What is the Paycheck Fairness Act?

The Paycheck Fairness Act is proposed legislation that would help to secure equal pay protections for all Americans. Numerous bills have been introduced in support of the Act over the past 20-plus years. The most recent bill, introduced by U.S. Rep. Rosa DeLauro (D-Conn.) in January 2021, has been referred to the House Committee on Education and Labor. The bill aims to address wage discrimination based on sex.

Specifically, the Act is designed to help close the gender pay gap in the U.S., which sees women who work full time earning 82 cents for every dollar earned by men.

Key Takeaways

  • The Paycheck Fairness Act is a piece of legislation that aims to eliminate wage discrimination based on sex.
  • Numerous versions of the Act have been introduced in Congress over the years, with the most recent one introduced in January 2021.
  • The Paycheck Fairness Act is viewed as an update to and extension of the Equal Pay Act of 1963, as well as the Lilly Ledbetter Fair Pay Act of 2009.
  • If passed, the Act would end pay discrimination, prohibit employers from seeking information about an employee's salary history, and protect workers from retaliation when sharing wage information.

Understanding the Paycheck Fairness Act

The Paycheck Fairness Act intends to expand on provisions included in the Equal Pay Act of 1963, which made it illegal for employers to pay men and women unequal wages for performing substantially equal work. Specifically, the Equal Pay Act says that:

  • Wages must be paid in the same form to male and female employees.
  • Equal work does not require that jobs be identical, only that they be substantially similar in terms of the skill, effort, and responsibility required to perform them.

While the Equal Pay Act was progressive in its intent to equalize pay across gender lines, its application has proven problematic, and as a result, the gender pay gap persists nearly 60 years after its passage.

Key provisions of the proposed Paycheck Fairness Act would attempt to close that gap. Specifically, the Act would:

  • Limit an employer's defense that a pay differential is based on a factor other than sex to only bona fide job-related factors arising in wage discrimination claims
  • Provide additional protection against retaliation for employees who share wage information
  • Make it illegal to require any employee to sign a contract or waiver prohibiting them from sharing information about their wages
  • Increase civil penalties for violations of equal pay provisions
  • Require wage discrimination training for Equal Employment Opportunity Commission (EEOC) employees
  • Direct the Department of Labor (DOL) to establish a grant program to offer salary negotiation skills training for women and girls, make wage discrimination information publicly available, and conduct research to eliminate the gender wage gap
  • Establish a national award for pay equity for employers that make substantial efforts to eliminate pay disparities between men and women
  • Require the EEOC to issue regulations for collecting compensation data from employers

The Paycheck Fairness Act builds on both the Equal Pay Act of 1963 and the Lilly Ledbetter Fair Pay Act of 2009. The 2009 Act, signed by then-President Obama, overturned a Supreme Court decision in a case surrounding the period of time when employees had to file complaints regarding compensation discrimination. Specifically, the 2009 Act allows employees the right to file claims for compensation discrimination within 180 days after the most recent pay violation.

If you believe you're being paid less than your co-workers because of your race, color, religion, sex, national origin, age, or disability, then you can file a complaint with the EEOC through the agency’s website.

Benefits of the Paycheck Fairness Act

The chief benefit of the Paycheck Fairness Act would be to create a level playing field for men and women who perform similar work but earn dissimilar wages. While the gender pay gap has closed slightly over time, women still earn significantly less than men, which can have long-term impacts on their financial well-being.

Women, for example, hold nearly two-thirds of the $1.54 trillion in student loan debt in the U.S. Earning less money than their male colleagues can create an impediment to paying off those loans faster, leaving women in debt for longer periods of time. The same is true for women who may have other types of debt, such as credit cards, auto loans, or mortgages.

The gender pay gap can also be detrimental to women in achieving a comfortable retirement. Consider Social Security benefits, which are calculated based on workers' lifetime earnings. A woman who earns less over the course of her career has a lower base earnings amount upon which Social Security benefits are calculated. While married women may be able to draw against the benefits of their spouses, disparities in pay may leave single women in a financial lurch when it's time to retire.

Statistically, women are less likely than men to be offered a retirement savings option at work. Even if women are saving through a workplace plan or an individual retirement account (IRA), they're still likely to end up with less in retirement funds than men. As of 2019, the most recent year for which data are available, the median total retirement savings for women was $23,000 versus $76,000 for men.

Women's lower earnings can also be problematic for future generations. A single parent, for example, may find it more difficult—or even impossible—to save money to help their child pay for college, based on their income. That can limit a child's options to either incurring student loan debt to finance college or not attending college at all. In the latter case, that feeds a cycle in which children may be set up for lower lifetime earnings themselves.

Ensuring gender equality in wages could go a long way toward helping to solve these problems and improving the lives of women and their families.

Maxing out contributions to an employer-sponsored plan can help women prepare for retirement, especially if it involves getting "free" money in the form of a company match.

Criticisms of the Paycheck Fairness Act

While there are numerous arguments in support of the Paycheck Fairness Act, previous incarnations of the proposed bill have drawn criticism. Most often, the criticism has centered on the Act's potential impact on employers and how that might outweigh any benefits.

It's been suggested, for instance, that implementation of the Act would effectively end salary negotiations. When required to offer equal pay, employers would no longer have an incentive to negotiate compensation to attract and retain talent. Employers may also be less likely to offer promotions to women or hire women if they're concerned about being targeted with wage discrimination lawsuits.

As of March 2021, the Paycheck Fairness Act has not been passed into law and for the time being has no impact on employer wage decision-making.

Other critics have suggested that wage disparities are not necessarily the result of discrimination based on sex, but are instead based on the decisions of individual workers. This argument is based on the results of a 2009 study conducted on behalf of the Department of Labor, which suggested that discrimination does not play a role in influencing the gender pay gap. If the study is correct, the critics argue, then the Paycheck Fairness Act would do nothing to address wage disparities.