Getting Paid the Same: Claims Under the EPA
Your company has a diverse sales force that includes both men and women. All of your salespeople are responsible for calling on existing and potential customers, renewing and increasing existing accounts, and closing sales with new accounts. All receive a base salary plus commissions and, although their base salaries differ, their commission rates are the same. One of your female salespeople, hired on the same day as a male, learns that her overall compensation last year was significantly less than his. She complains to human resources about not getting paid the same for “equal work.” What’s your response?
What is the EPA?
The Equal Pay Act (EPA), which was enacted in 1963 as an amendment to the federal minimum wage and overtime law, was designed to address pay disparities between men and women who performed similar work. Historically, many employers paid men more than women for the same jobs, often justifying it based on a man’s status as the sole breadwinner for his family. The EPA prohibits this practice and requires “equal pay for equal work.” Although the EPA’s original purpose was to ensure that women were paid as much as men in similar jobs, both men and women may bring claims under the statute. The EPA covers all elements of an employee’s compensation, including base salary, overtime, bonuses, stock options, profit sharing, and benefits.
Almost all EPA litigation focuses on the equal work element: how does an employee establish that she performed the same job as a man? Under the EPA, “equal work” means jobs that require equal skill, effort, and responsibility and that are performed under similar working conditions (and in the same type of work location). The jobs do not have to be identical, but they must be substantially equal. It is the content and duties of the job, not the job title or the employer’s job description, that controls.
Elements of the EPA may overlap with other federal anti-discrimination laws, notably Title VII of the Civil Rights Act of 1964 (Title VII), and employees often bring claims under both statutes. But an EPA claim is distinct in several ways. Both the EPA and Title VII prohibit sex discrimination, but the EPA is limited to disparities in pay and does not cover other types of employment actions. The EPA does not require an employee to file a charge of discrimination with the Equal Employment Opportunity Commission (EEOC) before pursuing her claim in court, and an employee has two years (three years in some cases) to file suit under the EPA, as opposed to 180 days for a Title VII claim. Under the EPA, the two-year clock starts ticking each time the employee receives unequal pay, so an employee who alleges ten years of unequal pay would be able to recover as long as she files her lawsuit two years (or three years in the case of willful violations) after she received her last paycheck. However, if she waits until two or three years from the last discriminatory paycheck, she will only be able to recover for that last paycheck.
Unlike Title VII, the EPA does not require an employee to prove that the employer intentionally discriminated against her because of her gender. However, the employee must establish that the comparable jobs require equal skill, effort, and responsibility and are performed under similar working conditions. Once the employee demonstrates those elements, the employer may be liable unless it can prove that the difference in pay was based on a seniority system, a merit system, a system that measures earnings by quantity or quality of production, or “any factor other than sex.” Under Title VII, in contrast, an employer need only articulate a legitimate non-discriminatory reason for the difference in pay, and the burden would shift back to the employee to prove intentional discrimination. Most employers defend EPA cases by arguing that their pay decisions are based on factors “other than sex.” One popular argument, which has been accepted by some courts, but rejected by others, is the “market rate” defense—meaning that a male candidate’s higher salary in his previous position required the employer to pay him more than a female candidate who made less in her last job. Employers may also argue that greater industry experience, an advanced degree, or higher profitability of a particular business are factors “other than sex.”
Because the burden of proof under the EPA differs from the burden under Title VII, an employee who alleges sex discrimination under Title VII and unequal pay under the EPA can lose her Title VII case while simultaneously winning her EPA case. For example, in a recent case an employee alleged that she was denied a bonus, but her male comparator received a bonus. The United States Court of Appeals for the Fifth Circuit upheld a jury’s conclusion that the employer did not discriminate against the employee because of her sex (in violation of Title VII), even though the jury did find that the employer violated the EPA. King v. Univ. Healthcare Sys., LC, 645 F.3d 713, 725 (5th Cir. 2011).
In the case of your complaining female salesperson, it might sound like there is cause for concern, but you would need to review the skill, effort, and responsibilities required in both jobs, as well as determine the working conditions. Is the male counterpart assigned more customers? Does he supervise any other employees? Does he have a different sales territory? A salesperson with a larger customer list, additional responsibilities, and a territory covering a downtown metropolitan area may not be performing work that is “equal” to that of a colleague with fewer customers, no supervisory responsibilities, and a sales territory in the suburbs. You would also look at each element of compensation. Is the male employee’s base salary greater, or does he make more in commissions? Did you hire him away from a competitor, where he was making more than the female salesperson? The commission component of these employees' compensation is likely based on their “quantity of production,” and if you paid the male salesperson a higher salary that was consistent with his previous job, that may be a “factor other than sex.” Some courts, however, reject the notion that paying a male employee more than his female counterpart in order to entice him to relocate qualifies as a “factor other than sex.”
An employee who succeeds on an EPA claim is entitled to different remedies than one who sues under Title VII. The successful EPA plaintiff gets her lost wages (meaning the difference between her pay and that of her comparator) for the two- or three-year statute of limitations period. If her employer cannot establish that it acted in good faith (meaning that it had reasonable grounds for believing that it was not violating the Act) she will receive liquidated (i.e., double) damages in an amount equal to the lost wages. The EPA also subjects employers to criminal liability. Under Title VII, an employee would be entitled to additional damages, including additional compensatory damages (for pain and suffering or emotional distress), as well as punitive damages. Both laws, however, require the employer to pay the successful employee’s attorney’s fees, which drives many of these cases.
Identifying and Addressing Pay Disparities
So what is your response to the complaining salesperson? As with other employee complaints of unlawful conduct, complaints about unequal pay should be taken seriously, investigated, and, if appropriate, corrected. You must also be cautious of any adverse employment action taken against the employee after her complaint is made, as it would be unlawful to retaliate against her. If you determine there has been an EPA violation, you must increase the compensation of the lower-paid employee, not reduce that of the higher-paid employee. Even absent an employee complaint, some employers find it useful to take the proactive step of conducting a detailed compensation analysis. A compensation analysis is typically done by an outside consultant, who looks for compensation disparities by comparing the pay of similarly-situated employees and ruling out non-discriminatory factors like education, prior work experience, performance, productivity, and time in the job as the basis for the disparity. Any remaining significant differences in pay are not likely to have occurred by chance in a neutral process, and an employer should consider re-evaluating its compensation or decisions procedures.
For more information on the Equal Pay Act, please contact the Troutman Sanders LLP Labor and Employment group.