Rhode Island Governor Daniel McKee recently enacted important pay equity legislation that could both be game-changing for the corporate world and have serious unintended consequences.
Pay equity is a term used to describe the elimination of discrimination based on sex and race in the wage setting system. There are two major pieces of legislation. The first part, which is expected to start being implemented in 2023, will prohibit companies from asking for salary histories of applicants before initial job postings.
Companies will no longer be allowed to ask job seekers about their wages and how much they earn. This is the question that was asked even before the start of an interview. A recruiter would grill your compensation before submitting your resume to the company.
The company’s internal human resources recruiter would ask or have you complete an application requiring a salary, bonus, and other compensation before you go for an interview. Even online business websites would need this data before allowing you to submit an application.
Fortunately for job seekers, those days are over. This rule was enacted, in part, to close the controversial gender pay gap. Another rationale for the law is to address the perceived injustice of a job seeker held captive compared to his current salary.
Past standard practices would imply that a company would offer a certain premium over what a candidate currently earns to induce them to leave their company and join the company. The problem for a lot of people was that they were underpaid. If you started out with a low salary and received a meager 2% annual raise, it would take decades to boost your pay. Even with a pay rise, they would still be below market wages.
Now in Rhode Island, you don’t have to disclose your pay. Instead, you can demand whatever you want. This new law could greatly benefit a candidate who is at the top of his field, but who earns considerably less than what is offered for a similar job at a competing company. A number of states have already implemented this rule. States that do not enforce this will generally obey this law, as it is good and fair business practice.
The second part of the legislation could be revolutionary. He calls for pay transparency in the workplace, which seems simple and reasonable. We could all agree that workers should be paid fairly, regardless of their race, religion, color, age and other characteristics.
The law prohibits an employer from paying an employee less because of “race, color or religion, sex, sexual orientation, gender identity or expression, disability, age or the ancestral country of origin ”to do the same work. Again, at first glance, this seems obvious, reasonable and fair. There will be severe penalties if companies do not respect this rule.
According to Joshua Nadreau, a partner in the Boston office of the labor and employment law firm Fisher Phillips, the Rhode Island law is “one of the few pay equity laws that targets other protected classifications. than sex or gender ”.
Nadreau postulates: “This can add a considerable burden to employers who may not have historically been tracking this demographic information. How many employers follow the religion or sexual orientation of their employees? One of the questions I have is whether an employer will be held legally responsible for a pay gap between various protected classes if they don’t even have the information to make that decision in the first place.
This could be both formidable and potentially set a dangerous precedent. Many people will benefit from higher wages. They will be more comfortable and will succeed in their interviews thanks to the new openness and transparency. This will level the playing field.
The challenge could be that it is not that easy to compare workers. You can have two employees working side by side. They both started on the same day and do similar work. We have all seen this in the workplace. One of the two is a rockstar and does an amazing job and consistently exceeds expectations, the second not so much. Is it fair to pay them both the same?
As Nadreau notes, “As the law contemplates defenses against wage disparities based on ‘merit’, how it will work in practice could be a nightmare for managers forced to constantly document the reasons for the employee. A is a rockstar and employee B barely lives up to expectations. In the absence of implementing regulations or judicial guidance, the nebulous nature of “merit” may prove difficult to establish if a complaint is filed. ”
There is also a lot of subjectivity involved. A manager may think that one of his employees is amazing. Meanwhile, their co-managers are not too enthusiastic about the person’s abilities and performance. Who hasn’t interacted with a coworker who thinks he’s a head and shoulders above everyone else, and truly believes him, when their bosses clearly disagree with this self-report.
Feeling aggrieved, you can imagine people complaining that they are not being treated fairly because they deserve more than their lazy colleagues. He believes that this law would push towards socialism in the workplace, in which people are paid the same regardless of their productivity. This could ultimately lead to internal animosity and possibly legal action.