Tax | | Nov 07, 2017
Written by Roman Katz, Edited by Harold B. Peterson, Jr.
It has been more than 50 years since the 1963 Equal Pay Act was signed into law. Yet, according to the 2014 US Census Bureau, a woman today makes, on average, 79 cents to every dollar a man makes. Rather than addressing whether the wage gap between genders is legitimate, please review for yourself the American Association of University Women’s census-based findings to look at some analytics about how much of a problem this is today.
Gender-based wage inequality is not a new problem. However, social justice movements are forcing politicians to bring it to light and politicians are taking a new round of actions to reduce the wage gap. For the entertainment industry, these changes have gained momentum as more and more actresses speak out about it. In 2014, Hilary Swank discussed making 1/10th the pay of male counterparts in an interview at Loyola Marymount University. A few months later, Patricia Arquette gave an impassioned Oscar speech calling for wage equality throughout the US. After the 2014 Sony hack revealed how much more her male co-stars were making, Jennifer Lawrence wrote an essay acknowledging how difficult it is to get equal pay. This momentum coincides with the wage equality momentum in politics.
President Obama set out, at the start of his presidency, to address these issues and is using his last year in office to push through meaningful changes. States like New York and California are creating laws to help employees get fair pay and to protect women from being targeted for gender-based discrimination. The result of this climate is a rollout of enforcement measures to police gender equality. The challenge of enforcement is to go behind the veil of the accounting systems and payroll to reveal when men and women with similar roles are consistently paid different salaries. For employers who aren’t sure whether they pay the same wages to men and women doing similar jobs, the best course of action is to engage an accounting firm in making payroll audits to reduce their chance of being non-compliant with state or federal mandates.
President Obama, seven years after signing into law the Lilly Ledbetter Fair Pay Act, is now recommending that larger employers report salary data to the EEOC with information on the race and gender of their employees. According to Jenny Yang, chairwoman of EEOC, the reporting process itself is private but, after obtaining the information, the Department of Labor can then file discrimination lawsuits and name employers in public records. With the current cultural movement against paying women and minorities less money to do the same jobs, boycotts similar to those at the Oscars may become more commonplace where there is pay inequity. To gauge the scale, the EEOC made 26,023 gender-based charges of the 88,950 charges they brought in 2014. When these new measures eventually go into effect, those numbers will only grow. Even before these changes, the LA Times reported last year that the ACLU of Southern California initiated an investigation into “the systematic failure to hire women directors at all levels of the film and television industry.” As the EEOC now begins their investigation of hiring practices, this federal government agency is poised to further explore the big swings in salary negotiation that started with actresses but may be pervasive throughout the industry.
To avoid needless litigation, employers have the choice to start auditing their payroll records to determine if they are out of compliance with equal pay laws. Salesforce, for instance, has already voluntarily reviewed their payroll and paid out $3 million in wage differences to bring female employees up to the level of the male employees in similar positions. PricewaterhouseCoopers publicized the findings over their own gender gap in the UK and ended up promoting women to partners in the firm. Entertainment companies with unequal pay and hiring practices have an opportunity to preclude a costly investigation by doing the same as the companies above.
As many films are shot in NY and CA and these states are leading the way, it is only a matter of time before most studios will also come up against new state laws which will allow employees to bring an action where 1) they receive a different wage for similar work and 2) that wage is not based on differences in location, education, training, or experience. Both state laws, New York’s Fair Pay Law and California’s Equal Pay Law, address the previous exception for business necessity by nullifying the exception studios used to use, to make arbitrary salary decisions, when an alternative business practice can serve the same purpose as paying a different wage based on the gender of the employee. Both laws also protect employees’ rights to inquire into wages with other employees. Entertainment employers have never been so vulnerable to being sued for gender discrimination and cultivating a reputation for discrimination that will actually affect their sales.
The simplest way to avoid litigation and public attention is to get a payroll review to ensure compliance with federal and state laws. Otherwise, studios still have to rely on industry precedent and project-based legal entities to create buffers from legal liability. Neither of these methods have strong standing in the context of the new laws.
According to Ted Johnson, a senior editor of Variety, industry precedent from previous box office performance is often used as a basis to determine a quoted rate for a performer. Performers and staff on various projects can be connected to their previous projects and a quoted rate may naturally come from the rate they were paid on their prior works. The problem is, where education, training, and experience aren’t major factors in determining pay, an alternative business practice may be used that doesn’t create a pay differential based on gender. Vulture.com uses domestic box office, overseas box office, e-score numbers, Oscar results, Metacritic results, twitter mentions and tabloid and studio executive scores by committee. The Internet Movie Database (IMDB) has a STARmeter. Ranker is a website that’s been cited by Forbes as a source of information about how well liked celebrities are. As claims are made of wage inequality, prior practices may fall short of reliably being used where there are robust sets of data for determining wages another way.
As for the practice of creating business entities for each production that allow studios to distance themselves from control and legal liability, that will neither be a long term solution nor will it address the underlying spirit of these laws. Avoiding paying equal wages by skirting the current laws is not an effective tactic. Litigation and exposure will still threaten these studios as claims are brought.
In Hollywood, these laws are partially beyond the point. In Nelson Granados’s article in Forbes, How Hollywood Women Will Benefit From California’s New Fair Pay Act, he claims the bigger problem in Hollywood is the relative scarcity of lead roles, writing positions, and director roles. This is the same supply-side argument currently being investigated by the ACLU. Creating legal buffers and rationalizing paying women less money to do similar jobs are what these new laws were created to oppose. To speak to the issues these laws address, an investigation into pay practices would go a long way. The bigger contention here is whether women are underrepresented in Hollywood altogether. That’s one for the ACLU, the EEOC, and for the public to chew on until there is a way to address this greater systemic issue. Meanwhile, these new laws and this trend in the public sentiment around wage inequality may soon get more and more attention as it is litigated. That is unless, again, Hollywood is able to read the writing on the wall and start auditing their own payroll before a court or government agency does that for them.