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 sex-based 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 sex (29 USC Sec. 206(d)).
The 9th Circuit Court of Appeals has held that an employee’s
prior salary, alone or in combination with other factors, does not
constitute a “factor other than sex” that would allow an employer
to pay a female employee less than male employees who performed the
same work (Rizo v. Yovino, 950 F.3d 1217 (9th Cir. 2020)).
According to the court, the defense encompasses only job-related
factors other than sex.
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 the employee’s counterparts, when the
employee has been offered a higher-paying job and the employer wants
to retain the employee. 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
found that the recruitment of a male vice president by other banks
did not excuse the employer’s duty to pay a female vice president
on an equal basis. The court also upheld the jury's finding that the
male employee’s college 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
with 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 guidance issued by the Equal Employment
Opportunity Commission (EEOC), pay differentials may be justified
when working conditions differ. According to the EEOC, "working conditions"
refer to the environmental surroundings and physical hazards of the
job. The guidance notes that working conditions of jobs only have
to be similar, while the other factors (skill, effort, and responsibility)
must be substantially equal.
The EPA requires that
employees of different sexes 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 expansive “comparable worth” standard 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).
Remedies. An employer that violates
the EPA may be ordered to pay back wages, liquidated damages, attorneys'
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.