February 22, 2011 | WebMemo on Labor
What Is the Paycheck Fairness Act (PFA)?
o The PFA would eliminate the “any factor other than sex” defense and replaces it with a “bona fide factor other than sex” defense. Employers can use this “bona fide factor” defense only if they demonstrate that business necessity demands it.
o However, if the employee demonstrates that an alternative employment practice exists that would serve the same business purpose without producing a gender differential and that the employer has refused to adopt this alternative practice, then employers may not use this defense.
o The Department of Labor discontinued this survey after concluding that it failed to identify sexual discrimination. A detailed study found that the EOS had a 93 percent false-positive rate and a 33 percent false-negative rate. Most companies identified as discriminating did not, while a third of companies discriminating were missed by the survey. The EOS did little better than random chance at identifying discrimination.
o The PFA would give a windfall to trial lawyers, exposing employers to unlimited punitive damages.
o The PFA would encourage trial lawyers to initiate many frivolous class-action suits in hopes of winning a few large judgments.
o The successful lawsuits could transfer billions of dollars from employers to trial lawyers, bankrupting businesses and costing jobs.
o The increased legal risks would also reduce the incentive for business owners to start new businesses or invest in and expand their firms, costing even more jobs.
o For instance, the courts would have to decide: Does experience constitute a “bona fide factor other than sex”?
o A woman earning less than a more experienced man could argue that her employer should be required to send her to training and then pay them identical wages. She would have a strong case to argue that experience was not a “bona fide” factor because an alternative employment practice would eliminate the disparity.
o Government micromanaging over areas in which the courts have no business expertise would reduce business competitiveness and cost jobs.
James Sherk is Senior Policy Analyst in Labor Economics in the Center for Data Analysis at The Heritage Foundation.