Why Remediating Systemic Pay Disparities Is a Matter of Compliance

As we have previously written about, recent shifts in federal DEI policy have left some organizations questioning whether to proceed with pay equity efforts. As noted, pay equity remains a critical priority for employers — both from a legal compliance standpoint and as a business imperative.

A key aspect, of course, of pay equity is remediation. In line with concerns over pay equity, some employers might be hesitant to move forward with remediating pay inequities. The rationale: making pay adjustments based on gender or race could create legal exposure.

This hesitation is not only misguided — it introduces significant legal risk for employers. Systemic pay disparities across protected classes are not a theoretical issue; they are a documented reality in many organizations. Failing to remediate them does not make the problem disappear — it makes companies more vulnerable to lawsuits, regulatory penalties, and reputational damage.

In this blog, we’ll clarify why remediation is not illegal, why inaction presents a greater legal risk, and why organizations should stay the course in ensuring unbiased, legally-defensible compensation practices.

The Misguided Fear of Pay Equity Remediation

A concerning trend is emerging among some organizations: the belief that remediating pay inequities based on protected characteristics (e.g., gender, race/ethnicity) may itself be a legal liability.

The argument goes like this: if an organization proactively adjusts salaries for employees within an underpaid group, it could be accused of making pay decisions based on race or gender, which might conflict with anti-discrimination laws.

This interpretation is deeply flawed. It implies that employers should never take corrective action on documented systemic pay inequities — an illogical stance that contradicts the very foundation of anti-discrimination laws.

Consider this: If a group experiencing systemic pay disparities were to file a class action lawsuit and win, the company would likely be required to provide back pay and salary adjustments. In other words, remediation isn’t just an option in such cases — it’s an expected legal remedy. Why wait for litigation when proactive remediation can prevent it?

Additionally, attorney generals from 16 different states issued joint guidance reinforcing that laws concerning DEI are still in effect and will be enforced. As we have previously noted, most of the anti-discrimination/pay equity enforcement action occurs in the U.S. at the state level.

The Legal Case for Pay Equity Remediation

Organizations should understand that remediating systemic pay disparities is not discretionary — it’s a legal imperative. Here’s why:

1. Anti-Discrimination Laws Require Employers to Correct Pay Inequities

Title VII of the Civil Rights Act and the Equal Pay Act prohibit employers from engaging in pay discrimination based on protected characteristics. When a pay audit reveals systemic inequities, the only legally defensible response is to take corrective action. Failing to do so can be used as evidence that an employer knowingly allowed discriminatory pay practices to persist.

Regulatory agencies, including the Equal Employment Opportunity Commission (EEOC) and the Office of Federal Contract Compliance Programs (OFCCP), have long maintained that when companies identify inequities, they are expected to remediate those issues promptly.

2. Many States Have Strong Anti-Discrimination and Pay Discrimination Enforcement 

These states have robust pay equity laws, salary history bans, and strong enforcement agencies:

1. California – The California Equal Pay Act requires equal pay for substantially similar work, prohibits salary history inquiries, and has stringent enforcement.
2. Colorado – The Equal Pay for Equal Work Act mandates pay transparency, prohibits wage discrimination, and requires pay range disclosures.
3. Illinois – The Illinois Equal Pay Act requires equal pay across genders and races, enforces reporting requirements, and bans salary history inquiries.
4. Massachusetts – The Massachusetts Equal Pay Act (MEPA) prevents gender-based pay disparities and prohibits salary history inquiries.
5. New Jersey – The Diane B. Allen Equal Pay Act enforces some of the strongest protections, covering all protected classes and allowing employees to seek six years of back pay for discrimination.
6. New York – The New York State Equal Pay Act expands protections beyond gender, applies to all protected classes, and includes strict salary history bans.
7. Oregon – The Oregon Equal Pay Act requires equal pay for comparable work and mandates proactive pay equity audits.
8. Washington – The Washington Equal Pay and Opportunities Act strengthens protections and enforces pay transparency requirements.

3. Courts Recognize Pay Equity Remediation as a Valid and Necessary Practice

Judicial precedent demonstrates that courts recognize pay equity remediation as a legally sound practice. Corrective actions taken to eliminate documented inequities are not the same as discriminatory practices. In fact, failing to address known disparities heightens legal exposure by demonstrating negligence or willful discrimination.

Employers should also consider that class-action lawsuits involving pay equity claims have resulted in multimillion-dollar settlements. Recent cases highlight how inaction can lead to substantial financial and reputational consequences.

4. Federal Scrutiny on DEI Doesn’t Invalidate Pay Equity Compliance Requirements

While recent executive orders under the Trump administration have signaled a shift in federal DEI policies, they do not change longstanding anti-discrimination laws. In fact, Executive Order 14173 entitled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity” explicitly requires contractors to certify compliance with all Federal anti-discrimination laws (even if this Executive Order withstands court scrutiny). Compliance with pay equity laws remains a priority at the federal, state, and international level, particularly under the EU Pay Transparency Directive.

Employers operating globally must navigate the complexities of conflicting regulations — but stepping away from remediation is not a viable risk management strategy. Failing to remediate puts companies at odds with international pay equity mandates, leading to potential fines and compliance issues.

The Greater Risk: Failing to Remediate

The greatest risk employers face is not in taking corrective action — it’s in failing to act.

• Legal Risk: Employees that identify disparities can file lawsuits, triggering costly settlements and enforcement actions.
• Regulatory Risk: Federal and state agencies continue to investigate and enforce pay equity compliance. Inaction could result in penalties and mandated back pay.
• Reputational Risk: Companies that fail to address pay inequities risk public backlash, loss of talent, and diminished employer brand credibility.
• Talent and Retention Risk: Employees are increasingly aware of pay transparency laws and expect fair pay practices. Failing to remediate pay inequities can lead to disengagement, attrition, and challenges in attracting top talent.

In fact, one of the executive orders doubled down on anti discrimination for federal contractors. It indicates that each contract or grant ward will require the contractor to agree that “its compliance in all respects with all applicable Federal anti-discrimination laws is material to the government’s payment decisions for purposes of section 3729(b)(4) of title 31, United States Code.”

Moving Forward: A Data-Driven, Legally Defensible Approach to Remediation

The key to effective pay equity remediation is using a neutral, data-driven methodology. Employers should:

• Conduct rigorous pay equity audits to identify inequities using legitimate, job-related factors.
• Implement structured remediation strategies that do not rely on quotas or rigid formulas but instead ensure pay adjustments align with unbiased, defensible analyses.
• Document the rationale for adjustments based on legitimate business factors such as market pay trends, experience, and performance.
• Engage legal counsel with pay equity expertise to ensure remediation efforts are compliant and well-documented.

Trusaic’s PayParity^® solution is designed to help organizations navigate these complexities with confidence — providing sophisticated analytics, unbiased insights, and legally compliant methodologies to ensure anti-discriminatory compensation practices. Our R.O.S.A. tool helps optimize your remediation budget so you can make every pay adjustment count.

Learn more about how our robust methodology simplifies pay equity and guides you to make compliant pay decisions with ease.

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