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The 4 Factors Used to Judge Your Workplace's Pay Equality

It’s important for employers to understand equal pay laws and be aware that pay discrimination claims can involve issues that go beyond the bottom-dollar wage paid to an employee.

For example, the U.S. Women’s Soccer team has been incredibly successful for years, winning three World Cup titles and four Olympic gold medals. By contrast, the U.S. men’s team has been less successful. Yet, according to a federal wage discrimination lawsuit filed last year by members of the U.S. Women’s Soccer Team, women players are paid roughly 40 percent of what their male counterparts are paid.

Similarly, in a case filed against the fast-food restaurant Checkers, the EEOC (Equal Employee Opportunity Commission) alleged that female workers at a Checkers in West Philadelphia were not only paid less than their male counterparts for substantially the same work, they were also given fewer work hours than their male counterparts and were the first to be sent home when business was slow.

Female employees were scheduled for 20 to 25 hours per week despite having requested full-time hours. Male workers were scheduled to work more than 30 hours a week on a regular basis. The general manager also required female employees to go home early on a slow shift while permitting the male employees to stay and work a full eight-hour shift. This particular Checkers franchise restaurant eventually settled with the EEOC for $100,000.

Understanding equal pay laws

The Equal Pay Act applies to all employers regardless of the number of employees. This means that the Act covers employers with as few as two employees. Also, the Act does not require any intent to discriminate, meaning it doesn’t matter if an employer didn’t realize their actions were discriminatory. Complainants suing under the Equal Pay Act can recover back pay and double the amount that the employer should have paid the employee. The Act is also not gender specific and protects men from being paid inequitably in relation to their female counterparts.

Employers need to look at the following four factors that the court will use in order to determine whether wage discrimination has occurred:

1. Does the wage differential exist among employees in the same establishment?

According to the Equal Employment Opportunity Commission, “[a]n establishment is a distinct physical place of business rather than an entire business or enterprise consisting of several places of business.” However, if physically separate places of business operate under a central administrative unit that 1) hires employees, 2) sets employee compensation, and 3) assigns employees to their work locations, then the entire business or enterprise could be considered as being the same establishment.

2. Does the employer pay different wages to employees of the opposite sex?

Remember that a court can consider the pay received by an employee who held the position either right before or right after the complainant under the condition there are no other employees of the opposite sex currently performing the same job as the complainant.

3. Do the employees perform equal work on jobs requiring equal skill, effort, and responsibility?

In this instance, you must look at the job requirements and not the individual employee’s skill level. For example, if a job requires a high school degree, then a pay difference cannot be given to an employee who has a college degree based solely on the fact that the employee has a college degree. The jobs do not have to be identical to each other, however, the jobs must at least be “substantially equal” to each other.

4. Are the jobs performed under similar working conditions?

Working conditions cover the physical environment and workplace hazards. For example, some positions provide better pay when they are performed in a designated hazard area.

This does not mean that a difference in pay is never allowed. An employer can use pay differentials when the employer’s legitimate reason for this pay differential is 1) seniority, 2) merit, 3) a system of pay based upon quantity or quality of output, or 4) a sound business reason or factor other than sex exists for the difference in pay.

Additional points to remember:

  • If an employer does have differentials in pay that are legitimately based on sound business reason or factors other than sex, it is imperative that the reason for the differential is well documented. Be sure to secure and preserve all relevant records to support why employees are being paid differently.
  • Provide equal opportunities and policies for overtime, work hours, and benefits among employees. Do not automatically assume that because a female has children at home she does not want the opportunity to work overtime.
  • Do not automatically assume that using prior salary history as a basis for starting pay will assure compliance with this law. By using salary histories, an employer could inadvertently set a standard salary structure that provided lower starting salaries for female employees than for the new male employees because it is likely that the female employees were underpaid at their previous place of employment. This sort of starting salary structure could not only expose an employer for violations under the Equal Pay Act, but could also expose the employer to disparate impact violations under Title VII.

The best advice for employers on this and all other labor law issues is to look out for any changes in legislation including EEOC guidelines, track employment policy trends in their industry and review internal policies with an employment law expert on a regular basis.


As published in the Business Journals