Pay Equity Hits Hospitality: New Laws Threaten to Upend Hotel Compensation

By Michael Starr Partner, Holland & Knight LLP | June 03, 2018

By mid-year, pay-equity statutes will be in effect in over 15 states, including key hospitality states like California, Illinois and Massachusetts.  Other states will be coming on board to this trend soon.  These new statutes will force hotels to justify pay disparities across jobs that were never before regarded as comparable – like, possibly, kitchen stewards and room attendants. Unless hotel employers start preparing now to analyze and justify pay disparities across job classifications, they may confront large and unexpected legal liabilities.  This article explains this emerging trend and gives guidance on how to prepare.

Equal Pay "Ain't What It Used to Be"

The principle of equal pay for equal work has applied in the United States for over 50 years – since 1963, when Congress enacted the Equal Pay Act ("EPA").  Men and women who are doing the same job must be paid the same, except where the difference can be justified by merit, seniority or other legitimate factors other than sex.  But for the equal-pay law to apply, the jobs in question must be equal – that is, equal in skill, effort, responsibility and performed under similar working conditions. 

Several states of significance for the hospitality industry have enacted little noticed changes in their employment-discrimination laws that, if ignored, could expose hotels to substantial liability for pay discrimination against women in predominantly female job-classifications.  This can happen because the old equal-pay principle is being replaced by the concept of pay equity, and that standard mandates equal pay for men and women working in merely similar (but not necessarily equal) jobs – that is, jobs that are "substantially similar" in skill, effort and responsibility – except where differentials are justified by legitimate factors, such as for performance, seniority or the quality or quantity of work performed. 

That change will have very significant consequences, especially because it may allow for pay-discrimination claims to be made as between individuals in different job classifications that would not ordinarily be regarded as comparable to one another.  Hospitality employers are especially susceptible to such claims and should start defensive and preventative actions now.

Compliance with the equal-pay requirements has had its challenges for business, and there are a significant number of circumstances where discrepancies between men and women have been challenged and the company has been unable to justify that difference.  There are, however, limits built into the EPA (and analogous state laws) that make compliance more manageable.  The requirement that jobs be of equal skill, effort and responsibility meant that discrimination would only be found if the challenger was in the exact same job as the men she compared herself to ("comparators" in legal parlance) or one that was essentially the same and differed in name only.  Small differences in jobs (like whether or not the job required travel) were often enough to negate a claim that the two jobs were equal. 

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Human Resources: An Era of Transition

Traditionally, the human resource department administers five key areas within a hotel operation - compliance, compensation and benefits, organizational dynamics, selection and retention, and training and development. However, HR professionals are also presently involved in culture-building activities, as well as implementing new employee on-boarding practices and engagement initiatives. As a result, HR professionals have been elevated to senior leadership status, creating value and profit within their organization. Still, they continue to face some intractable issues, including a shrinking talent pool and the need to recruit top-notch employees who are empowered to provide outstanding customer service. In order to attract top-tier talent, one option is to take advantage of recruitment opportunities offered through colleges and universities, especially if they have a hospitality major. This pool of prospective employees is likely to be better educated and more enthusiastic than walk-in hires. Also, once hired, there could be additional training and development opportunities that stem from an association with a college or university. Continuing education courses, business conferences, seminars and online instruction - all can be a valuable source of employee development opportunities. In addition to meeting recruitment demands in the present, HR professionals must also be forward-thinking, anticipating the skills that will be needed in the future to meet guest expectations. One such skill that is becoming increasingly valued is “resilience”, the ability to “go with the flow” and not become overwhelmed by the disruptive influences  of change and reinvention. In an era of transition—new technologies, expanding markets, consolidation of brands and businesses, and modifications in people's values and lifestyles - the capacity to remain flexible, nimble and resilient is a valuable skill to possess. The March Hotel Business Review will examine some of the strategies that HR professionals are employing to ensure that their hotel operations continue to thrive.