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Sep 2018
21
September 21, 2018

Pay Equity is Becoming a Priority

“Equal pay” is a simple concept: people should be paid equally for equal work. If a male and a female nurse both perform the same work in the same hospital on the same shift, for instance, “equal pay” suggests that they should be paid the same amount. Yet determining equal pay can be complicated. 

The federal Equal Pay Act (EPA) prohibits discrimination on account of sex in the payment of wages by employers. Equal work is work that requires substantially equal responsibility, effort and skill performed under similar working conditions. The EPA recognizes, however, that differences in pay can be legal. Individuals working in similar jobs may be paid differently based on merit or seniority, for example. Differences in pay based on education level or experience are also allowed. Yet differences in pay based on sex are not. 

The Equal Employment Opportunity Commission (EEOC) identified pay equity as one of its six strategic areas of focus for 2018–2021. Under the Obama administration, the EEOC published new reporting requirements for employers with more than 100 employees. These requirements would have provided the EEOC with information about the race, ethnicity and sex of an organization’s employees within certain pay ranges. However, under the Trump administration, the EEOC rolled back these requirements. 

Nevertheless, the EEOC continues to file equal pay lawsuits. For example, the University of Denver recently paid $2.66 million to settle an equal pay claim brought by the EEOC on behalf of female salaried professors. Such lawsuits are certainly a warning for employers that are not monitoring their pay practices.  
  
Some states have imposed additional responsibilities on employers beyond those in the federal EPA. One state law approach to pay equity is “banning the question.” “Banning the question” means that an employer may not ask an applicant about salary history. Massachusetts, along with a handful of other states, follows this approach. 

There is a growing trend towards a “comparable worth” approach. Comparable worth means paying employees equally for jobs of similar skill and responsibility. Comparable worth focuses on narrowing the gaps in pay between traditionally male and traditionally female-dominated fields. 

Under an equal pay analysis, the question is whether there is a justification for two employees in the same job (for example, two nurses) to be paid differently. Under a comparable worth analysis, the question is whether two employees in different jobs (e.g., an electrician and a nurse) are providing comparable value but are paid differently. For example, California has taken a step towards comparable worth by requiring equal pay for “substantially similar work,” taking into account “skill, effort and responsibility.”

Federal law currently focuses on equal pay, not comparable worth. Federal law also does not “ban the question.” Michigan currently does not have a law “banning the question.” Nor does Michigan have a current comparable worth law. Indeed, Michigan has a law that prohibits local governments from passing ordinances that would “ban the question” or impose comparable worth. But Michigan employers with employees in other states need to be mindful of the laws in those other states relating to “banning the question” and pay equity. 

Many employers are now starting to focus on pay equity issues for a number of reasons. One reason is legal compliance. However, another reason is to be able to attract and retain good talent, especially in a strong economy.

Some employers conduct internal pay equity studies. These studies seek to identify pay inequities that may indicate pay discrimination based on gender, race, national origin or other protected status. It may be useful to engage your attorney at the outset of a pay equity study. An attorney’s counsel can be privileged and confidential. If an employer does the study on its own, however, the study may be discoverable in a future lawsuit. 

Collaboration credit: Malaina Weldy, Notre Dame Law School 2019

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