Robert J. O’Hara, Member of the Firm in the Employment, Labor & Workforce Management practice, in the firm’s New York office, was quoted in the Bloomberg Law Daily Labor Report, in “Tight Labor Market’s Recruitment Focus Puts Pay Equity at Risk,” by J. Edward Moreno. (Read the full version – subscription required.)

Following is an excerpt:

Efforts at achieving pay equity are in danger of falling by the wayside as the tight labor market forces employers to boost salary offers to attract much-needed talent.

Since the Covid-19 pandemic left more open jobs than workers willing to fill them, companies are increasingly finding themselves having to offer higher and higher pay to entice workers to leave their current employers.

But if existing workers’ salaries remain stagnant, those recruiting efforts could translate into legal trouble.

Employers generally have flexibility in determining pay provided they don’t discriminate based on race, ethnicity, or gender. If companies don’t routinely run a pay equity analysis and address any disparities, they face the risk of pay discrimination suits or, if they are federal contractors, a fine from the US Department of Labor.

“Companies typically learn lessons the hard way: They get sued or a government agency finds them in an audit,” said Robert O’Hara, a partner at Epstein Becker Green P.C. “That gets their attention.”

‘Informed Business Decision’

A company may find itself wanting to hire somebody for a critical position at a salary $20,000 higher than what was advertised, for example. Pay equity is rarely top of mind when making the decision to increase a salary offer to attract a recruit, O’Hara said. But it will undoubtedly come up when the company runs an audit.

Companies already running routine audits should keep track of employees who are being hired at a higher pay rate than other employees, he said. They should “red circle that for further review,” not when there’s a time-crunch, like when a pay bias suit is filed or if the company is teed up for a DOL audit.

Considering pay equity implications when bringing somebody on board is part of making an “informed business decision,” just like any other, O’Hara said.

“That’s something that’s usually missing in the exchange,” when hiring new employees, he said. …

DOL Audits

Even if workers themselves don’t take action in response to pay disparities, the federal government might.

The DOL’s Office of Federal Contract Compliance Programs enforces employment discrimination statutes against federal contractors. The agency requires contractors to run pay equity analyses in order to ensure there’s no discrimination on the basis of protected categories such as race or sex.

Employers targeted for an audit by the OFCCP likely won’t have much luck arguing that pay disparities are justified due to the labor market, O’Hara said.

“That in and of itself is interesting but that’s not necessarily going to sway them, they’re going to want to know more,” he said. “You can’t hide behind the market being the driver for these decisions.”

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