Washington’s New Pay Equity Law

On substantive pay equity, the new law prohibits employers from paying people of different genders if they are similarly situated, meaning they perform jobs that require similar skill, effort, and responsibility and perform the jobs under similar working conditions. Job titles alone do not determine whether two employees are similarly situated. An employer may avoid liability for an apparent pay discrepancy based on gender if the discrepancy is based in good faith on bona fide job-related factors such as education, training, experience, a seniority system, a merit system, a system that measures earnings by quantity or quality of production, or a bona fide regional difference in compensation levels (including city-specific minimum-wage differences). Acknowledging that some pay discrepancies are the result of historical pay practices, an individual employee’s previous wage or salary history does not make the cut as a bona fide job-related factor, and is not a defense to an apparent pay discrepancy based on gender.

In an apparent effort to help employees discover pay discrepancies, the new law restricts how employers can maintain the confidentiality of pay. Employers face a number of new restrictions on confidentiality:

• An employer may not require an employee to agree to nondisclosure of their own wages as a condition of employment.
• An employer may not require an employee to sign a waiver or other document preventing the employee from disclosing their own wages.

Employers are also prohibited from discharging (firing) or otherwise retaliating against employees for:

• inquiring about, disclosing, comparing, or discussing their wages or the wages of another employee; 
• asking the employer to provide a reason for the employee’s wages or lack of opportunity for advancement; or 
• aiding or encouraging another employee in exercising their rights under the new law.

The legislature recognized that some employees (such as those in human resources and payroll) may have access to other employees’ pay information as part of their essential job functions. An employer may prohibit those employees from disclosing other employees’ pay information unless they are asked to do so in connection with a pay-equity complaint or investigation. 

The new law allows the Department of Labor and Industries to investigate complaints and assess penalties for violations. The new law also allows individual employees (or possibly groups of employees) to sue for back pay, monetary penalties, and attorney fees. Employees who are discharged or retaliated against in violation of the law may be entitled to reinstatement or other injunctive relief. 

The law becomes effective June 7, 2018. The full text of the law can be found here.

So what should employers do? Employers can do two things to help identify potential issues and prevent new issues from arising.

1. Review handbooks, policies, confidentiality agreements, and other documents to determine if they prohibit employees from sharing or discussing their pay. For employees in human-resources or payroll, review their agreements or policies that apply to them to ensure they include restrictions consistent with the new law. 
2. Audit current and past wages and compensation to determine if there are indications of a gender-based pay discrepancy. The complexity of the audit will depend on the employer’s size and locations. Using outside counsel to direct the audit may allow the audit process to take place in a manner protected by the attorney–client privilege and the attorney-work-product protection, which may help encourage greater candor and ensure deeper analysis of apparent pay discrepancies and the practices that may have led to them.

Pay equity is an important issue for employers to grapple with. Employers should take this opportunity to analyze their workforce’s pay to determine if they have any pay-equity issues and address them. If you have questions about how this new law affects your business, please contact Brian Keeley.