Why Courts, States, and Employers Are Focusing on Pay Equity
|The federal Equal Pay Act went into effect in 1963, but it hasn’t brought an end to pay disparities between men and women. Neither have state laws with the same objective. Long story short: the laws weren’t strong enough, and they didn’t account for all the causes of unequal pay. In many cases, it has been possible for an employer to comply with these laws while still giving unequal pay for equal work.
Often, it’s not that employers have deliberately chosen to pay women less than men for the same jobs. In many cases, the basis for pay differentials has seemed sensible, such as salary history. But it turns out that basing pay on salary history perpetuates discrimination over an employee’s career. Mindful of these facts, some states across the country have instituted salary history bans and implemented other legal measures to strengthen pay equality. And the 9th Circuit Court of Appeals issued an opinion recently that significantly strengthened the federal Equal Pay Act.
In this article, we’re going to look at that ruling as well as some of the state legislative efforts. But, first, let’s review the federal Equal Pay Act, since that law affects all employers.
The Equal Pay Act
The Equal Pay Act makes it illegal for employers to pay unequal wages to men and women who perform jobs that require substantially equal skill, effort and responsibility, and that are performed under similar working conditions within the same establishment. Job duties, not job titles, will determine whether jobs are substantially equal. Each of the relevant factors are summarized below:
Under the EPA, pay differentials are permitted when they are based on seniority, merit, quantity or quality of production, or a factor other than sex. These are known as “affirmative defenses” and it is the employer’s burden to prove that they apply. In correcting a pay differential, no employee’s pay may be reduced.
The 9th Circuit Ruling
The 9th Circuit Court of Appeals ruled last month that salary history is not an acceptable reason for pay differences under the EPA, even when used in conjunction with other factors. The new reading of the law impacts employers in Alaska, Washington, Montana, Idaho, Hawaii, Oregon, California, Nevada, and Arizona, but since Circuit Courts often rely on one another’s rulings, it’s very possible that the impact of this decision will spread.
As written, the EPA allows for pay discrepancies for the following reasons:
Employers, including the defendant in this case, have often used salary history to help determine a new employee’s starting salary, and assumed that this would count as “any factor other than sex.” The court did not claim that this is an unreasonable reading of the law. Rather, it said that such a reading is contrary to the point of the law, as an employee’s past salary is likely to be impacted by gender-based pay discrimination.
The Court also established that “any factor other than sex” is limited to legitimate, job-related factors, such as experience, education, and ability. The catch-all provision does not include business-related reasons, such as an individual’s willingness to work for lower wages or the need to offer higher wages to candidates in a more employee-friendly market. Essentially, the opportunity for cost-savings is not an acceptable reason for a pay differential.
The Court, however, deliberately stopped short of saying whether individualized salary negotiations—which may involve some reliance on past salary—would provide a defense, but it suggested a future court could rule on that issue.
State Bans on Salary History Inquiries
So far, California, Oregon, Delaware, and Massachusetts (as of July 1) have banned salary history inquiries. Washington allows employers to ask about salary history, but it prohibits employers from using that history as the basis for pay differentials.
The salary history bans are an effort to break the cycle of lower pay. These cycles happen all the time. Maybe it started with an employee’s first job or somewhere along the way, but at some point, the employee received pay lower than a male co-worker who was in a similar position with similar qualifications. Perhaps the cause of was deliberate discrimination. Or perhaps she simply requested lower pay than her male peers, and her employer saw no need to argue. In any case, she received less pay than she should have. If her future salaries are determined with reference to this salary, then the original disparity will stay with her over the course of her career. Salary history bans are an attempt to end such cycles and reset wages at equitable levels.
If you are in the 9th Circuit and among the many employers who have based employee wages to some extent on salary history, that practice should be stopped immediately, and different wages adjusted or accounted for. Also look for factors that contributed to pay differentials that were business-related rather than job-related. Remember that you cannot reduce someone’s pay as a remedy under the EPA.
Stop Asking About Salary History