Pay Transparency and the Power of Preventive Strategies – Episode 5: How Manufacturers Can Manage Worker Equity Expectations

Transcript

Laura A. Mitchell

Principal, Denver

Hello, everyone. I am Laura Mitchell, principal in the Denver office of Jackson Lewis and co-leader of our Pay Equity group. Welcome to our next installment of the Jackson Lewis We Get Work Pay Transparency podcast series. I'm joined today by my colleague, Emily Borna. Emily is the co-leader of our Manufacturing group. Welcome, Emily.

Emily S. Borna

Principal, Atlanta

Thanks, Laura, happy to be with you.

Mitchell

I'm excited to talk today about pay transparency. Before we dig in, do you want to give us a little background on the manufacturing industry group and what we do here for our clients in that space at JL?

Borna

My pleasure. Our manufacturing industry group is one of our largest segments of work. We have almost 200 attorneys in the industry group and serve manufacturing employers around the country and the globe with deep sector-specific legal knowledge and decades of practical experience navigating workplace considerations. We do a lot, especially in the automotive, food, beverage, and packaging sectors. We also represent building supply manufacturers, chemical manufacturers, electrical component manufacturers, all kinds of tool and machine shops, metals, and coatings.

There is never a dull moment; it runs the gamut. What we find in this population of employers is that they tend to have large hourly workforces, pretty standardized roles and comparable jobs across industry sectors. There are many changes happening in this area, from immigration issues and pressures to labor shortages to artificial intelligence, which is keeping us on our toes.

Mitchell

There's a lot going on everywhere, but certainly for manufacturing. Let's dig into how all of those changes are impacting the world of pay, pay transparency and pay equity for manufacturing employers. What are we seeing in the industry, and how are they thinking about pay and pay transparency?

Borna

I would be remiss if I didn't note that today, as we're recording this podcast, it's Equal Pay Day – the date that marks when women's wages catch up with men's wages. I heard on the radio this morning that, at this point, women have to work almost three months more than men to earn the same, on average about 81 cents for every dollar men earn, and so there are pressures for equity in manufacturing environments.

What our clients are asking us about, probably even more than compliance with the pay transparency laws cropping up in some states across the country, is internal strategies for addressing this issue, particularly amid staffing and labor shortages that are creating a lot of pressure.

Mitchell

That makes a lot of sense because when we traditionally think about pay transparency, we think about job postings, the ranges you put on the posting, and state compliance. However, there's also a really big internal component to pay transparency. We think about the impact on employee morale and the information sharing. We see in organizing campaigns that pay is a major talking point and negotiation point.

It's not surprising to me that we're seeing less emphasis, especially in this industry, on compliance. I am not saying they're not focused on compliance, but rather on managing what's going on internally and deciding where their policies and practices are going to be regarding internal transparency.

Borna

Right, Laura, there's really a de facto expectation of greater transparency internally about how pay decisions are made and whether they're based on experience, shift differentials or certain certifications, like whether somebody has a welding certification or is DOT-certified as a forklift operator. Those considerations are important.

The other thing we see from a lot of our manufacturing employers is questions about discretionary bonuses and how overtime is distributed. Whether you view that as a benefit or a burden depends on where you are, but many employees will question how overtime is distributed, its impact on their compensation, and whether there's a deliberate, intentional approach to handing out overtime assignments.

Mitchell

Interesting. You mentioned at the outset that we have large employee populations in similar roles, if not the same job title. I imagine pay is pretty standardized for those populations. I would think understanding how you get more pay, how you advance to the next level, and how pay is actually structured. Whether it's a pay band system or a leveling system, which plays into this concept of pay transparency, probably a lot for manufacturing employers.

Borna

Very true. It's a best practice, and an expectation, that hourly rates or salary bands are defined by role and level. For example, you may have operator one, two, and three levels, and there may be increasing opportunities for pay with each progression from operator three to technician to lead to supervisor. We caution our clients to be careful about artificially wide ranges, as they typically hire at the bottom of the range in every instance. We also advise our manufacturing employers to give careful thought on a recurring basis to whether the ranges are competitive and whether they have been updated, particularly in an environment with many labor shortages and pressures.

Mitchell

And where your competitor is literally across the street from you, right?

Borna

That's right, Laura, in many instances, manufacturing plants may end up in rural locations, literally across the street, whether it's Eufaula, Alabama or Corinth, Mississippi. When five different manufacturing employers are hiring and competing for the same labor pool, employees are going to want to go where they can make the most bang for the buck. They have to be competitive.

Mitchell

I would imagine, too, that having not only clearly defined bands, but clearly defined expectations or like what you need to achieve or be able to demonstrate skill competencies to move up from an operator one to an operator two to an operator three, right, would be really important. There's pay transparency around what your job is, what the current expectations are, and how you can progress and advance to that next level.

Borna

100%, and many of our clients do have a unionized workforce. Many of them are actively attempting to keep their workforce union-free. Where there is a collective bargaining agreement and a unionized workforce, there are usually very regimented guidelines around how you approach that progression and those opportunities for advancement.

In union-free environments, again, it's best practice to document those pay factors and make them transparent to employees when those opportunities are available. I have litigated cases in which transparency issues arose during litigation because there were disparities based on allegations of gender discrimination or race discrimination between the opportunities available to different manufacturing employees in the same employing unit for advancement. That may play out when two machine operators do very similar work but find out they are paid different hourly rates. Then they challenge it, alleging that it's based on protected status.

Mitchell

You mentioned a shortage of labor. I'm wondering how bringing in contractors or using a staffing organization can interrupt or interact with the concept of pay and pay transparency in these large workforces.

Borna

That can be a very sensitive subject, and because of fluctuations in demand and, in some cases, tariffs or a lack of materials needed for production, there can be dramatic fluctuations in production schedules. On those occasions, many manufacturing employers rely on temporary leased workers from staffing agencies. There's going to be a significant difference in how they're paid from regular employees. It's human nature for people working on the same line to discuss what they're making and how they're getting paid, so being cognizant of those differences is important.

There can be a lot of tension when new hires or lower-level workers are hired at higher rates of pay than long-tenured employees. That can create a real morale problem. Regularly assessing that, of course, it's in an employer's best interest to have a long, productive working relationship with their employees and to keep them for a long time. That is a sensitive subject.

Mitchell

I can imagine that. What would your top piece of advice be for an employer who is navigating this pay transparency space, whether it be state compliance or these internal challenges around disclosure of pay information and pay setting information?

Borna

I would advise manufacturing employers to proactively audit their pay practices and monitor for significant disparities across plants, across their pay systems. Certainly, geography can factor into pay differences, but again, to avoid the dynamic where two machine operators working on the same line are paid at very, very disparate rates without a compelling business justification. It's important to keep an eye out for that.

The other thing I would advise is to train managers and supervisors, your boots on the ground, front-line representation of the company, to keep alert and be cognizant about informal pay discussions, which can create a lot of risk. Of course, under the National Labor Relations Act, employees have the right to talk about terms and conditions of employment, including pay. However,  keep your finger on the pulse of the workforce. If you hear rumblings about pay, I would be prepared to address them proactively.

Mitchell

Aside from federal law, many states have anti-retaliation provisions in their pay transparency laws. That's a really important part.

I would have to add that any audit you do should be under privilege. At the direction of counsel, with the guidance of counsel, because you want to make sure that you don't fall into that category of no good deed goes unpunished. Then, you have that proactive audit being used against you, somehow or other. That's absolutely great advice.

As we close out, this group is so active, as you mentioned, it's such a large practice within JL. I know we have some upcoming programs around the country, but is there anything you want to give folks who haven't connected with our industry group a heads-up on what's coming down the pike that they may want to get involved in?

Borna

Sure, Laura. Our perennial event in New York City, Workplace Horizons, has a really terrific, robust industry roundtable. We have always enjoyed the takeaways from the manufacturing clients who, in real time, share their biggest pain points and pressures, so we can be prepared to guide them.

We have some exciting regional extensions coming later this year, around the country, including in my home base of Atlanta. We're going to be having a regional Workplace Horizons extension program with a manufacturing roundtable. We’ll also have one somewhere on the West Coast out in your neck of the woods, so stay tuned for that. It's particularly helpful for multi-state manufacturing employers who may be headquartered in an employer-friendly state like Georgia, but hire in states with pay transparency requirements, such as California, or in places like Colorado, to be alert to the regulatory requirements at a bare minimum.