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The Federal Courts of Appeal
In a previously published article, I answered negatively the question of whether disparate impact theory of liability is available as a matter of law for a plaintiff or an enforcement agency to make a case of sex-based discrimination in compensation under the Equal Pay Act of 1963 (EPA) and/or under Title VII of the Civil Rights Act of 1964. I reached this conclusion after reviewing two important Supreme Court cases.
First, the majority opinion in County of Washington v. Gunter 452 U.S. 161 (1981) ruled that the Bennett Amendment (codified in section 703(h) of Title VII) incorporated the EPA four affirmative defenses including the fourth one “any other factor other than sex” (AOFOTS). In doing so, the Court in County of Washington had expressed doubt in dictum as to whether sex-based disparate impact claims of discrimination in pay are viable under Title VII in light of the Bennett Amendment incorporation of AOFOTS affirmative defense.
Second, in a plurality opinion in Smith v. City of Jackson 24 years later, a plurality of the Supreme Court interpreted the EPA’s fourth affirmative defense, AOFOTS, as not requiring the employer to show the reasonableness of AOFOTS, making it clear that, by incorporating this broad “catch-all” exception that embraces an almost limitless number of factors, so long as they are sex neutral, Congress meant to prohibit all disparate-impact claims in the EPA. The Bennett Amendment incorporated the EPA’s four affirmative defenses, including AOFOTS, into Title VII. The clear implication of this incorporation of AOFOTS is that sex-based disparate impact claims in compensation, in all their forms and variations, are unavailable under Title VII. We reached this conclusion based on the Court’s discussion in Footnote 11 in Smith. We concluded that Title VII sex-based disparate impact discrimination in pay claims are not viable as a matter of law in Title VII.
In interpreting AOFOTS the federal courts of appeal have disagreed on whether the fourth affirmative defense, AOFOTS, requires an additional showing on the part of the defendant that the relied-upon AOFOTS has a legitimate business-related purpose. Two camps were formed:
With the exception of Wernsing v. Department of Human Services that was decided on October 21, 2005, all the above cases representing the two camps were decided before the US Supreme Court ruling in Smith v. City of Jackson (decided on March 30, 2005). Wernsing (reviewed in detail below), authored by Judge Easterbrook, is the Seventh Circuit’s strongest criticism of the other circuit courts that imposed as “ukase” a reasonable or legitimate business requirement on AOFOTS affirmative defense. It is clear that the Supreme Court Decision in Smith v. City of Jackson supports the Seventh and Eighth Circuits. It is our contention that the Smith plurality resolved this split in favor of the Seventh and Eighth Circuits that adopted the plain meaning and the literal interpretation of AOFOTS.
It is important to emphasize that the addition of the business-related legitimate or reasonable purpose as a “plus” to the AOFOTS has never been equated with Griggs’ standard of job relatedness and business necessity. The business-related legitimate or reasonable purpose is more in line with the defendant’s burden of production in response to a plaintiff prima facie case in a Title VII disparate treatment case. For example, in the Aldrich case, the Second Circuit – part of the AOFOTS “plus” camp – held that an employer bears the burden of proving that a bona fide business-related reason exists for using the gender-neutral factor that results in a wage differential in order to establish the AOFOTS defense. Additionally, the Second Circuit noted that the plaintiff may counter the defendant’s AOFOTS affirmative defense by offering evidence showing that the reasons sought to be proved are a pretext for sex discrimination. When deciding Title VII cases, it appears that the business-related AOFOTS camp has squarely placed the business-related or legitimate requirement within Title VII disparate treatment allocation of evidentiary burden. We conclude here that the enforcement agencies’ position on the availability of disparate impact in sex-based discrimination is not in line with either of the two camps. Furthermore, it appears to be in conflict with them.
Is making a defendant prove an EPA affirmative defense such as AOFOTS tantamount to requiring the defendant to show a business-related purpose? I don’t believe so. Proving the AOFOTS affirmative defense will require persuading the trier of facts that the AOFOTS is gender neutral in its intent and application, and that the employer actually relied on it, and not only proffered it, in the litigation context or after the fact. While not required, the employer, if it so wishes, could as an option show that its gender-neutral AOFOTS is also business-related. On the other hand, proving the business-related purpose of AOFOTS will require the employer to persuade the trier of facts that its business required it to rely on its proffered affirmative defense. The latter is a much higher burden that will lead to questioning the employer’s business rationale and will open the door to second-guessing the employer’s decision. As we will discuss below, when the gender-neutral AOFOTS affirmative defense is used in the context of Title VII (disparate treatment cases) where the burden of persuasion remains at all times with the plaintiff, there are risks related to the trier of facts viewing the absence of business-related purpose of the gender-neutral AOFOTS as weakness or even worse evidence of pretext. As Justice O’Connor noted in her concurrence in judgment in Smith, “[r]eliance on an unreasonable factor would indicate that the employer’s explanation is, in fact, no more than a pretext for intentional discrimination.”
To present the “gender-neutral AOFOTS” camp, we will review the Seventh Circuit case of Wernsing v Department of Human Services. In Wernsing, the question presented is whether an HR policy and practice that creates pay disparities between men and women by offering new hires a starting salary that is at least equal to what they had been earning at their last job, plus a raise (as an incentive to entice them to take the job), is an acceptable and successful affirmative defense that will enable defendant to escape liability under § 206(d), 29 U.S.C. of the EPA of 1963. Defendant argued that this practice constitutes AOFOTS that explains plaintiff’s lower pay when compared to that of other men performing equal work on jobs that require equal skill, effort, and responsibility, and which are performed under similar working conditions. Plaintiff has argued to the Seventh Circuit that (1) this practice used by defendant to set starting salaries lacked any acceptable business justification, and (2) any use of prior pay to set the starting pay of new hires must be discriminatory because it perpetuates discrimination that exists in society.
Judge Easterbrook relied on the plain meaning and literal language of the EPA statute to reject the plaintiff’s claim of AOFOTS requiring an acceptable business justification. Judge Easterbrook also discussed and rejected the Second, Sixth, Ninth, and Eleventh Circuits interpretation that have asserted as a “ukase” that the AOFOTS must be related to a business requirement. Judge Easterbrook insists that Section 206(d) does not authorize federal courts to set their own standards of “acceptable” business practices. The statute asks whether the employer has a reason other than sex – not whether it has a “good” reason, for “Congress has not authorized federal judges to serve as personnel managers for America’s employers.” For Judge Easterbrook, the language of the statute was clear enough for the plain-meaning rule to govern the judicial decision, without the need to go into any nebulous Congressional intent. Furthermore, when Judge Easterbrook examined the Act’s legislative history, the only proper and clear conclusion he drew was that Congress intended a broad interpretation of AOFOTS affirmative defense in order to preserve employers’ discretion to conduct their business.
Furthermore, Judge Easterbrook explained that the Seventh Circuit reading of the EPA is similar to how courts have dealt with equivalent questions under other federal statutes, such as Title VII of the Civil Rights Act of 1964. The judiciary doesn’t “sit in a court of industrial relations. No matter how medieval a firm’s practices, no matter how high-handed its decisional process, no matter how mistaken the firm’s managers, Title VII and § 1981 do not interfere.” Anti-discrimination statutes prohibit reliance on criteria such as race and sex but leave employers free to set their own standards as long as they avoid reliance on the forbidden grounds. When a plaintiff is challenging the employer business-legitimate reason at the pretext phase of a Title VII disparate treatment case, Judge Easterbrook explains that proof that the actual reason produced by the employer was not in its best business interest does not discharge the plaintiff’s burden, as long as the employer does not rely on one of the forbidden grounds.
When discussing the Ninth Circuit case of Kouba where the “acceptable reason” requirement originated, Judge Easterbrook explained that the Ninth Circuit did not explain its genesis. “The Ninth Circuit proceeded as if the Equal Pay Act worked like the disparate-impact theory under Title VII: if the plaintiff shows that an employment practice adversely affects protected workers as a group, then the employer must provide a strong reason (‘business necessity’) for the practice.” For Judge Easterbrook, an analogy to disparate-impact litigation under Title VII does not justify a “business reason” requirement under the EPA, because the EPA deals exclusively with disparate treatment. It does not have a disparate-impact component.
When discussing the Eleventh Circuit case of Glenn, Judge Easterbrook rejected the view that “Congressional intent” provided any justification for the adding of an acceptable business reason requirement to the AOFOTS. For those Circuits Courts that may hint or claim that there is some Congressional intent regarding what AOFOTS is, Judge Easterbrook responded that legislative intent is an oxymoron, or nebulous at best. For Judge Easterbrook, Congress makes legal rules through statutes, and in most cases no one can discern in them some majoritarian intent.
At the end, Judge Easterbrook summarized the Seventh Circuit’s firm view fairly well:
“The disagreement between this Circuit (plus the Eighth) and those that require an “acceptable business reason” is established, and we are not even slightly tempted to change sides. Our position has the support of the language in
§ 206(d), the practice under other employment-discrimination regimes, and the holdings of the Eighth Circuit. The opposing view rests on an “intent” that, if not manufactured by the judges rather than discovered by digging through legislative debates, lacks any footing in enacted texts.”
Starting pay as a discrete event is an interesting topic in compensation discrimination. We have dedicated an entire forthcoming article to discussing it, including how countries such as the UK and Canada have dealt with it under their own laws. It is worth noting that the practice of relying on past salary to set a starting salary presents several unique issues. First, theoretically, if discrimination in pay against women is prevalent in society this practice will perpetuate that discrimination. Women’s pay will never catch up with men’s, even when they change jobs. Second, the fact is that starting salary is a market encounter, and neoclassical economic theory is driven by forces of supply and demand. The University of Chicago’s neoclassical School of Economics is very influential on the Seventh Circuit jurists. This economic theory assumes that employers compete with one another for qualified workers and that workers compete with one another for the best jobs. Employers will not pay more than they have to for employees, and employees will not leave their current jobs unless they see the benefits of doing so.
Interestingly, the court in Wernsing required that plaintiff proves how discrimination in society is actually causing the defendant’s HR policy and practice to discriminate against women1 but did not require from the defendant (who had the burden under the EPA of proving its affirmative defense of AOFOTS) to show how the market forces actually relate to the gender-neutral policy and practice the defendant relied on. Admittedly, any requirement for the employer to show that its policy and practice had some type of relation to the market forces will be tantamount to requiring the employer to show that its AOFOTS is business-related. Still we were puzzled by the fact that a quick reference to the market was enough to rally the court. During oral argument and in his written opinion, Judge Easterbrook framed the question of market forces as off-limits to judicial review by declaring that sex discrimination is an intentional wrong and markets are impersonal and have no intent. Consequently, as a matter of dogma, markets can never discriminate. No inquiry was made by the court whether the presumably market-driven policy and practice of establishing new employees’ salaries based on their previous salaries had anything to do with the interaction between the supply and demand (e.g., number of offers rejected, etc.). The difficulty involved in proving market causation is a discussion best left for another day. Suffice it to say that in the strong-hold of neoclassical economic theory that is the Seventh Circuit, litigants don’t need to prove market causation – the court will take judicial notice! Judge Easterbrook described it as “the evident benefit of making the job more attractive to the best candidates.” At work here is one of the axioms of neoclassical economics. The Homo Economicus is well and alive in the Seventh Circuit. The holy truth of market logic is held to be self-evident, and needs neither evidence nor proof of whether or how it was operating in any specific circumstances. It is worth mentioning that in Corning Glass Works v. Brennan, 417 U.S. 188 (1974), the Supreme Court expressed some concern about the wholesale acceptance of market forces when it expressed the view that the pay differential that arose because men would not work at the low pay rates of women inspectors reflected a job market in which Corning could pay women less than men for the same work. The court expressed the view that the fact that Corning “took advantage of such a situation may be understandable as a matter of economics, but its differential nevertheless became illegal once Congress enacted into law the principle of equal pay for equal work.”
Business-Related or Legitimate Business Purpose Requirement for AOFOTS
The Second, Sixth, Ninth, and Eleventh Circuits interpreted the fourth affirmative defense AOFOTS as requiring the defendant to prove a business-related legitimate need. The reason provided relies on the prediction that if such a requirement were not there, employers could easily find loopholes to justify pay discrimination. Furthermore, they argue that Congress never intended to provide an employer with a loophole that would undercut the purpose of the EPA, which was to eliminate sex discrimination in pay.
To present the position of this camp, I will discuss the first case to impose the business-related requirement. Kouba v. Allstate Ins. Co., 691 F.2d 873 (9th Cir. 1982) involved an undisputed wage differential between newly hired male and female sales agents. Under Allstate’s policies, new sales agents participated in a thirteen-week basic training course, during which they were guaranteed a basic minimum pay that was set using a number of factors, including the agent’s prior salary. The plaintiff argued that the use of prior salary almost by definition perpetuated the effects of past gender discrimination.
The District Court agreed and required Allstate to demonstrate that it had made a reasonable attempt to satisfy itself that the factor causing the wage differential was not the product of sex discrimination. Subsequently, the District Court found that Allstate had not met that burden and entered summary judgment in favor of the plaintiff.
The Ninth Circuit reversed and remanded. The court rejected the District Court’s formulation recognizing that in enacting the AOFOTS exception, Congress was clearly signaling that the EPA was not meant to be a means of remedying the effects of all past sex discrimination. Note that the remediation of past and pre-existing structural inequalities, whether caused by discrimination or other factors, is what disparate impact theory of liability is about. For example, a wage differential that reflects past differences in training and experience would be covered by the AOFOTS exception, even though opportunities for training and experience may have been denied to women in the past. See H.R. Rep. No. 309, 88th Cong., 1st Sess. 3, 1963 U.S. Code Cong. & Ad News 687-689.
Finding that the District Court’s formulation swept too broadly, the Ninth Circuit attempted to formulate a “pragmatic standard” requiring the employer to demonstrate that it used the challenged AOFOTS “reasonably in light of the employer’s stated purpose.” The Ninth Circuit opined that EPA does not impose a strict prohibition against the use of prior salary, but the Court must find that the business reasons given by Allstate do not reasonably explain its use of AOFOTS before finding a violation of the Act. Consequently, the Court concluded that “an employer cannot use a factor which causes a wage differential between male and female employees absent an acceptable business reason.” The Court then remanded the matter back to the District Court to determine whether Allstate’s proffered AOFOTS met this standard. The instructions given to the District Court on remand will require the District Court to act as the “Compensation Manager” for Allstate (“relevant considerations in evaluating the reasonableness of this practice include (1) whether the employer also uses other available predictors of the new employee’s performance, (2) whether the employer attributes less significance to prior salary once the employee has proven himself or herself on the job, and (3) whether the employer relies more heavily on salary when the prior job resembles the job of sales agent.”).
The AOFOTS Can be Challenged on Other Grounds
The gender-neutral AOFOTS, without the business justification, does not give a free pass to employers to discriminate. The AOFOTS must be neutral in its application and intent. Furthermore, the employer must show that it had relied on it instead of using it as an after-the-act justification in the context of litigation. Naturally, these are evidentiary issues that are tied to the specific facts and circumstances of each case. Some courts have relied on the bona fide requirement expressed by Justice Brennan in the majority decision in County of Washington v. Gunther. The Black’s Law Dictionary defines bona fide as “in or with good faith; honestly, openly, and sincerely; without deceit or fraud… Truly; actually, etc.” The actual reliance on AOFOTS as well as its neutral application and neutral intent should satisfy the bona fide requirement.
In King v. Acosta Sales and Marketing, Inc. 678 F.3d 470 (2012), a three-judge panel of the Seventh Circuit (Judges Posner, Wood and Easterbrook) reversed the District Court that had made a legal error by accepting defendant articulation of education and experience as potentially explanatory variables under AOFOTS, without making defendant prove that they actually account for the difference in pay between plaintiff and her male comparators. The Court ruled that plaintiff’s claim under the EPA must be returned to the District Court for a trial at which defendant will need to prove, and not just offer – as it is the case in Title VII burden shifting approach – that education and experience account for these differences in pay. The Court explained that plaintiff, on her Title VII disparate treatment claim, can also show that defendant’s explanation (AOFOTS) may be a pretext for discrimination.
In the context of an OFCCP audit of federal contractors’ compensation practices, or an EEOC investigation of an EPA or Title VII sex-based pay discrimination charge, it is worth discussing whether few inconsistencies in the pay of few employees are enough for an enforcement agency to claim that the explanatory factor is tainted, and the employer should be precluded from using it. It is our contention that the enforcement agencies are too quick to conclude that AOFOTS is tainted, e.g., not neutrally applied. Generally this conclusion is reached after observing a small number of inconsistencies in the employer practice of applying AOFOTS.
For anyone who has managed compensation for a company in the private sector, inconsistencies in pay are just a fact of life. What is an inconsistency in pay? An inconsistency occurs when the actual difference in pay between two employees contradicts (or cannot be explained by) the employer-proffered independent factors or variables that the employer uses to determine employees’ pay. For example, suppose an employer’s approach to determining pay for similar jobs is based on two factors, performance rating and time with the company (with starting salary being the same for everyone). The employer will have an inconsistency on its hands when a male employee who has higher cumulative performance ratings and more years of service is earning less, equal, or slightly higher pay than another male employee performing the same work. (In this scenario, the favorable difference in pay must not be fully explained by the difference in performance and years of service.)
Inconsistencies in pay are certainly rare for the employers that have unionized employees. The CBA generally uses a formulaic approach to pay that substantially eliminates managers’ discretions in determining rewards, and to a certain extent, shields both employees and employers from the effect of the market by delaying market adjustments until the opening of the contract negotiations. The grievance system that regulates the provisions of the CBA ensures consistent application of the CBA pay provisions, in the case of any minor deviation from its terms. In this context, inconsistent decisions are scrutinized, and inconsistent applications of the provisions of the CBA are challenged – and ultimately eliminated – through the grievance process, all the way up to the filing of ULP and the NLRB process.
In non-unionized workplaces, inconsistencies among employees’ pay will always exist, in varying degrees. Their degree of spread and frequency may depend on whether the employer sets and enforces guidelines or rules regarding managers’ discretion, and the variations of the different market conditions faced by employers and employees at different times. When an employer’s compensation practices have high management subjectivities and discretion or when the employer typically operates in volatile market conditions, we can expect to see much pay inconsistency among employees, not only when we compare the pay of male to female employees performing “similar jobs,” but also when we compare female to female employees or male to male employees. Pay is a cumulative dependent variable, and multiple managers, facing different business and market conditions, have historically impacted, to a certain degree, each employee’s current level of pay. But more importantly, when managers make pay decisions, they don’t engage in the comparative process that a court engages in when examining a pay discrimination claim.
It is important to emphasize that pay inconsistencies may not be automatically discriminatory at all (as shown in the above example where we compared two male employees’ pay). Many individual cases of compensation discrimination are lost by employers, not because of individual discrimination, but because the employers are not able to explain the inconsistencies when comparing the pay of a female employee to a male employee, considering the independent variables that are available or unavailable, retained or not-retained, properly or improperly documented, or consistently or inconsistently applied. For example, many employers don’t track and retain their employees’ starting pay, foreclosing an important affirmative defense.
An employer will escape liability if it can justify a pay differential by showing that the AOFOTS it relied on is gender neutral, and that this neutrality can be evidenced by demonstrating a lack of discriminatory application or intent. As we will discuss in the next section, EPA cases are strict liability cases where plaintiff is not required to prove intent. If the employer fails to discharge its affirmative defense burden through persuasion of the trier of facts, the employer loses the case. Title VII disparate treatment, on the other hand, will require an additional showing of intent to discriminate against an employee because of his/her gender or a bias/animus against an employee because of his/her gender. Cohort analysis and cohort reports performed by employers are the best tools available to flag those inconsistencies in pay that could be the basis of an individual claim of unequal pay for equal work. It is suggested that these inconsistencies be properly investigated and resolved.
Liability Under EPA and Title VII2
The question of whether liability established under the EPA and its burden of proof scheme will automatically lead to Title VII liability has generated conflicting opinions from the federal courts of appeal. There has been much controversy over what effect the Bennett Amendment has on Title VII sex-based wage discrimination claims, specifically in regard to its effect on the allocation of the burden of proof in Title VII sex-based unequal pay for equal work claims. Federal courts have answered the following question differently: does the adoption of the Bennett Amendment and its incorporation of the EPA’s four affirmative defenses into Title VII provide a basis for deviating from the traditional Title VII analysis, which would leave the ultimate burden of proving discriminatory intent upon the plaintiff, and instead require an EPA analysis in sex-based claims of unequal pay for equal work under Title VII?
These different conclusions reached by the two camps are not academic. They have significant impact on plaintiff (including the EEOC) who usually brings an unequal pay for equal work claim under both Title VII and the EPA, requiring the courts to examine the elements and burdens of proof under both statutes to determine how plaintiff’s evidence fits into the two different burden of proofs. It is important to note that the federal court has a great deal of discretion in deciding these questions because the Congressional record on the relationship between these two statutes is lacking or inconclusive. Aside from the anemic record of Congress regarding the Bennett Amendment, there is very little history addressing the relationship between the EPA and Title VII.
Though the EPA and Title VII share a similar purpose in prohibiting sex-based pay discrimination, they are nonetheless distinct in many areas. These include pleading requirements, proof required as to the allocation of the parties’ burden of proof, statutory coverage, damages and remedies, trier of fact (jury or judge), charge-filling requirements, limitation period, individual liability and class action rules. These items require an entire article dedicated to discussing each of them. We will limit our discussion to the burden of proof that establishes liability when plaintiff alleged an unequal pay for equal work claim.
The Non-equivalence of a Prima Facie Case of Sex-based Discrimination under EPA and Title VII: In a previous article, we discussed what is unique about a compensation injury or adverse action. Differences in pay (negative as well as positive), or zero difference between an employee and his/her comparator, may or may not constitute an actionable harm or injury. The controlling factor in determining a compensation injury is not the difference or no difference in pay (the dependent variable), but how an employee or group of employees are “rated” under the other independent factors or variables that influence or correlate with pay. Presence of injury, harm, or adverse compensation action is not determined on the basis of pay considered in isolation; rather it is based on the interaction of pay with the relevant factors that determine and influence pay. We argued that in the prima facie stage of a sex-based Title VII pay discrimination case, focusing on the dependent variable (pay) and ignoring the independent variables (factors that explain pay) have been misplaced by the courts.
Under Title VII a plaintiff earning more, the same or less than his/her comparator can still claim a compensation injury if the independent variables that influence his/her pay favor him/her more than his/her comparator. We argued that in a case alleging violation of equal pay for equal work standard, a Title VII prima facie case is not equivalent to an EPA prima facie case. Title VII offers the plaintiff the possibility of making a prima facie case even though his/her pay is similar or higher than his/her comparator. However, under the EPA, the language of the statute limits actionable claims to a scenario where the plaintiff’s pay is less than his/her comparator. This is certainly a paradox that may need to be resolved by the court.
The Non-equivalence in Phase Two of the Burden of Proof under EPA and Title VII: To avoid being repetitious, I will not recite all the elements and the allocation of the burden of proof in EPA and Title VII actions as they appear at length in so many judgments and opinions. For EPA we will rely on the Supreme Court case of Corning Glass Works v. Brennan 417 U.S. 188 (1974) and for Title VII we will rely on McDonnell Douglas Corp. v. Green, 411 U. S. 792 (1973) and Texas Department of Community Affairs v. Burdine, 450 U.S. 248 (1980) for guidance on the burden of proof.
Once the plaintiff has established a prima facie case under the EPA, the burden then shifts to the defendant in phase two, to show that the pay disparity is due to one of four EPA affirmative defenses. The defendant must prove that the affirmative defense advanced, explains away the difference in pay. Thus, under the EPA, once a prima facie case has been established, the risk of non-persuasion rests with the defendant on the ultimate issue of liability. In Title VII cases, when the plaintiff succeeds in proving the prima facie case, the burden shifts to the defendant to articulate some legitimate, nondiscriminatory reason for the employee’s adverse compensation action. The defendant carries only a burden of production to articulate a legitimate, nondiscriminatory reason for the pay disparity. Accordingly, in Title VII cases the plaintiff retains the burden of persuasion and carries the risk of non-persuasion on the ultimate issue of liability.
Guidance is needed from the court on the non-equivalence between EPA and Title VII (e.g. the defendant has a burden of persuasion in EPA that it does not have in Title VII) in many critical areas.
The Rift in Title VII Between Sex-Based and Race-Based Discrimination in Compensation
It is clear from the reasons discussed above that under Title VII, race-based pay discrimination claims must and should be treated differently than sex-based pay discrimination ones. The important question of whether the federal court dealt differently with race-based pay discrimination and sex-based pay discrimination under Title VII will be addressed in a forthcoming publication.
The EPA was directed solely at wage discrimination between the sexes, forbidding the specific practice of paying unequal wages for equal work to employees of the opposite sex. Title VII, on the other hand, forbids discrimination on the basis of gender, race, national origin, etc. The legislative history of Title VII demonstrates that it was enacted primarily to counter racial discrimination. The prohibition against sex-based discrimination was added to the legislation at the last minute, and according to some theories, in an effort to thwart passage of the Civil Rights Act of 1964. Insufficient attention had been paid to so many inconsistencies, and Senator Bennett’s proposed “technical amendment” to the Civil Rights Bill that ended up codified in section 703(h) of Title VII addressed only the tip of the iceberg.
Many questions are left open. Why should a plaintiff who brings a sex-based discrimination in compensation claim under Title VII be precluded to advance a disparate impact claim and not a plaintiff who brings a race-based (or any other protected category, other than sex) discrimination in compensation claim? Did Congress’ adoption of the Bennett Amendment provide ample reason for courts to treat sex-based claims of unequal pay for equal work under Title VII differently than race, color, religion, or national origin cases? Why didn’t anyone think to apply a comparable worth type of theory to race-based pay discrimination? After all, race-based pay discrimination cases are unrelated to the EPA and are not statutorily restricted to claims of unequal pay for equal work, etc.
Notwithstanding the disagreement between the Circuit Courts on the interpretation of AOFOTS, or on the proper burden of proof in sex-based pay discrimination, it is abundantly clear that disparate impact in sex-based pay discrimination is not available, as a matter of law, in both Title VII and EPA. For employers, who are sincere in their intent and actions to comply with the laws and regulations governing pay discrimination, the task is very daunting and confusing. As we said in a previous article, the law of pay discrimination, pre-existing approaches, and methodologies are full of unresolved absurdities, uncertainties, conflicts, anomalies and paradoxes. There are conflicts between federal courts and conflicts between enforcement agencies and federal courts; sex-based pay discrimination claims are governed by different legal principles than race- or ethnicity-based claims of pay discrimination; sex-based discrimination in selection cases are treated differently than sex-based compensation claims under Title VII3.
Following New York State, California with its Senate Bill No. 358 that is, as of today, on the desk of the Governor of California, is about to enact the most confusing equal pay law in the nation. California’s forthcoming Fair Pay Act4 will expand coverage, rearrange the burden of proof as we know it under federal law, reintroduce disparate impact theory of liability in sex-based pay discrimination cases, make disparate impact available to a single plaintiff who may be able to bypass the requirement to show a significant statistical imbalance, and introduce a softer version of comparable worth! If signed by Governor Jerry Brown, this new law will become a magnet for litigation.
The stakeholders are going to wade through these confusing and contradictory laws for a long time. Indeed, this is an area of law ripe for further illumination from the Supreme Court.
This article was prepared by the author in his personal capacity. The views and opinions expressed in this article are the author’s own and do not reflect the views of his current or former employers. The author is not an attorney, his personal views and opinions are not legal advice, and no one should rely upon or construe them as such.
1. “Wage patterns in some lines of work could be discriminatory, but this is something to be proved rather than assumed. Wernsing has not offered expert evidence (or even a citation to the literature of labor economics) to support a contention that the establishments from which the Department recruits its employees use wage scales that violate the Equal Pay Act and thus discriminate against women. If sex discrimination led to lower wages in the “feeder” jobs, then using those wages as the base for pay at the Department would indeed perpetuate discrimination and violate the Equal Pay Act… It remains possible that pay differences between men and women reflect discrimination rather than choices made about allocating time between family and market endeavors, and some industries may have been successful in disguising their discrimination. But if this is so it must be established by evidence rather than assumed.” ↩
2. In this section we are not discussing the burden of proof involved in systemic cases or mixed-motives cases of pay discrimination. In a forthcoming publication we will discuss systemic cases that are either EPA or Title VII class actions, including Pattern and Practice disparate treatment cases. ↩
3. Let’s take the example of an employer that pays its employees based on their height. Under this employer policy and practice, women will be paid less than men. Under current anti-discrimination laws in compensation, this employer will be able to satisfy the AOFOTS affirmative defense, shielding itself from any liability to its women employees for pay discrimination. The paradox is, if this same employer used height as job requirement in the selection process for hiring employees, there would be no doubt that this employer’s height requirement will have disparate impact on women and the employer will be found liable if it can’t prove that the height requirement is job-related and consistent with business necessity. In Dothard v. Rawlinson, 433 U.S. 321 (1977), the Supreme Court did exactly that when it held that height and weight requirements not shown to be job-related were violating Title VII. But when used to determine pay, there is no such requirement to validate height. Another paradox is the fact that this employer’s Asian employees may be able to successfully challenge their employer’s policy and practice that predicates pay on height! ↩
4. The bill provides, in pertinent part:
2(a) An employer shall not pay any of its employees at wage rates less than the rates paid to employees of the opposite sex for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions, except where the employer demonstrates:
(1) The wage differential is based upon one or more of the following factors:
(A) A seniority system.
(B) A merit system.
(C) A system that measures earnings by quantity or quality of production.
(D) A bona fide factor other than sex, such as education, training, or experience. This factor shall apply only if the employer demonstrates that the factor is not based on or derived from a sex-based differential in compensation, is job related with respect to the position in question, and is consistent with a business necessity. For purposes of this subparagraph, “business necessity” means an overriding legitimate business purpose such that the factor relied upon effectively fulfills the business purpose it is supposed to serve. This defense shall not apply if the employee demonstrates that an alternative business practice exists that would serve the same business purpose without producing the wage differential.
(2) Each factor relied upon is applied reasonably.
(3) The one or more factors relied upon account for the entire wage differential. ↩