Today is Equal Pay Day

Today is Equal Pay Day. Equal Pay Day was originated by the National Committee on Pay Equity (NCPE) in 1996 as a public awareness event to illustrate the gap between men's and women's wages. According to the NCPE, Equal Pay Day "symbolizes how far into 2010 women must work to earn what men earned in 2009."

According to NCPE,

"Equal Pay Day involves thousands of local advocates in programs and activities focused on eradicating wage discrimination against women and people of color. Local Equal Pay Day activists organize rallies, lobby days, speak-outs, letter-writing campaigns, workshops, and meetings with employers, policy-makers, and enforcement agencies to promote effective solutions for closing the wage gap."

In his March 2010 testimony before the Senate HELP Committe, Acting EEOC Chairman Stuart Ishimaru stated:

"The wage gap is alive and well in America, with the typical full time year round female worker making $0.77 for every dollar earned by her male counterpart... Although some of the pay gap can be explained by differentials in experience or as a result of the differences in the occupations men and women typically do, the Shriver Report estimates that about 41% of the pay gap cannot be explained by these factors."

Based on the findings of the Shriver Report, of the $0.23 differential between men's and women's earnings, approximately $0.09 cannot be explained by differentials in experience or differences in occupation.

Employers should regularly conduct compensation self-audits to ensure that they are compensating employees fairly. In these self-audits, looking for gender disparities is not enough; it's important that all employees are compensated fairly, regardless of protected group status.

Formula-Based Comp Systems Protected from Title VII Disparate Impact Claims

Last week, there was a new ruling affecting the financial services industry with respect to claims of compensation discrimination. A federal judge in the Southern District of New York recently held that a pay system that compensated people on the basis of actual production is protected from disparate impact claims under Title VII, irrespective of whether the pay system has a disparate impact on minorities or women and irrespective of whether the employer knows that it will have a disparate impact.

According to information provided by Weil Gotshal:

The case involved a transition "stay bonus" program that Merrill Lynch adopted in connection with the Bank of America merger. The program provided payments only to Merrill Lynch's most productive Financial Advisors, and those payments were tied in various ways to the amount of the FA's production. Plaintiff argued (a) that the protections in Title VII for production and merit-based programs do not apply if the production is infected with discrimination, because for example leads are given to men but not to women, or (b) under the express language of the statute the protection does not apply if the program is adopted with "intent to discriminate", and plaintiff argued that such intent can be inferred if the employer adopts a program knowing that there is underlying discrimination that infects the production on which the program is based."

In response to plaintiff's first argument, the court held that "a merit, seniority, or production-based compensation system is 'bona-fide' if it applies equally to all employees in the same way. Even if the compensation system perpetuates the effect of other acts of discrimination that clearly violate Title VII, as long as the compensation system itself was adopted without discriminatory intent, it is immunized under section 703(h) [of Title VII]... To the extent that other acts of discrimination in violation of Title VII affect the 'inputs' into a bone fide merit, seniority, or production-based compensation system, a plaintiff's remedy lies in challenging those other violations directly." In addressing plaintiff's second argument, the court held that "knowledge of past and even present discrimination alone does not make it plausible that defendants actually adopted the [stay bonus program] with discriminatory intent."

There are some important implications. Under the reasoning of this decision, employers would be protected from general attacks on formula-driven compensation systems. Plaintiffs would have to show that the inputs into the compensation formula were discriminatory. This changes the nature of the statistical inquiry in these matters. Rather than simply examining "compensation", the processes and metrics determining compensation would need to be studied with respect to disparate impact.

Alleged Gender Discrimination in the Financial Services Industry

On Tuesday, March 30, 2010 three women filed a lawsuit against Bank of America Corporation and Merrill Lynch alleging gender discrimination. According to a New York Times article, the suit was filed in the United States District Court in Brooklyn and accused Bank of America and Merrill Lynch of giving male counterparts of the three employees bigger bonuses and better opportunities. The women also said that the companies sought to punish them when they complained about perceived inequalities.

An article appearing on investmentnews.com indicates that the plaintiffs claim they were discriminated against as financial advisers in the opportunities made available to them, including account distributions, pay, and the professional support they were provided. The plaintiffs are seeking injunctive and declaratory relief, an award of back and front pay, and compensatory and punitive damages. The New York Times article also indicates that the complaint also asks the court for class action status.

A spokeswoman for Bank of America, Shirley Norton, denied the allegations, stating: "Bank of America has a strong track record of hiring and developing associates and has been recognized for its success in creating and supporting a diverse and inclusive workplace. We do not tolerate discrimination and discrimination of the type alleged in the complaint violates the bank's policies and values. Bank of America is regularly recognized as one of the top companies for women for its diversity policies."

Allegations of gender discrimination within the financial services industry is not new; there have been numerous cases filed dating back to at least the mid-1990s. While the plaintiffs and defendants have changed, they share a common set of claims. In my experience as an economic and statistical consultant on these matters, the central issues relate to the "production" of financial advisors, however the particular financial institution measures it. Plaintiffs contend that the production of female financial advisors is lower than that of their male counterparts, leading to lower compensation, because of discrimination by the employer. Employers have argued that while the production of some female financial advisors may be below that of their male counterparts, the difference is not attributable to discrimination by the employer.

The issues raised by these claims are difficult to study because they involve factors that are hard to measure. There are several possible non-discriminatory explanations, ranging from attachment to the labor force to differentials in selling and negotiation skills to customer preference. Exploring these possible explanations requires a multi-disciplinary approach to the analysis. The answer to the question cannot be found by a simple comparison of the production of male and female financial advisors, and concluding that any difference must be attributable to gender discrimination by the employer.  The real answer is likely to be found outside of the traditional realm of econometrics.

The Importance of Statistical Evidence - Randall v Rolls Royce

Earlier this month, Hon. Sarah Evans Barker of the US District Court for the Southern District of Indiana denied certification of a putative gender discrimination class action.

Judge Barker's decision is notable not only due to the novel nature of  the class theory that she rejected, but also due to its thorough analysis of the competing statistical evidence before the court. The decision highlights the significance of powerful expert reports and testimony in class actions... (Morgan Lewis Labor and Employment lawflash)

Judge Barker's decision was heavily influenced by her examination of the competing statistical analyses offered by each party's expert. Her opinion stated that:

"if there is a dispute as to the value or applicability or efficacy of either side's expert statistical analysis, the way in which that dispute is resolved impacts both the underlying systemic discrimination claim and the determination of whether a viable class action exists."

In her opinion, Judge Barker acknowledged that the commonality requirement for class certification presents a "relatively low hurdle". According to the Morgan Lewis lawflash, she concluded that "the requirement was not met here, primarily because 'we do not find Dr. Drogin's [plaintiff's expert's] statistical analysis convincing.'" Judge Barker's decision then goes on to discuss a detailed analysis of the statistical evidence relating to the typicality requirement of Federal Rule 23(a) for class certification.

The discussion of statistical evidence in Randall is likely to be important for future class action claims in litigation. But the impact of Randall goes further - it has important implications for proactive analyses as well. Employers should review documentation of their compensation decisions to ensure that this documentation clearly captures the variables determining compensation. The Randall decision criticized the plaintiff's expert analysis for failure to account for fundamental variables determining compensation, such as pay grade. In the event of litigation, an employer will need not only a clearly articulated compensation policy, but also data points for the variables determining compensation. As part of a risk management plan, employers should plan for what information and data will be needed to defend a claim, and to ensure that this information and data is collected and maintained.

Are Poor Project Management and Recruiting Practices Contributing to Gender Discrimination?

Are poor project management and recruiting practices contributing to gender discrimination at high-tech firms? Ellen Messmer, of Network World, thinks so. In her post Gender Discrimination Linked to Poor Project Management, she states that 'tech firms rely excessively on a 'hero mindset' to save runaway coding projects that are poorly organized, and employees with family responsibilities -- often women -- are sacrificed as a result."

Her conclusions are based on a new study by the Anita Borg Institute for Women and Technology. The study, "The Recruitment, Retention, and Advancement of Technical Women: Breaking Barriers to Cultural Change in Corporations" alleges that there is also bias against women in recruitment and job assignment in high-tech corporate cultures that thrive on this 'hero mindset'.

Ms. Messmer states that "this fly-by-the-seat-of-your-pants workaday world represents a pattern that's grown mainly because an organization 'poorly defines requirements and project management'." Ms. Messmer paraphrases a portion of the Borg report, stating:

"Silicon Valley's sometimes frantic fire-fighting pace and in-your-face communications style produce many technical cultures that 'leave women feeling isolated and crushed', according to the report."

The Anita Borg Institute is proposing some recommendations aimed at eliminating gender bias at high-tech firms. One of these recommendations is based on the finding that women are eliminated in the hiring process at the resume-reviewing level. The Institute proposes that companies might consider interviewing all women candidates.

While it may be the case that gender discrimination exists in recruiting, hiring, and job assignment, interviewing all female candidates is not the solution. I think that this is a very inefficient solution that would most likely have little effect on reducing any gender bias in hiring.

A better solution is to have clearly defined job descriptions with well-articulated qualifications. Each candidate should be objectively assessed against those qualifications.  In order to assist with this objective assessment, an organization may want to remove any information that would identify a candidate's "protected class status" and create a redacted 'candidate profile'. The 'candidate profile' would provide all information about education, qualifications, previous experience, and other pertinent information used by the organization in evaluating a candidate. This 'candidate profile' would then be passed along to hiring managers and decision makers. It should be noted that this is also an effective strategy for organizations that rely heavily on recruiting from social media; social media profiles tend to provide protected class information which should not be considered in the hiring process.

If a candidate is rejected at the 'candidate profile' screening phase, the reasons for this decision should be documented. Documentation of the objective rejection reasons, such as failure to meet minimum education or certification requirements,  is perhaps one of the most important things an organization can do. Not only does it create a permanent record of the rejection reason, it forces the hiring manager or decision maker to clearly articulate the reason(s) for which the candidate is rejected.

The creation of a 'candidate profile' will not guarantee a bias-free hiring process. There is still the opportunity for hiring managers and decision makers to introduce bias at the interview stage, either consciously or subconsciously. It is, however, a step in the right direction.