United States: Alabama's New Pay Equity Law Takes Effect September 1, 2019

Alabama became the 49th state to adopt equal pay legislation when Governor Kay Ivey signed the Clarke-Figures Equal Pay Act (CFEPA) on June 11, 2019. The CFEPA, effective September 1, 2019, prohibits an employer from paying an employee less than another employee of a different race or sex for equal work.

How Does the CFEPA Compare With Existing Federal Law?

The CFEPA tracks existing federal laws such as the federal Equal Pay Act (EPA) of 1963 and Title VII of the Civil Rights Act of 1964, with a few key changes.

Prohibition on Discrimination. The EPA prohibits an employer from paying an employee a lower wage rate than an employee of another sex for equal work in the same establishment, where job performance requires "equal skill, effort, and responsibility" and occurs "under similar working conditions." The CFEPA adopts almost identical language but adds "education" and "experience" to the list of job performance requirements.

Race. The EPA prohibits sex-based wage discrimination, while the CFEPA prohibits both race- and sex-based wage discrimination. However, the CFEPA does not provide greater protection than federal law because Title VII prohibits discrimination based on an employee's race, color, religion, sex, or national origin.

Exceptions. Both the CFEPA and the EPA identically provide that there is no violation where an employer bases a wage differential on a seniority system, a merit system, a system that measures earnings by quantity or quality of production, or any factor other than sex or race.

Wage History. The CFEPA goes farther than the EPA by prohibiting an employer from refusing to "interview, hire, promote, or employ," or retaliating against an applicant, because the applicant fails to provide wage history. Other states have completely banned wage history requests, but federal law presently does not. The CFEPA may provide a new path to court for employees claiming discrimination for not providing wage history, and it raises the stakes for pay-history inquiries during the selection process.

Pleading Standard. The CFEPA contains a heightened pleading standard for employees. Rather than merely stating a "plausible" claim, as with the EPA, employees must "plead with particularity" that (1) the employer violated the act, and (2) that the alleged wage differential is not due to one of the four permissible exceptions listed above. Alabama courts might interpret this standard to require employees to identify a comparator of a different race or gender in the complaint. Ultimately, the pleading standard's impact will develop as litigation progresses through Alabama's courts.

Penalties. The CFEPA penalties are not as severe as the EPA's penalties, which impose criminal fines for willful violations. In contrast, an employer violating the CFEPA may be liable to the employee only for the impermissible wage difference, with interest. Notably, while Title VII caps damages and the EPA limits the types of recoverable damages, the CFEPA does neither.

No Double Recovery. Under the CFEPA, if an employee files claims under both the EPA and the CFEPA and recovers damages under both, the employee must return to the employer the lesser amount recovered under either law.

Recordkeeping Requirements. The CFEPA adopts federal recordkeeping requirements already established by the U.S. Department of Labor for the Fair Labor Standards Act (FLSA). Interestingly, the CFEPA does not define "employer," but a conservative approach would be to presume coverage for all Alabama employers. The FLSA requires employers to keep certain records regarding employee pay for three years, as opposed to one year under Title VII.

Statute of Limitations. Like the EPA, the CFEPA has a two-year statute of limitations, but the CFEPA does not have the EPA's three-year limit for willful violations. As for Title VII compensation discrimination claims, an employee must file with the U.S. Equal Employment Opportunity Commission (EEOC) within 180 days. Before the enactment of the Lilly Ledbetter Fair Pay Act of 2009, the last day to file a pay claim was either two years or 180 days after the alleged discrimination for EPA and Title VII claims respectively. The Lilly Ledbetter Act significantly expanded the limitations period by counting each paycheck containing discriminatory compensation as a separate violation, regardless of when the discrimination began.

The CFEPA is silent on how it relates to the Lilly Ledbetter Act, so it is unclear how Alabama courts will interpret the limitations period. Alabama courts may embrace a more conservative approach and find that the limitations period begins when the employee obtains notice of the discrimination.

State Court Versus Federal Court. The enactment of the CFEPA raises this question: Will Alabama state court employment claims increase? A similar question arose upon adoption of the Alabama Age Discrimination in Employment Act, but an uptick in state claims never followed, presumably because of the statute's ambiguous language. Many attorneys may not want to be the first to test an uncharted statute when the federal path is already paved. Time will tell as the CFEPA goes into effect.

Bypassing Federal Agencies. Federal law currently provides a path straight to court for compensation discrimination claims. EPA claimants can head to court without filing an EEOC charge. Moreover, while Title VII race-based claims require an initial EEOC charge, an employee can bypass the agency by filing a claim under 42 U.S.C. § 1981. Although rare, Section 1981 claims afford employees a route to federal court for race claims when they miss the 180-day deadline for filing an EEOC charge. Now, the CFEPA may provide a path straight to state court for race-based pay claims that would be untimely under existing federal law.

How Can Alabama Employers Prepare to Comply With the CFEPA?

Given the impending effective date of the law, Alabama employers may want to consider taking the following actions.

  • Avoiding wage history requests and/or restructuring the question. Given that many states are banning the wage history question, and that the CFEPA creates liability for wage-history discrimination, employers may decide to avoid asking altogether, absent a compelling reason. Employers that are currently using the question to set starting salary, may want to ask for the applicant's salary expectations, rather than salary history.
  • Establishing clear and defensible compensation policies and pay practices. It is prudent periodically to review compensation policies and practices to ensure they are useful and that minimal deviation occurs.
  • Documenting compensation policies and decision-making in evaluating pay equity. Compensation decisions can be challenging to defend without accurate records documenting the reasons behind compensation decisions. Consider documenting each element used to establish compensation for a given employee, to the extent possible. Common examples of data points that are useful in explaining compensation include time in position, education level, years of relevant experience, certifications, knowledge and/or skills, and applicant salary expectations/negotiations.
  • Maintaining written, specific, and current information on job content, skill levels, essential functions, performance requirements, reporting structure, etc. Although not required, job descriptions outlining positions' required or preferred knowledge, skills, and abilities can be useful in establishing and justifying the salaries of new and current employees.
  • Conducting a proactive, privileged, and voluntary analysis of compensation with the appropriate subject matter experts as a first step to limit legal risk. Considering all aspects of a company's compensation levels may be appropriate to uncover latent inconsistencies that may have emerged due to a variety of factors.

A version of this article was published in the September 2019 issue of HR Professionals Magazine.

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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