Compliance

HR should clearly communicate, monitor compensation in light of high-profile equal pay lawsuits at companies like Amazon, experts say

HR should be monitoring compensation “in real time” to get ahead of any gender-based inequities, one expert tells HR Brew.
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Three Amazon staffers sued the company in federal court on Nov. 20, alleging the company’s compensation system “resulted in the disproportionate underpayment of women as compared to their similarly-situated male counterparts.” Amazon’s employment policies and practices, “even when facially neutral, had an adverse impact on women,” the complaint stated.

The employees suing Amazon are seeking to represent a class of women who worked at the company up to three years before an initial complaint was filed. This is the first equal pay class-action lawsuit filed against Amazon, attorneys with Outten & Golden, the law firm representing the plaintiffs, said in a statement.

Plaintiffs allege Amazon management not only discriminated against women by paying them less than comparable male employees, resulting in pay inequities, but also retaliated against them when they reported their concerns to HR. The complaint alleges the retail giant violated equal pay laws in both Washington State and at the federal level, as well as family and medical leave acts at both levels.

In light of cases like this, HR pros should pay careful attention to ensure their compensation systems are not discriminatory, and correct for gender-based pay inequities when they are discovered, legal and HR experts say.

Lawsuit alleges gender discrimination, retaliation. The lawsuit details the experiences of Caroline Wilmuth, Katherine Schomer, and Erin Combs, who all work on Amazon’s research and strategy team. The women were all disadvantaged by the company’s compensation policies and practices, the complaint alleges.

Wilmuth, for example, was hired to perform a research scientist role, but was not classified in a research job category, the complaint says. She was also hired at an L7 level, whereas a male colleague with less education and experience was hired at an L8 level, it alleges. As a result of this “misclassification,” Amazon underpaid Wilmuth by hundreds of thousands of dollars, the lawsuit alleges. The complaint illustrates the alleged pay disparities by pointing out one of Wilmuth’s direct male reports was paid a $590,000 salary between June and December 2022, while she earned approximately $400,000 as his manager.

When Wilmuth and her colleagues took their concerns about pay inequities to managers and HR, they went unaddressed, the plaintiffs allege. They also allege they were retaliated against, which took the form of demotions, reduced stock and compensation, and lower performance ratings.

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“We believe these claims are false and will demonstrate that through the legal process,” Kelly Nantel, an Amazon spokesperson, said in an emailed statement via PR rep Brad Glasser. The retailer has estimated that US women earned 99.6 cents for every dollar that men earned performing the same jobs at Amazon in 2022.

Takeaways for people pros. While the Equal Pay Act has made it illegal to pay men and women different salaries for similar work since 1963, there’s heightened scrutiny surrounding pay practices in the workplace today thanks to high-profile cases like this one, new pay transparency laws taking effect, and a greater willingness among employees to talk about their compensation.

When employees talk openly about their pay, “certain things come to light,” said Meredith Dinkins, assistant general counsel and HR consultant for Engage PEO, which works with small and medium-sized businesses. “Employers just need to make sure they’re treating people fairly.”

This means establishing clear criteria for managers to follow when making pay decisions, regularly reviewing compensation for any gender-based disparities, and correcting such disparities when they’re discovered, Dinkins said.

Two employees being assigned different roles on paper doesn’t mean pay discrepancies are justified, she added: “If a person has a different job title, but they’re performing substantially equal work, that can get employers into trouble.”

There are, of course, gender-neutral factors that may account for pay inequities, Kyle Holm, VP of compensation advisory at HR software platform Sequoia, told HR Brew. Experience, education, and performance can all play a role in determining compensation. But when factors potentially related to gender, race, or ethnicity come into play, “That’s when you get into a situation where it may feel, or it may potentially be, inequitable,” he said. Employers should be monitoring pay in real-time to ensure they’re on top of any potential inequities, he added.

Both Dinkins and Holm agreed putting resources into building a fair compensation program, as well as looking into concerns when they arise, has implications not only for compliance, but also employee engagement.

“Being able to be transparent and knowing that we can communicate a fair program to our employees” can help employers attract, motivate, and retain talent, Holm said.

Quick-to-read HR news & insights

From recruiting and retention to company culture and the latest in HR tech, HR Brew delivers up-to-date industry news and tips to help HR pros stay nimble in today’s fast-changing business environment.