In 1963, Congress passed the Equal Pay Act (EPA) to fix longstanding wage discrimination against women, who had typically received less pay than men doing the same jobs. (29 U.S.C. § 206.) The law was enacted as an amendment to the Fair Labor Standards Act.
The EPA says that men and women working in the same establishment and performing jobs that require equal levels of skill, effort, and responsibility should be paid equally. Working in the same “establishment” generally means being employed in the same store, office, or worksite—not merely working for the same company.
The law applies to nearly all public and private employers, and employers can be held liable for wage discrimination even if they had no intent to discriminate.
Exceptions for Unequal Pay
Under the EPA, it’s okay for an employer to pay a member of one sex more than a member of the other who does basically the same job if the difference is because of:
- a seniority system
- a merit system
- a productivity system, or
- any factor other than sex.
Employers who are accused of wage discrimination can defend themselves by producing evidence that the wage difference was caused by one or more of these exceptions. They’ll prevail if they can convince the judge or jury that it’s more likely than not that an exception explains the differential.
Let’s look at each exception in a bit more detail.
Seniority System
One of the EPA exceptions allows employers to use a seniority system that compensates employees based on years of service. An employer may use a seniority system to pay longer-tenured employees more than newer hires, even if this approach results in a wage disparity between the sexes.
An employer using a seniority system must do so in good faith. Supervisors cannot make arbitrary exceptions to the system, nor can they use the setup as a cover for genuine discrimination. An employer could not, for example, exempt employees who are sole breadwinners from the seniority system.
Merit System
Another exception is for merit systems that pay employees based on job performance. In a merit system, supervisors evaluate employees on a regular basis according to predetermined objective measures, with exceptional performers receiving raises or bonuses.
While performance reviews must be based on objective criteria, a certain amount of subjectivity is inevitable—and allowed under the EPA. For example, a supervisor might be asked to rate his employee’s ability to interact with customers on a scale of one to ten. If no or little objective data is available, the supervisor might have to give an evaluation based largely on impressions and anecdotes. Unlimited subjectivity is not okay, though, and employers need to closely examine their merit systems to ensure that they are evaluating performance fairly and consistently.
Productivity System
The next EPA exception relates to productivity systems, also called “incentive systems.” These systems reward employees based on the quality or quantity of work produced. Employers often use this kind of approach in manufacturing and other production jobs where output can be measured easily. For example, an employee in a fulfillment warehouse might receive a bonus for every 100 packages prepared for shipping.
Other Factors
Factors other than sex can also be responsible for legal wage disparities between the sexes. But such factors must be related to the job, beneficial to the employer’s business, and applied equally to male and female employees. Factors that can justify higher pay include:
- additional education or training
- more experience in the industry
- willingness to work evenings or weekends
- greater revenue generated by the employee, and
- greater employee bargaining power.
For example, a school could pay its teachers with master’s degrees in education more than those without, or a hospital could choose to pay more to nurses who work night shifts. An employer could also give a raise to a worker who had received an attractive job offer from a competitor.
The Importance of Wage Audits
Some have argued that the broad exceptions to the EPA have essentially swallowed the rule requiring equal pay. But in recent years the Equal Employment Opportunity Commission (EEOC) (the agency tasked with enforcing the EPA) and federal courts have interpreted the exceptions more narrowly.
As a result, it’s usually a good idea for employers to conduct regular wage audits to determine whether they’re violating the EPA. The employer should consider the employee’s total compensation, including:
- salary
- benefits
- bonuses
- vacation and holiday pay
- stock options, and
- overtime.
Regular audits are especially important because employers can commit illegal discrimination even without any intent to discriminate.
Getting Legal Help
If you’ve been the victim of unlawful wage discrimination, you can file a claim with the EEOC or in federal court. Before you file a claim, you should consider contacting an employment lawyer to discuss your options. One of the issues to discuss with a lawyer is how state law might apply to your situation—many states have their own equal pay laws that are similar to the EPA. (Some such laws have exceptions for small businesses.)
In addition, employers who may have committed wage discrimination—even unintentionally—should consider hiring an employment lawyer to address any claims of discrimination and to ensure ongoing compliance with the EPA.