Equal pay for equal work may seem like a no-brainer, but the gender pay gap is still with us almost 50 years after the passage of the Equal Pay Act (EPA) in 1963. Nationally, women earn 77 cents for every dollar earned by men. The Vermont Attorney General’s Office (AG) and the Equal Employment Opportunity Commission (EEOC) recently held an “equal pay” conference at the University of Vermont to reaffirm their commitment to closingthe gender pay gap, so a “refresher” seems in order. Do you know what would turn up if an equal pay audit were conducted at your company? Are you up to date with the requirements of federal and state pay equity laws? Read on to find out.
The federal EPA prohibits employers from discriminating against employees on the basis of sex by paying higher wages to employees of the opposite sex for equal work. All forms of pay are covered, including salary, overtime pay, bonuses, stock options, profit sharing, bonus plans, life insurance, vacation and holiday pay, cleaning and gasoline allowances, hotel accommodations, reimbursement of travel expenses, and other benefits. In correcting a pay differential, no employee’s pay may be reduced. Instead, the pay rate of the lower-paid employee must be increased. The EPA covers all employees regardless of the size of the employer.
The jobs need not be identical but must be substantially equal. The focus is on the actual duties performed, not job titles, and whether the jobs have the same common core of tasks. In determining whether jobs are substantially equal, the following factors are considered:
- Skill is measured by the experience, ability, education, and training required to perform the job, not by the level of those qualities that a jobholder possesses. For example, two jobs may be considered equal even if one of the jobholders has a master’s degree in an unrelated field (so long as the degree isn’t required for the job).
- Effort involves the amount of physical or mental exertion necessary to perform the job. If an assembly-line job regularly requires substantially more effort, such as heavy lifting, than other jobs on the line, it wouldn’t be a violation to pay that jobholder more than others.
- Responsibility may justify a pay differential if one jobholder has more responsibility than others. The additional responsibility cannot be trivial ― for example, turning the lights out at the end of the day.
- Similar working conditions include consideration of the physical surroundings, such as temperature, fumes and ventilation, and hazards.
- The same establishment factor also comes into play. A single establishment is a distinct physical place of business (as opposed to an entire company consisting of several separate facilities). In some circumstances, however, two or more physically separate portions of a business may be treated as one establishment if personnel and pay decisions are determined centrally and the operations of the separate units are interconnected.
Unlike Title VII of the Civil Rights Act of 1964, the EPA doesn’t require an employee to establish an employer’s discriminatory intent. Thus, an employer is strictly liable if there is an unexplained difference in pay between employees of the opposite sex who perform the same work. Also, EPA claimants, unlike those pursuing claims under Title VII, aren’t required to exhaust their administrative remedies but may file suit directly in court.
Pay differentials are permitted if they are based on (1) seniority, (2) merit, (3) quantity or quality of production, or (4) a “factor other than sex.” The employer bears the burden of proof in establishing an affirmative defense. If you can show that a wage disparity is justified by one of the four defenses, the employee may counter with evidence that your proffered reason is a pretext for sex discrimination.
There is a split in the federal circuits over what is required to establish an affirmative defense based on a “factor other than sex.” Federal courts have held that an employer must prove that a bona fide business-related reason exists for using a gender-neutral factor that results in a wage differential. In other words, you must ask yourself whether the use of the “factor” is reasonable in light of your stated purpose and other practices.
State-by-state comparison of 50 employment laws in all 50 states, including discrimination and wage laws
Other compensation discrimination laws
Don’t forget that compensation discrimination is also prohibited on the basis of race, color, religion, sex, national origin, age, or disability under Title VII, the Americans with Disabilities Act (ADA), the Age Discrimination in Employment Act (ADEA), and some state-specific fair employment laws. Unlike the EPA, under those laws, an employee need not show that her job is substantially equal to that of a higher-paid person outside her protected class. Similarly, the statutes don’t require an employee to work in the same establishment as her comparator.
The Lily Ledbetter Fair Pay Act of 2009 clarifies that each paycheck reflecting discriminatory compensation is actionable under Title VII. Under the Act, an employee has up to 180 days (or 300 days in some states, counties, and cities) to file a charge with the EEOC after receiving a paycheck that reflects unequal wages.
Executive Order 11246 prohibits federal contractors, federally assisted construction contractors, and federal subcontractors from discriminating in employment decisions, including compensation on the basis of race, color, religion, sex, or national origin, when the contracts or subcontracts exceed $10,000. The Office of Federal Contract Compliance Programs (OFCCP) administers and enforces Executive Order 11246 as well as other civil rights laws.
On June 5, the Paycheck Fairness Act failed to advance in the U.S. Senate, but efforts to pass the legislation likely will continue. If passed, the Act would require employers to demonstrate that any salary differences between men and women doing the same work are not gender-related. It also would prohibit employers from taking action against employees who share salary information with their coworkers and require the U.S. Department of Labor (DOL) to increase its outreach effort to eliminate pay disparities.
HR Guide to Employment Law: A practical compliance reference manual covering 14 topics, including discrimination
Increased education and awareness
Historically, the number of federal and state equal pay claims has been statistically small. Believing that may be partially due to a lack of knowledge about the law and how to pursue a claim, the EEOC is engaged in outreach and education activities. The White House has created an Equal Pay Task Force to spearhead efforts to reduce the gender gap in compensation. The task force is working to improve coordination between the various federal enforcement agencies ― mainly, the EEOC, the DOL, and the U.S. Department of Justice (DOJ) ― to improve data collection.
In 2011, the EEOC hosted 28 “Equal Pay Day” events around the country, and the agency’s training institute used its “technical assistance program” seminars on equal pay to train approximately 950 individuals on permissible pay practices. Additionally, the DOL’s Women’s Bureau hosted four regional events and cosponsored 34 additional events with employers, contractors, and advocates to advertise its educational materials and highlight available tools and resources for pay equality.
For small employers seeking to comply with various discrimination laws, the EEOC has a small-business initiative. Additional information for small businesses can be obtained at www.eeoc.gov/field/boston/smallbusiness.cfm. Also, the EEOC’s Office of Legal Counsel in Washington, D.C., has an “attorney of the day” whom you can contact with questions at 202-663-4691 without exposing your organization to risk of an audit.
There are good reasons to care about pay equity issues in your company. For starters, efforts to provide greater awareness and education at the federal and state levels have been coupled with increased efforts to enforce the law. The EEOC now uses pivot tables and regression analysis to determine if there is a statistical discrepancy in pay. These tools are used to determine whether (1) the factors an employer relies on in setting wages are legitimate and (2) there are unexplained disparities in pay between members of the opposite sex. Make sure your HR staff, managers, and supervisors know that retaliation is prohibited. An employee may fail to establish an EPA claim but prevail on a retaliation claim for making a complaint.
The OFCCP has recovered more than $24 million in back wages and evaluated the pay practices of more than 10,000 businesses with federal contracts. In June 2011, the agency settled a lawsuit involving claims that a multinational pharmaceutical corporation paid certain female sales associates less than their male counterparts. Under the terms of the settlement, the company agreed to (1) pay $250,000 to 124 female employees who worked at the company’s business center in Pennsylvania, (2) reexamine its pay practices in offices across 13 states and the District of Columbia, and (3) adjust salaries accordingly.
Last year, the EEOC settled a retaliation lawsuit against a company that fired a female employee for complaining after she discovered she was being paid less than a more-recently hired male colleague. The company agreed to pay $188,000 to the employee and provide training for all HR personnel and employees at its facility. And in February 2012, the DOJ filed a settlement agreement in a lawsuit against a state corrections department challenging the physical test used to hire new corrections officers. The settlement requires the corrections department to (1) pay $765,000 to women who were denied employment because of the test, (2) hire up to 30 qualified female corrections officers on a priority basis, and (3) develop a new, lawful test.
Reviewing your pay practices
Fortunately, there are steps you can take to ensure your pay practices are in compliance with state and federal law. The process begins with asking a series of questions in several categories:
- Job descriptions
- Do you have clear and concise job descriptions with performance standards?
- What skills are required to perform the job? You can consider experience, ability, education, and training.
- What physical or mental effort is required to perform the job?
- What degree of accountability and responsibility is required?
- Do the particular working conditions require extra skill, effort, or responsibility?
- What is the relationship between wage rates and the job description?
- Is there a performance rating system with measurable criteria that differentiates between levels of performance?
- How are pay raises and bonuses determined? Are pay and bonus decisions made in a nondiscriminatory manner?
- Are performance evaluations conducted fairly? Is there transparency regarding compensation? For example, are job openings and salary ranges posted in the workplace?
- Are there any discrepancies in benefits, bonuses, shift differentials, overtime, training opportunities, or separation pay?
- If starting salaries are negotiated, does that fact have an adverse impact on the women in your workplace? Historically, women have been less assertive than men in negotiating starting salaries.
- How are employees assigned to specific jobs?
- Are assumptions made about what certain employees can or cannot do, such as working overtime, traveling on short notice, and participating in training? For example, some employers may assume that female employees with young children are unwilling or unable to work overtime or take business trips.
- Are all employees given equal opportunities for advancement and professional development?
- Are all employees given equal opportunities to earn merit pay increases and bonuses?
After answering those questions, you should have a better idea of what you need to do. Specifically, you should consider:
- Reviewing your compensation data and compensation policies;
- Developing specific, objective criteria for compensation decisions and minimizing subjective decision making;
- Reviewing your record-keeping practices and making sure that compensation decisions are documented in case the decision makers take other jobs; and
- Providing training on equal pay and ensuring everyone understands that retaliation is prohibited.
About: Vermont Employment Law Letter:|
Vermont Employment Law Letter is written by attorneys at the law firm of Dinse, Knapp & McAndrew, P.C. Vermont Employment Law Letter does not attempt to offer solutions to specific problems, but rather to provide information about current developments in Vermont and federal employment law. Inquiries about specific problems should be addressed to the labor or employment law attorney of your choice. Vermont does not certify lawyers as specialists in labor and employment law or other areas of concentration. Contact attorneys at Dinse, Knapp & McAndrew, P.C.