This is the second part of a series of posts relating to the gender pay gap.
Last week, we pointed out that nearly all data sets are subject to the proverbial “garbage in, garbage out” principle, and that principle applies poignantly to the equal pay discussion. As we noted, statistics show the gender pay gap can be as large as 23% or as small as 2-3% depending on how you ask and answer the question “do men and women receive equal pay?” And while you can count me as part of the chorus singing that gender-based pay inequality definitely exists and is a serious problem in need of correction, when discussing the issue within a framework of “pay inequality versus pay discrimination,” we need to take care how we use data, because what data are used have a profound impact on the legal question of when is pay “equal” and when has pay discrimination occurred.
Defining “Equal Pay”
Having read that paragraph, you may be asking, “ok, what does ‘pay discrimination’ actually mean under the law?” That same question is critical to isolating examples within the Gender Pay Gap caused by actual discrimination from examples of pay disparity arising from a host of other factors.
As with most employment legal matters, the “pay discrimination definition” issue begins with a federal statute: the Equal Pay Act enacted in 1963 as an amendment to the Fair Labor Standards Act (where federal minimum wage, overtime, limitations on child labor and the like come from). Predating the landmark Civil Rights Act of 1964 (where Title VII comes from) by a year, the federal EPA was both groundbreaking for its time and certainly necessary. However, given that we are now 54 years removed from the EPA’s passage and still struggling with a 2-3% “real” pay disparity in the workplace, there is still work to be done. And as more and more interest groups have realized, in the employment sphere it is much easier to achieve progress at the state and even local level.
The equal pay arena is one where this seems to be particularly true, as nearly every state in the country has its own specific equal pay rules and protections. In fact, only two states (Alabama and Mississippi) lack their own state-specific equal protections (although the federal EPA applies). Amongst the other 48 states and the District of Columbia, according to the American Association of University Women, only eight states (CA, DE, IL, MA, MD, MN, OR, and VT) have what the AAUW characterizes as “strong equal pay protections,” whereas 14 states (AZ, FL, GA, IN, KS, LA, MO, MT, NC, SC, TX, UT, VA, and WA) have “poor” protections and the remainder have “moderate” protections.
I am regrettably not fully conversant on every state’s specific equal pay statutes, court interpretations and other sources of protection (and I suspect few employment attorneys are off the tops of their heads), so I cannot validate one way or another the AAUW’s views with respect to many of their ratings. Nor would a state-by-state analysis make sense in this forum, given that 48 states each have their own protections and interpretations, necessitating a dissertation-level analysis to fully explore how to understand the legal concept of “equal pay” across the country.
Common Threads of State Laws
That said, virtually every state’s protections against pay discrimination share more-or-less common analytical approaches to what types of pay practices are and are not permissible. Each of these parameters all ultimately drive at the question “what does EQUAL mean in the context of equal pay?” typically by addressing the following:
- Who is protected within the sphere of “equal pay”: The large majority of state equal pay laws prohibit pay disparities based on “sex,” though a handful of states specifically use the term “gender,” which presumably is more expansive, particularly as gender-identity becomes more prevalent in our collective conscious. A handful of jurisdictions (D.C., Hawaii and the amended Massachusetts law going into effect January 1st are examples) address equal pay more universally by extending protections across protected categories such as race, national origin, etc., thereby moving away from the more traditional male-female paradigm that mostly dominates the equal pay conversation.
- How you measure what is truly “equal pay for equal work”: Many state laws list specific factors to assess what ”equal work” really means. Common amongst these factors are the level of skill involved in the position, the amount of effort a position demands, the amount of responsibility the position entails, the amount of education and experience a position requires, and the like. Some states take a more narrow view on some of these “softer” factors like education and experience that are prone to manipulation; in some circumstances they do truly reflect greater responsibility and capability, but for other positions, they do not have a significant impact on performance once minimum qualifications are satisfied (such that a male with a master’s degree and ten years’ experience should not necessarily earn a higher salary than a female in the same position with a bachelor’s and six years of experience because the master’s degree and additional experience do not result in a functionally greater role). An emerging area of disparity amongst the “equal work” factors is “location” – a number of state laws specifically require comparison within one workplace or location, whereas California last year amended its law (and now claims to now have the strictest equal pay law in the country) to specifically require comparison across like positions of the employer within the state regardless of location.
- What pay disparity practices are specifically allowed: Most state laws recognize that there are legitimate reasons why pay disparities can arise that have no relation to any discriminatory intent and occur because of gender-neutral factors or performance-based pay schemes. In addition to requiring consideration of factors such as ability and responsibility, many state laws explicitly state that pay discrimination does not exist where pay disparities occur because of seniority or merit increase systems that are gender-neutral (such as a union contract or lockstep compensation scheme), shift differentials, or compensation systems based on production quality, quantity, or revenue generation.
- What nefarious strategies are specifically prohibited: In addition to the obvious prohibition against paying men and women (or protected minorities in some states) differently for the same work, some states expressly preclude employers from lowering the wages of existing employees to achieve pay equality.
A Special Word About California and the Burden of Proof
California gets its share of focus, and in this arena rightfully so. In addition to amending its law to compare pay across locations, California has also taken a first-of-its-kind step to flip the burden of proof to the employer. Typically, employees have to prove that discrimination exists when making a legal claim. However, the California equal pay law now creates an affirmative burden on employers to justify pay disparities with legitimate defenses.
Employers in California need to not take this lightly. Random or circumstantial differences could be argued away in the past, but now the employer is responsible for creating legitimacy in pay and proving that legitimacy when challenged.
Less About Pay, More About Work
The real issue then, at least in the context of legal versus illegal pay disparities, is not so much a “pay” question as it is a “work” question. In other words, if you want to have a conversation about a gender-based pay gap and the discrimination concerns appurtenant to that pay gap, the first analysis for HR is the work, not the pay. You need to understand around what factors to cast the “equal work” net and how various legal factors shape the apples-to-apples analysis (while also understanding that the relevant apples in California are probably not the same apples in Nevada and so on). Only then can you start looking at differences in pay within the relevant positions to determine whether a gender-based pay disparity exists, and if so, whether it occurs because of legitimate factors such as neutral seniority, pay-for-production systems, greater experience and education that truly relate to greater responsibility, and the like. In other words, before you can assess whether you have an illegal gender-based pay disparity, you must first ensure that you have good data.