Paycheck Fairness Act: a “nonsensical” lawsuit-trap

by Walter Olson on November 17, 2010

I’ve got a new post at Cato at Liberty on one of the worst measures under consideration in the lame-duck Congress.

P.S. So extreme is the bill, notes Carter Wood, that even the Boston Globe is editorially critical.

{ 12 comments }

1 Mark Biggar 11.17.10 at 2:26 pm

Are collective bargaining agreements exempt from the these rules? If so then this would seem to be a subtle incentive for companies to allow more unionization as that would protect them from this type of lawsuit.

The real question is how to define “the same” when comparing two different employee’s situations. Does the law define that or does it leave it vague. The more strictly “the same” is defined by the law the easier it will be it get around this law by showing differences between employees. For example, can a company use GPA to distinguish between employees with the same college degree? If they left it completely vague then this is just another lawyer full-employment act.

2 Allan 11.17.10 at 2:51 pm

If two people have exactly the same qualifications and produce the exact same results for an employer, should they not be paid the same?

But, you say, employee A is a better negotiator.

This is a tough nut to crack. On the one hand, why should an employee get dinged for having the balls to ask for more money? On the other hand, why didn’t the other employee grow a pair?

3 captnhal 11.17.10 at 10:52 pm

I couldn’t help but notice in the examples in the linked article that the woman could sue for making less. Would the same be true if the genders were reversed? If not, then “fairness” is not the word I would use to describe the situation.

4 gitarcarver 11.17.10 at 11:21 pm

If two people have exactly the same qualifications and produce the exact same results for an employer, should they not be paid the same?

Great hypothetical question.

It has no basis in reality.

No two people are the same. Whether it is productivity, attitude, experience, conduct, knowledge, or sheer ability, no two people are alike. As a friend of mine used to say, no two rats have tails the same length.

As a business owner, part of my job is to determine what people are more valuable to me and compensate them accordingly.

The problem with seeing employees only as statistics is that not only does it dehumanize the worker, but it lowers the bar to the lowest denominator. Why would anyone want to work harder than the biggest slacker in the company if the pay is all the same?

In the real world, they won’t. In the world of the government, they will do a study, bring in a dog and pony show, and then want to hire people to fill the governmental watchdog in charge of people and companies that do actual work.

5 GregS 11.18.10 at 12:39 pm

gitarcarver makes many excellent points. I’d add another one – even if, theoretically, you could demonstrate that two employees “have exactly the same qualifications and produce the exact same results for an employer”, there might still be a rational basis for paying them differently. For example, say that one employee has made it clear that he plans on returning to college in a year, while the other wants to pursue a career in your business and wants to stay with your firm, it would make sense to pay the second one more as an incentive to stick with your company. Because in one sense, he is more valuable to your company because his expected future value is greater.

6 GregS 11.18.10 at 12:47 pm

I’m starting to sound like a broken record on this, as I’ve posted on it on various sites many times, but I want to restate how insane it is to me that there is such a thing as a “lame duck” session of Congress. In most modern countries, the legislature is dissolved before an election occurs. It seems crazy that for two months after an election in the U.S., the congressmen and senators that you just voted out of office can continue to write and vote on laws.

7 Allan 11.18.10 at 1:11 pm

Of course, no two employees are exactly equal.

We should, however, have a starting point, which is that if there were two equal employees, they should be paid equally. Then, it would be up to one party to prove that there is a reason for unequal pay. The other side should be able to rebut the presumption.

Assuming the reason is gender, what type of law could be passed to ensure that the aggrieved party can obtain a remedy, while at the same time, not imposing undue burdens on employers?

8 gitarcarver 11.18.10 at 2:06 pm

Of course, no two employees are exactly equal.

We should, however, have a starting point, which is that if there were two equal employees, they should be paid equally.

Pardon my confusion Allan, but how can you have a starting point based on “equal employees” when you admit there is no such thing?

Then, it would be up to one party to prove that there is a reason for unequal pay.

“Prove” how? I am not trying to be argumentative here, but please tell me how a judge, jury, panel, or lawyer is going to understand my business and what I feel is important and of value in an employee?

You can’t “prove” that. All you can do is hope that the opinion of the people judging your decision agree with you.

That is not “proof.” That is a popularity contest. And even worse, for the most part the people that sit on panels, on the bench, in a jury box or argue the case have never owned or run a company. Yet their opinion is seen as more “expert” than the people who actual do run companies.

9 Mark Biggar 11.18.10 at 3:10 pm

You can an make a reasonable (but very politically incorrect) argument that female employees are less valuable then male employees on average just on the maternity leave issue alone. So any time there is a pay difference between a superficially similar man and a woman, then it’s automatically assumed by many that the pay difference is due to gender bias. To justify the disparate pay you need a much more obvious difference between a man and a woman then you need between two men. The definition of “the same” seems to shift based on just who is compared and who is comparing which should be taken as an indication that there is no really fair way to compare. Therefore any attempt to base pay levels on fairness criteria will result in automatic unfairness, oops! Besides what right does the government (or another employee) have to interfere with terms of what ever employment contract I negotiate for myself. BTW, the concept of “minimum wage” has problems for the same reasons.

10 Bob Lipton 11.18.10 at 5:51 pm

You can also argue that having made accomodations for a handicapped employee because you must make reasonable accomodation — you are effectively paying a handicapped employee more because those are your costs — and thus you need to increase the pay of the non-handicapped employee to bring him up to parity.

Then the lawyers can come and argue you are being unfair to the other employee.

Bob

11 Jack Wilson 11.18.10 at 6:08 pm

What a lot of people ignore is that sometimes people trade pay for flexibility.

If enforced, this will hurt a lot of working mothers who have accepted less pay for the ability to work around a school schedule, for example.

To pay them the same as someone who doesn’t have this flexibility would actually cheat the other worker.

12 David Schwartz 11.21.10 at 9:55 pm

Allan: “If two people have exactly the same qualifications and produce the exact same results for an employer, should they not be paid the same?” In a word, no. And if you try to think of an argument why this should be so, there is none.

Suppose, for example, an employer has 50 employees who perform a particular job and they all get paid $9.75 an hour. Suppose the employer could afford to employ another one at $9.45 an hour but can’t justify hiring someone at $9.75. If there is someone willing to work at $9.45/hour, what’s wrong with that? How does the fact that someone else is paid more change the fact that for *this* employee, $9.45 is the right price?

You would essentially have to object to a market completely. Because a market sets prices based on supply and demand, desperation to sell and enthusiasm to buy, negotiating skill, and individualized need, and a thousand other factors.

“We should, however, have a starting point, which is that if there were two equal employees, they should be paid equally. Then, it would be up to one party to prove that there is a reason for unequal pay. The other side should be able to rebut the presumption.”

But rebutting the presumption is always possible and trivial. The employer is willing to pay, and the employee willing to accept, different wages. If that’s not sufficient, then you reject the notion of a market.

Why do car manufacturers make cars in different colors? There’s no objective increased value in one car over another that you can prove in court. Some people, however, will buy a car whose color they like. Is something wrong with that? Should the car dealer who didn’t sell the car for the stupid reason that the consumer just didn’t like the color be able to prove his car was just as good and force the consumer to objectively justify his color preference?

That’s just ridiculous.

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