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Paul Millus Authors “Equal Pay for Equal Work: The Government’s Next Gambit” for NYLJ

Publication Source: New York Law Journal

Millus_PaulFor years it has been reported that female employees earn 77 cents for every dollar earned by a man. While conclusions reached by some on the subject may be questioned based on a variety of factors,1 there is no question that equal pay is a topic of serious debate and now, the government has weighed in again on the subject.

On the seven-year anniversary of the signing into law of the Lilly Ledbetter Fair Pay Act of 2009, the chairman of the Equal Employment Opportunity Commission (EEOC) announced on Jan. 27, 2016, the publication of a proposal to collect pay data for all employers with 100 or more employees. From the EEOC’s perspective, the data collection will help employers evaluate their own pay practice to prevent discrimination in their pay practice. The public comment period began with the filing of the proposed rule in the Federal Register on Feb. 1, 2016, leaving 57 days (April 1, 2016) to submit a formal comment. This will be followed by a public hearing which may result in changes to the proposed rule or no changes at all. The proposed rule (and any modifications) will be effective 120 days after publication in the Federal Register.

The new data will consist of W-2 earnings of employees identified by sex and ethnicity within 10 job categories each with 12 “Pay Bands” with annual salaries of $19,239 up to $208,000 and over. It will include the total number of hours worked by the employees in each Pay Band across the same gender and ethnic lines. This data will be included with the other information filed by employers in their Employer Information Report (EEO-1) which includes an employee’s race, ethnicity, and sex by job category.2 Thus, commencing on the regular filing date for such report, Sept. 30 any calendar year, starting in 2017, subject employers are to include this information in their pay data. This article will address the law as it applies to equal pay claims and the possible impact of the new EEO-1 reporting requirements.

The Law on Equal Pay
The Equal Pay Act was passed in 1963.3 It protects employees from discrimination “between employees on the basis of sex” who are paid different wages for “equal work on jobs–the performance of which requires equal skill, effort and responsibility.” As for the Equal Pay Act’s New York counterpart, claims brought under the New York Equal Pay Act are evaluated the same as federal Equal Pay Act claims.4 Equal pay claims can also be brought under Title VII if the allegation is that alleged pay inequality was based on the employee being a member of a protected class.5

The primary difference between bringing an equal pay claim under the Equal Pay Act as opposed to one brought under Title VII is that, essentially, the Equal Pay Act is a strict liability statute where a plaintiff need not prove discriminatory intent.6 However, discriminatory intent must be shown with a Title VII claim. In the end, however, claims under each statute “must be construed in harmony, particularly when claims made under the two statutes arise out of the same discriminatory pay policies.”7

Next, the Ledbetter Act may also be a factor in any equal pay claim. Under the Ledbetter Act “each paycheck issued pursuant to a discriminatory compensation decision or pay structure” is deemed to be “an independent, actionable act” and is applicable retroactively “to all claims of discrimination in compensation under Title VII…pending after May 28, 2007.”8 Finally, the last time legislation was considered in connection with equal pay was the Paycheck Fairness Act. This act was defeated in Congress in 2014 and it would have, inter alia, limited pay differentials to be based on “bona fide” factors such as education, training or experience.9

Under the Equal Pay Act an employee must allege “[(1)] the employer pays different wages to employees of the opposite sex; [(2)] the employees perform equal work on jobs requiring equal skill, effort or responsibility; and [(3)] the jobs are performed under similar working conditions.”10 A prima facie case under Title VII requires the plaintiff to show (1) that the employee was a member of a protected class; (2) that the employee was paid less than non-members of the employer’s class for work requiring substantially the same responsibility and (3) there is evidence of discriminatory animus.11

Whether the claim is brought under Title VII or the Equal Pay Act, the same standards are used and the same basic question abounds, to wit, was the plaintiff treated differently than those similarly situated?12 Both types of claims are analyzed under the burden-shifting test established in the McDonnell Douglas case.13 Under the burden shifting analysis, as set out by the Supreme Court in McDonnell Douglas Corp. v. Green, after a plaintiff has made out a prima facie case under Title VII, the burden of going forward shifts to the employer to “articulate some legitimate, nondiscriminatory reason” for the adverse employment action. The plaintiff then shoulders the ultimate burden of proving that the employer’s articulated reason was pretextual.

While an employer can demonstrate that unequal pay is predicated on legitimate factors that are not sex related such as seniority, or quantity of production, the cases often turn to an analysis between plaintiff’s position and circumstances of her employment and those of her purportedly similarly situated counterparts. While making that comparison, the plaintiff “need not demonstrate that her job is identical to a higher-paid position, but only must show that the two positions are ‘substantially equal'” in skill, effort and responsibility.

A sole comparison can suffice, and the plaintiff’s job title is not controlling.14 Nevertheless, the employee must be found to have been similarly situated in “all material respects.”15 This requirement generally provides enough room for an employer to demonstrate that there is no viable claim. The variety of differences between an employee’s job responsibilities and actual duties often make a successful comparison between relevant employees elusive.

EEO Reporting Requirements
The wage and hour information that will inevitably be added to the subject employers’ EEO-1 reports will not change how an equal pay case is analyzed. The courts have spoken on such matters with clarity. However, this information will be readily available to government agencies in the first instance, such as the EEOC, which can use it to develop a pattern analysis as it pertains to pay differentials between men and women in the workplace. Moreover, once information is disclosed, someone will find a way of obtaining it and using it for their own purpose.

There is no question that, despite the confidentiality protections afforded to EEO-1 data, the information is ascertainable.16 First, according to the Notice filed by the EEOC on Feb. 1, 2016, the EEOC plans “to develop a software tool that will allow their investigators to conduct an initial analysis by looking at W-2 pay distribution within a single firm or establishment and by comparing the firm’s or establishment’s data to aggregate industry or metropolitan-area data.”17 Thus, the government will have the data readily available to do what they see fit with it. Whether the pay data will enable investigators to truly and accurately evaluate pay disparities among male or female workers is another story.

An intellectually honest assessment may be undermined by the fact that a company’s payroll is defined by workers who work in different jobs, have differing levels of marketability or education and who have vastly unique and dissimilar abilities–all of which affect salary determination. Considering the EEOC is increasingly playing a proactive role in finding evidence of alleged discrimination as opposed to simply adjudicating filed claims, employers have reason to be on alert as to what they may face in the future.

Also, EEO reports are generally discoverable.18 Where knowledge is power, the information that will be available to putative plaintiffs may be used to buttress their disparate treatment or disparate impact claims. More importantly, such data is ready made for the equal pay class action. It is true that the data will not fully explain the distinction in the variety of jobs within each EEO-1 Pay Band or identify individual employees’ pay, and will most certainly not touch on the lawful factors supporting any decision regarding compensation. Yet, it will provide meaningful information that, at a minimum, may be used by the government or in private litigation to redress perceived wrongs. Since this type of employment litigation is generally complex and expensive, often requiring the hiring of very expensive experts, employers need to take note and prepare for the future.

Reprinted with permission from the February 16, 2016 online issue of New York Law Journal. 2016 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited.