On July 31, the House of Representatives passed the Paycheck Fairness Act (H.R. 1338) by a vote of 247-178. The bill aims to amend the Equal Pay Act to stiffen penalties for employers by making unlimited compensatory and punitive damages available for a wider range of claims. The Act would also further prohibit employers from retaliating against employees who share salary information with their coworkers, and would impose “guidelines” on the relative worth of different types of jobs.

A number of amendments were approved during debate of the measure, including:

- striking a portion of the legislation regarding application of the provisions to the Fair Labor Standards Act of 1938;

- delaying the effective date for six months;

- providing that plaintiffs must show “malice or reckless indifference” in order to collect punitive damages; and

- prohibiting the bill’s grant program from being used for Congressional earmarks.

The legislation will next be addressed in the Senate, where a companion bill has been introduced as S. 766 by Senator Hillary Clinton (D-NY).

The American Benefits Council has expressed some concern about the possible unintended consequences of H.R. 1338/S. 776 for employer-sponsored benefits. Specifically, the Council is concerned that, in connection with the Ledbetter Fair Pay Act, the legislation could unintentionally expose retirement plans to liability for decades of alleged discrimination.

The Small Business and Entrepreneurship Council likewise opposes the legislation, and sent a letter to Congress stating:

We wish we could say that H.R. 1338, the "Paycheck Fairness Act," lives up to its name - it does not. Passage of H.R. 1338 into law would only benefit the paychecks of our nation's trial lawyers.

Employers must follow this legislation closely, as its passage would substantially alter their ability to justify legitimate pay differences among workers, and subject them to significant additional litigation.