Will Companies Really Be Fined for Paying Men More than Women?

If Sen. Kamala Harris gets her way, federal pay-equity law would be strengthened and would also help fund a national paid-leave program.

The California Democrat, who is among a pool of candidates seeking the party’s presidential nomination, unveiled a plan on Monday that would require employers to receive affirmative certification from the EEOC that they are in compliance with federal pay-equity law, or risk facing a fine equal to 1% of their profits for every 1% of the wage gap that exists between genders. The fines collected would then be invested in building universal paid family and medical leave.

According to Fisher Phillips‘ Richard Meneghello, “This is the boldest proposal taken to date by any presidential candidate vying for a shot at the White House in 2020, and may spur the current slate of candidates to begin a substantive conversation about pay equity on the national stage.”

Here are the seven specific steps Harris proposes:

1. Mandatory “Equal-Pay Certification” – First, companies would be required to obtain a certification from the EEOC acknowledging that they have eliminated pay disparities between women and men who are doing work of equal value. The only factors that would justify a pay gap would be merit, performance or seniority. Companies with 100+ employees would be required to obtain this certification within three years of enactment, and every two years thereafter. Companies with 500+ employees would have two years.
2. Massive Fines – Businesses that fail to receive the certification or otherwise stay in compliance would face a fine for every day they discriminate against their workers. “This fine will be assessed based on a company’s average wage gap for work of equal value,” the senator’s policy proposal states. “For every 1% gap that exists after accounting for differences in job titles, experience and performance, companies will be fined at 1% of their average daily profits during the last fiscal year.”
3. Public Disclosure – Companies would be required to disclose whether they are “Equal-Pay Certified” on the homepage of their websites and to prospective employees; public companies would also need to disclose this certification in their annual reports. Compliance reports would also be posted publicly on the EEOC’s website for all to see.
4. Universal Leave – Harris estimates that the plan would generate roughly $180 billion over 10 years, with revenue decreasing over time as “strong equal-pay practices become part of corporate culture.” This money would be used to fund the proposed FAMILY Act and provide 12 weeks of paid family and medical leave.
5. Pay Disclosures – Companies would be required to disclose their pay policies to the EEOC as part of the certification process. They would also be required to report statistics on the percentage of women in leadership positions and the percentage of women who are among the company’s top earners. They would also be required to report the overall pay and total compensation gap that exists between men and women, regardless of job titles, experience and performance. These statistics would be determined by employees’ race and ethnicity.
6. Best Practices – The plan also outlines a series of pay-equity “best practices” that would be enacted through law:
   1. Employers could no longer ask about prior salary history as part of the hiring process.
   2. Mandatory arbitration for pay discrimination matters would be banned.
   3. Employees would be permitted to freely talk about their pay with each other.
7. Expanded Enforcement – Harris proposes to expand Title VII to cover all employers, not just those that meet the minimum employee standard. The plan would also boost the resources of the EEOC to significantly increase the agency’s oversight and investigatory authority.

While Harris’ plan would impact employers in myriad ways, Meneghello says, it’s too early for employers to start planning for the plan’s eventual adoption.

“It’s going to be a long road to the Democratic nomination for president, let alone the general election in November 2020 (still 18 months away),” Meneghello says, “and there are sure to be countless twists and turns when it comes to candidates’ policy proposals along the way.”