Paycheck Fairness Act: Meaning, Pros and Cons

Rebecca Lake is a journalist with 10+ years of experience reporting on personal finance. She also assists with content strategy for several brands.

What Is the Paycheck Fairness Act?

The Paycheck Fairness Act has 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, passed the House on April 15, 2021, and has been placed on the Senate Legislative Calendar.

The Paycheck Fairness Act is a piece of legislation that aims to eliminate wage discrimination based on sex, as defined in the bill to include sexual orientation, gender identity, pregnancy, and sex characteristics. Specifically, the Act is designed to help close the gender pay gap in the U.S., which sees women who work full-time earning 83 cents for every dollar earned by men.

As of December 2022, the Paycheck Fairness Act has not been passed into law and for the time being, has no impact on employer wage decision-making.

Key Takeaways

• The Paycheck Fairness Act is a piece of legislation that aims to eliminate wage discrimination based on sex.
• As of 2022, it has not been passed into law by U.S. Congress.
• 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 men and women 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 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.

It is important to note that sex and gender are different, Sex is defined as male or female, but gender is defined as a man or a woman. However, in the Paycheck Fairness Act "sex" is defined as "to include pregnancy, sexual orientation, gender identity, and sex characteristics."

Advantages and Disadvantages of the Paycheck Fairness Act

Advantages

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 colleagues who are men can create an impediment to paying off those loans faster, leaving women in debt for longer periods. 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 throughout 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.

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.

Disadvantages

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 the 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.

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.

• Would create a level and fair field for men and women
• Could close the gender gap in equal pay
• May help women invest for in retirement accounts

• Might end salary negotiations
• Would not address wage disparities
• More lawsuits in the workplace could occur

Special Considerations

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, they're still likely to end up with fewer 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.

What Is the Paycheck Fairness Act?

The Paycheck Fairness Act is legislation designed to level the playing field for work and pay in the workplace, and its goal is to eliminate wage discrimination between men and women.

Is the Paycheck Fairness Act a Law?

No. The Paycheck Fairness Act has not been passed in Congress as of December 2022.

Are Women Paid Less than Men?

According to the U.S. Department of Labor, women earn .82 cents for every dollar earned by men.