By Tracey R. Wallace

On July 20, 2010, President Obama called on the Senate to pass the Paycheck Fairness Act (H.R. 12, S. 182). You may read the full text of the bill here: http://www.govtrack.us/congress/bill.xpd?bill=h110-1338. In his renewed push for passage of this legislation -- which followed the Senate's refusal in 2009 to accept similar provisions in the House version of the Lilly Ledbetter Fair Pay Act -- President Obama characterized the Paycheck Fairness Act as “a common sense bill that will help ensure that men and women who do equal work receive equal pay.” Passage of the PFA in its present form would result in sweeping changes to the Equal Pay Act (“EPA”).

EXPANDED RELIEF. Under the proposed legislation, the PFA will expand available relief from “liquidated damages” and “back pay” to unlimited compensatory and punitive damages. It is anticipated that the potential increase in PFA lawsuits would result in increased exposure to employers where employees demonstrate gender pay discrimination.

DIFFERENT CLASS ACTION PROCEDURE. The PFA as proposed will also change EPA class actions from their current “opt-in” status to the more inclusive “opt-out” status (i.e., you are included in a class action unless you specifically indicate you do not want to participate) as presently provided by the Federal Rules of Civil Procedure.

RETALIATION CLAIMS. The PFA as proposed will also expand the anti-retaliation provisions of the EPA. It prohibits retaliation against employees for inquiring about, discussing, or disclosing the wages of the employee or another employee in response to a complaint or charge, or in furtherance of a sex discrimination investigation, proceeding, hearing, or action, or an investigation conducted by the employer.

CHANGE TO DEFENSES. The PFA as proposed will also significantly alter the current “bona fide factor other than sex” defense. Under the PFA, the “bona fide factor” defense would apply if the employer demonstrates that the factor: (1) is not based upon or derived from a sex-based differential in compensation, (2) is job-related with respect to the position in question, and (3) furthers a legitimate business purpose. An employee, however, can defeat this defense if the employee can demonstrate: (1) an alternative employment practice exists that would serve the same business purpose without producing the pay differential, and (2) the employer has refused to adopt the alternative practice.

BASIS FOR WAGE COMPARISONS. The PFA as proposed also changes the meaning of “establishment.” Currently, a wage discrimination claim requires a comparison of the compensation of employees working at the same “establishment,” and some courts have interpreted this term to mean that wage comparisons are precluded between workers located in different facilities or offices of the same employer. Under the PFA, wage comparisons would be made between employees located in different facilities or offices.

CONCLUSION. In summary, the Paycheck Fairness Act proposes the most sweeping changes to the Equal Pay Act since its adoption in 1963. If the Senate does pass the PFA as presently worded, this legislation could have a profound effect on pay structure, hiring and promotions. This proposed legislation bears watching.

For further information regarding this e-Alert, please contact Tracey Wallace at 214.953.5873 or twallace@jw.com.