High burden for employers justifying pay disparities

Under the federal Equal Pay Act (EPA), employers are required to pay men and women equally for work that requires “substantially equal” skill, effort and responsibility under similar working conditions. Employers who violate the EPA by paying women less than equally qualified men for the same work risk serious consequences, including enforcement actions by the Equal Employment Opportunity Commission and lawsuits by employees who claim they’ve been discriminated against.

Employers can defend themselves against EPA claims by claiming they had “gender-neutral” reasons for a pay disparity. But a recent ruling by a federal appeals court shows that employers have to meet a high standard for this to work.

In that case, three state employees in Maryland sued their employer under the EPA, complaining they were being paid less than male co-workers with the same qualifications.

The state agency tried to defend itself by claiming the disparity was because it was using a state salary schedule and because of the experience and qualifications of the workers. A lower court judge agreed with the employer and threw out the suit.

But the federal appeals court reversed. According to the court, the salary schedule excuse didn’t hold water because the agency could have been guilty of gender bias in how it assigned salary steps in the first place.

Further, the court didn’t buy the experience/qualifications argument because nothing in the record showed definitively that these factors actually explained the pay differences.

The key point here is that it’s not enough to show that a legitimate non-gender-based reason could explain a pay differential.  The employer must show that it actually did.

This could be a tough burden to meet, so you need to be very conscious of how pay differentials could be perceived by certain workers and make sure that any differences are actually justified by experience and qualifications. It also helps to consult with an employment lawyer in setting salaries to make sure you’re not unwittingly leaving yourself vulnerable to an equal pay claim.