Last week an article appeared in the New York Times announcing the filing of a class action Equal Pay suit against Bank of America by some of it’s female brokers. The brokers claim that when Merrill Lynch was absorbed into BoFA as part of the federal government’s program, female brokers were offered lower retention bonuses then their male counterparts. This event, two recent US Appeals court cases, and upcoming legislation changes to the Equal Pay Act may be combining to show that equal pay claims are becoming the new “hot” area of employment law litigation in the next few years.
For those who may be unfamiliar with the Equal Pay Act, under the law a plaintiff can establish a prima facie case of pay discrimination if they can show that an employer pays different wages to employees of opposite sexes for equal work in jobs that require the same level of skill and responsibility and are performed within similar working conditions. If a plaintiff can establish this then the burden of proof shifts to the employer to prove that the employee was paid a lower wage due to some reason other then gender (i.e. seniority, merit, some other system that measures quantity or quality of work).
In Conti v. American Axle & Mfg., Inc. No. 08-1301 (6th Cir. May 22, 2009), company executive Suzanne Conti claimed that she had not received the same work benefits as her male counterparts, specifically, salary increases and opportunities for advancement and training. Her employer argued that compared to many of her male executive peers, she made the same or more in salary and that her job duties were oftentimes different then theirs and would explain any pay discrepancies. This argument worked in all but one instance.
In her last position with the company, Conti had been promoted and she was paid substantially less then her male predecessor. The company argued that she was paid less because the position was downgraded from a Director to a Manager level and that the new title reflected a difference in the duties. However, Conti argued that she performed the same duties as her predecessor and that she also had acquired some additional responsibilities while in the role. The Appeals Court found that Conti did not have to prove that the duties associated with the different titles were identical to establish her prima facie case, but just that there was a “substantial equality of skill, effort, responsibility and working conditions.” They allowed her proceed with her claim.
While the Conti case points out the importance of paying a replacement an equal salary, another case points out the danger of not paying the predecessor properly. In Drum v. Leeson Electric Corp. 2009 WL 1350737 (8th Cir. May 15, 2009), a Human Resource Manager’s unequal pay claim was prompted when the employer hired a male replacement at a much higher salary. Since the plaintiff had established her prima facie case that she had been paid differently for equal work the issue in this case was whether the pay differential was based on something other then her gender. Her employer argued that the male replacement was the best candidate for the HRM position and that they had to pay a higher marker rate to acquire him. They also try to justify Drum’s lower salary by pointing to her prior salaries arguing that they resulted from a hiring policy that set salaries slightly under market rates. The court rejected these arguments stating that showing that they had to pay the male replacement a higher rate did not explain why they paid Drum a lower salary for the same position, and that they could not use a “lower market salary theory” to explain her prior salaries unless they could show that they were not related to her gender. As a result she was also allowed to proceed with her claim.
Some may argue that perhaps the plaintiffs in Drum and Conti did not have the same qualifications and past experience as their male counterparts and therefore deserved to be paid less. Potentially that could be a valid argument to explain a disparity in pay. However, interestingly, neither employer made that argument (because it wasn’t documented/true?). More important though I think the facts in both cases show their employers obviously both thought they were “qualified’ enough to do the jobs in question in the first place. Maybe the most important message to take away from these cases is that the Equal Pay Act states you should make sure you pay people the same for the same skills and requirements that the position itself requires, not necessarily for the skills and qualifications the person may have as an individual.
Many candidates may be able to meet the minimum requirements of a position, but many often have experience and qualifications that may go above and beyond. Usually this is a good thing because most employers hire with a view towards the future recognizing that talent acquisition is not just for the job today but for the job tomorrow. So what can an employer do to protect themselves from equal pay claims and yet still ensure that their organization is hiring leaders for the future?
• Job Descriptions and duties should be clearly outlined and defined. Any differences in responsibilities, education, or experience requirements should be clearly outlined and differentiated from other jobs.
• Employers should review their compensation structures to make sure they are up to date and market competitive. If hiring an external candidate to fill a position would cost you a significantly higher amount of salary, maybe that is a signal that the pay grades for that position are too low.
• Compensation packages for external and internal candidates for the same positions should be evaluated for consistency. If a candidate has a higher level of experience or qualifications that creates a pay disparity with another employee in the same position this information should be documented so that those decisions can withstand a lawsuit.
• No more perks! Companies will also have to be careful of the traditional “handshake deals” that fall outside of a specific job’s normal compensation package. (i.e. extra weeks of vacation, signing bonus, etc.).
One final reason why employers should re-evaluate their compensation practices is because of legislation that is currently moving to expand the reach of equal pay claims. If the Paycheck Fairness Act becomes law it will expand the Equal Pay Act from pay differences based on gender to include claims based on race and national origin. In addition, the Lilly Ledbetter Act now allows employees to file claims for prior adverse compensation decisions, meaning that decisions that were made years in the past that still affect the employee now can be the basis for claims.
