How to Prevent Wage Discrimination and Ensure Equal Pay

Author: Beth Zoller, XpertHR Legal Editor

All employers should be keenly aware of their obligation to make certain that their employees are paid fair and equal wages to avoid lawsuits brought under the Equal Pay Act (EPA) and other laws. This How To looks to assist employers who wish to avoid costly wage discrimination lawsuits and ensure equal pay for equal work.

Step 1: Understand the Laws

The Equal Pay Act (EPA) requires that men and women receive equal pay for equal work. Generally, jobs do not have to be identical for equal pay to be required, but substantially equal in terms of skill, effort and job responsibility, and performed under similar working conditions. The term pay refers not just to salary but also overtime, bonuses, vacation and holiday pay, stock options, life insurance, and all other benefits and compensation of any kind paid to employees. Pay disparities may be allowed under a seniority system, a merit system or a system measuring earnings by quality or quantity of production, or, if wages were set based on a factor other than sex. In addition to the EPA, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act (ADEA), and the Americans with Disabilities Act (ADA) prohibit wage discrimination based on race, religion, sex, national origin, age and disability. However, unlike the EPA, the other statutes apply even if jobs in question are not substantially equal.

Step 2: Institute a Policy Prohibiting Wage Discrimination

In order to ensure equal pay in the workplace, employers should implement and enforce a policy prohibiting compensation discrimination or wage discrimination based on an employee's membership in a protected class. This can often be part of a Discrimination Policy or EEO Policy that prohibits discrimination in compensation and a practice of ensuring equal pay. Employers need to make sure that all employees are paid fair and equal wages based on their position and skill.

Step 3: Make Decisions Based on Skill and Performance

Employers, supervisors and HR managers need to make sure that all employment decisions regarding promotions, raises, bonuses, etc., are based on legitimate and nondiscriminatory factors such as skill, merit and performance rather than an employee's membership in a protected class. Employers should avoid wage differentials based on sex, race, national origin or any other protected class unless they can be justified by legitimate and nondiscriminatory reasons.

Step 4: Train Supervisors and Managers to Avoid Wage Discrimination

Employers need to make sure that all supervisors and managers receive proper training on how to avoid wage discrimination and make employment decisions based on legitimate and nondiscriminatory reasons.

Step 5: Document Guidelines and Requirements for Salaries and Bonuses

Employers should make sure that any salary guidelines or requirements for any bonus (whether it is based on merit, productivity, sales or commissions) are well documented and based on fair, objective, predictable and measurable criteria. This should be adequately conveyed to employees so that they know what the employer's expectations are and are not left wondering how an employer arrived at a particular decision.

Step 6: Be Aware of State and Local Laws Prohibiting Wage Discrimination

Employers need to be aware that a number of states have laws prohibiting wage discrimination. Although the federal EPA only specifically prohibits wage discrimination on the basis of sex, some state laws may go beyond this. Employers should familiarize themselves with the laws of the state and cities in which they operate.

Step 7: Document and Be Ready to Defend All Employment Decisions

Employers need to make sure to carefully document all decisions regarding pay, performance and promotion. Doing so will provide an adequate record and serve as a defense in case of a claim of wage discrimination.

Step 8: Audit Pay Practices

Employers should frequently review their pay practices to make sure that they are not engaging in discrimination. Employers should make sure that any differentials that do exist are based on legitimate and nondiscriminatory factors and supported by written documentation, and if they are not, they should correct them. By doing so, employers may dramatically reduce the chance that they will be faced with a claim for wage discrimination.

Step 9: Aim to Hire an Integrated and Diverse Workforce

Employers should try to make sure that they hire and recruit qualified candidates regardless of gender or membership in a protected class. Employers and hiring managers should make decisions based on education, skill and merit. Employers should avoid making stereotypical assumptions about what a job applicant can and cannot do based on his or her membership in a protected class.

Step 10: Provide Timely and Effective Performance Evaluations

Employers should aim to provide employees with yearly or biannual performance evaluations. In doing so, employers should clearly set out the employer's expectations and show the employee how the employee is meeting them or not meeting them.

Step 11: Do Not Prohibit Employees from Discussing Wages

Employers should not prohibit employees from discussing information regarding wages, salary or benefits with other employees. The National Labor Relations Act specifically affords employees the right to engage in mutual concerted protected activity and work collectively to improve their wages, hours and working conditions. In addition, states such as California, Colorado, Illinois and Michigan have laws that prohibit employers from requiring that employees refrain from discussing their wages and/or waive their right to discuss such information.

Additional Resources

Primer on Employer Obligations Regarding Equal Pay

Employee Management > EEO - Discrimination