Nike is making headlines after they decided to give raises to 7,000 employees. This comes after women at Nike revolted saying that Nike's culture was toxic. Nike wants to make it right, so they are giving pay raises.
This is admirable and a step along the way to making things better at Nike. But if you read this and say, "Hey, let's check our pay and fix any problems!" and immediately download a spreadsheet with race, gender, title, pay, etc., you may not have the Nike happy ending and good publicity.
In fact, you could end up on the losing end of a lawsuit--for your attempt to do what is right.
Pay audit cautions.
On the Hostile Work Environment Podcast, employment attorneys Marc Alifanz and Dennis Westlind discussed some of the problems. If, for instance, you give an employee a random raise to make up for a discrepancy you found, you're going to need to explain why, especially if it's more than a few dollars. Here's an example of the issue:
Manager: "Hey, Jane, you're doing a great job, so here's a $5,000 raise."
Jane: "Thanks! That's awesome! But why? I didn't get promoted. It's not year end."
Manager: "Oh, we did an audit and found out that we were underpaying you compared to your male co-workers! Keep up the good work!"
Jane: "I've worked here for 5 years! How long have you been underpaying me for?"
Manager: "Uhhh, you just got a raise! Congrats, $5k! It's great!"
Jane: "Uh, $5K short per year for five years is $25,000 I'm owed. Where's my $25,000?"
Do you see the problem? You've just admitted you've been illegally discriminating against Jane. She can now call a lawyer and sue you. Just because you've raised her pay today doesn't mean she can't sue you for being underpaid yesterday.
But, you say, the lawyer only has Jane's word for it! That's not enough evidence!
Well, how did you determine Jane was underpaid? You ran a pay audit, right? Unless that pay audit is under attorney-client privilege, it's discoverable. And will the attorney Jane hired just look at Jane's pay? Well, I'm guessing you're handing over a class-action lawsuit.
See why you need your attorney involved from the start?
How to do a pay audit the right way.
Step 1: Hire an attorney (or have an in-house attorney involved).
Step 2: The attorney directs you to perform a pay audit.
While this protects the data audit, it doesn't protect the underlying data, explain Westlind and Alifanz. You're just making it harder for Jane's attorney.
What about safe harbor?
In some states, if you find out about pay discrepancies and you fix them immediately, you're protected from further lawsuits. That's a relief! But if you conduct the pay audit, find the problems, and decide to fix them later, or not at all, you may lose your protection.
Now, if your pay audit is done properly and you live in a safe harbor state, you have options on how to fix the problem. And remember, this isn't good news, it's an announcement you have been underpaying some group of people. It's terrible news.
You need to work closely with your employment attorney to make sure you are doing it properly, legally, and with the least amount of drama necessary. For instance, perhaps you should time everything so the pay increases that result from this audit come at the same time as your annual increases. Since everyone gets a raise, and people don't generally talk about salary, people won't know that Jane, Karen, and Stephanie got 7 percent increases, and Bill, Joe, and Bob all got 2 percent increases. You've fixed your problem in an underhanded way.
Never let this get out of hand.
While it seems like I'm advising you to be sneaky, what I'm really advising is that you look out for your business and keep a close eye on things. With proper monitoring, you don't have to ever get to this state.
When you make a job offer to someone, check it against other salaries to make sure it's fair. When you do a company-wide increase, do an analysis of the proposed increases and make sure they are fair before you apply them.
This does not mean that every person doing the same job has to have an identical paycheck. You can have pay differentials for performance, experience, and education, for instance. It's OK if Jane makes $5,000 less than Steve, if Steve has been consistently rated a "high performer" and Jane has merely been "meeting expectations" for the past five years. That's fine. This is why you can't do a pay audit just by saying "the average male salary is X, the average female salary is X-Y."
Always keep your employment attorney involved. Always be careful with pay. And always fix problems as soon as you find out about them.