New York Extends Pay Equity Act to All Protected Classes

The New York State Legislature has passed an amendment to New York’s Achieve Pay Equity Act (the “Act”), which will prohibit pay discrimination against any employee based on his or her membership in any class protected by the New York State Human Rights Law (“NYSHRL”).  The new law will also make it easier to prove pay discrimination.  It is anticipated that the Governor will sign the bill into law and it will take effect ninety days thereafter. 

You may recall that in late 2015, Governor Cuomo signed a series of bills entitled the “Women’s Equality Agenda” that made significant amendments to the Act, with the goal of providing additional protections for women in and outside the workplace.  The bills expanded protections for women beyond what was required under the Federal Equal Pay Act by limiting the basis for pay differentials between women and men, excluding certain pay differential policies, and broadening the definition of “same establishment”.  You can read our prior post on that here.

The new amendment to the Act significantly expands the protections to not just those based on sex, but also based on any of the protected classes set forth under the NYSHRL.  Specifically, the definition of “protected class” under the NYSHRL includes: age, race, creed, color, national origin, sexual orientation, gender identity or expression, military status, sex, disability, predisposing genetic characteristics, familial status, marital status, or domestic violence victim status. 

In addition, it may now be easier for employees to establish pay discrimination under the Act.  As currently written, an employee must establish that their job is equal to the job of a higher-paid co-worker, i.e. that their job requires equal skill, effort and responsibility and is performed under similar working condition.  However, under the amended Act, employees may also prove pay discrimination by showing that the employer is paying them less for performing “substantially similar work” when viewed “as a composite of skill, effort and responsibility performed under similar working conditions.”  So, while the initial equal job standard remains in place, employees may now instead look to this relaxed standard requiring equal pay for substantially similar work.  Among other things, this more flexible standard will require employers to look beyond just an apples-to-apples comparison – two people in different roles may still be doing work that is similar enough to make them comparators for purposes of complying with the Act.

Employers should note that the amended Act will still allow for pay differentials based on seniority, merit, quantity, or quality of production, or a bona fide factor other than a protected class, i.e. education, training or experience.  However, the bona fide factor cannot be based on, or derived from, a protected class related differential in compensation and must be job-related and consistent with business necessity.  In addition, an employee will still be able to overcome the bona fide factor exception by demonstrating that: (1) an employer uses a particular employment practice that causes a disparate impact on the basis of status within one or more protected classes; (2) an alternative employment practice exists that would serve the same business purpose and not produce such a differential; and (3) the employer has refused to adopt such alternative practice.

Currently the New York State Department of Labor (“DOL”) provides training webinars to help employers understand their responsibilities in connection with pay equity, as well as policy recommendations previously provided to Governor Cuomo in order to assist with closing the gender pay gap in the state.  However, the guidance has not yet been updated to account for these changes in the Act.  

In particular, there is no guidance to address the reality that most employers do not know whether their employees fall into certain protected classes in order to properly detect and correct potential discriminatory pay practices.  Many employers have data around gender, race and ethnicity (typically via EEO-1 reports) or are otherwise aware of an employee’s protected classes as self-evident, but other categories such as predisposing genetic characteristics and domestic violence victim status are neither self-evident nor often voluntarily disclosed by employees.  In those cases, employers typically would not seek out that information for the purpose of conducting an audit, or if they did, they would be well advised to first seek guidance from counsel to do so in a way that avoids backing into a separate discrimination claim. 

We will continue to monitor for the Governor’s signature, as well as revised guidance from the New York State DOL.  Given the anticipated quick turnaround and the fact that plaintiff side attorneys have increasingly set their sights on litigating this issue, we recommend New York employers work with their human resource professionals and/or counsel to begin doing the following:

• Analyze current compensation structures, including salary and bonus amounts, with a specific focus on how and why the company calculates differences in pay for certain positions or for certain positions that may be considered similar;
• Review job descriptions, including required skills and education to ensure that they are up-to-date and accurately reflect the jobs;
• Review employee handbooks and other employment-related contracts to ensure compliance with the law with respect to evaluation and pay practices; and
• Review written policies relating to seniority, merit-based or productivity-related compensation to confirm that they are in line with permissible pay differentials noted in the law.

Some employers may also want to take this opportunity to conduct a more complete compensation audit, inclusive of a statistical sampling of jobs and employees at the company.  However, keep in mind the potential burden in doing so as employers are no longer accounting for only gender, but all protected classes.  Employers that elect to perform an audit should consider hiring an outside consultant to perform the evaluation for purposes of efficiency, credibility and outside expertise.  But, be aware that using an outside consultant brings with it a lack of in-house expertise and a higher resource spend.  Employers must also look to conduct the audit in a way that will create and preserve an attorney-client privilege should litigation or external audits occur, making inside and/or outside counsel’s assistance critical during the process.

Finally, if discrepancies are uncovered during the review, employers should work with their human resources personnel and counsel to implement appropriate corrective actions, including fixing pay practices and remedying disparities appropriately in order to avoid potential exposure under the amended Act.

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