1. Equal Pay Enforcement: Minimizing the Risks Presented by: T. Scott Kelly Ogletree, Deakins, Nash, Smoak & Stewart, P.C. Scott.Kelly@ogletreedeakins.com 205.986.1024 Equal Pay Enforcement: Minimizing the Risk Association of Corporate Counsel – Louisiana Chapter December 6, 2013

2. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 Discussion Points  Pay Equity Enforcement Theories  Understanding the Analytical Approach (ugh… statistics)  Crafting Corrective Action  Best Practices to Avoid Litigation and Minimize Risk

3. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 The Enforcement of Pay Equity  Title VII of the Civil Rights Act (“discrete acts”)  Ledbetter Fair Pay Act (“pay decisions”)  Equal Pay Act (“equal work”)  (Paycheck Fairness Act)  Dodd-Frank Offices of Minority and Women Inclusion  EEOC and OFCCP  National Equal Pay Enforcement Task Force

4. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 The Enforcement of Pay Equity  Title VII –Disparate Treatment Individual Systemic/Pattern and Practice Needs proof of discriminatory motive Direct Evidence Circumstantial Evidence –Disparate Impact No proof of discriminatory motive required Employer must show business justification/alternatives  Equal Pay Act

5. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 Risk Factors for Pay Claims  Lack of meaningful standards, guidelines, or guidance  Lack of management training  Exercise of discretion  Subjective decision-making  Failure to document pay decisions and bonuses  Failure to communicate criteria and basis for pay decisions and bonuses  Favoritism – others are better paid, get more overtime, preferential shifts, etc.

6. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 Statistical Concepts  Understand the compensation decision-making process  Estimate the outcome expected in a neutral setting.  Compare actual and expected compensation levels  Is the difference statistically significant (2 standard deviations or 5%)?

7. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 Comparison of averages not sufficient ® Why not?

8. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 “Similarly Situated” ®  Similar paths to current position  Perform similar work (job content)  Similar skills/qualifications  Similar level of responsibility  Other pertinent factors (e.g., full- time status, “permanent”)

9. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 “Similarly Situated”: Examples ®  Job family  Pay grade  Company experience (time in grade, time in job, tenure)  Education  Prior relevant experience  Performance  Organizational unit (e.g., division, department, etc.)

10. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 “Regression Analysis” ® A statistical tool that allows the analyst to quantify the protected/non- protected salary difference after “filtering out” differences that are attributable to other measurable factors that influence pay.

11. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 What Does a Regression Look Like? ®

12. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 What Does a Regression Look Like? ®

13. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 What Does a Regression Look Like? ®

14. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 What Does a Regression Look Like? ®

15. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 Statistical Concepts: Review ®  Plaintiffs and regulatory agencies sometimes use whatever procedures they want  Straight averages are not sufficient  Proper regressions allow for comparisons between similarly-situated employees  Note the difference between actual and expected compensation levels  Need to understand decision-making process

16. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 Conducting a Compensation Analysis ®  Understand the decision-making process  Who makes the compensation decisions?

17. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 Conducting a Compensation Analysis  What factors affect compensation?  Some examples: Job code/title Job group (or SSEG) Pay grade Race, gender, etc. Original date of hire Date entered job Date entered grade Department Division Location Performance rating Education/training Measure of market pay

18. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 Collecting the Data ®  Your data will have problems, such as o Reusing Employee IDs o Date inconsistencies o Data entry inconsistencies o Extreme values o Default values o Legacy systems  Example

19. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 Statistically Significant Results – Now What? ®  Problems with underlying data files  Important factors not in the model  Legitimate pay disparities  Use regression to focus on hot spots  Identify people who have the largest influence on the outcome (“outliers”)  Contractor and counsel review outliers and explain their compensation level

20. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 “Outlier” Review ® Grade Job Family #Females#Males Pay Difference #Std Dev R SquareStat Sig? Overall7891574$ (1,339.71)-2.5993%* E07Engineers993$ (12,255.21) -3.2555%*

21. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 “Outlier” Review (After Reviewing Data and Identifying Outliers) ® GradeJob Family #Female s #MalesPay Difference #Std Dev R SquareStat Sig? Overall7881574$ (1,210.97) -1.8093% E07Engineers893$ (2,705.59) -0.4762%

22. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 Other Events That May Affect Compensation ®  Break in service  Change in career interests  Education/training attained after hire  Joined via acquisition  Demotions  Alternative work arrangement → part- time  Move to location with different cost of living

23. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 STILL Statistically Significant Results – Now What? ®  By now, we should have an understanding of the cause of the problem. In the meantime,  Use regressions to isolate the focus on individuals or smaller groups of individuals to limit exposure. Not a company-wide problem. Review of outliers “Sensitivity” tests

24. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 Other Considerations ®  Other work history events affect current pay  Factors may vary within the company  Not just what plaintiff or regulatory agency wants

25. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 Starting Pay Analyses ®  Everyone hired in the past “X” years  Analyze starting pay levels by hire year  Control for factors related to Job hired into Qualifications prior to joining company

26. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 Promotional Increase Analyses ®  Everyone promoted in the past “X” years  Analyze promotional increase amounts by year  Control for factors related to Job at time of promotion Performance, other relevant factors

27. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 Merit Increase Analyses ®  Everyone given a merit raise in the past “X” years  Analyze merit increase amounts by year  Control for factors related to Job at time of increase Performance, other relevant factors

28. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 What To Do With Opposition’s Compensation Analysis? ®  Read it very carefully  Is their analysis consistent with reality?  Attempt to replicate their results  Conduct sensitivity tests  Anything else that doesn’t look right?

29. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 Best Practices  Review/revise compensation policies, job descriptions, and training programs  Do a self-audit under privilege by appropriate professional  Know where you stand before employees or their counsel complain  Monitor starting pay, current pay, merit increases, promotional pay  Review raises: consistent with evaluations?  Look at pay policies: are they sufficient?  Understand the factors behind pay  Understand why disparities in pay exist  Keep good data  Fix unexplained disparities (but don’t assume discrimination!)  Analyze data files before producing to opposition or regulators

30. Association of Corporate Counsel – Louisiana Chapter - December 6, 2013 Equal Pay Enforcement: Minimizing the Risks Presented by: T. Scott Kelly Ogletree, Deakins, Nash, Smoak & Stewart, P.C. Scott.Kelly@ogletreedeakins.com 205.986.1024 Equal Pay Enforcement: Minimizing the Risk Association of Corporate Counsel – Louisiana Chapter December 6, 2013