Equal Pay in the “Me Too” Era

Congratulations to Dan Haneman on his nomination for HR Consultant of the Year
March 22, 2018

 

Equal Pay in the “Me Too” Era

Part I: The Law Today

Guest Post by: James A. Matthews, III, Fox Rothschild LLP

Introduction

The idea of “equal pay for equal work” has not only been the law since at least 1963, but at first blush seems so straightforward as to need no real analysis. A man and a woman are performing the same job and should be paid the same. Right? And it is self-apparent, is it not, that the law has not led to equal pay for equal work because it is undisputed that all women on average earn less than all men on average, with the current estimates putting women at 78 cents to 83 cents for every dollar earned by men? Actually, not so much.

To understand why, and to appreciate how the law in this area is developing, one must first understand where the law is today.

The Law of Compensation Discrimination Today

All equal pay questions involve three statutes: the Equal Pay Act of 1963 (EPA), Title VII of the Civil Rights Act of 1964 (Title VII) and the applicable state employment discrimination law (in Pennsylvania, the Pennsylvania Human Relations Act (PHRA) and in New Jersey, the New Jersey Law Against Discrimination (NJLAD)). The may also implicate local ordinances (such as the Philadelphia Fair Practices Ordinance). Each is different in various ways, some clear and some more subtle, and an understanding of how they related to each other is critical to an understanding of where the law is going.

The EPA is quite specific in its prohibition

No employer . . . shall discriminate, within any establishment . . . , between employees on the basis of sex by paying wages to employees in such establishment at a rate less than the rate at which he pays wages to employees of the opposite sex in such establishment for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions . . . .

It then goes on to provide that a pay differential is not unlawful if it is based upon (i) a seniority system, (ii) a merit system, (iii) a piecework or similar system or, and this is critical, (iv) “any other factor other than sex.”

Thus, the EPA’s protections are relatively limited. For a pay disparity to violate the EPA, it must (a) exist between two actual people of different genders, (b) employed within the same “establishment” or physical location (c) in jobs that are substantially the same in all material respects. Further, such a disparity is still not unlawful if the employer demonstrates that it is based three specific types of compensation plan or “any other factor other than sex.” However, absent such an explanation, the disparity violates the EPA whether or not the employer actually intended to discriminate on the basis of sex.

On their face, Title VII’s protections are broader. They prohibit sex-based discrimination in compensation in the same way that they prohibit sex and other forms of discrimination in all aspects of employment. Therefore, a plaintiff may prove that her compensation was unlawfully based upon her sex without the limitations imposed by the EPA, but subject to the same defenses. However, unlike the EPA, Title VII is not a strict liability statute and proof of a violation requires proof of intentional discrimination. It is also possible to bring a “disparate impact” compensation discrimination claim under Title VII. Such a claim does not require proof of intentional discrimination, but it does require the plaintiff to prove that the compensation differential is based upon a generally applicable, objectively neutral criterion which nevertheless has a statistically significant adverse impact upon all women employed by the employer, not simply the plaintiff herself. If the plaintiff makes such a showing, the employer may escape liability only by showing that the use of the facially neutral criterion is justified by “business necessity.” In simplest terms, this means proving that the same legitimate business goal cannot be accomplished by another means with less adverse impact.

While there are differences from state-to-state, most state statutes are modeled on Title VII and permit the same claims and defenses, with the important exception that most state statutes – including the PHRA and NJLAD – do not import the four EPA defenses.

Conclusion

From one perspective, the protections against gender-based compensation discrimination provided by existing law are substantial and reflect efforts to provide them without unnecessarily dictating employer business decisions or interfering with market forces. From another, they have proved insufficient to the task of addressing, if not intentional sex discrimination, certainly the impact of market forces that have historically undervalued the work of women. In Part II of this series, we will explore the clash of these two viewpoints currently playing out in the world of employment legislation and regulation.


Jim Matthews is a senior partner in the Fox Rothschild LLP Labor & Employment Department. He is a past co-chair of the department and has served as an elected member of the Firm’s Executive Committee.

Jim writes and speaks frequently on labor & employment issues and is the author of Pennsylvania Labor & Employment Law (2016), a fully revised edition of his comprehensive treatise on federal and state employment issues affecting Pennsylvania employers and employees that was first published in 2013. Jim also authored Pennsylvania Labor & Employment Law: Employment Discrimination (2016), which provides a thorough and focused examination of the federal, state and local equal opportunity and employment discrimination laws governing Pennsylvania employers and employees.

 

 

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