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The Securities and Exchange Commission (SEC) reached a settlement with the National Treasury Employees Union (NTEU) after an arbitrator ruled in 2007 that its merit system resulted in illegal discrimination. The SEC will pay $2.7 million to some African-American employees and some workers over 40 and increase their salaries between $266 and $2,482, depending on their grade level and the length of time they were affected by the merit pay system.
The SEC adopted the pay-for-performance system in 2003 and terminated it in 2007 after the arbitrator's ruling. They system had 15 pay levels with as many as 31 steps in each level. Employees could move up a maximum of three steps per year and earn annual raises of about 4.5 percent.
NTEU's statistical analysis of how the agency awarded raises found that 16 percent of African-American SEC employees received maximum raises of three steps and 10 percent received none, while 30 percent of white Caucasian employees received the maximum raise and only 6 percent received none. The analysis also found that 67 percent of the employees who received no merit-based pay increase were 40 or older, despite making up only 50 percent of the SEC workforce.
The 2007 ruling found that the SEC did not intend to discriminate against African-American or older employees, the system unintentionally produced illegal discrimination. NTEU and SEC are now working together to create a new pay-for-performance system.
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