A recent press release by the U.S. Equal Employment Opportunity Commission (EEOC) demonstrates that Equal Pay Act claims are becoming increasingly common. The EEOC in Baltimore, MD announced that an auto dealership agreed to pay $62,500 to resolve an Equal Pay Act claim by a female employee. The employee had alleged that she was being paid less than a male employee who was performing equal work, and that she was retaliated against for complaining about the situation.
According to the EEOC, in addition to paying $62,500 in monetary relief, the auto dealer is enjoined from sex-based pay discrimination and retaliation moving forward, and is required to adopt a policy creating channels for employees to report unequal pay and procedures for handling those complaints. In addition, the dealer was required to conduct training on preventing gender-based wage discrimination.
What was the issue?
The Equal Pay Act requires that men and women in the same workplace be given equal pay for equal work. The jobs need not be identical, but they must be substantially equal. All forms of pay are covered by this law, including salary, overtime pay, bonuses, stock options, profit sharing and bonus plans, life insurance, vacation and holiday pay, cleaning or gasoline allowances, hotel accommodations, reimbursement for travel expenses, and benefits. Title VII also makes it illegal to discriminate based on sex in pay and benefits. Therefore, someone who has an Equal Pay Act claim may also have a claim under Title VII. Title VII, the ADEA, and the ADA prohibit compensation discrimination on the basis of race, color, religion, sex, national origin, age, or disability. Unlike the EPA, there is no requirement under Title VII, the ADEA, or the ADA that the jobs must be substantially equal.
How can you avoid these types of claims?
Employers should take every opportunity to proactively review any vulnerabilities in their pay practices. A pay equity audit can help determine if any pay equities or pay gaps exist in the workforce, what employee population is affected by the inequity and if the pay inequity can be explained by legitimate job-related reasons, such as tenure, education and experience. A thorough evaluation includes reviewing pay structures, starting pay policies, merit increase policies, promotional pay policies and recordkeeping practices. In addition, confidentiality of the evaluation can be established with the use of attorney-client privilege.
The time to conduct a pay equity audit is now, before any litigation arises. This is especially true for employers who were experiencing difficulties in recruiting, and who may have offered very generous compensation packages to new hires as a result.
Benefits of an audit include avoiding or defending against litigation, gaining safe harbor protection in some states, improving employee recruitment, retention and morale, and responding to shareholder activism pertaining to pay equity. The benefits of an audit far outweigh the risks. Risks include finding unfavorable results and employee suspicion of results.
