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A spotlight on gender equality in the workplace is putting pressure on companies both to present a positive public image of fair compensation practices and to take steps to minimize the possibility of lawsuits.

Big companies ever more are sharing pay data publicly. But by releasing more information, companies also expose themselves to lawsuits, management-side lawyers said. Transparency is important but the risk of a lawsuit won't go away, Denise Visconti, a Littler Mendelson shareholder in San Diego, said last week.

“The lack of a pay gap is defensible. If you are making an announcement that there is virtually no gap, that can be dangerous,” Visconti said. “Plaintiffs counsel will still look at any gap and unless you can explain it, it could violate the law. These laws require equality, not close or virtually close. Virtually no gap is still an opportunity for plaintiffs counsel. They want no gaps.”

Visconti offered guidance on a recent webinar focusing on compliance with the increasing number of state and local laws confronting pay equality.

Pay equity is expected to remain a hot issue for the labor and employment bar in the coming months. Increasingly, pay audits have become a trend.

Plaintiffs attorney Kelly Dermody, partner and chair of the employment practice group at Lieff Cabraser Heimann & Bernstein, said in an interview this summer that companies are sometimes insincere about pay audits. “Either they uncover pay differences that they don't fix or they slice the data to minimize or conceal the pattern of underpayment,” she said.

Meanwhile, a lawsuit in Washington challenges the Trump administration's moves to scuttle an Obama-era rule that would have required companies with 100 employees or more to report their pay data, along with a racial and gender breakdown. And there's a petition in the U.S. Supreme Court that confronts whether employers can use salary history to justify paying men and women differently for comparable posts.

In January, Citigroup Inc. announced it would provide gender and ethnicity wage data and “commit to closing the gap.” Other companies, such as GoDaddy and Salesforce.com Inc., have voluntarily released information about their gender pay practices. Intel Corp., Apple Inc., Facebook Inc. and Microsoft disclosed gender pay information only in reaction to shareholder demands through proposals brought by activist investors. Still, other big companies have rejected shareholder proposals asking for detailed reports on the pay gap between men and women.

Several financial services companies have followed Citigroup's approach to disclose gender pay data even after rejecting a shareholder proposal, according to an analysis by Orrick, Herrington & Sutcliffe.

The companies in the United States disclosing voluntarily usually have a good story to tell and can explain why gaps may exist,” said Orrick partner Mike Delikat, who advised Citigroup on its plan to disclose pay data.

“There is always a concern that after making a public disclosure the analysis will be sought in discovery if there is future litigation,” Delikat said. “The benefit from disclosing good data is the positive impact on recruitment and retention and a competitive advantage as being a company striving to achieve pay equity.”

Visconti said the numbers that reveal any pay gap can be misleading. The difference is not necessarily unlawful and companies should only compare similar job posts. Still, there can be certain problem areas for companies.

“Different types of laws exist on the federal level [that] are designed to reduce or eliminate direct intentional discriminatory actions based on pay or potentially differences with no intent,” Visconti said. “States have new laws on the books that are primarily designed and target those that are unintentional. If you have a pay gap or if you have a differential in pay and that appears to be based on a protected category.”

Visconti and Littler shareholder David Goldstein said the combination of new local and state laws and shareholder activists raising pay equity issues have contributed to class actions and large settlements becoming more common.

Visconti said the #MeToo movement, which put attention on sexual harassment, became a call to action on pay equity front. More states, since last year, are looking at ways to confront fair pay.

“It's not a flash in the pan. It will continue to grow,” she said. “Activists or folks are leading this movement into boardrooms and companies are responding.”

Goldstein and Visconti said they advise companies on updating job descriptions and conducting pay analysis to find weak spots.

“Take a good look at what's happening,” Visconti said. “Evaluate where your risks are. See if you can explain the differential or gaps that you are seeing. Then, what are you going to do about it? If you have some high risk, especially in states with lots of litigation, you could be exposed to potential issues.”

 

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