Equal Pay and Compensation Discrimination

Equal Pay and Compensation Discrimination

According to Gender

Equal Pay Act of 1963

Pregnancy Discrimination

According to Race

According to Social Networks

According to Age

According to Corporate Culture

According to Performance and Rewards

The 2001 State labor legislation included several significant developments in employment standards (Nelson 2002). These were an increase in the minimum wage rates, child labor measures, employment in the entertainment industry, limits to child labor and employment discrimination on the basis of genetic information or other reasons. Occupational safety and health, employment and training, labor relations, employee background clearance, economic development local living wage ordinances were not covered. A ban on female workers being paid less than male employees by the same employer for the same work was excluded. Instead, the legislation provided that employers may not discriminate in the payment of wages on the basis of gender for equal work on jobs requiring equal skill, effort, and responsibility and under the same work conditions.(Nelson). Besides gender, there are other types of pay discrimination practices.

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According to Gender - Morgan Stanley, an investment firm, paid $54 million in settlement to Allison Schieffelin, as lead plaintiff for reasons of gender discrimination (Stites 2005). The suit was filed by the Equal Employment Opportunity Commission or EEOC. Schieffelin said that the company withheld from her opportunities for promotions and higher pay. The firm set aside $40 million for other female employees who would make similar claims and $12 million for a new diversity program to enhance the compensation and promotional opportunities of its female employees. it, however, denied the discrimination charges. The settlement was made after the a class-suit action was allowed against Wal-Mart Stores, Inc. Wal-Mart was accused of sex discrimination, including gender pay inequity. The suit could cover approximately 1.6 former and current female employees in the store chain. It was the largest workplace discrimination lawsuit in American history (Stites).

The Equal Pay Act of 1963

The Commission listed at least 24,000 sex discrimination complaints in its files since 1988 (Stites 2005). In 2004 alone, it won more than 10,000 sex discrimination complaints and recovered $100.8 million worth of benefits for the aggrieved parties. The Equal Pay Act of 1963 obliges employers to give male and female employees equal pay for equal work in the same organization or establishment. Human resource professionals must ensure pay equity within the organization for employees with the same work experience and education. Should a discrepancy exist, they should identify the reason and whether it is legitimate. Under the Act, it is unlawful to retaliate against those who oppose discriminatory practices against sex, file discrimination charges, testify or participate in any investigation in any way (Stites).

Twenty-eight female employees an airline manufacturing company filed action against the company for systemic gender discrimination (Law Reporter 2004). They claimed it violated Title VII of the Civil Rights Act of 1964, federal and State equal pay statutes, and State anti-discrimination laws. They charged that the company denied them job assignments, promotions and overtime pay on the sole basis of gender. The company also knowingly practiced significant disparities in the salaries of its male and female employees and did not correct these disparities. The complaining employees also sued for breach of contract, negligent supervision, and violation of the Stage wage law. The company denied that any of its operating divisions or subsidiaries practiced or engaged in gender discrimination or disparate treatment of employee salaries. The parties eventually settled amicably before trial for compensation between $40.6 million and $72.5 million. The company also agreed to change its policies on compensation, promotion selection and overtime pay (Law Reporter).

Pregnancy Discrimination

Pregnant women employees are also discriminated against, as in the case of Milyn Pickler of Meza, Arizona. When she told her boss at the Berge Ford auto dealership about the good news of her pregnancy, she was fired (Woodward 2005). He told her that employees had to be proactive rather than reactive. He said that her cramping or throwing up could lead to an accident and a lawsuit against the company. He assured her, however, that she could go back to work after the delivery. But the loss of her job as representative in the service department also meant the loss of her health insurance. Pickler was only 19 years old and she would lose her job right before Christmas. She sought the help of the EEOC, which sued in her behalf. An out-of-court settlement was reached for $70,000 (Woodward).

Pregnancy discrimination claims in rose by 5% from 2001 to 2004, making pregnancy discrimination a fast-growing type of discrimination (Woodward 2005). Cases of this kind filed at the EEOC increased from 39% in 1992 to 2003, surpassing even sexual harassment and other sex discrimination charges. Claim amounts likewise increased three times during the period. Commission spokesman, David Grinberg, recovered roughly $12 or 13 million a year through litigation and pre-litigation where most of the settlements occurred. Pregnancy discrimination settlements rose by 15.6% in 2004, according to Grinberg. He said that more than half of all the complaints were for illegal or improper termination. Others included imposing improper restrictions on the amount or type of work for pregnant employees or their ability to take maternity leave. More than half of these employees worked in the service and retail industry. This has been the trend since the early 90s. Legal and public policy director Jocelyn C. Frye of the National Partnership for Women and Families, however, noted that pregnancy discrimination could be subtler than in the case of Pickler. A well-performing pregnant woman who is on a managerial level could be moved to another type of job. Contributing factors to pregnancy discrimination have been varied. One would be the increased and increasing number of women in the workplace (Woodward).

The U.S. Census Bureau said that nearly 60% of women aged 16 and older joined the workforce (Woodward 2005). The U.S. Department of Labor said that women would account for more than half of the increase in labor force growth between 2002 and 2012. Another factor was that they would continue to work after their pregnancy. A comparison of trends was presented by the 2001 population reports. In 1978, or a year before the passage of the federal Pregnancy Discrimination Act, the majority of women quit their jobs. But in the early 90s, only less than 27% of them did. The Family and Medical Leave Act was still another factor. Senior associate Jennifer Long of Baker & McKenzie of Chicago, an international legal services firm, offered an explanation. Before 1993, the year when the Act was passed, pregnant women were not as conscious of their rights as afterwards. With its passage, pregnant women became better aware that they were entitled to 12 weeks of unpaid leave if they met the minimum eligibility requirements. Victims also had greater motivation to sue than before because their paychecks formed a greater part of the household budget. Their income was needed during and after the pregnancy. Still another factor to the increase in this type of discrimination was stereotyping. Employers believed that pregnant women could not perform their duties like other workers, would want to work for fewer hours or would become less committed to their jobs. EEOC trial attorney Michael J. O'Brien said that the Commission noted that the last type had been prevalent in the last five years. Long of the Baker & McKenzie company suspected that the actual volume of pregnancy discrimination cases could be more than statistically represented. Women at the professional level or higher were often hesitant to file complaints and claims because of their reputation in the workforce. They felt that damage on their reputation could remain and affect their future abilities. Long believed that discrimination could be worse on women at the lowest job levels. Lower-level managers might not be aware or in tune with legal requirements in dealing with pregnant women. The Pregnancy Discrimination Act of 1978 requires employers to treat pregnant women in the same way as non-pregnant persons. The Act was an amendment to Title VII of the Civil Rights Act of 1964. It entitles pregnant employees to accommodations similarly extended to other employees in similar disabling conditions as those who, for example, figure in an accident. The Act applies to companies with 15 or more employees, while the Family and Medical Leave Act or FMLA applies to companies with 50 or more employees. In addition, State laws also provide respective rights and benefits. These rights and benefits are so numerous that employees get confused. Some of these 25 States offer more rights than do federal laws

According to Race. - Coca-Cola Company topped the list of companies, which must pay dearly for pay discrimination practices in the workplace (King 2001). African-American employees in April 1999 sued the Company for a hierarchy, where Blacks' pays were at the lowest scale. It paid the complainants $192.5 million in settlement and still faced a looming $1.5 billion discrimination suit filed against it by Black employees in the court. These figures dwarfed what other big businesses paid for discriminatory practices. These businesses included Texaco, Inc.; Shoney's, Inc., Winn-Dixie, Stores, Inc.; and CSX Transportation, Inc. Critics saw Coca-Cola's settlement as signaling a major breakthrough among big businesses as coming to terms with diversity in the workplace (King). Because the company has been a leader in many areas, these critics regarded it as setting an example of greater openness to promotions across races of employees (King).

Settlement terms included $23.7 million as back pay; $58.7 million as compensatory damages; and $10 million as promotional achievement award fund distributed to the complainants. A remaining $20 million went to attorney's fees and $36 million to the implementation of internal program reforms. Coca-Cola would also create an external, seven-member task force to insure that the terms were complied with and to oversee the company's diversity efforts (King).

According to Social Networks. - Connections in a business organization can be a factor in inequitable salary negotiations. A study analyzed negotiations data on 3,670 job applicants at a mid-sized high-technology firm in the U.S. For a 10-year period starting in 1985 (Seidel 2000). Findings revealed that referral networks could put racial minorities at a disadvantage, particularly in salary negotiations. Friends and other connections in the organization enhanced an applicant's chances for salary increases. Racial minority groups also tended to have fewer friends in the organization. And there was negative direct effect of an applicant's belonging to a racial minority group in negotiating for salary increases (Seidel).

Inside Information and the Right Connection

The friend or connection in the organization could obtain or provide inside information to the applicant in helping the latter to favorable salary negotiations (Seidel 2000). When an applicant finds a job vacancy, a friend or inside contact would be a strong tie in the hiring process. That inside information, especially concerning compensation, would be an advantage to the applicant and a disadvantage to the organization. The inside contact could be caught between two loyalties, which eventually would be in favor of the applicant. While racial minorities would have their own networks in the same degree as Whites would, these networks would have less access to companies dominated by Whites. Network differences would contribute to wage differentials, which favored demographic groups in the organization's numerical majority. Although most U.S. companies have a majority of White employees, the trend has been changing in recent years. More racial minorities and foreigners have been joining the workforce. The trend could mitigate current network disadvantages to minorities, but the so-called "glass ceiling" effects could still limit the advantages minorities would have wanted to obtain through their network (Seidel). Those with the right connections would tend to have the advantage to salary negotiations as well as other negotiations in the organization.

According to Age - the payment of benefits to aging employees could be another ground for a lawsuit, according to an attorney of the EEOC (Wiscombe 2003). According to Atty. David Offen-Brown, the Commission recently managed a recent $250 million age-discrimination settlement for employees of the California Public Employees Retirement System or CalPERS. It is the nation's largest public retirement fund. The employees complained that the company attempted to reduce their benefits on account of their age. Offen-Brown said that the settlement called for heightened awareness on the unlawfulness of age discrimination. It emphasized that any attempt to reduce the benefits to employees age 40 and above would be scrutinized. A company, which would decrease these benefits, would be taking risks, according to him. The lawsuit was filed under the Age Discrimination in Employment Act (Wiscombe).

The employees charged that police officers suffered discrimination when the company reduced their industrial-ability retirement benefits in proportion to their age at the time of hiring. Hundreds of police officers and firefighters with disability pensions were affected. These complainants began their career at 31 or older (Wiscombe).

Beverley Hilton's Age Discrimination Lawsuit

EEOC filed the lawsuit on behalf of 11 male and female employees, aged over 40, who complained that the Hotel denied they jobs as servers for reasons of age (Bronstad 2001). The Hotel, for its part, said the reason was the employees' lack of adequate experience. The Hotel expressed outrage over the lawsuit and, instead, claimed that the Hotel was a model employer in 200s. The owner himself was 76 years and the Hotel had a quarter of the employees working there for at least 20 years. The complainants applied for their jobs between 1998 and 2000 (Bronstad).

Age discrimination suits, like this one, increased and became prevalent recently as more baby boomers reached an age ceiling, according to Anna Park, executive director of EEOC in Los Angeles (Bronstad 2001). The Commission said that, between October 1, 1999 and September 2000, 16,009 claims of age discrimination increased from 14,141 in previous years. Of this number, the companies were found not to have reasonable cause for the discrimination. The Commission noted that Mondrian Hotel was also reported to have resorted to discriminatory practices on the basic of national origin. The Hotel's explanation was typical in that the employees did not fit its projected image. Mondrian Hotel later paid $1.08 million in settlement in August 2000 for firing nine bellmen of other nationalities. They were replaced with 15 White workers before the Hotel's reopening in 1996. In the case of Beverley Hilton, the EEOC would like to recover a still-unspecified amount of pay for the complainants, based on what they should have earned if they remained in their jobs. This would be at the standard minimum wage plus typical tips. The minimum wage was $6.25 an hour and typical tips ranged from $250 to $500 a week (Bronstad).

According to Corporate Culture - the rash of equal pay discrimination suits could only mean that the United States has been suffering from salary equity (Moline 2004). In 1974, a typical U.S. company chief executive officer earned 35 times more than an average factory worker. This ratio had widened to a 326-1 by 1998. Business professor Diane Swanson at the Kansas State University made this observation at the Leeds School of Business Symposium on Business and Professional Ethics. She discussed the results of a recent survey of 200 Australian executives. These executives preferred working where the highest salaried manager earned 57 times the company's lowest paid worker. Executives are paid to focus beyond self-interest. They are supposed to supervise. An executive who pins his attention n pay inequities may not be the correct personality for the organization. The findings of the study could explain the reasons behind the seeming lack of interest in reducing U.S. salary inequities despite the rise in corporate greed (Moline).

Swanson said that the ultimate effect of salary inequity in an organization would not only be bad business but also a lack or poor ethics on the part of well-paid managers (Moline 2004). She predicted that managers who would not admit or realize the role of corporate ethics and values in their decision-making would neglect the community, which the company served. The survey, however, noted that only 16.6% of the surveyed executives agreed to the 326:1 ratio at only 39.1%. The typical executive believed the ratio should be 57:1 salary differential. This ratio would accommodate some self-interest factor "for greater potential compensation." A group of surveyed executives saw differential salaries as a motivator. The rest associated the concept of pay equity with socialism (Moline).

What Executives Had to Say Regarding Pay Inequity

Half of those surveyed disagreed that the government should intervene with regulations to reduce pay inequalities in corporations. When asked about the place of ethics and values in their decision-making, more than half expressed preference for highly differentiated pay scales in the workplace (Moline).

According to Performance and Rewards - a study on professional baseball players attempted to measure salary inequity on individual performance on a pay-for-performance context (Harder 1992). The respondents were all major-league baseball players in the 1987-1988 season of the All-National Basketball Association. They received base salaries and pro-rated and discounted signing bonuses from 1976, 1977, 1987 and 1988. Pay inequity among most of the surveyed players was strongest among over-rewarded. Under-rewarded players were less likely to decrease performance for fear of losing their future rewards. Under-rewarded players took more shots but scored less than over-rewarded players. On the other hand, over-rewarded players contributed more by a non-scoring performance. Over-rewarded players were also more team-oriented, while under-rewarded players were more self-oriented. The results could also mean that a team's management would tend to derive the greatest value from its highly paid players. These players, in return, would play more regularly and perform better. Thus, management would react to high pay rather than to over-reward inequity. Individual performance could be a function or result of group expectation. It could also be the outcome of one's own expectation of a high or low performance (Harder).