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Paycheck Fairness Act: A Democrat Campaign Stunt

April 8, 2014

For half a century, workers have been protected against sex-based pay discrimination by the Equal Pay Act of 1963 and Title VII of the Civil Rights Act of 1964. Despite this, Democrats are pushing their election-year campaign to seek a vote on S. 2199, the Paycheck Fairness Act. Leader Reid has moved up consideration of Paycheck Fairness before consideration of minimum wage so that a Senate vote would coordinate with the President’s speech and Executive Orders today, on what activists call “Equal Pay Day.” 

The Senate voted last on this issue in 2012 – also an election year. The vote to invoke cloture failed 52 to 47 on a party-line vote. There is no reason to think the politics are different this year or that the outcome will change, as the bill has not. The Paycheck Fairness Act is another election year distraction that will harm job creators and will not put Americans back to work.

Pay Discrimination Is Already Illegal

Under existing law, employees have options where gender pay discrimination is suspected. 

Equal Pay Act of 1963

Prohibits paying women less for performing the same job with the same level of experience and qualifications. Discriminatory intent is not needed for a plaintiff to prevail. Allows for the recovery of lost wages, liquidated damages, and attorney’s fees.

Title VII of the Civil Rights Act of 1964

Prohibits employment discrimination based on race, color, religion, sex, and national origin. Provides for the recovery of compensatory and punitive damages in cases of intentional discrimination.

Executive Order 11246

Office of Federal Contract Compliance regularly audits federal contractors’ pay practices for pay discrimination.

Civil litigation

People who suspect pay discrimination can sue on their own or file a complaint with the Equal Employment Opportunity Commission.

While any sex-based pay discrimination in the workplace is unacceptable, statistics collected by the U.S. Equal Employment Opportunity Commission (EEOC) show that employees who believe they are being discriminated have means to file successful complaints and access financial remedies under existing federal statutes. 

In fiscal year 2013, there were 1,063 charges of discrimination resolved under the Equal Pay Act. Of these, the EEOC determined there was reasonable cause to believe that discrimination occurred in 5.9 percent of cases. There were 28,605 claims of sex-based discrimination filed under Title VII in fiscal year 2013. EEOC investigations turned up reasonable cause in four percent of those. Workers received nearly $132 million from successfully resolved Title VII and Equal Pay Act discrimination claims last year. Given that the current system already provides substantial recourse, it appears that Democrats want to make it easier for employees to file discrimination charges against employers regardless of merit. 

In a January 15, 2009, editorial, the Washington Post said: “The Lilly Ledbetter bill would restore employees’ rights to use the courts to address unfairness. The Paycheck Fairness Act risks tilting the scales too far against employers and would remove, rather than restore, a sense of balance.” 

Wage Gap

Written into the Paycheck Fairness Act is the “finding” that “many women continue to earn significantly less pay than men for equal work.” Analysis of economic data tells us there are explanations for this disparity.

A 2009 report for the U.S. Department of Labor found that different attributes between men and women explain the aggregate wage gap. The choices men and women make regarding education, breaks in employment to care for children or older parents, and non-wage compensation such as health insurance and flexible work hours are all reasons why a wage gap exists.

Harm Inflicted by Paycheck Fairness Act

To address alleged discrimination, the Paycheck Fairness Act amends the Fair Labor Standards Act by creating a new standard for acceptable salary differences between men and women. Under the new language, the differences must not only be “job-related,” but also “consistent with business necessity.” What constitutes “necessity” is left open to a jury or court to decide. If employers indicate that the wage difference is in fact consistent with business necessity, they would still have to prove they could not implement an alternative that would produce the same business outcome without creating a difference in salary. 

The practical application would be that if a male employee were the lead on a project that was completed on time and under budget, his manager would be unable to give him a bonus. Or if a male employee notified his employer that he had a job offer that included a higher salary, the employer would not be able to raise his pay because the wage discrepancy could expose the employer to claims of discrimination. The Paycheck Fairness Act could restrict performance pay incentive programs because these pay some workers more than others.

Other aspects of the bill would have even more adverse effects on the economy.

  • Under current law, workers must provide written consent to join a class action lawsuit. The Paycheck Fairness Act would change that by automatically including all employees in a class. This would likely result in more class action lawsuits being filed, make it easier to obtain class certification, and increase the size of the class, regardless of whether the suit has any merit. 
  • Under current law, the Equal Pay Act allows successful claimants to collect back-pay damages, but not compensatory or punitive damages. Compensatory or punitive damages can be awarded under Title VII if intentional discrimination is found, but there are caps on those damages depending upon the size of the employer. The Paycheck Fairness Act would allow unlimited compensatory and punitive damages under the Equal Pay Act – even in cases where discrimination was found to be unintentional. 
  • Under the bill, the EEOC would be directed to collect sensitive pay and compensation data from all covered employers, which it could then disclose publicly. The EEOC would have unlimited authority to determine the level of wage data employers must report. Attorneys could search company wage data looking to bring a discrimination suit. 

The Paycheck Fairness Act would apply to nearly every business in America. By making it difficult for employers to defeat frivolous lawsuits, fostering larger class action lawsuits, and creating an unprecedented level of remedies regardless of the intent to discriminate, the real winner under the Democrats’ bill would be trial lawyers. The increased liability that job creators would face could have a chilling effect on wage growth and hiring at a time when our economy needs both.