April 8 2014
Paycheck Fairness Fraud
Carrie L. Lukas
Political campaigns rely on tried-and-true slogans that resonate with their supporters: Republicans can be counted on to champion tax cuts and Democrats minimum wage increases — especially when an election nears. In recent years, calls for legislation to advance "equal pay" have become another Democratic Party tool. Yet Americans should recognize this for what it is: A pure political tactic.
The chief beneficiaries of the latest "equal pay" legislation would be lawyers and government bureaucrats; and the losers will be American workers — particularly American women — who will see their opportunities further constrained by this latest government overreach.
Americans support the important principle of equal pay for equal work. That's why for more than 50 years there have been laws on the books that protect employees from gender-based wage discrimination: the Equal Pay Act (1963) and the Civil Rights Act (1964). The first bill President Obama signed into law was the Lilly Ledbetter Act, which at the time was touted as needed to make "equal pay for equal work" the law on the land. That law extended the time period during which an employee could sue for discrimination. Indeed, there may have been a need to give employees more time to recognize and seek recourse from discrimination, though the Ledbetter Act moved the bar so far that now employees may sue businesses years, even decades, after the alleged discrimination took place. That means companies could face lawsuits long after the managers responsible for employment decisions have left, making justice difficult to obtain and creating significant new potential costs for business.
Now we are told that women are still being denied equal pay for equal work, and another piece of legislation — the Paycheck Fairness Act — is the solution. Note that the legislation's champions avoid discussing what the bill will actually do, beyond platitudes about helping women and equal pay. That's because once again this legislation is about changing how discrimination lawsuits are conducted, dramatically increasing the potential payouts for plaintiffs and their lawyers, facilitating class action suits and making it much more difficult for employers to defend themselves. Few Americans would support the bill if they new that it was primarily about helping lawyers, not working women.
Take the changes to class action suits. Under current law, a worker has to agree to take part in a class action lawsuit against her employer. The Paycheck Fairness Act would change this so that employees must opt out, rather than into, a class. This creates a new burden for workers, but makes it much easier for lawyers to obtain certification as a class and increase the size of potential awards.
The Paycheck Fairness Act also raises current caps to make the potential payouts from lawsuits much larger. Under existing law, victims of discrimination can receive back-pay for the earnings they were denied, and punitive damages of up to $300,000 when discrimination was intentional. The Paycheck Fairness Act would instead allow unlimited punitive damage awards, including for unintentional discrimination. This dramatically increases the motivation for both lawyers and employees to sue in hopes of a super-sized payout.
Currently, businesses can justify differences in pay based on factors such as experience, job duties and business necessity. Yet under the Paycheck Fairness Act, employers would be exposed if an employee could demonstrate that "an alternative employment practice exists that would serve the same business purpose without producing such differential." No one knows what that ambiguous definition means, leaving employers open to potential lawsuits for essentially any compensation decision, whether that's making a counter-offer to retain a valued employee or offering an employee more flexible hours in exchange for reduced compensation.
The Paycheck Fairness Act would also empower government bureaucrats to collect information about compensation practices and establish a national award for employers deemed best in advancing "pay equity." Companies hardly need more government red tape, but more disturbingly government "guidelines" collected today could easily become regulations and mandates in the future — undoubtedly justified as necessary for the cause of "equal pay."
How would businesses react to the new legal risks and administrative burdens? Likely they would seek to reduce their exposure to lawsuits by limiting the number of employees and adopting more rigid, one-size-fits-all compensation practices. That's bad news for women who value flexible work arrangements and are looking for work today.
Americans like the idea of equal pay, which is why those are the only words you hear from proponents of the Paycheck Fairness Act. They studiously avoid terms like "lawsuits" and "new government filing requirements," because the American people recognize these as enemies of job creation and economic growth. Yet Americans must look past the slogans and slick internet ads and recognize that the Paycheck Fairness Act isn't about equal pay and apple pie — it's a big payout to lawyers that would leave working women worse off.
Carrie Lukas is the managing director of the Independent Women's Forum.