Iceland Moves to Freeze Out Wage Discrimination

On January 1, 2018, Iceland’s amended Equal Pay Standard took effect, the latest in a serious of measures seeking to address the persistence of national gender wage gaps. The law requires employers with 25 or more employees to obtain a government certification every three years verifying a company’s compliance with equal pay requirements. Failure to attain certification exposes employers to liability of up to nearly $500 in penalties per day. Employers with an observed pay differential can comply by raising the salaries of employees to eliminate the differential.

The new Icelandic law shares some common DNA with gender pay reporting bills passed in the U.K. and passed (and subsequently vetoed) in California that emphasize wage equity compliance and enforcement outside of employee litigation. Those bills, which did not include new methods of enforcing wage discrimination, instead sought to address the wage gap by requiring public disclosure of pay differentials to encourage employers to self-correct wage discrimination.

In the U.K., large employers, effective March 31, 2017, must submit workforce data to the government on an annual basis, including pay gap statistics as assessed between male and female employees with the same job title.  As we previously reported here and here, critics of wage gap reporting underscore the numerous inaccuracies that accompany raw pay gap percentages. In particular, wage gap percentages may overstate pay differentials if a statistical model does not control for a multitude of non-discriminatory factors that influence employee pay, such as experience and tenure.

Critics of the Icelandic bill voiced concerns about compliance costs, particularly for small businesses. Provisions in the law attempt to lessen that burden by introducing a latency period of several years, staggering the certification process for smaller employers through 2022. Despite these and other lingering questions, Iceland’s effort follows increased global emphasis on this issue.