This is the second part of a discussion about expected changes in the compensation discrimination laws. The first post addressed how Congress will likely change the statute of limitations under Title VII for compensation discrimination claims. This post will focus on proposed changes to the Equal Pay Act. Unlike the statute of limitations legislation, these changes are not part of the Senate bill that is expected to be voted on this Wednesday (Jan. 21, 2009). It is part of the bill the House passed and sent to the Senate. Obviously, the final vote and conference, we won't know what, if anything, will be passed.
For these reasons, I will refer only to the House bill (HR 11).Part II of HR 11 would change the Equal Pay Act ("EPA"), a 45 year-old statute which regulates sex-discrimination in compensation. The Equal Pay Act was passed in 1963, a year before the Civil Rights Act of 1964 (which included what we now call "Title VII"). Because there was no then-existing provision, the EPA was added to and became part of the Fair Labor Standards Act ("FLSA") and the damages available for violations of the FLSA (lost backpay and liquidated damages) have been adopted to redress EPA violations.
To understand the changes HR 11 would make, understand how the law current works as it applies to Tennessee employers (so bear with me while I quote passages from court decisions). Under the EPA, an employee must demonstrate that an employer pays "different wages to employees of opposite sexes 'for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions.'" EEOC v. Romeo Cmty. Schs., 976 F.2d 985, 987 (6th Cir. 1992). The job functions of two individuals need not be identical to be considered "equal work," Beck-Wilson v. Principi, 441 F.3d 353, 359 (6th Cir. 2006), there need only be a "substantial equality of skill, effort, responsibility, and working conditions." Odomes v. Nucare, Inc., 653 F.2d 246, 250 (6th Cir. 1981)).
If an employee proves equal jobs and a pay difference (more on that in a later post), the employer must prove that the difference is justified by one of four affirmative defenses: (1) a seniority system; (2) a merit system; (3) a system that measures earnings by quantity or quality of production; or (4) any factor other than sex. The focus of the pending legislation is on the fourth defense so we can ignore the first three, for now. As the Sixth Circuit interprets it, the final defense "does not include literally any other factor, but a factor that, at a minimum, was adopted for a legitimate business reason." EEOC v. J.C. Penney Co., Inc., 843 F.2d 249, 253 (6th Cir. 1988). Much could be written about how the "legitimate business reason" came to be a requirement, but since one court has addressed this, I won't go into it further.
The beef Congress has with the fourth defense is that the way some courts (including the one linked to above) have interpreted it. These courts hold that the "'factors other than sex' need not be business-related or even related to the particular position in question" (at least according to what was said in legislative history from a prior Congress). This factor should, the same legislative history says, "be job-related, not derived or based upon a sex-based differential, and consistent with business necessity." The evil identified in the legislative history is when some court decisions interpret "any other factor other than sex" as letting employers base starting salaries on "market forces." That is bad, Congress concludes, because the "market" historically underpays females.
Market forces, the criticized decisions say, legally justifies a pay difference such as when employers hire a person into a job paying that person $X.XX whereas it paid (at some point) a person of the opposite sex $Y.YY (Y being less than X in this example). This perpetuates lower pay for females, concludes Congress, because: "While market forces may be a legitimate basis for determining pay, market forces tainted with sex discrimination are not."
So, to change the effect of these decisions, the legislation passed by the house would redefine the "any other factor other than sex" to apply "only if the employer demonstrates that such factor: (i) is not based upon or derived from a sex-based differential in compensation; (ii) is job-related with respect to the position in question; and (iii) is consistent with business necessity. Such defense shall not apply where the employee demonstrates that an alternative employment practice exists that would serve the same business purpose without producing such differential and that the employer has refused to adopt such alternative practice."
This change would not only adopt the "legitimate business reason" already imposed on Tennessee employers by the Sixth Circuit, it would require employers to go further and show the factor is "consistent with business necessity." This is very different from the "legitimate non-discriminatory business reason" employers are used to in the typical discrimination claim. It refers to a "business necessity" apparently meaning to have this phrase interpreted as it is used Title VII. To be sure, the legislative history from the prior Congress' thought "business necessity" meant that the practice (or factor) bears "a significant relationship to a business objective of the employer." The phrase, however, is not defined in the statute (or proposed statute) and the Supreme Court has not consistently defined the term (saying it meant "related to job performance" in one case and that it must be "necessary to safe and efficient job performance" in another).
So, far from simply adopting the Sixth Circuit standard, the pending bill would force employers to re-evaluate every factor used in pay setting or pay increase decisions. To give an example of the kind of concerns this would raise, look at a decision criticized by the legislative history. There, the employer paid males higher wages because they worked in the more profitable men's clothing department. The court held this legitimate, a decision criticized because "the products sold by the women were of lesser quality and cost less than the goods sold in the men's department." So, any factor, even a neutral one, that can be identified as causing – even in part - a sex-based pay difference will need to be examined to ensure it will not lead to EPA liability. Several suggestions on how to do this will be addressed in later posts.
The EPA is sort of a statute lost in the weeds of other, more "popular" discrimination statutes. To some, the EPA serves a different purpose from Title VII because the EPA does not require a showing of discriminatory intent. In practice, however (at least around here), courts make no meaningful distinctions between Title VII and EPA claims and Title VII already prohibits "unintentional" discrimination (disparate impact). Given that Title VII already prohibits sex-based disparate impacts including those affecting compensation, a legitimate argument could be made that the EPA even as amended merely duplicates existing statutes and should be repealed to eliminate confusion for both employees and employers. That would be, of course, politically inopportune to say the least so don't count on it happening.
The next post will focus on other changes HR 11 would make to EPA claims. Those changes are designed to make EPA claims much more financially attractive to those who want to bring a lawsuit over perceived pay differences.
For these reasons, I will refer only to the House bill (HR 11).Part II of HR 11 would change the Equal Pay Act ("EPA"), a 45 year-old statute which regulates sex-discrimination in compensation. The Equal Pay Act was passed in 1963, a year before the Civil Rights Act of 1964 (which included what we now call "Title VII"). Because there was no then-existing provision, the EPA was added to and became part of the Fair Labor Standards Act ("FLSA") and the damages available for violations of the FLSA (lost backpay and liquidated damages) have been adopted to redress EPA violations.
To understand the changes HR 11 would make, understand how the law current works as it applies to Tennessee employers (so bear with me while I quote passages from court decisions). Under the EPA, an employee must demonstrate that an employer pays "different wages to employees of opposite sexes 'for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions.'" EEOC v. Romeo Cmty. Schs., 976 F.2d 985, 987 (6th Cir. 1992). The job functions of two individuals need not be identical to be considered "equal work," Beck-Wilson v. Principi, 441 F.3d 353, 359 (6th Cir. 2006), there need only be a "substantial equality of skill, effort, responsibility, and working conditions." Odomes v. Nucare, Inc., 653 F.2d 246, 250 (6th Cir. 1981)).
If an employee proves equal jobs and a pay difference (more on that in a later post), the employer must prove that the difference is justified by one of four affirmative defenses: (1) a seniority system; (2) a merit system; (3) a system that measures earnings by quantity or quality of production; or (4) any factor other than sex. The focus of the pending legislation is on the fourth defense so we can ignore the first three, for now. As the Sixth Circuit interprets it, the final defense "does not include literally any other factor, but a factor that, at a minimum, was adopted for a legitimate business reason." EEOC v. J.C. Penney Co., Inc., 843 F.2d 249, 253 (6th Cir. 1988). Much could be written about how the "legitimate business reason" came to be a requirement, but since one court has addressed this, I won't go into it further.
The beef Congress has with the fourth defense is that the way some courts (including the one linked to above) have interpreted it. These courts hold that the "'factors other than sex' need not be business-related or even related to the particular position in question" (at least according to what was said in legislative history from a prior Congress). This factor should, the same legislative history says, "be job-related, not derived or based upon a sex-based differential, and consistent with business necessity." The evil identified in the legislative history is when some court decisions interpret "any other factor other than sex" as letting employers base starting salaries on "market forces." That is bad, Congress concludes, because the "market" historically underpays females.
Market forces, the criticized decisions say, legally justifies a pay difference such as when employers hire a person into a job paying that person $X.XX whereas it paid (at some point) a person of the opposite sex $Y.YY (Y being less than X in this example). This perpetuates lower pay for females, concludes Congress, because: "While market forces may be a legitimate basis for determining pay, market forces tainted with sex discrimination are not."
So, to change the effect of these decisions, the legislation passed by the house would redefine the "any other factor other than sex" to apply "only if the employer demonstrates that such factor: (i) is not based upon or derived from a sex-based differential in compensation; (ii) is job-related with respect to the position in question; and (iii) is consistent with business necessity. Such defense shall not apply where the employee demonstrates that an alternative employment practice exists that would serve the same business purpose without producing such differential and that the employer has refused to adopt such alternative practice."
This change would not only adopt the "legitimate business reason" already imposed on Tennessee employers by the Sixth Circuit, it would require employers to go further and show the factor is "consistent with business necessity." This is very different from the "legitimate non-discriminatory business reason" employers are used to in the typical discrimination claim. It refers to a "business necessity" apparently meaning to have this phrase interpreted as it is used Title VII. To be sure, the legislative history from the prior Congress' thought "business necessity" meant that the practice (or factor) bears "a significant relationship to a business objective of the employer." The phrase, however, is not defined in the statute (or proposed statute) and the Supreme Court has not consistently defined the term (saying it meant "related to job performance" in one case and that it must be "necessary to safe and efficient job performance" in another).
So, far from simply adopting the Sixth Circuit standard, the pending bill would force employers to re-evaluate every factor used in pay setting or pay increase decisions. To give an example of the kind of concerns this would raise, look at a decision criticized by the legislative history. There, the employer paid males higher wages because they worked in the more profitable men's clothing department. The court held this legitimate, a decision criticized because "the products sold by the women were of lesser quality and cost less than the goods sold in the men's department." So, any factor, even a neutral one, that can be identified as causing – even in part - a sex-based pay difference will need to be examined to ensure it will not lead to EPA liability. Several suggestions on how to do this will be addressed in later posts.
The EPA is sort of a statute lost in the weeds of other, more "popular" discrimination statutes. To some, the EPA serves a different purpose from Title VII because the EPA does not require a showing of discriminatory intent. In practice, however (at least around here), courts make no meaningful distinctions between Title VII and EPA claims and Title VII already prohibits "unintentional" discrimination (disparate impact). Given that Title VII already prohibits sex-based disparate impacts including those affecting compensation, a legitimate argument could be made that the EPA even as amended merely duplicates existing statutes and should be repealed to eliminate confusion for both employees and employers. That would be, of course, politically inopportune to say the least so don't count on it happening.
The next post will focus on other changes HR 11 would make to EPA claims. Those changes are designed to make EPA claims much more financially attractive to those who want to bring a lawsuit over perceived pay differences.
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