E Q U A L W O R K

T h e R i s k s o f t h e G e n d e r Wa g e G a p b y L o r i Wi d m e r

U N E Q U A L P A Y

JAMES YAMASAKI /LINDAREPS.COM

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 It was a scene straight out of the 1980s:
When Donna Kassman complained about
a salary cut, she was told she didnt have
to worry because she had a nice engage-
ment ring. In fact, Kassman later even
received a $20,000 pay cut when she went
on maternity leave, then she says she was
overlooked for promotion despite a long, suc-
cessful tenure with her company. Citing her
performance with employees, the firm made
her attend coaching sessions, based on com-
plaints by two male employees that she was
unapproachable and too direct.
Yet it wasnt 1980. It was 2011. Today, Kassmans lawsuit against her employer, KPMG,
has turned into a class action lawsuit involving nearly 1,300 women, both present and
former employees. The lawsuit alleges systemic discrimination in pay and promotion,
discrimination based on pregnancy, and chronic failure to properly investigate and
resolve complaints of discrimination and harassment, according to Sanford Heisler,
LLP, the Washington, D.C.-based law firm handling the case.
Similar charges have been brought against some of the largest companies in the
country, including Microsoft, Citigroup, Hyundai, Home Depot, Goldman Sachs and
Quest Diagnostics. There is no one industry paying women an equal amount as men of
the same skill level. Even highly skilled jobs do not equate to equal payin fact, a recent
Doximity study of medical professionals revealed some of the largest pay gaps. Male
ophthalmologists reportedly earn $95,000 per year more than female ophthalmologists
(a 36% difference), and male cardiologists earn $97,000 more than their female counter-
parts (a 29% difference).

HOW WIDE A GAP?

In order to earn the 2016 wages of their male counterparts, women would have to work
until April 4, 2017. Coined Equal Pay Day by the National Committee on Pay Equity,
the day shifts each year based on U.S. Department of Labor median wage data.
In recent years, women have had to work nearly five theoretical months into the new
year (April 28 in 2009) or about four months and three weeks (April 20 in 2010 and
April 17 in 2012) in order to match what men earned the previous year. Equal Pay Day in
2016 was April 12, the same as in 2011. While slow, it appears some progress is happening.
The U.S. Census Bureau annually measures the wages of both genders across all
industries. While the figure fluctuates slightly year over year, the wage gap women face
Risk Management 23
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 typically falls between 77 and 79 cents to every dollar earned
by men. Other calculations differ slightly, but the overall pic-
ture remains the same. According to the U.S. Bureau of Labor
Statistics and analyst group 24/7 Wall St., women make 82% of
what their male counterparts make.
LAWS AND THEIR IMPACT
No matter which figure is used, the data unequivocally shows
that women are compensated less than men, which techni-
cally has been prohibited in the United States since 1963, when
President Kennedy signed the Equal Pay Act into law. At that
time, women were earning 59 cents for every dollar earned by
men. The situation for women has improved, but a notable gap
remains. In 50 years, the payment needle has nudged just 20
cents, where it has stalled for the last decade.
The disparity prompted President Obama to sign the Lily
Ledbetter Fair Pay Act of 2009, which restores the interpreta-
tion of the law that a pay discrimination claim accrues whenever
pay discrimination affects an employee, according to a White
House press release. In 2010, the Obama Administration also
established the National Equal Pay Enforcement Task Force,
designed to form a cross-agency effort among the Equal
Employment Opportunity Commission (EEOC), Department
of Justice, Department of Labor, and the Office of Personnel
Management to build an enforcement mechanism to compel
better implementation of equal pay laws.
In addition, the administration introduced the White Houses
Equal Pay Pledge, which asks companies to pledge to end the
wage gap and promise to conduct annual reviews of pay, hiring
and promotion practices. To date, 26 companies have signed the
pledge, including Facebook, Microsoft and General Motors.
Underpaying women is a serious mistake for companies,
whether done intentionally or not, and demands greater atten-
tion, according to Richard Warren, employment and labor dep-
uty group leader at the law firm Miller Canfield. Employers who
cannot explain the pay differential by pointing to a legitimate,
non-gender-related factor, such as prior work experience or good
performance, can be found liable for a substantial amount of eco-
nomic damages, he explained.
In 2011, for example, Dollar General asked a federal judge in
Alabama to approve an $18.75 million settlement to female man-
agers who claimed gender-based wage discrimination. In January
2016, Novartis agreed to an $8.2 million settlement in a proposed
class action lawsuit claiming unequal pay, just six years after the
company had agreed to pay $152.5 million to settle another gender
discrimination class action.
Women are not the only ones being discriminated against,
suggesting that greater scrutiny of gender issues may be needed
across the board. In 2014, Ventura Corporation, a beauty prod-
ucts wholesaler, agreed to pay $354,420 for refusing to hire male
employees in sales positions and for retaliation. In 2012, the FBI
was sued by a male employee who claimed the physical fitness test
24 November 2016
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RM11.16_EqualWkUnEqual.indd 24
to become an agent was biased against men. In 2010, NBC and
Jimmy Fallon were sued by a stage manager who claimed he was
demoted and fired based on his gender.
STATES FOLLOW SUIT
State legislation is beginning to gain strength as well. In 2015,
California passed the Fair Pay Act, which gave teeth to the exist-
ing Equal Pay Act, placing the burden on employers to prove
a mans higher pay is based on factors other than gender. New
Yorks fair pay legislation was updated in 2016 to increase dam-
ages for pay discrimination violations. Other states, including
Connecticut, Delaware, Illinois, North Dakota and Oregon,
have some form of related legislation in place or are reforming
existing statutes.
In some states, such as California, laws are tougher than the
federal law. We dont look at equal pay in the same establish-
ment anymore, said Kate Gold, partner at Drinker Biddle in Los
Angeles. That same establishment requirement was eliminated
from the new law. Because that language was taken out, were
counseling employersparticularly those with multiple loca-
tionsto look across their whole organization. Plaintiffs lawyers
will not just be looking at what people are paid in Los Angeles,
San Francisco or Fresno, but they may also be looking at Oregon,
Nevada or New York City.
Meanwhile, Massachusetts prohibits asking a candidates
current salary, a practice that can perpetuate women being
underpaid. Thats something that, regardless of the legislation,
employment lawyers are talking to their clients about, she said.
Start looking at how to really structure your pay practices, pro-
motions and pay raises and do not just do it the way its always
been done.
Gold believes such laws will in turn expand litigation.
Certainly when you have a new law in California, we have a very
robust plaintiffs bar, she said.
Plus, a new EEOC reporting form containing significant
changes goes into effect in March 2018. That form will require
employers to report their workforce not just in terms of race and
gender, but also by detailing the different pay bands. Now that
the federal agency will have this information, employment law-
yers are certainly anticipating that the EEOC will be looking at
it and will do something should they find disparities that cant be
explained, she said.
WHERE THE RISKS LIE
To add to the growing list of financial consequences companies
face, Kate Mueting, partner at Sanford Heisler, said employers
could be on the hook for back pay and more. The Equal Pay
Act advises that employers have to pay employeeswomen
double what they were underpaid as a penalty, she said. Should
the employee prevail, employers would also be required to pay the
employees attorneys fees.
10/11/16 10:11 AM
 In addition to the significant legal costs and employee youre talking about class action and potential exposure to class
resources required to address litigation, there are extended action, which could be nationwide, can be really big numbers,
risks when lawyers access employment documents. Sometimes she said.
we will be pursuing a gender discrimination claim and we will All experts stress that the law is not intended to give what is
learn through the process of discovery that the company is also not earned. If someone is more skilled and has more experience,
not paying people overtime or theyre having problems with how thats a justifiable reason for paying that person more, Mueting
theyre managing their 401(k) plans, which could lead to ERISA said. Thats not something the law is trying to prevent. But
lawsuits, Mueting explained. going outside what should be accounted for and taking gender
There is also the real possibility of a class action filing. Her into accountthats when it becomes a problem.
firm often files such wage discrimination charges as class actions.
We have seen that a failure to pay women unfairly isnt an iso- Lori Widmer is a Philadelpha-based freelance writer and editor who specializes in
lated problem, she said. More often than not, it is a systemic risk management and insurance.,
problem. That significantly increases the employers exposure.
Such lawsuits also come with reputational consequences,
Mueting added. But beyond litigation, she believes the entire
practice of underpaying one segment of the workforce simply is
not practical from a business perspective. Theres a real ineffi-
ciency in not paying people fairly, she said. Its inefficient to pay
a man more than he deserves to be paid. Its also inefficient to pay
a woman less than she deserves to be paid, even if she doesnt file
a lawsuit. The employer is not maximizing what it can get from
her, still not using her to her full potential. It does not make busi-
ness sense to pay people unfairly.
Employers should examine bargaining agreements as well.
Collective bargaining agreements tend to have job titles and
wage rates in them, and were seeing that thats not necessarily a
bulletproof defense, Gold said. That is because the work being
performed is often not the work outlined. Its not going to be a
defense to say, I was just paying the wage rate for that job skill,
particularly if youve got people who are actually doing the same
work and being paid differently, she said. The Risk Management Pay Gap
Just as in other industries, female risk managers also
earn less than their male counterparts. The 2015
RIMS Compensation Survey revealed that, while the
EQUAL PLAYING FIELD
median annual base salary for risk professionals in the
In light of these risks, risk management should consider an audit
United States (as of June 1, 2015) was $115,000, men
of payroll practices and wage data. The best approach is to iden-
made $130,000 on average while women took home
tify the pay differences and consult experts on how to eliminate
$101,000. This equates to women making about 78
them, Warren said. Risk managers can take three distinct actions
cents to every dollar earned by men, which is in line with
to mitigate the likelihood of pay discrimination claims. First, he
the national average wage gap.
suggests adopting policies that identify specific factors, such as
Whats more, when it comes to bonuses and other
prior experience and education level, then using them to establish
cash compensation earned in addition to base salary,
starting pay for new employees.
male risk professionals reported receiving $22,000,
Second, make sure that the human resources department (or
compared to $14,000 for women.
risk management) is involved in making and/or reviewing start-
Some of the disparity, according to the survey, may
ing pay decisions to confirm that the policy is being followed,
be explained by the fact that male survey respondents
and that similarly-placed workers are paid similar salaries, he
tended to have higher levels of education (42% of men
said. Third, conduct periodic salary reviews to compare salaries
had more than a Bachelors degree, compared to 31% of
earned by male and female workers performing similar jobs and,
women) and more experience in the risk management
where disparities reveal themselves, correct them before they
profession (an average of 19 years of experience for men
turn into lawsuits.
versus 14 years for women).
For those trying to convince upper management to make
Morgan ORourke
the necessary changes, Gold pointed out that the effect on
the bottom line can be very persuasive. The risk of loss when
Risk Management 25
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