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Legal Privilege Plays a Key Role in Pay Equity Analysis

Pay equity has put compensation and human resources mangers in the hot seat for some time. Hopefully, they have gotten comfortable with being the center of attention because the focus on pay equity isn’t going away — at least not any time soon.

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The needle doesn’t seem to be moving on the stubborn and persistent wage gap. Women still earn about 80 cents for every dollar paid to a man and the differential is even greater for women of color. African-American women earn just 63 cents and Hispanic women earn a mere 54 cents for every dollar earned by a man. While some sources have noted that this pay gap is shrinking, it is doing so at a glacial pace.

So, what does addressing the pay gap have to do with the attorney-client privilege? Everything.

Traditionally, information related to employee pay and employers’ compensation practices were the black box of the employment world. Those days are quickly becoming a distant memory. Employers are under increasing pressure from all sides to be more transparent about their pay practices and to close the pay gap in their own workforces. New state laws focused on attacking the gap are coming online regularly. Federal and state enforcement agencies and private litigators are laser-focused on bringing collective or class-action pay discrimination claims. Finally, employees and shareholders are demanding transparency in compensation. With so many forces focused on an employers’ pay practices, compensation and HR managers have no choice but to focus on pay equity, and that necessarily includes the attorney-client privilege.

What Is the Attorney-Client Privilege and Why Is it Important?

The main tool in any employer’s pay equity toolbox is an annual pay equity analysis that assesses pay across locations and positions. There are various types of pay equity analyses that serve different purposes and vary in terms of scope and depth. Regardless of the purpose, pay equity analyses will reveal the unexplained pay differences between comparable employees and any deficiencies in the company’s pay practices. As a general matter, most organizations prefer not to disclose these results. And those who are interested in making the results public, in some form, generally prefer to control the content and timing of the message. That is where the attorney-client privilege comes in.

Create Confidentiality
The attorney-client privilege protects confidential communications between a client and its attorney for the purpose of obtaining or rendering legal advice. Failure to establish and maintain the privilege exposes communications and attorney work product — such as the results of the analysis as well as the methodology for assessing pay — to disclosure should the company’s pay practices and decision-making be subject to litigation.

Tips to Establish and Maintain the Attorney-Client Privilege

  • In-house counsel is a critical member of the “privileged pay equity team.” However, in order to take full advantage of the attorney-client privilege, the company should also hire outside counsel. In-house counsel often wears two hats: a legal hat and a business hat. When rendering advice on a pay equity project, it is often difficult to prove that in-house counsel was acting as an attorney rather than a business partner. There is no such concern with an outside attorney.
  • The in-house counsel or other company representative should hire the outside counsel.
  • In turn, outside counsel should hire the consulting expert, who will conduct the analysis. The expert’s communications should be to the outside attorney, not the company client. Expert invoices should be reviewed by the outside attorney but may be paid by the company client. Advice ultimately rendered to the company client must be by the outside attorneys and not the experts.
  • In order to establish and maintain confidentiality over the project, the in-house counsel — in consultation with outside counsel — should establish the “privilege team.” Those are the officials, managers and employees who will be involved in determining the parameters of the analysis, assessing the results and implementing changes. We recommend starting with a core group and adding others as the project progresses and the need arises.
  • In order to maintain confidentiality, communications should be on a need-to-know basis and only to members of the privilege team.
  • All communications between members of the privilege team should be labelled “privileged & confidential” and should include outside counsel.

Proactive pay equity analyses are a critically-important tool for preventing your company from being the next target of a class-action pay discrimination claim. They also provide helpful guidance on when and how to publicly disclose information about your company’s pay practices. However, if these analyses are not done under privilege, you could lose control over when, how and what is disclosed.

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About the Author

Consuela Pinto Bio Image

Consuela Pinto is a shareholder and leader of the pay equity practice at FortneyScott.


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