Unequal Pay Is Targeted by Tougher U.S. Enforcement
The Labor Department, after years of prodding employers to eliminate the gender wage gap with little success, is stepping up its enforcement of pay discrimination laws, forcing more and more companies to give raises to women doing the same work as men.
Employers’ groups are chafing at what they call overly aggressive tactics from the government. The tougher enforcement comes at a time when the effort to reduce pay inequities is gaining momentum on Capitol Hill.
In the last several months, the government has ordered corporate giants such as Texaco, Xerox and CoreStates Financial to increase the salaries of their female employees after audits showed that the women were paid less than men for similar work. All the companies have complied.
This year, the Labor Department plans to impose punitive damages of up to $300,000 per person if it can prove that a company intentionally discriminated against women. Investigators will audit the pay records of 6,000 companies that do business with the government, compared with about 3,700 reviews last year, according to Labor Secretary Alexis M. Herman.
The Labor Department has secured back pay and wage increases totaling as much as $3.1 million from firms accused of discrimination. In the $3.1-million settlement, the largest so far, Texaco agreed to pay 186 female employees back pay ranging from $1,700 to $51,000 for the three-year period audited. The women worked in various executive and professional jobs.
Under a 1963 executive order, the Labor Department examines hiring and pay practices of the government’s 200,000 contractors, which employ nearly a quarter of the nation’s civilian work force.
“I hope the signal that companies are picking up is to conduct self-audits,” Herman said, referring to the Texaco settlement. “Don’t wait for the government to come knocking on your door.”
Three powerful business groups in Washington--the U.S. Chamber of Commerce, the Society of Human Resource Management and the National Assn. of Manufacturers--are poised to fight what their attorneys described as “overly aggressive tactics.”
They say the government is becoming too intrusive, making unprecedented requests for sensitive employee information such as the name, race, sex and salary of every person employed at a targeted company.
‘It Seems Crazy to Overburden’ Firms
“Nobody wants discrimination in the workplace, but it seems crazy to overburden every employer to capture a handful of misbehaving employers,” said Barry Lawrence, a spokesman for the human resource group.
“It’s like trying to catch a fish with an A-bomb,” Lawrence said.
Some economists, however, say the Labor Department’s more forceful approach could reap positive results.
“One ripple effect could be that many companies will scrutinize their own payrolls because they would not want to get cited,” said Joyce Jacobsen, a professor of economics at Wesleyan University in Middletown, Conn. “Firms will be forced to look at explicit and implicit biases in the pay and promotion process.”
In 1998, the Labor Department’s compliance office secured $35 million in settlements from contractors whose pay and hiring practices discriminated against women and minorities. About $2.2 million of that money came as a result of glass-ceiling reviews, where investigators compared the salaries of female and male managers. That amount represented a 200% increase from the $741,713 collected in 1997.
For every dollar earned by a man, women take home 74 cents, a mere 15-cent improvement since the Equal Pay Act in 1963 outlawed gender-based wage discrimination. Because the gender wage gap has been closing at the rate of about a half a penny a year, tougher enforcement is needed “to hasten the progress and get it jump-started again,” said Heidi Hartmann, president of the Institute for Women’s Policy Research, a Washington think tank that produces an annual state-by-state report on the pay gap.
“Many government contractors are the best-known corporations,” said Hartmann. “Once they start paying women equal, and higher, pay, those wages are bidded up and it will filter down to every one.”
Women, Labor Support New Tack
President Clinton and numerous women’s and labor groups are supporting tougher enforcement.
When he presents his budget Monday, Clinton will ask Congress for $14 million to hire more staff to enforce equal pay laws.
Clinton has raised the pay equity issue several times recently, including in his State of the Union address, when he asked Congress to “make sure women and men get equal pay by strengthening enforcement of equal pay laws.” The president is expected to speak about pay equity in his weekly radio address today.
Some lawmakers are already taking heed. One bill proposed by Rep. Rosa L. DeLauro (D-Conn.) and Senate Minority Leader Tom Daschle (D-S.D.) would toughen the Equal Pay Act by allowing victims of wage discrimination to recover compensatory and punitive damages. The 1963 law only allows victims to collect lost wages.
Last year, lawmakers gave the compliance office a $67-million budget, which supported 755 full-time employees.
In previous years, the office has focused on discrimination in the hiring of women and minorities. As more women and minorities entered the work force, that focus shifted to pay equity. Investigators this year plan to target disparities in executive pay by conducting 40 reviews, compared with 10 last year, Herman said.
The program cannot seek punitive damages in its cases, but the Labor Department is also revising its agreement with the Equal Employment Opportunity Commission to seek damages of up to $300,000 per person in certain discrimination cases.
In reviewing a company’s pay data, Labor Department auditors calculate the median of a pay grade to determine if women and minorities receive pay mostly above or below the median wage.
Officials say that if they find discrepancies, they often examine a company’s own policy to see if factors such as seniority, education and experience could account for them.
“We don’t have a cookie-cutter approach,” an official said.
But critics say the Labor Department’s method of analyzing pay data is crude, at best.
“Measuring so-called discrimination by comparing women’s wages to the median wage is like saying there’s something wrong with oranges because they are smaller than grapefruits,” said Diana Furchtgott-Roth, an economist at the American Enterprise Institute, a conservative think tank.
‘A Trap for the Unwary’
Paul Grossman, a prominent Los Angeles lawyer who represents management in employment disputes, calls the compliance office’s pay analysis “a trap for the unwary.” Only a sophisticated statistical analysis, which considers factors such as experience and seniority, could uncover wage discrimination, he said.
Grossman said federal investigators have filed claims against a firm when women and minorities earn less in some pay grades but not take any action when women and minorities earn more than white males in other pay grades.
“It’s an over-simplistic way of targeting pay equity,” Grossman said. “And despite that, not very sophisticated employers pay up to settle these claims.”
Chris Gidez, spokesman for Texaco, said the firm decided to comply this month after its own “complex analysis” found that women in professional and executive positions were consistently paid less than their male colleagues. Texaco has also agreed to analyze its pay scales every year.
Last April, CoreStates Financial Corp. agreed to pay $1.5 million to correct pay inequities involving 142 women and minorities.
And earlier this month, Xerox’s management in El Segundo agreed to pay 21 women a total of $110,000 in back pay and wage increases. The allegations were an embarrassment for Xerox, which had previously been given the Labor Department’s top award for promoting women and minorities into management jobs.
“We’ve [acknowledged] all along that there will always be areas for improvement. This case was one of those areas,” said Xerox spokesman Judd Everhart.
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PAY UP
The Labor Department will do more pay audits in 1999 and seek harsher penalties against companies that pay women and minorities less for doing similar work. Here is a list of 10 companies that agreed to settle pay discrimination claims with the department’s compliance program:
* Texaco Inc. agreed in January 1999 to pay $3.1 million to 186 professional and executive women who were paid less than their male colleagues. The settlement includes $2.2 million in back pay and $900,000 in salary increases.
* CoresStates Financial paid $1.5 million in back pay and pay increases to address claims that the Philadelphia-based bank paid lower salaries to 142 women and minorities. The settlement, signed last April, found that the bank did not apply its own compensation policies uniformly.
* Allison Engine acknowledged that it shortchanged 54 female professionals and managers. In a settlement last March, the Indianapolis firm paid $499,999 in back pay and increases to the women.
* R.R. Donnelley & Sons of Chicago paid $425,000 last September to resolve wage disparities involving 29 women and minorities who were employed as professionals or managers. As part of the settlement, the company also agreed to analyze its pay system at a cost of $57,000.
* Fairfax Hospital in Fairfax, Va., paid $425,586 to 52 women employed in the top six pay grades of the hospital. In a 1993 settlement, the firm paid an additional $178,357 in salary increases to 44 of the women.
* U.S. Airways, in Arlington, Va., made a $400,000 payment to 30 women in management and professional positions. A glass ceiling review completed in December 1997 turned up the disparity.
* I-NET of Bethesda, Md., paid $400,000 in January 1998 to resolve allegations of pay discrimination involving 153 women. The labor agency said women were paid less than male colleagues even though they had the same qualifications and seniority.
* Blue Cross Blue Shield of Maryland paid $500,000 to 57 female employees in September 1996 after labor investigators found that women with equal or higher qualifications than men received less pay.
* Owens & Minor of Richmond, Va., paid $300,000 to settle allegations that it underpaid female and minority employees in managerial positions.
* Trigon Blue Cross Blue Shield of Richmond, Va., paid $370,000 to 34 female managers who were paid less than male colleagues of equal qualifications and seniority.
