Over the past several weeks, Congress moved toward approving two bills which if enacted, would present employers with major changes in the ways they classify and justify employee salaries.  The first bill is intended to reverse the U.S. Supreme Court’s 2007 decision in Ledbetter v. Goodyear.  In that case, the plaintiff alleged that her current salary lagged those of comparable male employees due to discrimination that occurred decades ago.  The Supreme Court concluded that her claims were time barred under Title VII.  The new bill would make each subsequent paycheck reflecting the old discrimination a new illegal act under Title VII.  Thus, alleged old acts of discrimination could perpetually be challenged if the employee contends they have an effect on current compensation.  Both the House and Senate passed versions of the bill, and it now awaits conference committee reconciliation.

More troubling for employers is the Paycheck Fairness Act, passed by the House and awaiting Senate action.  The PFA is intended to address glass ceiling gender discrimination pay claims by making it much easier for plaintiffs to bring and to prove violations of the Equal Pay Act.  Under current interpretations of the EPA, it is difficult for plaintiffs to compare their salaries, especially by comparison to that of an employee in a different part of the business operation.

The PFA would institute a form of “comparable worth,” allowing plaintiffs to allege illegal salary disparities despite differences in jobs and job duties.  Employers could defend such claims by showing bona fide factors tied to business necessities.  However, the plaintiff could still prevail on a wage discrimination claim if she could demonstrate that alternative business or employment practices would serve the same business purpose.  The cost of such alternatives would not be directly taken into account.  The bill also contains a provision that makes it illegal for employers to prohibit employees from comparing their compensation.

In other words, the PFA would result in federal courts being asked to act as pay referees, making judgments on the comparable worth of disparate jobs within an organization.  Employers would need to exercise extreme caution when setting salaries, including extensive documentation of the business and market factors that led to establishment of salary levels for different jobs.

Both bills stand a good chance of becoming law.  President Obama has indicated his willingness to sign both bills into law.  These bills represent the first of an anticipated wave of pro-employee labor and employment legislation expected from the new Congress.