Articles - Compensation and Benefits

The Equal Pay Act prohibits gender-based wage discrimination where men and women perform work of similar skill, effort, and responsibility for the same employer under similar working conditions.

What qualifies as "wage discrimination"?

Wage discrimination applies in cases where employees are doing substantially similar jobs, but receive unequal compensation.

To support a discrimination claim under the Equal Pay Act, two employees, one male and one female, must work in the same place, do equal work, and receive unequal pay.

• What does "substantially similar" mean?

Two employees don't necessarily have to have identical jobs - their jobs just need to be substantially equal. The EEOC advises that it is the job duties, not titles, which determine whether they are similar. The EEOC provides these five guidelines on determining similarities:

Skill: Employee skills are measured by experience, ability, education, and training required to perform the job. Only the skills required for the job are relevant. This means that two plumber positions are considered equal, even if one of the job holders has a law degree. An expertise in law is not necessary in the plumbing field, so these two plumbing positions are considered equal in the eyes of the Equal Pay Act.

Effort: If two employees have a similar job, but one regularly requires additional physical or mental exertion, it is not a violation of the Equal Pay Act to compensate them differently. If Kathy and Phil both operate cash registers all day, but Phil is in charge of reconciling the end of day balance and dropping the deposits off at the bank, it is justifiable to pay Phil a higher hourly wage than Kathy.

Responsibility: The EEOC advises that a major difference in job responsibility can be a factor in pay disparity. Minor differences do not warrant differences in pay. If two salespeople have the same job tasks, but one has the extra task of turning the lights out at the end of the day, that effort is considered a minor responsibility and would not justify a higher wage.

Working Conditions: Comparisons of workplace conditions are based on two factors: (1) physical surroundings like temperature, fumes, and ventilation; and (2) workplace hazards. Employees that work in difficult or less-than-desirable working conditions may be entitled to a higher wage.

Another aspect of working conditions applies to businesses with more than one physical presence. Under the Equal Pay Act, an establishment is a "distinct physical place of business, rather than an entire business or enterprise consisting of several places of business." In some circumstances, physically separate places of business are viewed as one establishment. If a central office hires employees, sets their compensation, and then assigns them to work in various locations, the separate work sites can be considered part of one establishment.

• Do my wage practices violate the Equal Pay Act?

Employers are required to pay workers at the same rate. This doesn't mean that employees have to have identical amounts of take-home pay. If, for example, one employee has a higher sales volume, and therefore generates a higher compensation over another employee, the pay differential is justified.

Pay differentials are also permitted when they are based on seniority, merit, quantity or quality of production, or a factor other than gender. These are known as "affirmative defenses", and it is the employer's burden to prove that they apply.

• What about benefits?

The Equal Pay Act covers more than just salary discrimination. Employees who do equal work are also entitled to equal employment benefits, including insurance coverage, paid time off, and retirement accounts.

• What is the statute of limitations on compensation discrimination lawsuits?

The Lilly Ledbetter Fair Pay Act, signed by President Obama in January 2009, states the180-day (or 300-day) statute of limitations for individuals subjected to compensation discrimination under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, or the Americans with Disabilities Act of 1990 resets with each new discriminatory paycheck showing wage disparity. The Lilly Ledbetter Act has a retroactive effective date of May 28, 2007, and applies to all claims of discriminatory compensation pending on or after that date.

• How do I correct unfair pay differentials between employees?

An employee's pay cannot be decreased in an effort to equal wage differences, regardless of their gender. The EEOC's compliance manual for employers, offers guidance and instructions for investigating and analyzing claims of compensation discrimination.

by NicoleD (business.gov)