Paycheck Fairness Act (Fair to Who?)

October 10, 2010

The Paycheck Fairness Act is back. Previously passed by the House of Representatives, the Act was introduced in the Senate in early 2009 but never came to a vote. Now, Senate Majority Leader Harry Reid (D-NV) has placed the proposed legislation on the legislative agenda.

Why should business owners worry? Well, for one, the bill would make employers liable for unlimited punitive damages under the Fair Labor Standards Act for even unintentional pay disparities, and eliminate current limits for back pay as well as for compensatory damages. It would also make class actions against employers much easier by eliminating a requirement under current law that employees must give their written consent to be included in a class action case. If passed, it would also hamper an employer’s ability to compensate its employees based on criteria such as cost-of-living differences among geographic locations, different work responsibilities within similar job categories, or prior salary history.

The bill is being attacked by business groups including the U.S. Chamber of Commerce. One labor attorney giving testimony during hearings last March said the Act has the potential to cripple companies, particularly smaller businesses. This begs the question, if this legislation would have the effect of driving some companies out of business, displacing those employees, how fair is it?