United States: "Equal" Means "Equal In Substance," Not "Equal In Form"

We noted several weeks ago that the Ellen Pao case reminds us that sometimes settlement is better than the airing of sensitive allegations, and sometimes outrageous settlement demands require an aggressive defense, media attention notwithstanding. But just below that surface is a different issue Ms. Pao's allegations have highlighted: equal pay for equal work questions, an issue that may be garnering increased scrutiny, particularly as studies continue to find pay rates for women lag behind their male counterparts. In the last several months, the federal appellate courts have taken up several Equal Pay Act of 1963 (EPA) claims, with their analyses often getting to the heart of what "equal" really means in the context of the EPA. While employers have prevailed in the majority of these cases, an appellate decision finding in favor of the employer from earlier this year offers a helpful illustration of what "equal" is supposed to mean and how an employer looking to assess EPA compliance should approach such a question.

In the case, the female employee worked for years in a position with a job description listing duties primarily related to managing a large fleet of company vehicles. She later took on additional responsibility for managing construction projects in multiple states. Based on the parameters of her job description, the employer paid her $22.78 an hour ($47,382 annualized). After several years of her working in this dual role, the employer created a new position spinning off her vehicle fleet responsibilities, then had the female employee create the position job description and train the male hired for the job at an hourly rate of $29.81 ($62,000 annualized). Months later, the employer terminated the female's services, hired a male into another newly created position with duties partially including management of the construction projects previously handled by the female employee. He received a $66,000 salary.

On such facts, it may not be hard to see why the appellate court found the female employee raised sufficient questions about the reasons for the pay disparity given what the male employees received for doing arguably the same work she had done (although it is perhaps puzzling the lower court initially dismissed the case, accepting the argument that the employer committed no wrong because it paid the female employee in line with the parameters of her job description). The court's analysis focused on the meaning of "substantially equal," because the EPA requires equivalent pay for jobs requiring equal skill, effort, and responsibility performed under similar working conditions. In other words, "substantially equal" according to the court turns "on the actual content of the job – not mere descriptions or titles" and does not concern itself with insubstantial or minor formalistic differences between the substantive work performed. Notably, the employer in the case did not claim it had no intent to pay the female unequally, which would have been a losing argument: under the EPA, the analytical test is results-based, not intent-focused.

We imagine, or at least certainly hope, that employers never intend to pay a female less than a male (or vice versa, because the EPA does not limit itself to historic gender stereotypes) for the same work. But where neither intent nor formalistic differences validate unequal pay, it may be prudent to audit for situations where disparities between employees arise more out of written job descriptions, job classifications, paper qualifications, and the like (including even how the employer conceptualized the two jobs at the outset) than they do from the actual work performed.

An example might help. Take two new employees of a fictional marketing business — we will call them Whitney and Mark — who both recently earned their bachelor's degrees. The employer hires Whitney into its entry-level junior marketer position with responsibilities that include supporting the work of senior marketers, from client analysis and strategy to market research and relationship building with business contacts. Whitney will also occasionally communicate directly with clients to provide guidance on marketing initiatives. She receives a salary of $75,000 and is eligible for an annual discretionary bonus. The employer also hires Mark into a marketing generalist role to provide additional project support for senior marketers behind the scenes and conceives that Mark will work no more than 40 hours per week. Mark receives an annual salary of $55,000.

A year into the job, Mark and Whitney are both winning accolades from senior marketers. Having both earned the confidence of senior marketers, the company loads them up with work such that they both occasionally work late nights and weekends, and allows both to communicate directly with clients. Both are also assigned aggressive market research projects. At the end of the year, Whitney receives at 5 percent bonus, but Mark receives no bonus.

This hypothetical scenario raises valid EPA issues, and particularly concerning ones given the employer conceived Mark's and Whitney's positions to be different, had no intent to undercompensate Mark, and had a very positive thing happen — Mark (as well as Whitney) did great work and earned greater responsibility. At the outset of our hypothetical circumstance, there are no apparent EPA issues, as the responsibilities and requirements of Whitney's position are greater than Mark's. As they developed however, both demonstrated strong skills, so the senior marketers began using them in substantially equal ways. While there inevitably would remain smaller differences between Mark's and Whitney's work, their jobs became far more alike than unlike. Under the EPA, their compensation should have become more alike too.

For employers with an eye on EPA compliance, Mark's is the type of situation they should be looking to identify. Certainly we do not claim formalistic factors such as job descriptions, titles, experience and the like cannot or will not legitimately support pay differences when the substance of the work aligns with the formal distinctions between jobs. But when the substance of two different jobs looks similar, and the differences fall more to minor variations and not the true work performed, EPA problems lurk. And this concern may be more likely to occur in what would normally seem a positive circumstance for an employer that has hired someone taking on more responsibility than the job calls for and showing the ability to handle and wanting to handle greater roles. In such circumstances, the prudent approach is probably to reward the employee with what he (or she) has already earned for what he (or she) is already doing, both because it will put the employer on the right side of the EPA and may just be the proverbial "right" thing to do.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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