Wednesday, April 14, 2010

Compensation Discrimination

The following information comes from the EEOC web site regarding compensation discrimination:

What is "compensation"?

Compensation refers to any payments made to or on behalf of employees as remuneration for employment. All forms of compensation are covered, including salary, overtime pay, bonuses, stock options, profit sharing and bonus plans, life insurance, vacation and holiday pay, cleaning or gasoline allowances, hotel accommodations, reimbursement for travel expenses, and benefits.

Under what circumstances is compensation discrimination unlawful under Title VII (The Civil Rights Act), the ADEA, and the ADA?

Compensation discrimination is unlawful when an employee is paid less because of his or her race, color, religion, sex, national origin, age or disability. The following are examples:

--An employer pays women less than similarly situated men, and the employer's explanation (if any) does not satisfactorily account for the difference.

--An employer sets the pay for jobs predominantly held by Hispanics below that suggested by the employer's job evaluation study, while the pay for jobs predominantly held by non- Hispanics is consistent with the level called for by the job evaluation study.

--A discriminatory compensation system that disadvantaged African-Americans has been discontinued, but salary disparities caused by the system still continue.

How can you tell whether compensation discrimination may be occurring in a workplace?

Of course, there can be an explicit policy or other direct evidence of compensation discrimination. For example, in the past, some employers provided lower pension benefits to women even though the women made the same pension contributions as men. This was held unlawful by the Supreme Court.

Typically, however, discrimination in compensation is more subtle and requires closer examination. The basic approach outlined in the Compliance Manual section is to identify similarly situated employees and compare their compensation. If there are differences, the next step is to determine whether there are nondiscriminatory reasons for the differences. If not, the differences may well be due to discrimination. Even if there appear to be nondiscriminatory reasons, those reasons should be evaluated to determine whether they actually explain the pay differences.

How do you determine whether employees are similarly situated?

The jobs the employees hold should be similar enough that one would expect the jobs to pay the same. This need not be an overly rigid process. The key is what people actually do on the job, not job titles or departmental designations. Skill, effort, responsibility, and the general complexity of the work are guideposts in determining job similarity.

Is it unlawful to discriminate in bonuses, commissions, and other compensation not included in base pay?

Yes. Bonuses, commissions, stock options, and any other payments in addition to base pay must also be provided on a nondiscriminatory basis. It is important to determine whether the employer's policy for providing non-base compensation is nondiscriminatory in design and application. There are two basic issues to consider in determining whether there is discrimination in non-base pay: (1) whether the eligibility criteria for the non-base compensation are applied in a nondiscriminatory way, and (2) whether, among those eligible, employees receive non-base compensation in nondiscriminatory amounts.



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