicated.

A company with multiple internal categories for manual laborers should be clear in its own documentation what differentiates each category and adjust pay accordingly, in case the DOL comes calling.

Katz also suggests that employers review what an employee’s actual job duties are vs. what the job title is, to make sure they match up if the Department of Labor decides to investigate further. “It’s very common that the responsibilities under job titles will change over time, and the job titles and descriptions don’t match up to what the job actually is,” he says.

For instance, an employee might have volunteered for additional training on a new machine and with new responsibilities received a bump in pay, but no title change.  “And that can cause problems … because the employer will be paying based on what the employee is actually doing, but the Department of Labor is going to come in and look at the job title,” says Katz

Think about how you would explain a particular role to a Department of Labor investigator who may not have manufacturing expertise, says Katz. “A manufacturing employer knows how their employees provide value to the company, so they may value certain types of employees more than others and pay them more,” he says. “But the DOL may just come in and say, ‘Hey, we see all these manufacturing line workers or low-level employees are the same. So why are you paying this one that happens to be a female $10 an hour, and you pay this male $20 an hour? We think it’s discriminatory.’”

Steve Koppi , the executive director of the Career Development Center at Worcester Polytechnic Institute —a STEM-focused college where a third of the graduates are women—says that some companies are already doing this type of reporting on their own.

“Intel is a great example of a company that specifically says at the top level, ‘We’re going to look at the numbers and the pay by gender and race and ethnicity, and we’re going to take action’” to make it equitable, he says. “It becomes more of an engineering or problem-solving exercise and less of a political issue.”

Troutman says the Department of Labor has been stepping up enforcement on pay discrimination cases, having been allocated additional money to hire new investigators, and that it’s been developing software that allows them to “look at more employers more in depth and more quickly than they have before.

“Better for the employer to understand the system” and “iron out any kinks” internally, “rather than wait for a government investigation,” he says.

About the Author

Laura Putre | Senior Editor, IndustryWeek

I work with IndustryWeek's contributors and report on leadership and the automotive industry as they relate to manufacturing. Got a story idea? Reach out to me at [email protected]


Sponsored Recommendations

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!