Hunton Employment & Labor Perspectives

As pay equity has drawn more attention in recent years, employers need to stay abreast of the patchwork of federal, state, and local laws related to pay equity issues. Importantly, employers should understand the varying standards for protected characteristics, appropriate comparators, and accepted defenses under the varying laws of different jurisdictions. At a high level, this post summarizes the federal and state legal frameworks for pay equity claims and highlights the important differences in analyzing such claims.

Under the Equal Pay Act of 1963 (EPA), employers cannot discriminate on the basis of sex with respect to compensation.  More specifically, the EPA prohibits employers paying lower wages to an employee performing equal work on jobs that require equal skill, effort, and responsibility, and are performed under similar working conditions at the same establishment. Title VII of the Civil Rights Act of 1964 prohibits employers from discriminating against employees (including with respect to compensation) on the basis of race, color, religion, sex (including pregnancy and sexual orientation), and national origin with respect to compensation. In addition to federal law, certain state laws also prohibit discrimination in pay based on varying protected classes, including: sex, sexual orientation, gender, gender identity or expression, race, color, ethnicity, national orientation, religion, creed, familial status, marital status, veteran status, domestic victim status, disability, and/or age. Employers should be mindful of the protected classes in the states where they operate. 

To prove a claim under the EPA, an employee must show that the jobs being compared are “substantially equal”. Unlike the EPA, there is no requirement under Title VII that the jobs being compared must be “substantially equal”; instead, Title VII focuses on “similarly situated” employees. In 21 states[1], plaintiff-employees must show that they were paid less for “equal work” to prove a pay discrimination claim. In Montana and Washington, the standard is “equivalent/similar work”. But, in Arizona, Illinois, and Maryland the standard is “same work”. At least six states[2] evaluate equal pay claims with the “substantially similar work” standard. Finally, at least eleven states[3] use the “comparable work” standard to compare employee compensation for equal pay claims.

These varying standards for proving pay discrimination create nuanced differences in the analysis of these claims. Courts will typically look at the skill, effort, responsibility, and working conditions to determine whether a proffered comparator is “substantially equal”, “equal work”, “equivalent/similar work”, “same work”, “substantially similar”, or “comparable work”. While two jobs may be considered comparable under one standard, they may not be under another. This is an important point for employers seeking to conduct pay audits with the goal of minimizing risks related to pay discrimination claims. Audits should be tailored to the protected classes and the legal standard for comparators in the employer’s relevant jurisdiction(s).

In addition to the differing protected classes and varying standards for comparators, different pay equity laws also provide differing defenses for pay differentials. Under the EPA, employers can rely on four justifications: (1) a seniority system, (2) a merit system, (3) a system that measures earnings by quantity or quality of production, and (4) any other factor other than sex. Employers must prove that the justification actually motivated the compensation decision and accounts for the entire differential. The fourth justification under the EPA – any factor other than sex – is a catchall justification that allows employers to explain pay differentials with non-discriminatory reasons such as education, training, or experience. However, some states have limited or eliminated this justification. For example, in Colorado and Massachusetts “any other factor other than sex” is not a justification for pay differentials under the state pay equity laws. In California, the justification is limited to bona fide factors other than sex, race, or ethnicity that are job-related, consistent with business necessity, and not based on or derivative of a sex, race, or ethnicity-based factor.

Employers should pay attention to this patchwork legal landscape for pay discrimination claims, as what may be considered lawful differences in pay under one law may be unlawful pay discrimination under another legal standard.

[1] Alabama, Connecticut, Delaware, Florida, Georgia, Hawaii, Indiana, Iowa, Kansas, New Mexico, Minnesota, Nebraska, Nevada, New Hampshire, New Mexico, Ohio, Pennsylvania, Rhode Island, Vermont, Virginia, and Wyoming.

[2] California, Colorado, New York, Massachusetts, New Jersey, and Oregon.

[3] Arkansas, Idaho, Kentucky, Maine, Missouri, North Dakota, Oklahoma, Puerto Rico, South Dakota, Tennessee, and West Virginia.