4 Essentials to Mitigate Fallout From a Pay-Gap Analysis

A smart approach to compensation studies will help your company attract and retain talent -- while avoiding stumbles that could punish you for trying to do the right thing.
4 Essentials to Mitigate Fallout From a Pay-Gap Analysis
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People can debate the extent of the gender pay gap, but no one credibly can argue that it doesn't exist. Some degree of gap might be due to factors outside of an employer’s control, such as time a worker takes off to serve as primary caregiver. Other factors, though, may be due to systemic or implicit (unconscious) bias.

The gender pay gap does more than expose an employer to legal risk. Closing the gap is a talent imperative, too. Individuals who are paid less for no clear reason usually know it. If they don’t leave your company, they'll be less engaged during their continued employment.

Related: Why I Didn't Speak Up When Male Colleagues Made More Doing the Same Job -- But Worse

Not surprisingly, more employers are conducting self-assessments to determine the presence and extent of pay gaps. If not done properly, however, these self-assessments could result in exactly what you hope to avoid: litigation.

Here are four critical steps to help you mitigate the risk that your attempt to do the right thing will result in a plaintiff’s lawyer on your doorstep.

1. Conduct initial analysis under privilege.

I wish an employer’s self-analysis was not discoverable in litigation. But my wish is just that -- a wish.

The courts generally have held that self-analysis of this type is discoverable. Therefore, an employer’s analysis won't be protected from discovery even as leadership tries to determine whether a gap can (or cannot) be explained by seniority, performance or some other legitimate factor.

Employers are well-advised to collect data at counsel's request and then analyze the information jointly with counsel under the attorney-client privilege. If structured properly, the data still will remain discoverable, but the analysis itself won't be. 

Related: New Study Finds That Your Career Income Is Significantly Affected by the First 10 Years on the Job

2. Look beyond gender.

Don't limit your analysis to gender. Your evaluation also must address potential bias in compensation based on race, ethnicity and other groups protected by federal, state or local law.

Imagine having to answer this question in a deposition: “Why did you focus only on gender bias and not racial or other kinds of bias?” There's no good response.

As you learn more about root causes of any gaps, don’t limit yourself to possible legal wrongs. Employees sometimes are underpaid because they had a bad manager who suppressed salaries. Take steps to correct these types of inequities, too.

Related: Why You Need to Focus on Diversity Before It's Too Late

3. Prepare a discoverable-business document. 

While it's generally recommended to conduct analysis under privilege, you shouldn't stop there. If you do, you'll be faced with two rotten options in the event of litigation and this inevitable question: "Why did you make (or why didn't you make) a change?"

  • You could respond, "Privileged." Think about your own reaction when a character in a movie takes the Fifth Amendment. Assert "privilege," and a jury will assume you're hiding something.
  • You could waive your privilege. But how far does that waiver go? I have no choice but to answer with an annoying lawyerism: It depends. Judges have wide latitude in this area, so you could be waiving the privilege with respect to the entire subject matter -- that is, the entire self-evaluation.

Prepare a discoverable-business document. It should summarize your “salary-parity analysis” (not a "gender pay-gap analysis").

Related: This Company Raised $6.5 Million to Help You Find Out if You're Underpaid

4. Make fixes without admissions.

If a pay gap exists with good reason -- such as location, experience or others noted previously -- no fix is necessary. Still, you should document your reasons for concluding the gap is justified.  

On the other hand, you should adjust compensation where no strong justification can be made for an existing gap. Unfortunately, it's rare to know whether that gap is due to an impermissible factor. Why speculate or concede such? Plus, if you do a robust pay-parity analysis, you're sure to make some changes even where no legal exposure exists. 

Rather than asserting, “This may be gender bias,” you might state something like this instead: “The employee is underpaid within our range for the position when we look at experience, performance etc., so we are going to correct that.” Fix the problem, but be thoughtful how you do it.

Related: Palantir Settles Discrimination Claims for $1.7 Million

This article is not legal advice and should not be construed as applying to specific factual situations or establishing an attorney-client relationship.

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