Equal pay for equal work: Is your business delivering it?

Oct. 17, 2018

This paid piece is sponsored by Woods, Fuller, Shultz & Smith PC.

By David C. Kroon, employment law attorney

According to recent studies, U.S. women working full time earned just 80 cents for every dollar earned by a man in 2016. The wage gap widens even more when broken down by race.

The Equal Pay Act requires that men and women in the same workplace be given equal pay for equal work. All forms of pay are covered by this law, including salary, overtime pay, bonuses, vacation and holiday pay. Other federal laws including Title VII also make it illegal to discriminate based on sex in pay and benefits.

Specifically, the Equal Pay Act provides that employers may not pay unequal wages to men and women who perform jobs that require substantially equal skill, effort and responsibility, and that are performed under similar working conditions within the same establishment. “Skill” is measured by factors such as the experience, ability, education and training required to perform the job. “Effort” is measured by the amount of physical or mental exertion needed to perform the job. “Responsibility” is considered the degree of accountability required in performing the job.

To identify whether discrimination exists, investigators often begin by identifying employees in similarly situated jobs and then proceed to compare their compensation. If the compensation for a female worker is lower than the compensation of her co-workers, the employer must offer a nondiscriminatory explanation for the differential.

Pay differentials are permitted when they are based on seniority, merit, quantity or quality of production, or a factor other than sex. These are considered “affirmative defenses,” and it is the employer’s burden to prove that they apply.  In correcting a pay differential, no employee’s pay may be reduced. Instead, the pay of the lower paid employee must be increased.

Compensation disparities also can arise because of discriminatory practices that affect compensation indirectly. This “glass ceiling” phenomenon can depress the compensation of members of protected classes. These types of practices can include discriminatory promotion decisions, performance appraisals and procedures for assigning work, training opportunities or employer practices of steering protected-class members into lower paying jobs.

Employers often attempt to rely on an employee’s salary history to justify paying men and women differently for comparable jobs.  In a 2018 decision, Rizo v. Yovino, the 9th U.S. Circuit Court of Appeals considered a case in which a female hired by a county office of education sued her employer when she discovered that men were paid as much as $10,000 more in comparable positions. The employer justified the discrepancy based on the lower salary that had been paid by a previous employer. The 9th Circuit held the practice violated the Equal Pay Act.  The ruling reasoned that accepting the employer’s argument would perpetuate rather than eliminate the institutionalized discrimination that the Equal Pay Act aimed to protect. The employer has appealed the decision to the U.S. Supreme Court, but the court has not yet determined whether it will hear the case.

Other courts, including the 8th U.S. Circuit Court of Appeals, which encompasses South Dakota, have held that a prior salary may be considered in conjunction with other factors such as education, experience and training, and still other courts prohibit the use of salary history as the sole justification. The Rizo decision illustrates disagreement between the federal circuits and makes it likely the Supreme Court will have to resolve the conflict. Although South Dakota is not among them, it is worth noting that some states and localities have specific laws banning salary history inquiries, and more states are considering similar legislation.

Most employers have not examined their pay practices to consider whether a pay disparity exists, and if so, whether permissible factors explain the disparity. We recommend all employers review their pay practices to ensure pay equity across all protected classes.

To learn more about the laws governing equal pay, attend a free Woods Fuller employment law seminar Nov. 2 at the Washington Pavilion. Seminar information, including registration, is available at woodsfuller.com.

Equal pay for equal work: Is your business delivering it?

Chances are, your business has not examined pay practices to consider whether a pay disparity exists. These tips and an event coming up soon can help.

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