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Equal Pay Issues Gaining Attention

May 19, 2016

The concept of equal pay for equal work is receiving attention from the Equal Employment Opportunity Commission (EEOC), President Barack Obama, and the 2016 candidates for president. That means there’s no better time than the present for a review of what “equal pay” does and doesn’t mean, recent amendments to the Equal Pay Act (EPA), and proposed regulatory changes.

What is the EPA?

The EPA requires employers to pay men and women equally for performing the same work—hence, the phrase “equal pay for equal work.” It applies equally to men and women, but the law was originally passed to help address the wage disparity experienced by female workers. It has almost always been applied to situations where women are paid less than men for doing the same work. The EPA is administered and enforced by the EEOC.

Equal pay does not mean absolutely equal. The law allows for pay differentials when individuals are evaluated based on criteria such as seniority, production levels, and merit. For example, a male salesperson earning more than a female salesperson because he closed more sales would not be a violation of the EPA. All forms of compensation are included in the calculation—salary, bonuses, vacation and holiday pay, and other benefits.

Equal work is open to more interpretation and has more gray areas, but it still doesn’t mean absolutely equal. The duties performed by employees determine whether their positions are equal. If two employees are actually performing the same duties, it doesn’t matter if their titles or job descriptions differ.

In general, two positions are equal for purposes of the EPA when they both require the same level of skill, effort, and responsibility and are performed under similar conditions. Minor differences in the level of required skill, effort, or responsibility do not make two jobs unequal. The biggest problems arise when two positions are basically the same, but one includes additional duties. The employer may pay additional compensation to the employee who performs the extra duties. However, you should note whether your higher paying jobs with extra duties are consistently reserved for workers of one gender.

Under the EPA, employees working at the same “establishment,” which technically means the same distinct physical place, are subject to comparison. However, some courts have broadened this requirement to examine the integration level of each operation. For example, a court may find that a drugstore chain where all pharmacists are managed and their compensation is set on a regional basis is an integrated operation. Thus, employees working in different stores can be considered to be working in a single establishment.

Damages for noncompliance with the EPA are significant. The Act includes a provision for 100 percent “liquidated damages,” which means the damages awarded to a prevailing employee are automatically doubled. Thus, if an employer paid a female employee $10,000 less per year than it paid a male employee for the same work, the EPA allows the female employee to recover $20,000 per year in damages.

Finally, unlike claims under Title VII of the Civil Rights Act of 1964, an EPA claim doesn’t need to be filed within 180 days of the discriminatory act (or 300 days, depending on the jurisdiction), and administrative remedies need not be exhausted before a court action is filed. An employee has two years to file a lawsuit (and three years if the violation was “willful”). Thus, your company may still face a pay discrimination lawsuit long after the time limit for filing a charge under Title VII expires.

Amendments to the EPA

On January 29, 2009, President Obama signed into law the Lilly Ledbetter Fair Pay Act (LLA), which increases employers’ risk and exposure for pay discrimination claims. The LLA specifies that unlawful discrimination occurs when:

(1) A discriminatory compensation decision or other practice is adopted.
(2) An individual becomes subject to a discriminatory compensation decision or other practice.
(3) An individual is affected by the application of a discriminatory compensation decision or other practice, including each time wages, benefits, or other compensation is paid, resulting in whole or in part from such a decision or other practice.

Under the LLA’s “paycheck rule,” the statute of limitations for filing a wage claim resets each time the employee receives a paycheck, benefits, or other compensation. An employee can recover back pay and other relief for up to two years preceding the filing of a charge if the unlawful employment practices that occurred during the charge-filing period are similar or related to practices that occurred previously. The LLA expands the definition of “unlawful employment practice” to include not only “decisions” regarding compensation but also any “other practice” affecting employee compensation.

In 2010, the EEOC, the U.S. Department of Justice (DOJ), the U.S. Department of Labor (DOL), and the Office of Personnel Management (OPM) joined together to form the National Equal Pay Task Force. One goal of the task force is to enhance collaboration between the agencies that enforce federal equal pay laws. Moreover, the EEOC designated pay equity a top priority in its Strategic Enforcement Plan for fiscal years 2013-16.

EEOC’s Proposed Rule Changes

On January 29, 2016, the EEOC proposed revisions to its EEO-1 form that will require all employers with 100 or more employees (not just federal contractors) to submit additional data on the wages they pay their employees. Under the proposed change, covered employers would need to submit information about wages sorted by gender, race, and ethnicity.

The EEO-1 form is intended to encourage voluntary compliance with the Act by requiring regular attention to and evaluation of compensation structures. Additionally, using data gathered through the new EEO-1 form, the EEOC would be able to focus its investigations on employers that are unlawfully discriminating by paying workers lower wages based on their gender, race, or ethnicity. Under the EEOC’s proposal, employers would submit pay data for the prior 12 months, starting with the EEO-1 filing due on September 30, 2017.

The EEOC approved the action to change the EEO-1 form with a vote of the commissioners and followed the normal rulemaking procedures with public input. When the revised EEO-1 receives final approval, the EEOC will post a notice on its website, www.eeoc.gov.

Bottom Line

Given the renewed focus on equal pay, you should closely examine your company’s compensation systems and conduct an audit. The first area to look at is individual jobs. Are your job descriptions up to date? Are employees actually performing the job duties listed in their job descriptions?

The second area to examine is pay rates. Do you have a method for determining the market rate for a given job? How do you determine salaries, benefits, and pay increases?

Finally, make sure your methods for setting pay rates are being implemented fairly. How does pay compare for similar positions at your company? Are women paid equally to men with similar positions? Are there legitimate reasons for any pay disparities between employees who perform the same job? You should promptly address any of those questions you have trouble answering in the affirmative. Once you can answer “yes” to each question, your business will be ahead of the game and well prepared to submit the new EEO-1 form in 2017.

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This article, slightly modified to note recent updates, was featured in the March 2016 issue of the Wisconsin Employment Law Letter, which is edited by Axley Brynelson Attorney Saul Glazer and published by BLR®—Business & Legal Resources. Reproduced here with the permission of BLR®—Business & Legal Resources.