1. 2016 HR FLORIDA CONFERENCE & EXPO

2. Managing Pay Transparency in the Office
Presented By:
Charu Avasthy, MBA, PHR, SHRM-CP
Senior Consultant
Berkshire Associates Inc.
August 30, 2016

3. Agenda What is the Pay Transparency Rule?
How Does it Impact Contractors?
Pay Transparency Enforcement
Pay Equity Analyses
Best Practices

4. Executive Order 13665 Prohibiting Pay Secrecy
Pay Transparency
Executive Order 13665
Prohibiting Pay Secrecy

5. Why is Pay Transparency Important?
OFCCP cited a number of reasons in support of the E.O. and the new Rule:
It is more difficult to discover compensation discrimination if employees are prohibited from discussing pay
Market efficiency is diminished if employees are fearful of discussing pay
Pay transparency helps level the playing field for women and people of color

6. Executive Order 13665
Prohibits taking adverse action against applicants or employees because they inquire about, discuss, or disclose their own compensation or the compensation of another employee or applicant

7. Exceptions: Protection does not apply:
To an employee who discusses or discloses pay information about other employees when that information is obtained as part of the employee’s essential job duties*
If an individual violates uniformly applied company policy while sharing pay information
*Disclosure is allowed in very narrow circumstances

8. Who is Covered by the New Rule?
The Rule became effective on January 11, 2016, and applies to federal contractors and subcontractors who meet these criteria:
New or modified federal contracts or subcontracts with a date of January 11, 2016, or later
Have contracts totaling over $10,000 in one year

9. What Types of Pay Can Be Discussed?
The Final Rule includes a broad definition of “compensation,” including:
Salary
Wages
Overtime pay
Shift differentials
Bonuses
Commissions
Vacation and holiday pay
Allowances
Insurance and other benefits
Stock options and awards
Profit sharing
Retirement

10. The Rule Does NOT Require:
Company is not required to provide pay information requested by applicant or employee
No additional data analysis, reporting, or tracking
No changes to requirements for job postings or advertisements
No changes to advertising tag line
No additional required training

11. Impact on Contractors

12. Actions Review contract effective dates/renewal dates
Review contract dollar amounts
Review policies regarding disclosure of pay information
Narrowly tailored

13. Actions
Determine which jobs require access to pay information as an essential function of the job
Examine oversight process for disciplinary action
Post statement and include it in your handbook
Inform and train supervisors and managers

14. Essential Job Function Defense
An employer is allowed to take adverse action if an employee discusses or discloses pay information that they obtained in the performance of an “essential job function”
There are some exceptions which we will discuss in a few slides

15. Definition of “Essential Job Functions”
Information is obtained as a part of an employee’s “essential job functions” if:
Access to compensation information is necessary to perform that function or another routinely assigned business task, or
The function or duties of the position include protecting and maintaining the privacy of employee personnel records, including compensation information

16. Exceptions to the Exemption
An employee who has access to pay information through performance of essential job functions MAY be protected when disclosing pay under some very strict circumstances:
Responding to a formal charge or complaint
As part of an investigation, proceeding, hearing, or action
Consistent with an employer’s legal duty to provide such information
Disclosing their own pay
Discussing pay information obtained by other means

17. Essential Job Function—Example
A Payroll Administrator has access to pay information to perform their essential job functions
Payroll Administrator notices one employee is paid substantially more than another and they are in the same job
Payroll Administrator tells the employee who is earning lower pay about the disparity
Can the employer discipline the Payroll Administrator?

18. Considerations: Results
Did the Payroll Administrator disclose information that was obtained in the performance of the essential functions of the job? Yes
Did the Payroll Administrator have a duty to keep this information confidential? Yes
Did any exceptions apply? No

19. Essential Job Functions–Another Example
What if?
Two clerical employees who are performing the same job swap information about their own pay to each other over their lunch break
The lower paid employee then complains to another employee about being paid less and discloses the first employee’s pay
Can any of the three employees be disciplined?

20. Considerations: Results
Did either of the two clerical employees obtain pay information through the performance of their essential job duties? No, it was a discussion between two employees about their own pay
What about the clerical who shared the co-worker’s information with a third employee? Can the company discipline this person for sharing someone else’s pay information? No, the information was passed from one employee to another informally
Did any of the three employees have a duty to protect the information? No

21. Workplace Rule Defense
Show the action was taken based on a consistently and uniformly applied workplace rule
Workplace rule cannot be a prohibition against discussing, disclosing, or asking about pay
Ensure there was no discriminatory motive influencing the action

22. Workplace Rule Example
30-minute lunch break rule
Three employees who have never been late returning from lunch
Monday—one employee returned late and was fired
Wednesday—two employees returned late and were fired
The two employees had discussed unfair pay practices at lunch on the day they were fired
Can the employer fire these two employees?

23. Considerations: Results
Was this a legitimate workplace rule? Yes
Did the employer know they had discussed pay at lunch on Wednesday? No
Was the discussion of pay a motivating factor to firing the two employees? No, employer did not know about the discussion
Would the action have been the same if the employees were not discussing pay? Yes

24. OFCCP Enforcement

25. OFCCP Enforcement
Agency will investigate complaints from applicants and employees
During compliance reviews, OFCCP may
Confirm required “EEO is the Law” posting
Confirm Pay Transparency Policy Statement is posted and in employee manuals
Review existing company policies for pay transparency problems
Interview employees about company practices/culture surrounding pay decisions

26. Pay Equity Analyses

27. Your Pay Analysis Project Plan
Make your business case
Assert Attorney-Client Privilege
Collect data
Conduct pay equity analyses
Correct unexplained disparities
Plan for the future
Your Pay Analysis Project Plan

28. Collect Data What will be the level of analysis?
What will be the unit of analysis?
What factors influence pay decisions?
What data is tracked in the HRIS?
How will other data be collected?

29. Compensation Data: Item 19
Employee Data
Employee ID
Race
Gender
Job Title
EEO-1 Category
Job Group
Hire Date
Base Compensation*
Annualized Salary; and/or
Wage Rate
Typical Hours Worked in a Workweek
*As of date of Workforce Analysis/Org Display
Other Compensation**
Overtime
Bonuses
Incentives
Commissions
Merit Increases
Locality Pay
**For the 12-month period preceding date of Workforce Analysis/Org Display

30. Factors Influencing Pay
Time in company
Time in grade
Time in position
Performance ratings
Highest level of education
Field of expertise or study
Starting salary
Years of relevant experience
Certifications
Market data
Promotion history
Geographic location

31. Conduct Pay Equity Analyses
Preliminary Analysis
Cohort Analysis
Multiple Regression Analysis

32. Preliminary Analysis t-test Fisher’s Exact Test
A high-level statistical analysis of the differences in mean or median compensation between protected and nonprotected comparator groups
t-test
Large groups (30/5/5)
Applied to mean
Significant at 2.0 or greater
Fisher’s Exact Test
Small groups (< 30/3/3)
Applied to median
Significant at .025 or less

33. Preliminary Analysis

34. Cohort Analysis
A visual comparison of salaries for employees in the same group (i.e. job title) to help determine if there are pay equity issues, and if so, the reasons for variance in pay Nonstatistical review of non-discriminatory factors that are likely to explain differences in pay

35. Cohort Analysis

36. Multiple Regression Analysis
A statistical analysis to identify the percentage of pay variance explained by, and significance of, merit variables Analyzes the impact of a combination of multiple factors, as well as the protected predictor, on pay

37. Multiple Regression Analysis

38. Methods for Correcting Disparities
Lump sum increase
Stand alone or
In conjunction with merit increases
Distributed over time
With normal pay increase or
Outside normal pay schedule
Differentiate equity increase from merit increase

39. Limiting Inequity in the Future
Review salaries regularly to mitigate future inequities
Analyze decisions related to compensation
Begin tracking data that is not in HRIS
Develop process for avoiding red-circles
Maintain accurate, well-written job descriptions
Research relevant salary survey information
Maintain and enforce consistent compensation policies
Maintain appropriate records
Even if statistical disparities still exist, do the research and be able to explain them

40. Best Practices

41. Best Practices: Pay Transparency
Include pay nondiscrimination statement in employee handbooks
Post statement where visible to employees and applicants

42. Best Practices: Pay Transparency
“EEO is the Law” Poster and Supplement

43. Best Practices: Pay Transparency
Update EEO clause in subcontracts and purchase orders, but can still incorporate by reference

44. Best Practices: Pay Transparency
Determine who is covered by essential functions exception and train appropriate managers on new rules
Continue to conduct annual salary equity analyses under attorney- client privilege
Provide oversight to disciplinary actions and terminations to ensure protected activity is not a basis for decision
Enhance compensation information storage and disposal practices

45. Questions? 800.882.8904 bai@berkshireassociates.com
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