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Equal Pay Enforcement: Minimizing the Risk. Association of Corporate Counsel – Louisiana Chapter December 6, 2013. Equal Pay Enforcement: Minimizing the Risks. Presented by: T. Scott Kelly Ogletree, Deakins, Nash, Smoak & Stewart, P.C. Scott.Kelly @ogletreedeakins.com 205.986.1024. - PowerPoint PPT Presentation
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Equal Pay Enforcement: Minimizing the Risks
Presented by:
T. Scott KellyOgletree, Deakins, Nash, Smoak & Stewart, [email protected] 205.986.1024
Equal Pay Enforcement: Minimizing the Risk
Association of Corporate Counsel – Louisiana ChapterDecember 6, 2013
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
Discussion Points Pay Equity Enforcement Theories
Understanding the Analytical Approach (ugh… statistics)
Crafting Corrective Action
Best Practices to Avoid Litigation and Minimize Risk
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
The Enforcement of Pay Equity Title VII of the Civil Rights Act (“discrete
acts”) Ledbetter Fair Pay Act (“pay decisions”) Equal Pay Act (“equal work”) (Paycheck Fairness Act) Dodd-Frank Offices of Minority and Women
Inclusion EEOC and OFCCP National Equal Pay Enforcement Task Force
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
The Enforcement of Pay Equity Title VII
– Disparate Treatment• Individual• Systemic/Pattern and Practice• Needs proof of discriminatory motive
Direct EvidenceCircumstantial Evidence
– Disparate Impact• No proof of discriminatory motive required• Employer must show business
justification/alternatives Equal Pay Act
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
Risk Factors for Pay Claims Lack of meaningful standards, guidelines, or
guidance Lack of management training Exercise of discretion Subjective decision-making Failure to document pay decisions and
bonuses Failure to communicate criteria and basis
for pay decisions and bonuses Favoritism – others are better paid, get
more overtime, preferential shifts, etc.
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
Statistical Concepts Understand the compensation decision-
making process Estimate the outcome expected in a
neutral setting. Compare actual and expected
compensation levels Is the difference statistically significant
(2 standard deviations or 5%)?
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
Comparison of averages not sufficient
®
Why not?
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
“Similarly Situated”
®
Similar paths to current position Perform similar work (job content) Similar skills/qualifications Similar level of responsibility Other pertinent factors (e.g., full-
time status, “permanent”)
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
“Similarly Situated”: Examples
®
Job family Pay grade Company experience (time in grade,
time in job, tenure) Education Prior relevant experience Performance Organizational unit (e.g., division,
department, etc.)
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
“Regression Analysis”
®
A statistical tool that allows the analyst to quantify the protected/non-protected salary difference after “filtering out” differences that are attributable to other measurable factors that influence pay.
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
What Does a Regression Look Like?
®
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
$0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 $160,000
Actu
al S
alar
y
Market Salary
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
What Does a Regression Look Like?
®
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
$0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 $160,000
Actu
al S
alar
y
Market Salary
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000
Act
ual S
alar
y
Market Salary
Males Females
What Does a Regression Look Like?
®
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
What Does a Regression Look Like?
®
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000
Act
ual S
alar
y
Market Salary
Males Females
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
Statistical Concepts: Review
®
Plaintiffs and regulatory agencies sometimes use whatever procedures they want
Straight averages are not sufficient Proper regressions allow for comparisons
between similarly-situated employees Note the difference between actual and
expected compensation levels Need to understand decision-making
process
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
Conducting a Compensation Analysis
®
Understand the decision-making process
Who makes the compensation decisions?
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
Conducting a Compensation Analysis What factors affect compensation? Some examples:
• Job code/title• Job group (or SSEG)• Pay grade• Race, gender, etc.• Original date of hire• Date entered job• Date entered grade• Department• Division• Location• Performance rating• Education/training• Measure of market pay
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
Collecting the Data
®
Your data will have problems, such aso Reusing Employee IDso Date inconsistencieso Data entry inconsistencieso Extreme valueso Default valueso Legacy systems
Example
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
Statistically Significant Results – Now What?
®
Problems with underlying data files Important factors not in the model Legitimate pay disparities Use regression to focus on hot spots Identify people who have the largest
influence on the outcome (“outliers”) Contractor and counsel review outliers
and explain their compensation level
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
“Outlier” Review
®
Grade Job Family #Females #Males Pay
Difference#Std Dev R Square Stat Sig?
Overall 789 1574 $ (1,339.71) -2.59 93% *
E07 Engineers 9 93 $ (12,255.21)
-3.25 55% *
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
“Outlier” Review (After Reviewing Data and Identifying Outliers)
®
Grade Job Family
#Females
#Males Pay Difference
#Std Dev
R Square Stat Sig?
Overall 788 1574 $ (1,210.97)
-1.80 93%
E07 Engineers
8 93 $ (2,705.59)
-0.47 62%
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
Other Events That May Affect Compensation
®
Break in service Change in career interests Education/training attained after hire Joined via acquisition Demotions Alternative work arrangement → part-
time Move to location with different cost of
living
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
STILL Statistically Significant Results – Now What?
®
By now, we should have an understanding of the cause of the problem. In the meantime,
Use regressions to isolate the focus on
individuals or smaller groups of individuals to limit exposure. Not a company-wide problem.
• Review of outliers• “Sensitivity” tests
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
Other Considerations
®
Other work history events affect current pay
Factors may vary within the company
Not just what plaintiff or regulatory agency wants
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
Starting Pay Analyses
®
Everyone hired in the past “X” years
Analyze starting pay levels by hire year
Control for factors related to• Job hired into• Qualifications prior to joining company
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
Promotional Increase Analyses
®
Everyone promoted in the past “X” years
Analyze promotional increase amounts by year
Control for factors related to • Job at time of promotion• Performance, other relevant factors
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
Merit Increase Analyses
®
Everyone given a merit raise in the past “X” years
Analyze merit increase amounts by year
Control for factors related to • Job at time of increase• Performance, other relevant factors
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
What To Do With Opposition’s Compensation Analysis?
®
Read it very carefully Is their analysis consistent with
reality? Attempt to replicate their results Conduct sensitivity tests Anything else that doesn’t look
right?
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
Best Practices Review/revise compensation policies, job descriptions, and
training programs Do a self-audit under privilege by appropriate professional
Know where you stand before employees or their counsel complain
Monitor starting pay, current pay, merit increases, promotional pay
Review raises: consistent with evaluations? Look at pay policies: are they sufficient?
Understand the factors behind pay Understand why disparities in pay exist Keep good data Fix unexplained disparities (but don’t assume discrimination!) Analyze data files before producing to opposition or
regulators
Association of Corporate Counsel – Louisiana Chapter - December 6, 2013
Equal Pay Enforcement: Minimizing the Risks
Presented by:
T. Scott KellyOgletree, Deakins, Nash, Smoak & Stewart, [email protected] 205.986.1024
Equal Pay Enforcement: Minimizing the Risk
Association of Corporate Counsel – Louisiana ChapterDecember 6, 2013