Avoiding Unequal or Discriminatory Pay Practices

An employee could sue you for unequal pay. We share some best practices for implementing and promoting pay parity at your healthcare practice.

The national conversation about unequal treatment in the workplace – largely spurred by the #MeToo movement – has highlighted gender and racial pay gaps. As a result, disparities in pay have become a concern for employers and employees alike. So how do you ensure you’re paying employees fairly and equitably, and how can employees be sure they aren’t victims of pay discrimination? 

See our related article, “Sexual Harassment in Healthcare in the #MeToo Era.”

Increasingly, states have begun passing pay transparency laws to educate employees about how their salaries compare to those of their peers. And discussions about industries with the biggest pay gaps have shed light on inequalities within the healthcare industry.

What is “pay parity?”

Simply put, pay parity means equal pay for equal work. Generally, two employees doing the same job at the same organization should make the same amount of money. While differences in work experience, education, and job performance may contribute to variations in salary, demographic factors such as race, religion, or gender should not. 

An employee can sue you for unequal pay. Numerous federal and state laws protect employees’ right to fair and equal compensation. For example, the Federal Equal Pay Act requires that men and women in the same workplace should earn equal pay for equal work. Title VII also makes it illegal to discriminate based on sex in pay and benefits. In addition, 42 states have enacted an equal pay law, act, or statute.

Thus, a workplace that engages in unfair pay practices might find itself at the receiving end of a lawsuit from an employee or a class of employees (meaning a group that alleges that they have faced similar discrimination). No company is immune from these lawsuits; Google recently agreed to pay $118 million to settle a lawsuit that raised gender discrimination and unequal pay claims.

Pay Parity for Small Practices

You may be thinking, “I have a small practice. Does this apply to me?”

Not all equal pay laws apply to small employers. However, many such laws cover employers of all sizes and functions. Be sure to understand the regulations in your state, and consult your attorney if you’re unsure.

There are other reasons to model and implement pay parity policies at a small practice, even when not strictly required by law. No matter the size of the business, pay parity policies can help employees feel valued and respected. Equal pay and fair treatment can promote a positive workplace culture. Happy employees are more likely to create positive patient experiences that will help your practice succeed.

Creating equal pay policies is crucial to creating a fair and supportive workplace. Taking the time to understand your obligations relating to employee compensation will benefit your employees and your practice as a whole.

Evaluating Pay Parity at Your Practice

To determine if your practice or business maintains fair pay practices, ask yourself: if two individuals had the same work experience, education, and credentials, would you pay them the same? Most business owners answer a resounding “yes” to this question. “Of course, I would pay them the same!” you may think. 

However, because no two individuals are exactly identical, is it possible that your pay practices are less equitable than you imagine? For example, would you offer the same salary to an applicant who has all of the same qualifications but has been a stay-at-home parent? What about someone whose name has a particular racial or ethnic connotation or whose professional associations suggest they may identify as LGBTQ+, practice a particular religion, or have a disability? And if you didn’t offer them the same salary as an equally qualified applicant, how would you justify it? 

You might be thinking, “I’m not biased! I would never consider discriminatory factors when determining pay.” Unfortunately, even while you aren’t making overtly biased compensation decisions, this reaction overlooks the strong likelihood that implicit bias does affect your pay decisions (and the myriad of other hiring, firing, and disciplinary decisions you make each day). 

To confirm that your practices are fair, consider:

• your formal policies and procedures;
• your current and offered compensation packages; and
• the degree to which your managers are held accountable for following your equal pay policies.

It’s also crucial to audit whether your policies and procedures help you reach your pay parity goals.

Implementing Pay Parity Policies

So, you’ve decided to try and implement pay parity practices. The process of intentionally creating and maintaining fair pay policies requires two steps:

Step one: evaluate your current employee salaries.

First, identify any salary discrepancies among your current staff. Review employees’ salaries and pinpoint the dates and frequencies at which they have received raises or bonuses. If similarly situated employees receive different salaries, determine the reason for the discrepancy. If a difference in pay is based on something justifiable – such as job performance or different intangible benefits, like a flexible work schedule – note that reason in your HR records. If there’s no “good” explanation, determine whether pay should be adjusted to remedy the discrepancy. 

Periodically audit your employee compensation practices. If your practice has an HR department or manager, they can conduct these audits. Still, you should regularly review their conclusions and ensure that bias is not guiding your HR team’s decisions. Meanwhile, If you’re a small or solo practice without an HR department, it’s vital for you to perform these sorts of checks and balances yourself. Many HR software programs available to small workplaces provide tools to help. For example, they can remind you when an employee is due for a raise or flag employees who are outliers for bonuses or raises.

Step two: establish policies for setting new employees’ compensation

Achieving pay parity means more than just ensuring current employees receive fair pay. It also means ensuring that your policies promote fair pay now and in the future. As you hire new employees, make sure their pay is fair from the start. 

Your pay parity policies may require evaluating and setting a role’s compensation when you post the job opening. If you set a salary range for a position, establish what skills and experiences will determine a candidate’s offered salary. 

Avoid asking a candidate for their salary history or preferred salary in your application process and avoid similar questions during an interview. Asking about a candidate’s salary history may perpetuate pay inequity that has impacted that candidate’s prior salaries. Meanwhile, some states, such as Illinois, now prohibit workplaces from inquiring about a candidate’s salary history. In general, it is best to determine what a qualified candidate filling the advertised position is worth to you. Then set the pay accordingly.

See our related articles:

“Hiring for Your Healthcare Practice? Mind These Legal Issues”

“Discussing Salary History: What’s Allowed Under the New Illinois Law?”

Regardless of the specific practices you adopt, you should aim to compensate employees in a way that’s competitive and equal to those with similar roles and qualifications. You’ll also need to ensure that your support staff receives training on fairness and transparency in hiring and compensation. Likewise, your training and hiring materials should support your pay parity goals.

Get Legal Support

Hiring, managing, and compensating workers represents one of the trickiest responsibilities for small and mid-sized healthcare business and practice owners.  Fortunately, an experienced healthcare attorney can help you avoid legal missteps. If you’re in one of the states where we have licensed attorneys, contact us for a free consultation to find out if we’re a good fit for your needs.

This blog is made for educational purposes and is not intended to be specific legal advice to any particular person. It does not create an attorney-client relationship between our firm and the reader. It should not be used as a substitute for competent legal advice from a licensed attorney in your jurisdiction.