Are You Compliant with Federal Gender-based Pay Equity and Discrimination Laws?

Federal law prohibits virtually all employers from compensating employees differently based on gender. Specifically, the Equal Pay Act (EPA) requires all employers to pay male and female employees equally if they perform “substantially equal” work in the same workplace. In addition, Title VII of the Civil Rights Act of 1964 (Title VII) prohibits employers with 15 or more employees from discriminating in pay based on gender, even in cases where employees do not perform substantially equal work.

In 2009, the Lilly Ledbetter Fair Pay Act (LLFP Act) amended Title VII to clarify that each paycheck containing discriminatory compensation constitutes a separate violation, regardless of when the discrimination began. This means that the 180-day period for an employer to be charged resets with each discriminatory payment. The LLFP Act also allows employees to recover back pay for periods of up to two years before the filing of a Title VII violation charge.

The U.S. Equal Employment Opportunity Commission (EEOC) enforces these federal pay discrimination laws.

The Equal Pay Act

The Equal Pay Act (EPA), which amended the Fair Labor Standards Act (FLSA) in 1963, requires employers to provide equal compensation to men and women who perform equal work within the same workplace. The law also makes it illegal for employers to retaliate against individuals for opposing discriminatory employment practices or making formal or informal complaints about unequal compensation.

Every employer subject to the EPA must post the “EEO is the Law” poster in a place and format accessible to applicants, employees and members. This poster describes the applicable provisions of the EPA, which are addressed in more detail below.

Equal Work

Job content, rather than job title, determines whether jobs are equal. Jobs do not need to be identical to meet this standard. Instead, jobs are equal under the law if they involve substantially similar:

Skill

Measured by factors such as the experience, ability, education, and training required to perform the job. The issue is what skills are necessary for the job, not what skills the individual employees may have. For example, two bookkeeping jobs could be considered equal under the EPA even if one of the job holders has a master’s degree in physics since that degree would not be required for the job.

Effort

The amount of physical or mental exertion needed to perform the job. For example, suppose that men and women work side by side on a line assembling machine parts. The person at the end of the line must also lift the assembled product as he or she completes the work and place it on a board. That job requires more effort than the other assembly line jobs if the extra effort of lifting the assembled product off the line is substantial and is a regular part of the job. As a result, it would not be a violation to pay that person more, regardless of gender.

Responsibility

The degree of accountability required in performing the job. For example, a salesperson who is delegated the duty of determining whether to accept customers’ personal checks has more responsibility than other salespeople. On the other hand, a minor difference in responsibility, such as turning out the lights at the end of the day, would not justify a pay differential.

Working Conditions

This encompasses two factors: (1) physical surroundings (such as temperature, fumes, and ventilation) and (2) hazards.

Single Establishment

The EPA applies only to jobs within the same establishment. An establishment is a distinct physical place of business rather than an entire company or enterprise consisting of several business places. Under some circumstances, however, physically separate places of business may be treated as one establishment. For example, if a central administrative unit hires employees, sets their compensation, and assigns them to separate work locations, the separate work sites can be considered part of one establishment.

Equal Pay

The EPA applies to all forms of compensation, including:

• Salary
• Vacation Pay
• Overtime pay
• Holiday pay
• Bonuses
• Cleaning or gasoline allowances
• Stock options
• Hotel accommodations
• Profit sharing and bonus plans
• Reimbursement for travel expenses
• Life insurance
• Benefits

When pay inequality exists between men and women who perform equal work, employers may not reduce the compensation of either sex to equalize their pay. Instead, employers must increase the compensation of the lower-paid employee(s).

EPA Pay Discrimination Charges

Unlike other laws that the U.S. Equal Employment Opportunity Commission (EEOC) enforces, the EPA does not require individuals to file a charge with the EEOC to obtain relief or to recover damages for an employer’s allegedly discriminatory employment practices. Instead, individuals may initiate an EPA charge by either filing a charge with the EEOC or suing the employer in court.

The time limits for filing an EPA charge with the EEOC and for filing a lawsuit with a court are the same: within two years of the allegedly unlawful compensation practice. In the case of a willful violation, this extends to three years. Filing an EPA charge with the EEOC does not extend the timeframe for filing a lawsuit.

EPA Affirmative Defenses

The EPA allows pay differentials between employees of opposite genders if the employer bases them on factors other than sex. Certain factors are known as affirmative defenses under the law. Employers have the burden of proving that an affirmative defense should apply. The box below provides details about the affirmative defenses available under the EPA.

Unequal pay between employees of opposite genders is permitted if the difference is based on:

• A seniority system that rewards employees based on length of employment;
• A merit system that rewards employees for exceptional job performance;
• An incentive system that pays employees based on the quality of their work or the amount of work they perform; or
• Another factor related to job performance or business operations, such as paying a shift differential to workers on less popular shifts.

Note: The U.S. Court of Appeals for the 9th Circuit has ruled that employers may not use salary history as a basis for paying one employee less than it pays another employee of the opposite gender for equal work. The court’s decision in Rizo v. Fresno County Office of Education, issued on April 9, 2018, applies to employers in Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington.

Title VII of the Civil Rights Act

Title VII of the Civil Rights Act (Title VII) protects employees from discriminatory employment practices that are based on an individual’s sex, as well as those that are based on an individual’s race, color, religion or national origin. For purposes of enforcing the prohibition against sex-based discrimination, the EEOC interprets “sex” to include gender identity and sexual orientation.

In contrast to the EPA, Title VII applies only to employers with 15 or more employees, and its prohibition against sex-based pay discrimination does not depend on whether employees of opposite genders perform equal work in the same establishment. Nevertheless, an individual can have valid claims under both the EPA and Title VII if an employer does not provide equal pay to men and women.

Prohibited Practices

Under Title VII, the following employment practices are illegal if they are motivated in any way by an individual’s sex, race, color, religion, or national origin:

• Discriminating against an individual concerning compensation, terms, conditions, or privileges of employment;
• Discharging or failing or refusing to hire an individual; and
• Limiting, segregating, or classifying employees or applicants in any way would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect their employment status.

It is also illegal for an employer to retaliate against an individual who opposes discriminatory employment practices or who makes formal or informal complaints about unequal compensation under Title VII.

Title VII Pay Discrimination Charges

To obtain relief under Title VII, an individual affected by an allegedly discriminatory pay practice must file a charge with the EEOC. Individuals may not sue an employer in court for a Title VII violation unless the EEOC permits them to do so through a Notice of Right to Sue. The EEOC will not grant this permission until after it has investigated a charge and reached a conclusion that it is unable to determine whether a violation occurred.

The time allowed for filing a Title VII pay-discrimination charge with the EEOC is 180 days after an allegedly discriminatory pay practice occurs. This may extend to 300 days if a local or state law prohibiting the same form of pay discrimination applies. In these cases, individuals must file charges with the state or local agency that enforces the law.

Lilly Ledbetter Fair Pay Act

The Lilly Ledbetter Fair Pay Act (LLFP Act) amended Title VII to clarify exactly when the 180 (or 300) days allowed for filing a pay discrimination charge begins. This law also applies to charges alleging violations of any other Title VII provision and to charges alleging violations of the federal Age Discrimination in Employment Act and Americans with Disabilities Act.

Under the LLFP Act, the 180 (or 300) days to file a charge begins as of the most recent allegedly discriminatory paycheck or other pay-related action. Examples of other pay-related actions include:

• Decisions and adoptions of policies affecting base pay, wages, or job classifications;
• Denials of career ladder or other noncompetitive promotions; and
• Failures to respond to requests for raises or other compensation.

The LLFP Act clarified that each discriminatory action is a separate violation of Title VII. This means that the time for filing a charge begins anew every time an employee receives a paycheck containing discriminatory pay and every time an employer engages in any other prohibited practice.

In addition, the LLFP Act allows an employer’s liability for a Title VII violation to accrue – and allows an aggrieved person to obtain relief, including recovery of back pay – for up to two years before a charge is filed. This applies in cases where unlawful employment practices that occurred during the 180-day (or 300-day) charge-filing period are similar or related to practices that occurred within the rest of the two years before the charge-filing date.

Links and Resources

• EEOC overview regarding equal pay/compensation discrimination
• Text of the Equal Pay Act
• Text of Title VII of the Civil Rights Act of 1964
• Text of the Lilly Ledbetter Fair Pay Act

This Compliance Overview is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.

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