Because it is part of the Fair Labor Standards Act
(FLSA), the EPA has the same basic coverage of employers engaged
in interstate commerce (virtually all employers). The EPA is different from
the FLSA in that it covers employees who are exempt from the FLSA's overtime
and minimum wage provisions (e.g., executive, administrative, and professional
employees). With a few limited exceptions, the EPA also covers federal, state,
and municipal employers; nonprofit organizations; and religious entities.
The EPA specifically prohibits labor unions from attempting to cause any employer
to engage in gender-related pay discrimination. The EPA applies to both male
and female employees but does not apply to nonemployees, such as partners
and independent contractors.
“Wages” refers to all forms of compensation for employment, whether
paid periodically or deferred until a later date, including salaries, vacation
pay, expense accounts, gasoline allowances, use of company car, etc. Employee
benefits are also considered wages, including medical, hospital, accident,
and life insurance; retirement benefits; profit-sharing and bonus plans; leave;
and other similar benefits of employment. The fact that it may cost more to
provide a benefit to members of one sex does not justify a difference
in benefits (29 CFR 1620.11).
The EPA provides exceptions when a difference in pay is justified
by (1) a merit system, (2) a seniority system, (3) a system based on quality
or quantity of production, or (4) any factor other than gender (29 USC Sec. 206(d)).
The following are examples of factors that have been found sufficient
to justify pay differentials:
Retention. An employer may raise an employee's
pay, regardless of the pay rates and gender of his or her counterparts, in
order to retain the employee after he or she has been offered a higher paying
job. However, employers should remember that retention concerns cannot be
used to justify permanent, across-the-board pay differentials between men
and women. In fact, some federal courts have rejected exterior salary pressures
as reasons for pay differentials (Simpson v. Merchants and Planters Bank, 441 F.3d 572
(8th Cir. 2006)). The court in this case also rejected the employer's defense
that a male vice president's higher pay was based on the fact that he had
a college degree. The court upheld the jury's finding that the degree was
irrelevant to a skill determination because all the skills needed to perform
the work were acquired through on-the-job training.
Practice tip: Rather than relying on job
descriptions and general assumptions (e.g. that a college degree is related
to the skills required to perform a particular job), employers should be careful
to base pay differentials on factors that are actually reflected in the work
performed by employees.
Red circle rates. A permissible “red circle
rate” occurs when a worker is temporarily paid at a higher-than-normal rate
for a reason that is not based on gender. For example, when an employee with
compromised health is temporarily reassigned to lighter duty but is paid his
or her normal rate of pay, a red circle rate results. A red circle rate is
permissible only if it is temporary; it may not be used for the purpose
of maintaining a permanent wage differential between men and women (29 CFR 1620.26).
Different physical locations. Typically,
only jobs performed at the same physical location may be compared to one another.
Thus, it is permissible to maintain a pay differential between branch offices
in order to adjust for cost of living. However, in some circumstances, two
or more different locations may be considered a single establishment if their
activities are integrated and their personnel policies and practices are centralized.
In that case, the EPA would require that workers performing similar jobs be
paid equally, notwithstanding a difference in physical location.
Different working conditions. According
to guidelines issued by the Equal Employment Opportunity Commission (EEOC),
pay differentials may be justified by substantial differences in the surroundings
and/or the hazards regularly encountered by two individuals performing the
same job function. “Surroundings” is defined as elements regularly encountered
by a worker in his or her normal work environment, such as toxic fumes or
inclement weather conditions. “Hazards” refers to physical hazards regularly
encountered, such as radiation exposure or the risk of injury from operating
hazardous machinery. Slight or inconsequential differences in working conditions
would not justify a differential in pay.
The EPA requires that a male employee and a female employee be
paid equally if their jobs are “substantially equal.” Although formal job
titles may be considered, job content is the primary factor in assessing whether
two jobs are substantially equal. For example, a federal court ruled that
female employees who worked as nurse practitioners were permitted to proceed
with their equal pay lawsuit when they presented sufficient evidence to show
that their jobs were substantially equal to jobs held by higher-paid males
employed as physician assistants (Beck-Wilson v. Principi, 441 F.3d 353 (6th Cir. 2006)).
If two jobs require equal skill, effort, and responsibility,
and are performed under similar working conditions, they are equal for the
purposes of the EPA. Minor differences in degree of skill required or in job
responsibilities cannot justify a pay differential between men and women.
However, courts interpreting the EPA have not embraced the more stringent
“comparable worth” analysis, in which jobs with dissimilar duties are compensated
equally if they are of equal value to the employer.
The EPA provides alternatives for enforcement so that an employee
may file a charge with the EEOC or file a lawsuit in court without first exhausting
administrative remedies through the EEOC. The EPA allows a 2-year period for
an individual to bring a civil action in federal court and 3 years for suits
alleging an intentional violation by an employer (29 USC Sec. 255). Enforcing
equal pay laws is an area targeted in EEOC's 2013 to 2016 Strategic Enforcement
Plan. In the plan, the EEOC states its intention to target compensation systems
and practices that discriminate on the basis of gender. To facilitate enforcement,
the EEOC encourages the use of a commissioner's charge and directed investigations,
neither of which requires the EEOC to wait for a discrimination charge to
be filed before beginning an investigation. Employers should periodically
review their pay practices to ensure that any gender-based differences in
pay are based on legitimate, nondiscriminatory business reasons.
Remedies. An employer that violates the
EPA may be ordered to pay back wages, liquidated damages, attorney's fees,
and court costs. EPA liability is not limited to company owners. Individuals
may be held liable for EPA violations where it can be shown that the individual
maintained exclusive or total control of the company's day-to-day operations,
specifically regarding wages. For example, a court has held a university department
head personally liable for EPA violations in which the department head had
exclusive control of salaries, job descriptions, hiring, and promotions for
the department. On the other hand, an attempt to hold a restaurant maître
d' personally liable under the EPA for his alleged discriminatory allocation
of pooled tips among the waitstaff was rejected by the court because it was
found that the maître d' did not have sufficient control over staff salaries
to be deemed an employer.