Fair Wage Ratio Act
A Bill to Establish a Maximum Wage Ratio Between the Highest Compensated Individuals and the Lowest Paid Workers within Organizations Operating in the United States, Including All Forms of Compensation and Applicable to Executives and Owners
Preamble
Whereas economic inequality has been increasing, leading to social and economic disparities;
Whereas excessively high compensation ratios within organizations contribute to wage inequality and can negatively impact worker morale, productivity, and societal cohesion;
Whereas equitable compensation practices promote fairness, social justice, and economic stability;
Therefore, be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, to promote fair wage practices by establishing a maximum wage ratio between the highest compensated individuals—including executives and owners—and the lowest paid workers within organizations operating in the United States, encompassing all forms of compensation.
Title I: Short Title
This Act may be cited as the “Fair Wage Ratio Act”.
Title II: Definitions
For the purposes of this Act, the following definitions apply:
1. Covered Entity: Any corporation, partnership, limited liability company, sole proprietorship, nonprofit organization, or other business entity engaging in commerce or in any industry or activity affecting commerce that operates within the United States.
2. Employee: Any individual employed by a covered entity, including full-time, part-time, temporary, seasonal, and contract workers who are economically dependent on the employer.
3. Worker: Includes all employees as defined above, as well as independent contractors and gig workers who provide labor or services to the covered entity and are economically dependent on it.
4. Compensation: Total annual remuneration received by an individual from a covered entity, including but not limited to:
• Salary and Wages
• Bonuses and Commissions
• Overtime Pay
• Stock Options and Equity Grants
• Realized Gains from Equity Compensation: Gains from the sale or exercise of employer-provided equity.
• Dividends and Profit Distributions: Financial benefits derived from ownership interests.
• Deferred Compensation
• Perquisites and Benefits: Including but not limited to housing allowances, transportation, insurance premiums paid by the employer, and other non-cash benefits.
• Any Other Financial Benefits: Any other form of remuneration or financial gain provided by the covered entity.
5. Highest Compensated Individual: The individual associated with a covered entity who receives the highest total annual compensation, including but not limited to executives, owners, partners, directors, and any person with significant ownership interest or control over the entity.
6. Lowest Compensated Worker: The worker of a covered entity who receives the lowest total annual compensation.
7. Wage Ratio: The ratio of the total annual compensation of the highest compensated individual to that of the lowest compensated worker within the same covered entity.
8. Executive: Any individual who holds a senior management position within a covered entity, including but not limited to Chief Executive Officer (CEO), Chief Financial Officer (CFO), Chief Operating Officer (COO), and other C-level positions.
9. Owner: Any individual who holds an ownership interest in a covered entity, including shareholders, partners, members, proprietors, and any individual benefiting financially from the entity’s operations.
10. Controlling Interest: Ownership of 50% or more of the equity, voting rights, or control over the management decisions of a covered entity.
Title III: Establishment of Maximum Wage Ratio
Section 301: Maximum Wage Ratio Limit
• 301(a): A covered entity shall ensure that the wage ratio does not exceed 100:1, meaning the highest compensated individual shall not receive total annual compensation exceeding 100 times that of the lowest compensated worker.
Section 302: Calculation of Compensation
• 302(a): Total annual compensation for each individual shall be calculated based on all forms of remuneration received within the fiscal year, as defined under Title II, Section 4.
• 302(b): Realized gains from equity compensation and dividends and profit distributions shall be included in the fiscal year in which the gains are realized or received.
• 302(c): For individuals not associated with the covered entity for the full fiscal year, compensation shall be annualized based on the period of association.
• 302(d): Non-cash benefits and perquisites shall be assigned a fair market value for inclusion in total compensation.
Section 303: Adjustments for Part-Time and Seasonal Workers
• 303(a): Compensation for part-time, temporary, seasonal workers, gig workers, and independent contractors shall be calculated on a full-time equivalent basis for the purposes of determining the lowest compensated worker.
• 303(b): Covered entities shall not reduce hours, misclassify workers, outsource positions, or alter employment arrangements to circumvent the wage ratio requirements.
Title IV: Inclusion of Executives and Owners
Section 401: Applicability to Executives and Owners
• 401(a): The wage ratio requirements apply to all individuals associated with the covered entity, including but not limited to:
• 401(a)(1): Executives and senior management.
• 401(a)(2): Members of the Board of Directors.
• 401(a)(3): Owners, partners, shareholders, and any individual with an ownership interest or control over the entity.
• 401(b): Compensation received by these individuals, including dividends, profit distributions, realized gains from equity, and any other financial benefits derived from ownership, shall be included in the compensation calculations.
Section 402: Attribution of Owner Compensation
• 402(a): For owners with less than a controlling interest (less than 50% ownership), compensation shall include:
• 402(a)(1): All forms of remuneration received from the covered entity, as defined under Title II, Section 4.
• 402(b): For owners with a controlling interest (50% or more ownership), total compensation shall include:
• 402(b)(1): All financial benefits received from the covered entity, including salaries, bonuses, dividends, profit distributions, and realized gains from equity transactions involving the covered entity.
• 402(c): Compensation from passive investments or income unrelated to the covered entity shall not be included.
Title V: Compliance and Reporting Requirements
Section 501: Annual Reporting
• 501(a): Covered entities are required to submit an annual report to the Department of Labor detailing:
• 501(a)(1): Total annual compensation of the highest compensated individual, including all components as defined under Title II, Section 4.
• 501(a)(2): Total annual compensation of the lowest compensated worker.
• 501(a)(3): The calculated wage ratio.
• 501(a)(4): A comprehensive breakdown of all components of compensation for the highest compensated individual.
• 501(a)(5): The total number of workers, their classification, and employment status.
• 501(a)(6): Methods used for calculating full-time equivalents for part-time, seasonal, and gig workers.
Section 502: Public Disclosure
• 502(a): The Department of Labor shall make the wage ratio reports publicly available in a searchable, accessible format to ensure transparency and accountability.
Section 503: Certification of Compliance
• 503(a): An authorized officer or representative of the covered entity must certify under penalty of perjury the accuracy of the report and compliance with the maximum wage ratio requirements.
Section 504: Record-Keeping Requirements
• 504(a): Covered entities must maintain records supporting the compensation calculations and reports for a minimum of five years.
• 504(b): Records shall be made available for inspection by the Department of Labor upon request.
Title VI: Enforcement and Penalties
Section 601: Enforcement Authority
• 601(a): The Department of Labor shall have the authority to enforce the provisions of this Act, conduct investigations, and audit covered entities for compliance.
Section 602: Penalties for Non-Compliance
• 602(a): Covered entities found to be in violation of this Act shall be subject to the following penalties:
• 602(a)(1): A civil penalty equal to 10% of the total compensation paid to the highest compensated individual exceeding the allowable maximum.
• 602(a)(2): Mandatory adjustments to compensation structures to achieve compliance within 180 days of notice.
• 602(b): Continued non-compliance beyond 180 days shall result in additional penalties, including but not limited to:
• 602(b)(1): Increased civil penalties up to 20% of the excess compensation.
• 602(b)(2): Ineligibility for federal contracts, grants, loans, tax incentives, or other government benefits.
• 602(b)(3): Legal action to enforce compliance, which may include injunctions or other equitable remedies.
Section 603: Anti-Retaliation Protections
• 603(a): Covered entities shall not discharge, demote, suspend, threaten, harass, or in any manner discriminate against a worker who:
• 603(a)(1): Reports or attempts to report a violation of this Act.
• 603(a)(2): Participates in an investigation, audit, or proceeding related to this Act.
• 603(b): Workers subjected to retaliation may seek remedies including reinstatement, back pay, compensatory damages, and attorney’s fees.
Title VII: Miscellaneous Provisions
Section 701: Regulations
• 701(a): The Department of Labor shall issue regulations necessary to carry out the provisions of this Act within 180 days of its enactment.
• 701(b): The regulations shall include guidelines for:
• 701(b)(1): Valuation methods for all forms of compensation, including realized gains from equity compensation and ownership benefits.
• 701(b)(2): Reporting requirements, formats, and procedures.
• 701(b)(3): Methods for calculating full-time equivalents for part-time, seasonal, and gig workers.
• 701(b)(4): Procedures for audits, investigations, and enforcement actions.
Section 702: Severability
• 702(a): If any provision of this Act or its application to any person or circumstance is held invalid, the remainder of the Act and the application of its provisions to other persons or circumstances shall not be affected.
Section 703: Effective Date
• 703(a): This Act shall take effect one year after the date of enactment to allow covered entities adequate time to achieve compliance.
• 703(b): The Department of Labor may provide extensions of up to six months for covered entities that demonstrate good faith efforts to comply but face significant challenges due to the nature of their operations.
Title VIII: Studies and Reports
Section 801: Economic Impact Study
• 801(a): The Department of Labor, in conjunction with the Department of Commerce and independent economic experts, shall conduct a comprehensive study on the economic impacts of the maximum wage ratio on:
• 801(a)(1): Income inequality and wealth distribution.
• 801(a)(2): Worker morale, productivity, and retention.
• 801(a)(3): Business growth, competitiveness, and innovation.
• 801(a)(4): Small businesses and startups.
• 801(a)(5): Overall economic performance and stability.
• 801(b): The study shall include consultations with stakeholders, including businesses of various sizes, workers’ representatives, economists, and social scientists.
• 801(c): A report summarizing the findings, including recommendations for any legislative adjustments, shall be submitted to Congress