Equal Pay and Compensation Discrimination in the Workplace

Introduction: Compensation Discrimination and Labor Legislation

The 2001 state labor legislation included several significant developments in employment standards (Nelson 2002). These included increases in minimum wage rates, child labor measures, employment regulations for the entertainment industry, limits on child labor, and prohibitions on employment discrimination based on genetic information or other grounds. Areas such as occupational safety and health, employment and training, labor relations, employee background clearance, economic development, and local living wage ordinances were not addressed. A ban on female workers being paid less than male employees by the same employer for the same work was also excluded.

Instead, the legislation provided that employers may not discriminate in the payment of wages on the basis of gender for equal work on jobs requiring equal skill, effort, and responsibility performed under the same working conditions (Nelson 2002). Beyond gender, numerous other forms of pay discrimination persist in U.S. workplaces, each with its own legal framework, enforcement history, and pattern of case law.

Gender Pay Discrimination and the Equal Pay Act of 1963

Morgan Stanley, an investment firm, paid $54 million in settlement to Allison Schieffelin as lead plaintiff in a gender discrimination case (Stites 2005). The suit was filed by the Equal Employment Opportunity Commission (EEOC). Schieffelin alleged that the company withheld opportunities for promotions and higher pay. The firm set aside $40 million for other female employees who filed similar claims and $12 million for a new diversity program to enhance compensation and promotional opportunities for its female workforce. The firm, however, denied the discrimination charges.

The settlement came after a class-action suit was permitted against Wal-Mart Stores, Inc. Wal-Mart was accused of sex discrimination, including gender pay inequity. The suit potentially covered approximately 1.6 million former and current female employees across the store chain, making it the largest workplace discrimination lawsuit in American history (Stites 2005).

The EEOC listed at least 24,000 sex discrimination complaints in its files since 1988 (Stites 2005). In 2004 alone, it resolved more than 10,000 sex discrimination complaints and recovered $100.8 million in benefits for aggrieved parties. The Equal Pay Act of 1963 obliges employers to provide male and female employees equal pay for equal work within the same organization or establishment. Human resource professionals must ensure pay equity within the organization for employees with the same work experience and education. Should a discrepancy exist, they must identify the reason and determine whether it is legitimate. Under the Act, it is unlawful to retaliate against those who oppose discriminatory practices based on sex, file discrimination charges, testify, or participate in any investigation in any capacity (Stites 2005).

Twenty-eight female employees at an airline manufacturing company filed action against the company for systemic gender discrimination (Law Reporter 2004). They claimed it violated Title VII of the Civil Rights Act of 1964, federal and state equal pay statutes, and state anti-discrimination laws. They charged that the company denied them job assignments, promotions, and overtime pay solely on the basis of gender. The company also knowingly allowed significant pay disparities between male and female employees and did not correct them. The complaining employees also sued for breach of contract, negligent supervision, and violation of state wage law. The company denied that any of its operating divisions or subsidiaries practiced gender discrimination or disparate treatment of employee salaries. The parties ultimately settled before trial for compensation ranging between $40.6 million and $72.5 million. The company also agreed to revise its policies on compensation, promotion selection, and overtime pay (Law Reporter 2004).

Pregnancy Discrimination

Pregnant women employees are also subjected to discrimination. When Milyn Pickler informed her boss at the Berge Ford auto dealership of her pregnancy, she was fired (Woodward 2005). Her employer told her that employees needed to be proactive rather than reactive and that her cramping or nausea could lead to an accident and a lawsuit against the company. He assured her she could return to work after delivery. However, the loss of her job as a service department representative also meant the loss of her health insurance. Pickler was only 19 years old and lost her position just before Christmas. She sought the assistance of the EEOC, which filed suit on her behalf. An out-of-court settlement was reached for $70,000 (Woodward 2005).

Pregnancy discrimination claims rose by 5% from 2001 to 2004, making pregnancy discrimination one of the fastest-growing forms of workplace discrimination (Woodward 2005). Cases filed at the EEOC increased by 39% from 1992 to 2003, surpassing even sexual harassment and other sex discrimination charges. Claim amounts likewise tripled during that period. EEOC spokesman David Grinberg noted that the Commission recovered roughly $12 to $13 million per year through litigation and pre-litigation settlements. Pregnancy discrimination settlements rose by 15.6% in 2004. More than half of all complaints involved illegal or improper termination. Others included imposing improper restrictions on the amount or type of work assigned to pregnant employees or limiting their ability to take maternity leave. More than half of these employees worked in the service and retail industries, a trend that has persisted since the early 1990s.

Jocelyn C. Frye, legal and public policy director at the National Partnership for Women and Families, noted that pregnancy discrimination could be subtler than in Pickler's case. A well-performing pregnant woman in a managerial role might be quietly reassigned to a different type of position. Contributing factors to the rise in pregnancy discrimination have been varied. One major factor was the increased and still-increasing number of women in the workforce (Woodward 2005).

The U.S. Census Bureau reported that nearly 60% of women aged 16 and older had joined the workforce (Woodward 2005). The U.S. Department of Labor projected that women would account for more than half of the growth in the labor force between 2002 and 2012. Another factor was that women increasingly continued working after becoming pregnant. The 2001 Census population reports compared historical trends: in 1978, the year before the passage of the federal Pregnancy Discrimination Act, the majority of pregnant women quit their jobs. By the early 1990s, fewer than 27% did so.

The Family and Medical Leave Act was a further contributing factor. Before 1993, when the Act was passed, pregnant women were less conscious of their legal rights. After its passage, pregnant women became more aware that they were entitled to 12 weeks of unpaid leave if they met minimum eligibility requirements. Victims also had greater motivation to bring claims because their paychecks formed a larger share of the household budget, and their income was needed both during and after pregnancy. Stereotyping was yet another factor: employers believed that pregnant women could not perform their duties like other workers, would prefer fewer hours, or would become less committed. EEOC trial attorney Michael J. O'Brien noted that this last type of discrimination had been prevalent over the preceding five years.

Senior associate Jennifer Long of Baker & McKenzie suspected that the actual volume of pregnancy discrimination cases exceeded what statistics represented. Women at the professional level or above were often reluctant to file complaints for fear that reputational damage would affect their future careers. Long also believed that discrimination could be worse at lower job levels, where managers might be less aware of legal requirements when dealing with pregnant employees.

The Pregnancy Discrimination Act of 1978 requires employers to treat pregnant employees the same as non-pregnant employees. The Act, an amendment to Title VII of the Civil Rights Act of 1964, entitles pregnant employees to the same accommodations extended to other employees in similarly disabling conditions — such as those recovering from an accident. The Act applies to companies with 15 or more employees, while the Family and Medical Leave Act applies to companies with 50 or more employees. State laws further extend rights and benefits, and with 25 or more states offering protections exceeding those of federal law, many employees find the range of available protections difficult to navigate (Woodward 2005).

Conclusion: Enforcing the Equal Pay Act

The Equal Pay Act has received a great deal of focus and attention in the wake of widespread discrimination lawsuits. The U.S. Department of Labor announced that it would aggressively enforce the EPA by seeking and imposing harsher penalties against violating companies, an intention promptly demonstrated in the case of Texaco (Bland 1999). Texaco paid $3.1 million to female employees who had been consistently paid less than their male counterparts. The settlement included $2.2 million in back pay and interest and $900,000 in salary increases. Former President Bill Clinton requested that $14 million be allocated to close the wage gap (Bland 1999).

Although the EPA has been in existence since 1963, pay equity remained a persistent demand (Bland 1999). Women still earned only 75 cents for every dollar earned by men, according to then-U.S. Secretary of Labor Alexis Herman. African-American women earned 65 cents and Hispanic women only 55 cents for every dollar earned by a White male. This disparity affected women's purchasing power and fell most heavily on the children of single mothers. Pay inequity also reduces wages and living standards more broadly.

The EPA requires companies to provide equal pay for equal work. More specifically, it prohibits paying an employee of either sex less than an employee of the opposite sex when both perform the same work or the same amount of work requiring equal skill, effort, and responsibility under similar working conditions. The EPA covers only pay disparities between the sexes. It does not address pay differences based on race, color, age, disability, religion, or national origin, which are addressed by other federal laws — including Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, and the Americans with Disabilities Act. The EPA applies to all forms of payment and benefits, including perks such as profit sharing, expense accounts, bonuses, hotel accommodations during official travel, and the use of company vehicles (Bland 1999).

The EPA provides protection to employees of the opposite sex working within the same organization (Bland 1999). It applies to any employer with two or more employees who is subject to the Fair Labor Standards Act. Employees may also sue managers or supervisors who exercise control over them, as those individuals are considered "employers" under the Act. The EPA recognizes several exemptions: unequal skills, unequal effort, unequal responsibility, dissimilar working conditions, and differences in seniority and merit systems. Courts also recognize legitimate grounds for pay differentials, such as longevity of service or disciplinary demotion. However, courts prohibit unequal pay when it is based solely on an employee's prior salary, on the average cost of employing workers of one gender, or on the fact that employees work different shifts (Bland 1999).

Employers are advised to evaluate their pay structures to ensure compliance with the EPA (Bland 1999). They should review company pay policies, job duties, and required skills, and use that data to assess which positions fall under EPA provisions. Data should encompass seniority systems, merit systems, incentive systems, working conditions, and the levels of skill and effort required for each position. When pay differences appear between male and female employees performing the same job with the same qualifications, the employer must be able to demonstrate that the difference is based on a factor other than gender. If this cannot be demonstrated, the employer should correct the problem immediately and make wages equitable. Pay raises should be made retroactive for three years to conform to the EPA's three-year maximum statute of limitations. The EPA expressly prohibits reducing the pay of one gender to match the lower pay of the other; rather, the pay of the underpaid employee must be raised. While this may cost money, it will be far less costly than the penalties incurred by taking the legal risk (Bland 1999).