Client Alert

Managing Pay Equity Risks During the Downturn

February 26, 2009

Kenneth W. Gage and Jon A. Geier

In-house labor and employment lawyers have much to keep them busy these days. In addition to their day jobs, counseling in-house clients and managing outside counsel, most have been working late nights and weekends on the large-scale workforce reductions that are grabbing headlines daily. Working closely with senior management, human resources, and outside counsel, they advise on selections procedures and the development of appropriate decisional units, evaluate risk with adverse impact analyses, and carefully draft releases, all to minimize the litigation risk presented by departing employees. The litigation risks of workforce reductions are not exclusively found among the departing employee population, however. Workforce reduction decisions can have an indirect albeit material impact on potential pay discrimination claims of the employees who remain. The recently passed Lilly Ledbetter Fair Pay Act (the Ledbetter Act), as well as the proposed Paycheck Fairness Act (the PFA) legislation, which is a priority on the Democrats legislative agenda, will dramatically change the legal landscape for pay discrimination claims. And employers will be well served to evaluate their pay practices, particularly after large-scale workforce reductions.

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