Fair Pay Act
Learn what the Fair Pay Act is, how it impacts compensation practices, and what companies must do to promote pay equity and avoid legal risks.
What Is the Fair Pay Act?
The Fair Pay Act refers to legislation aimed at closing wage gaps and ensuring that employees are paid fairly for equal or comparable work—regardless of gender, race, or other protected characteristics. While "Fair Pay Act" can refer to various state and federal laws, it is most commonly associated with:
- The Federal Fair Pay Act of 1999 (introduced, but not passed)
- The Lilly Ledbetter Fair Pay Act of 2009 (federal law)
- State-level fair pay laws such as California's Fair Pay Act and similar legislation in states like New York, Massachusetts, and Colorado
The goal of these laws is to increase pay transparency, prevent wage discrimination, and hold employers accountable for systemic pay disparities.
Key Principles of Fair Pay Legislation
Equal Pay for Comparable Work
Employees performing substantially similar work—regardless of job title—must be paid equally unless justified by factors like seniority, performance, or education.
Transparency and Recordkeeping
Employers may be required to publish salary ranges, disclose pay gaps, or maintain detailed pay records for audits.
Protection Against Retaliation
Employees are protected when discussing wages or raising concerns about unfair pay.
Expanded Statutes of Limitations
The Lilly Ledbetter Fair Pay Act reset the clock on pay discrimination claims with each new paycheck affected by discriminatory practices.
Why the Fair Pay Act Matters
Promotes Pay Equity and Inclusion
Ensures fair treatment across gender, race, and other protected categories.
Reduces Legal and Reputational Risk
Noncompliance can lead to lawsuits, fines, and public scrutiny.
Supports a Strong Employer Brand
Fair pay practices help attract and retain top talent—especially in a competitive market.
Builds Trust and Transparency
When companies communicate how pay decisions are made, it increases employee confidence and engagement.
Common Challenges for Employers
Outdated or Inconsistent Pay Structures
Lack of a formal job architecture or salary bands can lead to unequal pay.
Limited Visibility into Internal Pay Gaps
Without centralized data, it’s hard to proactively identify and address disparities.
Non-Standardized Compensation Reviews
Discretionary raises without clear criteria may introduce bias or compliance issues.
Struggling to Meet Pay Transparency Laws
New regulations in states like California, Washington, and New York require pay ranges in job postings—many companies aren’t yet prepared.
Best Practices to Support Fair Pay Compliance
Conduct Regular Pay Equity Audits
- Identify gaps across gender, race, and other demographics
- Take corrective action when disparities are not explained by legitimate factors
Establish Clear Pay Bands and Job Levels
- Ensure consistency in pay decisions across teams and departments
- Use internal job architecture tools and market benchmarks
Implement Structured Merit and Comp Cycles
- Align raises and bonuses to performance and role expectations
- Track budget and fairness across managers
Increase Pay Transparency
- Share compensation philosophy with employees
- Publish pay ranges in job postings where required—and consider doing so even where it isn’t
Fair Pay Act vs. Equal Pay Act
The Equal Pay Act of 1963 was an early federal law requiring equal pay for equal work based on gender. Fair Pay Acts, including newer state laws, often go further—broadening definitions of comparable work, adding race and ethnicity, and mandating transparency.
Equal Pay Act
- Federal law (1963)
- Focuses on exact job equality
- Covers gender only
- No transparency requirements
Fair Pay Act
- Federal and state-level laws (ongoing)
- Includes “substantially similar” or “comparable” work
- Expands to race, ethnicity, and other characteristics
- May require pay ranges in job postings
The Bottom Line
The Fair Pay Act and related legislation are reshaping how companies approach compensation. Proactive compliance—through equity audits, structured pay practices, and increased transparency—isn’t just a legal safeguard, it’s a strategic advantage. Companies that prioritize fair pay are better equipped to build trust, attract talent, and create a more equitable workplace.