Pay equity, diversity and inclusion
Doing Business in Washington Requires Pay Equity
3 minute read
The great state of Washington boasts some of the world’s most influential businesses, from Microsoft, Starbucks, Amazon, and Costco to Zillow, T-Mobile, and Nordstrom. These firms are global in reach, and yet, along with all other employers (public and private) in the state, they are subject to the Equal Pay & Opportunities Act (EPOA).
According to the Seattle-based law firm Summit Law Group, Washington passed its first equal pay legislation in 1943. In this way, Washington was considerably ahead of its time, as the federal Equal Pay Act would not come into effect until 1963. In March 2018, the state underwent a significant equal pay overhaul when Governor Jay Inslee signed House Bill 1506 (the EPOA) into law. The EPOA was then amended in May 2019 by House Bill 1696. To date, the EPOA remains one of the strongest equal pay laws in the U.S.
This addition to the PayParity Post will give employers, attorneys, payroll, and HR personnel, and D&I officers an overview of the EPOA, including its application, enforcement mechanisms, and key terminology. Note: this post does not constitute legal advice; contact your counsel regarding questions under the EPOA.
Which employers are subject to the EPOA?
The EPOA is very broad and very clear on this point. An “employer” subject to the EPOA “means any person, firm, corporation, partnership, business trust, legal representative, or other business entity which engages in any business, industry, profession, or activity in this state and employs one or more employees, and includes the state, any state institution, state agency, political subdivisions of the state, and any municipal corporation or quasi-municipal corporation.”
In other words, all employers, whether public or private, non-profit or for profit, must abide by the EPOA..
What compliance obligations do Washington employers have under the EPOA?
In a nutshell, employers must ensure gender is not the basis for pay differentials between employees performing similar jobs (defined as “similarly employed”), except where the pay differentials can be justified by an acceptable reason as detailed in the EPOA. Such acceptable reasons, or “bona fide job-related factors,” must be relied on in good faith and include the following:
- Differences in education, training, or experience.
- Merit/work performance.
- Measuring earnings by quantity or quality of production.
- Regional differences in compensation.
- Differences in local minimum wages.
- Job related factors consistent with business need.
Importantly, employers bear the burden of proof with respect to the cause of pay differentials, and prior salary (sometimes called “salary history”) can never be an acceptable reason for pay inequality.
Further, as the EPOA includes “equal” and “opportunities” in its title, it should come as no surprise that Washington employers must ensure equal career advancement opportunities. In passing the EPOA, the legislature noted that it “finds that equality of opportunity for advancement is key to reducing income disparities based on gender. The legislature further finds that using gender as a factor in advancement contributes to pay inequity.” For these reasons, employers may not limit or deprive employees of career advancement opportunities on the basis of gender, except in certain limited circumstances. The EPOA’s equal advancement opportunities mandate sets it ahead of many other state equal pay laws, which do not explicitly link career advancement to equal pay.
Other compliance obligations required under the EPOA concern transparency and retaliation. As noted above, the EPOA contains a salary history ban, which as Trusaic has discussed elsewhere, is an essential step toward establishing pay equity. Above and beyond the salary history ban, however, the EPOA prohibits certain employer conduct, such as retaliating against employees who discuss or compare wages or exercise their rights under the EPOA. For a full accounting of the compliance obligations required under the EPOA, employers are encouraged to contact their counsel.
What types of compensation or pay are included in the EPOA?
Similar to other states that have passed stringent equal pay laws, such as Colorado, the EPOA paints with a broad brush in defining what kinds of pay are to be included in its scope. Specifically, “compensation” is defined as “discretionary and nondiscretionary wages and benefits provided by an employer to an employee as a result of the employment relationship.” As the Washington State Department of Labor & Industries explains in its Frequently Asked Questions, the EPOA does not simply prohibit gender-based differences in base pay, salaries, hourly rates, commissions, bonuses, benefits (such as medical and retirement), paid time off, gifts, and other categories must be considered as well.
What are some key terms that Washington employers should know under the EPO?
As noted above, gender cannot be the basis for pay differentials between “similarly employed” employees. Under the EPOA, employees are “similarly employed” if they “work for the same employer, the performance of the job requires similar skill, effort, and responsibility, and the jobs are performed under similar working conditions.” While “skill,” “effort,” “responsibility” and “working conditions” are subject to their own sub-definitions under the EPOA, a key takeaway for employers is that the Department of Labor & Industries considers factors such as job requirements, job descriptions, job duties, and management when determining whether employees are “similarly employed.” Importantly, the EPOA specifies that job titles alone are not determinative of whether employees are similarly employed.
What are the risks of non-compliance with the EPOA?
The EPOA carries significant penalties for employers that fail to comply with its requirements. Employees or applicants who believe a violation has occurred may file an administrative complaint or seek civil damages in court. Civil penalties imposed by a court include back pay, statutory damages equal to the greater of back pay or $5000, interest, attorneys’ fees and costs, and other relief such as reinstatement. Similarly, the Department of Labor & Industries may order an employer in violation of the EPOA to pay to the complainant actual damages; statutory damages equal to the actual damages or $5000, whichever is greater; interest; payment to the department of the costs of investigation and enforcement; and any other appropriate relief.
What can employers do to ensure they are in compliance with the EPOA?
The short answer is “conduct a pay equity audit.” Experts across the human capital, legal services, and business intelligence industries recommend a pay equity audit as a critical tool in an employer’s risk management tool belt. It is the industry standard for statistically comparing pay.
As is clear from the above overview of the EPOA, the state of Washington is strongly committed to pay equity on the basis of gender for all businesses operating in its boundaries. With its powerhouse stable of global firms headquartered in the state, including those, like Microsoft, that are committed to equal pay, other jurisdictions will no doubt follow suit.
Organizations that conduct a pay equity audit must communicate their progress and achievement along the way. To help you faciliate discussions around compensation, we created the Pay Equity Communications Planner.