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Benefit exceptions in hiring: Rolling the dice on liability

July 7, 2022
Think twice before you change your benefits to entice a new hire. Problems begin when employees find out they aren’t getting the same benefits, and lawsuits could result.

Given the current hiring challenges, many dental practice owners may be toying with making exceptions to their benefits and offering more to new employees than to existing employees. For many employers, these higher expectations and demands of today’s applicants mean that not offering may result in missing out on great employees. While this approach is nothing new, there are important considerations to be mindful of, and not doing so can have ugly ramifications.

Benefits are set differently for various groups of employees—full-time/part-time status, position, exempt/nonexempt status, managerial role, length of employment, and more. These are considered bona fide employment-based classifications. Once established, everyone within those groups should receive the same treatment. Setting up benefits in this way is generally not considered discriminatory. 

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The problem occurs when those parameters are established and individuals within them are treated differently. For example, say your part-time employees are not eligible for paid vacations, but a potential part-time employee is offered paid vacations to entice them to take the position. In another example, full-time employees must pay 50% of their health insurance premium, but a potential full-time employee may pay only 20%, again, in an effort to entice them to take the position.

Problems set in

The problems begin when employees find out they aren’t getting the same benefits. Can employers simply require confidentiality between employees or threaten to fire them? No, not without creating more liability for themselves. The federal National Labor Relations Act protects employees’ rights to engage in discussions (in-person and online) about wages, benefits, and working conditions. Employers are strictly prohibited from infringing on those rights.

Odds are your employees will talk, and they will question the treatment they’re receiving. Where does it go from there? Internal conflict, loss of morale, resentment, and turnover are likely minimum consequences, but they could extend to a discrimination lawsuit/claim. 

What the laws cover

Federal, state, and local laws protect individuals from discrimination based on what’s called protected classes. The list of protected classes encompasses characteristics such as race, age, sex, religion, pregnancy, disability, and more. Depending on which state you’re in, the list can be long. These laws prohibit both disparate treatment and disparate impact discrimination. 

Disparate treatment is intentional employment discrimination—singling out a particular protected class and treating them differently (i.e., worse). Disparate impact is unintentional discrimination. Disparate impact occurs when policies, practices, rules, or other systems that appear to be neutral result in a disproportionate impact on a protected group. 

While one can never rule out disparate treatment as a cause for discrimination, people are more apt to believe that employers who make exceptions when hiring people may become involved in lawsuits for disparate impact.

What if the applicant who just got higher pay or benefits in order to be hired is male and the workforce is predominately female? What if the workforce is older (40+) and the new person is 25? What if the newly hired employees vary in terms of race but somehow only the white employees were able to negotiate higher pay or benefits? This is all within the boundaries of disparate impact, and it is a legal minefield waiting to explode. 

Finally, there are pay equity laws to consider. One exists on a federal level, and many states are enacting stricter pay equity laws; it’s a growing trend. Under these laws, employers must pay workers equally for equal work, and this extends to wages, bonuses, benefits, and more. For example, two hygienists employed by the same employer are likely doing equal work and, therefore, must be paid equally. Consequently, an employer who makes an exception for one of the hygienists may wind up caught in a pay equity legal battle. 

Are there ways to prove that pay and benefit exceptions are not discriminatory? Yes. There can be bona fide job-related factors regarding pay and benefit differences. Proving this, however, lands squarely on the employer and is not easy. That’s why employers are advised to carefully consider whether making exceptions can be supported and legally defended. Hasty decision making is never a good method, and in the case of hiring can prove to be costly and damaging, turning that hiring decision into a real nightmare.

Editor's note: This article appeared in the July 2022 print edition of Dental Economics magazine. Dentists in North America are eligible for a complimentary print subscription. Sign up here.

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