FALL 2020 ISSUE:
People deserve equal pay for equal work. In today’s modern, diverse workforce, this simple proposition is a matter of basic fairness and simple human rights. Yet, achieving this simple goal has proven difficult. In 2020, women still earn 81 cents for every dollar earned by men.1 The gap is even greater for women of color.2 During a 40-year career, that disparity can add up to as much as $900,000 on average.3
Why can’t we solve this pay gap and achieve this seemingly simple goal? Three hurdles have proven especially difficult to overcome:
Confidential Pay Policies. Some employers impose a rule on employees that salary information must remain confidential. If an employee discloses his or her salary to others, that employee is either punished or fired. This practice makes it hard for an employee to discover that he or she is underpaid compared to peers of the opposite sex.
Use of Prior Salary. Some employers ask a prospective employee what he or she earned at a prior job and use that prior salary as the basis for setting the salary for the employee in the new job. Because women have historically been underpaid, using the prior salary to set the new salary can simply carry forward the prior gender pay discrimination.
Salary Negotiations. Some employers treat men and women differently when negotiating salaries. While studies show that both men and women try to negotiate pay when interviewing for a new job, men are more successful in those negotiations than women.
This article addresses why these systemic hurdles impede a world in which equal pay for equal work is the reality.
What is pay discrimination?
To understand the difficulty in overcoming these systemic hurdles to equal pay, it is helpful to understand what options underpaid employees have under the law to redress their situation.
Pay discrimination occurs when an employer pays an employee who does the same job as another employee of the opposite sexless simply because of gender. Federal law provides employees with two ways to pursue a gender-based pay discrimination claim: Title VII4 and the Equal Pay Act.5 Many states also have laws prohibiting discrimination in pay because of gender.6
Both women and men can pursue pay discrimination claims under these laws. However, because women have historically been the ones underpaid compared to their male peers, the vast majority of pay discrimination claims involve women seeking to be paid the same as their male co-workers.
Although Title VII and the Equal Pay Act provide underpaid employees with important options for pursuing pay discrimination claims, those options come with challenging claim deadlines, burdens of proof, and different damages. Unwary employees often do not know how to navigate the varying deadlines and paths to properly prosecute their claims, sometimes to their substantial detriment.
For example, under Title VII the employee must file a charge of discrimination with the Equal Employment Opportunity Commission (“EEOC”) within 300 days of an “adverse employment action”7 and prove that intentional discrimination caused the pay disparity.8 State law procedures can be even stricter. In Texas, for example, the employee must file a charge within 180 days.9 Texas law also requires proof that the pay disparity resulted from intentional discrimination.10
Under the Equal Pay Act, however, an employee has two years from the adverse employment action to sue with no need to file a charge with the EEOC before suing.11 The employee does not need to prove that intentional discrimination caused the disparity.12 Instead, the employee needs to prove that: (1) he or she was paid less than a co-worker of the opposite sex for equal work on a job; (2) the performance of the job required equal skill, effort, and responsibility; and (3) the performance was done under similar working conditions.13 If the employee can prove these factors, then the burden shifts to the employer to prove that an affirmative defense under the Equal Pay Act applies.14
Where to start attacking pay disparity? Start with the three systemic hurdles play a role in continued pay discrimination: confidential pay policies, use of prior salaries, and salary negotiations.
First Hurdle: Confidential Pay Policies
In the fight for equal pay, an employee’s ability to talk about the employee’s pay is important. Without pay transparency, an employee cannot know if he or she is paid equitably and fairly. Working to eliminate these illegal rules is a critical first step in achieving pay equality.
Unfortunately, many companies still instruct employees that their salary is confidential and should not be shared with anyone. Most employees do not understand that such a rule is a per se violation of the National Labor Relations Act (“NRLA”).15 Under Section 7 of the NLRA,16 employees must be allowed to engage in “protected concerted activity.” Protected concerted activities include the right to talk about the workplace terms-- including things such as pay.17
An employer with a rule preventing employees from discussing their pay or bonuses violates the NLRA. If the employer disciplines or terminates an employee for discussing salary—which happens often—the employer further violates the NLRA.18
Some companies that do not explicitly prohibit such disclosures try to skirt an NLRA violation by informally discouraging employees from sharing their salary with co-workers. Though not necessarily a NLRA violation, this practice still impedes the goal of pay transparency.
An employee who is disciplined for violating an illegal rule can file a charge with the National Labor Relations Board (“NLRB”), alleging an unfair labor practice.19 The NLRB aggressively pursues companies that implement these illegal rules.
Many companies mistakenly believe that they do not need to comply with the NLRA if the company does not have a unionized workforce. But that belief is simply incorrect. The NLRA applies to all employers of any size.20
Second Hurdle: Policies that set pay based on an employee’s prior salary
The salary or wage that an employee earned at a previous company doing a different job should not affect what the employee is paid by a new employer doing a new job. Unfortunately, some companies routinely ask prospective employees what they earned at their previous jobs and use that salary or wage as benchmark for setting pay at the new job. This leads to unfortunate and lasting results if the employee’s prior salary at a previous company was discriminatorily low. Like a ball and chain, such employees may never escape the drag of prior wage discrimination, and the same pay discrimination that the Equal Pay Act was passed to eliminate is simply carried forward.
Fortunately, such employees are not without recourse. Under the Equal Pay Act, an employer must pay equal wages to employees of the opposite sex for equal work on jobs the performance of which requires equal skill, effort, and responsibility and which are performed under similar working conditions.21 However, exceptions (or affirmative defenses) to this requirement occur where payment is determined based on: (1) a seniority system, (2) merit system, (3) a system which measures earnings by quantity or quality of production, or (4) a differential based on any factor other than sex.22
The fourth affirmative defense – a differential based on any other factor other than sex –leads to the most litigation. The question of what can be considered a “factor other than sex” has long bedeviled federal courts trying to interpret the phrase. In Rizo v. Yovino, the court finally offered some clarity when it answered whether prior salary could serve as “any other factor other than sex” to justify a pay disparity.23
The facts in Rizo are likely familiar to many working women in America and show why pay disparities remain so common. In Rizo, the Fresno County of Education hired Aileen Rizo as a math consultant in October 2009. She held two master’s degrees and had been teaching middle school and high school math since 1996.24
Fresno County had a practice of setting new employee’s salaries based on a pay schedule governed by its Standard Operating Procedure 1440 (“SOP 1440”).25 This pay schedule outlined 12 levels for different job classifications with ten steps in each level.26 To determine a new employee’s pay, Fresno County would first consider the employee’s prior salary. Once established, Fresno County would increase that previous wage by 5% and then assign the employee to the applicable step on the pay schedule.27 In using Rizo’s prior salary, Rizo was placed at Step 1, Level 1, of the County pay schedule. As a result, Rizo earned $62,133 plus an additional $600 for having a master’s degree.28
A few years after she was hired, Rizo learned from colleagues that a newly hired male math consultant had been placed at Level 1, Step 9 of the County pay schedule.29 As a result, the male math consultant earned $79,088 -- $15,000 more than Rizo despite them both performing the same job.30
Rizo sued under the Equal Pay Act. Although Fresno County did not dispute that Rizo was paid less than her male counterpart,31 Fresno County argued that Rizo was paid less under its SOP 1440. Fresno County further argued that SOP 1440 was not illegal because it was a “factor than sex” used to set salaries.32
After five years of litigation and a trip to the Supreme Court and back, the Ninth Circuit ultimately held that Fresno County’s reliance on Rizo’s prior pay to justify paying her less than her male peer was illegal. The court recognized that prior pay, in and of itself, was not a factor related to the work an employee performs for a new employer.33 The court further recognized that prior pay was not an indicator of whether or not gender discrimination played a role in setting that prior salary.34 The Court stated:
The EPA’s fourth exception allows employers to justify wage disparities between employees of the opposite sex based on any job-related factor other than sex. Because prior pay may carry with it the effects of sex-based pay discrimination, and because sex-based pay discrimination was the precise target of the EPA, an employer may not rely on prior pay to meet its burden of showing that sex played no part in its pay decision. For purposes of the fourth exception, we conclude that the wage associated with an employee’s prior job does not qualify as a factor other than sex that can defeat a prima facie EPA claim.35
With its decision in Rizzo, the Ninth Circuit finally provided a clear prohibition against the use of prior wage or salary to justify unequal pay.36
In response to the absence of clear court guidance under the Equal Pay Act, many states and local municipalities passed laws prohibiting an employer from asking a job applicant about his or her prior salary. As of August 2020, 19 states and 21 municipalities have passed laws prohibiting inquiries into prior salaries.37
Third Hurdle: Gender disparities in salary negotiations
One frustrating justification for the gender pay gap is the repeated stereotype that “women are just not good at negotiating.” However, recent social science research and cases show that this is merely a myth. In 2018, a study from the 2018 Harvard Business Review found that women indeed ask for raises as often as men but are simply less likely to get them.38 According to that study, women who asked for a raise received a raise only 15% of the time, whereas men who asked for a raise received the raise 20% of the time.39 Over time, that big difference leads to systemic pay disparity.
Courts increasingly recognize that a disparity in how a company handles its salary negotiations can itself be evidence of sex discrimination. Several Texas cases have recognized sex-based discrimination can be shown through the disparity in how an employer treats a woman’s efforts to negotiate salary compared to a male’s efforts to negotiate salary.
In one Texas case, Thibodeaux-Woody v. Houston Community College, a woman applied for a community college position. In discussing her salary, she was told that the salary being offered was the maximum salary and could not be further negotiated after she asked to negotiate for more.40 The college ultimately decided to hire a male for the same position and allowed him to negotiate for a higher salary. On appeal, the Fifth Circuit ruled that a reasonable factfinder could find the community college discriminatorily applied its negotiation policy.41
In another Texas case, Duncan v. Texas Health and Human Services Commission, the district court denied a motion for summary judgement because the employer discriminatorily applied its negotiation policy and allowed a male greater latitude to negotiate salary.42 In that case a nurse had applied for a position as a Reconsideration Nurse. The employer offered the applicant the salary minimum, which was the employer’s standard practice.43 Because the salary minimum was lower than the applicant’s current job, the employer agreed to match her current salary and hired the applicant.44
It was later determined that a male who applied for a similar Reconsideration Nurse job has been offered more than the salary minimum—despite the standard practice of offering only the salary minimum. When the male applicant negotiated his salary, the employer ended up paying him more than his previous salary instead of just matching it.45 The court recognized the disparity in how this employer negotiated between the male and female applicant and refused to grant the employer’s motion for summary judgment.46
As the Harvard Business Review study and these cases show, the problem is not that women are bad negotiators. The problem is that employers discriminate against them and use myths and stereotypes to justify the practice.47
Employees who sue for pay discrimination need to conduct careful discovery into how other peers at the company were hired, what the peers were offered in terms of a starting salary, and what salary negotiations took place. Eventually, employers will get the message and stop their longstanding discriminatory practices.
Removing longstanding and systemic impediments to justice is often hard work, taking decades to achieve. That is certainly the case with regard to the pay disparities that women still face in today’s modern workplace.
To achieve the goal of equal pay for equal work, these barriers to pay equality must be removed through the continued evolution of the law and dogged efforts by underpaid employees to protect their rights. Though progress has been made, the wage gap stubbornly persists, showing that there is still much work to be done.
1 Payscale.com, The State of the Gender Pay Gap 2020, https://www.payscale.com/data/gender-pay-gap (last visited Oct. 26, 2020).
15 29 U.S.C. § 151 et. seq.
18Id. (A workplace rule that forbids the discussion of confidential wage information between employee patently violates Section 8(a)(1).)
23Rizo v. Yovino, No. 1:14-CV-0423-MJS, 2015 WL 9260587 (E.D. Cal. Dec. 18, 2015), vacated and remanded, 854 F.3d 1161 (9th Cir. 2017), on reh'g en banc, 887 F.3d 453 (9th Cir. 2018), cert. granted, judgment vacated, 139 S. Ct. 706, 203 L. Ed. 2d 38 (2019), and aff'd, 887 F.3d 453 (9th Cir. 2018), and cert. granted, judgment vacated, 139 S. Ct. 706, 203 L. Ed. 2d 38 (2019), and aff'd, 950 F.3d 1217 (9th Cir. 2020).
36 The Fifth Circuit actually recognized this rule years ago but used the moniker “market forces” to refer to the issue instead of “prior salary.” Siler-Khodr v. Univ. of Texas Health Sci. Ctr. San Antonio, 261 F.3d 542, 549 (5th Cir. 2001). In that case, the court recognized that the “market forces” argument was not tenable because it simply perpetuated the discrimination that Congress wanted to alleviate when it enacted the Equal Pay Act. Id. As another court described it, “the unseen hand of the market does not enjoy a presumption that it is free from the discriminatory assumptions and stereotypes in the labor market Congress passed the Equal Pay Act to eradicate.” Sauceda v. Univ. of Texas at Brownsville, 958 F.Supp.2d 761, 780 (S.D. Tex. July 26, 2013).
37 HR Dive, Salary history bans, https://www.hrdive.com/news/salary-history-ban-states-list/516662/ (last updated Aug. 7, 2020). At this time, Texas has not yet enacted a law banning the asking of prior salary information.
38 Benjamin Artz, Amanda Goodall & Andrew Oswald, Research: Women Ask for Raises as Often as Men, but Are Less Likely to Get them, https://hbr.org/2018/06/research-women-ask-for-raises-as-often-as-men-but-are-less-likely-to-get-them (June 25, 2018).
41Id. at 284.
[43 Duncan at *1.
45 Id. at 2.
46 Id. at 3–4.
47 Elizabeth Weingarten, Disproving the Myth That Women Are Bad Negotiators, https://www.paycale.com/ salary-negotiation-guide/disproving-the-myth-that-women-are-bad-negotiators (last visited Oct. 26, 2020).