Consider this hypothetical: An employer operates a national business, and has two vice president of sales (VP) positions. The VPs have essentially the same tenure with the company and the same duties, except one oversees the western U.S. and the other the eastern U.S. Also, both territories are about the same size. 

Now, consider that the VP of the west is male and is paid 30% more than the VP of the east, who is female.  Is there legal risk of a pay discrimination claim under Title VII (the federal anti-discrimination statute)? 

Spoiler alert: The short answer is YES because the female performs essentially the same work as her male colleague for less money. 

Now let's ask a different question: Is less pay for equal work the only way to establish a pay discrimination claim under Title VII? 

A federal appeals court recently addressed that very issue in the case of Lenzi v. Systemax, Inc., et al. In that case, Lenzi, a former vice president-level executive, claimed she was paid less than other vice president executives (who are male) because of her female gender.  The trial court granted summary judgment to the company and dismissed the case, because the executive failed to show that her work/duties were substantially similar to the work/duties performed by the male vice president executives. The appeals court, however, reversed the decision, holding that there are other circumstances under which a discrimination pay claim can be established.  The court emphasized the fact that all Title VII requires is that an individual prove that her employer discriminated with respect to her compensation because of her gender (or other protected class).

The appeals court further concluded that the executive presented adequate evidence of gender discrimination regarding her compensation.  Specifically, male vice presidents were paid above the market rate established by the company for their positions, while she was paid below the market rate for her position. 

The court also noted that the executive presented evidence that the senior executive who was principally responsible for setting the compensation for vice presidents had a history of making derogatory comments and jokes about women.

In sum, employers should not rely solely on job titles and compensation in evaluating pay discrimination liability risk.  Employers should consider other circumstances that could support discriminatory animus, including but not limited to the following:

  • Has the decision maker responsible for compensation been engaged in or been accused of engaging in discrimination or harassment?
  • Are there compensation variations between similar level employees? If so, are employees who are members of a protected class compensated less?What are the business reasons for the variations?
  • What are the market rates for individual job categories?Is there any variation in compensation for employees who are members of a protected class?

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.