Two federal statutes prohibit gender-based differences in pay: the Equal Pay Act of 1963 (EPA) and Title VII of the Civil Rights Act of 1964 (Title VII).

The EPA prohibits employers from discriminating between employees who work in the same establishment by paying lower wages to an employee than they pay an employee of the opposite sex for equal work on jobs that require equal skill, effort, and responsibility that are performed under similar working conditions (29 USC Sec. 206(d)).

Title VII prohibits employment discrimination based on sex. Under federal regulations, any violation of the EPA is also a violation of Title VII. However, the converse is not necessarily true because Title VII covers additional types of wage discrimination not covered under the EPA (29 CFR 1620.27).

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 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 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 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 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). Enforcing equal pay laws is an area targeted in the EEOC's 2017 to 2021 Strategic Enforcement Plan. In addition to targeting compensation systems and practices that discriminate based on gender, the EEOC will focus on pay disparities based on race, ethnicity, age, disability, and other protected characteristics. Employers should periodically review their pay practices to ensure that any 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, 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.

Title VII covers employers with 15 or more employees and prohibits employment practices that discriminate based on sex. In addition to discriminatory pay practices, Title VII prohibits gender-based discrimination in hiring, firing, promotions, training, and other terms and conditions of employment. It also prohibits employment discrimination based on race, color, religion, or national origin. Please see the national Discrimination section.

To prove unlawful pay discrimination based on sex under Title VII, an employee must show that he or she was paid less than opposite-sex employees who were similarly situated. Similarly situated employees are those who would be expected to receive the same pay because of the similarity of their jobs and other objective factors. Job similarity can be determined by analyzing whether jobs require similar tasks, skills, effort, responsibility, working conditions, and complexity. This is a more relaxed standard than the "substantially equal" requirement under the EPA. Objective factors include the need for a specialized license or certification. In cases of disparate treatment, Title VII requires an employee to prove that an employer had discriminatory intent. The EPA does not have such a requirement.

Employers may defend a difference in pay by providing a legitimate nondiscriminatory reason for the disparity. In addition, the four affirmative defenses available under the EPA may be used by employers to defend a Title VII pay discrimination claim.

As with all Title VII discrimination complaints, an employee must first file a charge of gender-based pay discrimination with the EEOC before pursuing a civil action in court. Time limits for filing pay discrimination claims are subject to the requirements of federal law under the Lilly Ledbetter Fair Pay Act of 2009 (Ledbetter Act). The Ledbetter Act amended Title VII by making the issuing of each paycheck an unlawful discriminatory act if the paycheck resulted from a past discriminatory pay decision or practice (42 USC 2000e-5(e)(3)). Under the Ledbetter Act, an unlawful employment practice occurs when:

The practical effect of the Ledbetter Act is that the time period for filing a charge of discrimination begins each time an employee receives compensation or benefits (e.g., a paycheck) resulting from an employer's past discriminatory pay practice or decision, regardless of how long ago the discriminatory practice occurred. Therefore, from the time an alleged discriminatory paycheck is received, an employee has 180 days (300 days if the charge is also covered by state or local fair employment laws) to file a Title VII pay discrimination charge with the EEOC.

Remedies. Title VII provides for damages in the form of back pay, reinstatement, front pay, attorneys' fees and costs, and compensatory and punitive damages, including damages for emotional pain and suffering.

For all covered contracts entered into or modified on or after January 11, 2016, EO 13665 prohibits federal contractors from discharging or discriminating in any way against employees or applicants who inquire about, discuss, or disclose their own compensation or the compensation of another employee or applicant. Protected compensation information is interpreted very broadly to include not only wages and salary but also any form of payment, overtime, benefits, bonuses, commissions, and awards. Also protected is compensation information such as salary and pay structures, incentives, union agreements, and job analysis and descriptions. The final rule generally applies broadly to any business or organization that is covered by EO 11246.

Employer exceptions. Employers may take adverse action against an employee who discloses or discusses compensation information under two circumstances:

Equal opportunity clause. The equal opportunity clause that is included in qualifying federal government contracts, federally assisted construction contracts, subcontracts, and purchase orders has been revised to reflect the pay transparency requirements. Affected contractors must include the revised clause in covered contracts or may continue to incorporate the clause by reference.

Nondiscrimination provision. Covered contractors must also disseminate a mandatory nondiscrimination provision by electronic posting or by posting a copy of the provision in conspicuous places available to employees and applicants for employment. Contractors are also required to incorporate a nondiscrimination provision, as prescribed by the OFCCP, into existing employee manuals or handbooks.

Comparable worth theories are sometimes put forward by individuals making Title VII claims when they cannot meet the EPA requirement that the jobs compared be “substantially similar.” Under the comparable worth concept, employees performing completely different jobs must receive equal pay—notwithstanding the going market rates—if the jobs they perform are of equal worth to the employer. Generally, job worth is determined by using a point system to assess the level of skill, education, experience, and responsibility required in a particular job category. Jobs with the same total point score are viewed as comparable and should be paid equally.

Comparable worth theories have not been broadly accepted in the private sector, although some federal district courts allow them. In the public sector, however, the concept has met with more success, largely because of the diversity of jobs, the availability of wage information, and the fact that unions have frequently used the issue to organize public employees. A few states have incorporated the comparable worth concept into state equal pay laws.

Employers seeking to minimize the risk of EPA and Title VII wage discrimination claims should review their wage-setting practices with a view toward incorporating the following strategies: