Primer on Employer Obligations Regarding Equal Pay

Author: Beth P. Zoller, XpertHR Legal Editor

Greater workplace flexibility for women and putting women in greater positions of power in government and business has been raised repeatedly by this year's presidential candidates. As a result, the issue of equal pay for women and minorities has once again come to the forefront. Employers need to understand the laws requiring fair pay and their legal obligations and requirements as well as legislation that has been proposed in the US Congress.

Equal Pay Act (EPA)

The EPA was passed in 1963 and intended to ensure that men and women would be paid "equal pay for equal work". Generally, the jobs do not have to be identical, but need to be substantially equal in terms of skill, effort and job responsibility, and performed under similar working conditions. The term pay refers to not just 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. Employers can defend a claim of wage discrimination under a seniority system, merit system, a system measuring earnings by quality or quantity of production or if wages were set based on a factor other than sex.

Title VII and Other Federal Laws

Employers should know that Title VII also the Age Discrimination in Employment Act (ADEA), and the Americans with Disabilities Act (ADA) all prohibit wage discrimination based on race, color, religion, sex, national origin, age and disability. However, unlike the EPA, there is no requirement that the jobs must be substantially equal.

Lilly Ledbetter Fair Pay Act

In 2009, the Lilly Ledbetter Fair Pay Act was signed into law. It provides that the time an individual has to file a wage discrimination lawsuit begins each time the individual receives a paycheck, therefore allowing aggrieved individuals more time in which to file a lawsuit. This law was passed was in response to the US Supreme Court ruling in Lilly Ledbetter v. Goodyear Tire, 550 U.S. 618 (2007) which held that the time an individual has to file an equal pay lawsuit begins on the date the employer made the initial discriminatory compensation decision, not the date of the most recent paycheck. Employers also need to understand that the Lilly Ledbetter Fair Pay Act does not just apply to wage discrimination cases based on sex, but also wage discrimination based on race, age, color, national origin, and religion under Title VII as well as age under the ADEA and disability under the ADA.

Proposed Legislation

There are two other proposed laws relating to fair pay, although neither has passed in the US Congress. The Fair Pay Act (S. 788/H.R.1493) was proposed as a measure to end wage discrimination against individuals working in female-dominated or minority-dominated jobs by establishing "equal pay for equivalent work". Equivalent jobs are those in which the combined skill, effort, responsibility, and working conditions are equivalent in value, even if the jobs are not identical. The Fair Pay Act expands worker protection beyond the EPA in two ways. First, it prohibits pay discrimination on the basis of race and national origin, in addition to sex. Second, it prohibits such discrimination among workers performing dissimilar work in equivalent jobs while the EPA only refers to "equal pay for equal work" and prohibits discrimination between workers performing substantially the same jobs. The Fair Pay Act would permit different wages to be paid based on seniority, merit, or quantity or quality of work.

Employers also should be aware that the Paycheck Fairness Act (S.797, H.R.1519), was introduced two times in the US Congress, but failed to advance. The proposed law would provide individuals with increased damages under the EPA and include potentially unlimited back pay and punitive damage awards. It would put the burden on the employer to prove that a disparity in wages was based on a bona fide factor other than sex such as education, training, or experience, and that the other factor is job-related and consistent with business necessity. It would also make it easier to bring a class action lawsuit under the EPA and prohibit retaliation against employees for filing a claim of wage discrimination.

Advice for Employers

Even though the Fair Pay Act and Paycheck Fairness Act failed to advance and become law, their introduction illuminates that the issue of wage discrimination is still an important one in today's society. Although some state laws address equal pay and wage discrimination based on protected class status, not all states have such legislation in place. Accordingly, employers should make every effort not to engage in wage discrimination based on protected class status and correct any imbalances and discrepancies that may presently exist. Employers should seek to implement and maintain workplace policies that grant raises, promotions, and bonuses base on merit and employee performance regardless of sex, race, national origin etc. In doing so, employers will dramatically reduce the chance that they will be faced with a claim for wage discrimination.

Additional Resources

Employee Management > EEO - Discrimination

EEO Policy

Discrimination Policy