Defeating Employer Excuses For Unequal Pay in California
If you are being paid less than your coworker of the opposite sex, or another race or ethnicity, for performing substantially similar work, your employer may try to come up with a justification for the pay disparity.
Remember, your employer must prove the justification.
(1) It must prove that their reasons for paying you less actually justified its wage decision at the time it made the pay decisions. It cannot be an after-the-fact defense, even if it would have arguably made sense to use that justification.
(2) Your employer must prove these justifications accounted for the ENTIRE wage differential. For example, your employer pays a male $10,000 more than you. Any and all excuses your employer gives for paying him more must account for the full $10,000. If your employer argues a male received more pay because he had prior experience supervising 10 employees whereas you had similar experience supervising only 5 employees, arguably a $10,000 difference likely won’t explain the full differential.
(3) Your employer must prove it applied any of the justifications it raised reasonably.
And finally, as you learned in my Obtaining Equal Pay blogs (read this one if you are a job applicant, and this one if you are a current employee), any prior salary cannot justify any pay disparity.
There are 4 justifications an employer can use to pay you less:
A seniority system.
A merit system.
A system that measures earnings by quantity or quality of production.
A bona fide factor other than sex, that is job-related, consistent with business necessity, and not based on sex.
This system must be a valid and bona fide seniority system. It should be consistently and even-handedly applied, unless there are defined exceptions, which are communicated and understood by employees.
(1) A Seniority System
A seniority system provides employees additional rights, benefits, and compensation that improve the longer they work for the employer.
The system should be based on predetermined rules, which are communicated to employees. These rules should define when the seniority time clock begins, definitions on how and when a particular person's seniority may be lost, definitions on which time will count toward the accrual of seniority and which will not, and specific identifications of the types of employment conditions that will be governed by seniority and those that will not.
(2) A Merit System
A merit system rewards employees because they performed better.
The system should also be based on predetermined rules, which are communicated to employees.
There should be an organized and structured procedure under which employees are systematically evaluated according to predetermined criteria that are designed to determine the relative merits of the employees. These may include efficiency, accuracy, and ability.
A merit system can be based on an objective measurement or subjective rating. If the system includes subjective criteria, it must be strictly scrutinized. Objective criteria may measure clearly identifiable and measurable data points, how many sales calls made, number of products sold, quotas fulfilled, versus subjective criteria, which permits the reviewer to provide their opinion on the employee’s work performance in areas such as interpersonal skills, communication skills, and leadership skills. These areas leave significant room for the reviewer’s opinion, a breeding ground for gender bias.
A “merit system” carried out in an informal and unsystematic manner, on an ad hoc subjective basis, that includes decisions based on personal or ill-informed judgments, and the system was not communicated to employees, may not justify a compensation disparity.
(3) A System That Measures Earnings by Quantity or Quality of Production.
This is essentially an incentive system, which provides compensation on the basis of the quality or quantity of production.
The system should also be based on predetermined rules, which are communicated to employees.
The quantity test refers to equal dollar per unit compensation rates. If two employees receive the same pay rate but one receives more total compensation because that employee produces more, the employer may be justified in the pay disparity.
The quality test refers to increased compensation for higher quality products. If an employer regularly rewards employees of both sexes equally for producing higher quality products through compensation incentives, the employer may be justified in the pay disparity.
Here is an example with where an alleged seniority system, merit system, and the requirement to account for the entire wage differential concepts can come into play:
A female engineer alleges she is paid $5,000 less than a male engineer who performs substantially similar work. The employer says the pay disparity is due to a seniority system and the male engineer has greater seniority. But, the male only worked three years longer than the female engineer, and pursuant to their seniority system, that would only justify a $3,000 disparity. In this event, apay violation may be found.
Same example, except the pay disparity is $10,000 and the employer says the seniority system and a merit system explains the difference. $3,000 accounts for 3 years of additional seniority. There is a valid merit system, but the female engineer’s merit increases have been about the same as her male comparator throughout the years, so, the remaining $7,000 difference may not be explained by the merit system. The entire wage differential is not justified and a pay violation may be found.
(4) A Bona Fide Factor Other Than Sex.
A bona fide factor other than sex can include factors such as education, training, or experience. This is the catch-all provision.
But, here’s the real catch, your employer must prove all of the following:
The factor is:
(1) job related,
(2) consistent with a business necessity, and
(3) not based or derived from a sex-based diferential in pay.
These requirements are in addition to the above requirements for every stated defense: (1) the defense was known and used at the time of the pay decision; (2) it accounted for the entire wage differential; and (3) it is applied reasonably.
California’s equal pay law is stronger than the federal Equal Pay Law because the federal EPA’s catch-all provision has been a true loophole for some employers in certain jurisdictions to cite the differences in education, or training, to account for the pay disparity, even if the education or training is not related to the performance of the job.
Let’s See How This Could Play Out:
In this example, Jane was employed as a Creative Director for a boutique coffee company. She began her position with a salary of $84,000 and resigned one year later. The person hired to fill her position is a male, and he is offered a starting salary of $100,000.
When Jane learns of this, she files a charge on the basis of unequal pay, which is a violation of the Equal Pay Act.
The employer justifies the difference in pay based on the fact that her male successor had 10 years of experience as a creative director, whereas this was Jane’s first position with the title, having worked as a Senior-Level Art Director beforehand.
This is a qualifying factor other than sex for justifying the difference in pay.
Now, let’s look at it from a different perspective:
If we use the same experience above, but Jane’s male successor did not have significant experience (0-1 years) as a Creative Director prior to taking the role, we land at a totally different outcome.
This example exposes that the employer is not consistent in the importance they place on work experience when determining a new Creative Director’s starting salary. It paints the clear picture that a male who also lacked significant experience as a Creative Director was offered a higher starting salary than Jane, which is a violation of the Equal Pay Act.
And from yet another perspective:
Let’s say Jane did have experience as a Creative Director. Let’s give her 5 years experience, with her successor coming in with 6.5 years of experience. This difference in experience would not constitute a $16,000 difference in their starting salaries. This would be a violation of the Equal Pay Act.
And a more abstract example for good measure:
Amy was hired as a Senior Mortgage Broker with a base salary of $70,000 per year. One year into her tenure with the company, a male colleague with similar previous experience was hired for another Senior Mortgage Broker position at the company. This colleague was offered a $80,000 per year base salary. If the employer makes the case that the male colleague is paid more than Amy because he has more connections with local realtors for referrals, this may be legal.
The bottom line:
if something smells fishy, that probably means that it is fishy. If you are not aware of your company’s policies for determining pay, ask! If you feel your equal pay rights are being violated at work, reach out to an employment attorney.