Paycheck Fairness Act Aims to Close Wage Gap with Salary History Ban, Tougher Enforcement, and Pay Data Collection

The Paycheck Fairness Act steps into the ring to tackle wage disparities based on sex, updating rules that haven't seen major changes in decades. At its core, this legislation aims to ensure people receive equal pay for equal work by strengthening enforcement mechanisms under the Fair Labor Standards Act, prohibiting employers from relying on a candidate's salary history, and requiring more transparency around pay data.

Leveling the Playing Field: Stronger Rules for Equal Pay

This Act significantly tightens the rules around pay discrimination. First, it broadens the definition of "sex" to explicitly include pregnancy, childbirth, related medical conditions, sexual orientation, gender identity, and sex characteristics (Sec. 2). If an employer wants to justify paying someone less for the same work based on factors other than sex – like education or experience – they face a tougher standard. Under Sec. 2, they must prove this "bona fide factor" is not sex-based, is job-related, essential for the business (business necessity), and fully explains the pay difference. Crucially, if there's an alternative practice that achieves the same business goal without the pay gap, and the employer refuses it, the defense doesn't hold up. The Act also beefs up anti-retaliation protections (Sec. 2), making it unlawful for employers to punish employees for discussing wages, filing complaints, or participating in investigations related to pay discrimination.

No More Guessing Games: Salary History Ban & Pay Transparency

One of the most direct changes for job seekers and employers is the ban on using salary history (Sec. 9). Employers generally cannot ask about a candidate's past wages or rely on that information to set their pay. The idea is to prevent lower wages, potentially resulting from past discrimination, from following a worker throughout their career. There's an exception: if a candidate voluntarily discloses their wage history after receiving a job offer with compensation details, specifically to negotiate a higher wage, the employer can consider it. Violations come with penalties, including potential damages up to $10,000 plus attorney's fees for the affected individual. To get a clearer picture of pay practices, the Equal Employment Opportunity Commission (EEOC) is tasked (Sec. 7) with collecting compensation data from employers with 100 or more employees, broken down by sex, race, and national origin. This data is intended to help target enforcement efforts and will be published in aggregate form.

Tools for Change: Training, Research, and Recognition

Beyond enforcement, the Act includes several measures aimed at promoting pay equity proactively. It authorizes funding for the EEOC and Department of Labor (DOL) to train their own staff and educate employers and the public on wage discrimination (Sec. 3). The DOL is also directed to establish grant programs for negotiation skills training, particularly for women and girls, and to encourage employers to conduct self-audits and adopt fair compensation practices (Sec. 4). Furthermore, the DOL will conduct research on pay disparities, share best practices (Sec. 5), and establish a "National Award for Pay Equity in the Workplace" to recognize employers making strides (Sec. 6). A National Equal Pay Enforcement Task Force (Sec. 10) involving multiple federal agencies is also established to coordinate efforts.

What It Means for Business: Compliance and Support

While aiming for fairness, the Act acknowledges potential impacts on businesses. Employers will need to review their compensation practices to ensure compliance with the stricter standards for justifying pay differences and the ban on using salary history. The new data collection requirements (Sec. 7) will add administrative tasks for companies with 100+ employees. However, the Act also includes provisions for assistance. It directs the DOL and EEOC to provide technical assistance materials specifically designed to help small businesses comply (Sec. 12). Small enterprises exempt from certain Fair Labor Standards Act requirements retain that exemption here. Employers are also required to post notices informing employees of their rights under this Act (Sec. 13).