Equal Pay Act

The Equal Pay Act: Equal Total Compensation Is No Defense If Rate of Pay Is Unequal

Imagine this scenario: a corporation runs health spas, each of which is divided into a men’s division and a women’s division that operate on alternate days.  Male managers run the men’s division, while female managers run the women’s division.  Because there are far more female customers interested in spa services, the corporation decides to compensate the male managers and female managers, all of whom are paid on commission, at different rates in order to ensure that male and female salaries are equal.  So male managers’ salaries are based on a higher percentage of gross sales than female managers’ salaries.  This way, the total compensation of men and women is exactly the same.

If this superficially “equal” compensation scheme seems unfair to you, that’s because it is.  In Bence v. Detroit Health Corporation, 712 F.2d 1024 (6th Cir. 1983), the Sixth Circuit Court of Appeals held that this exact pay practice violated the Equal Pay Act (“EPA”).

The EPA, passed by Congress and signed into law by President Kennedy in 1963, prohibits an employer from discriminating “between employees on the basis of sex by paying wages . . . at a rate less than the rate at which [the employer] pays 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,” with exceptions for when an unequal pay scheme is established pursuant to (1) a seniority system, (2) a merit system, (3) a system that measures earnings by quantity or quality of production, or (4) a differential based on any factor other than sex.  29 U.S.C. § 206(d)(1) (emphasis added).

Many states have similar statutory provisions.  As the Sixth Circuit held in Bence, Detroit Health Corporation’s desire to ensure that male and female managers’ total compensation was equal by paying women at a lower rate violated the EPA and fell under none of its exceptions, since the lower commission rate “effectively locked female employees, and only female employees, into an inferior position regardless of their effort or productivity.”  712 F.2d at 1031.

This crucial distinction between total compensation and rate of pay has been recognized in more recent EPA decisions throughout the country.  For example, in Kelly v. Media General, No. 03-AR-2557-S, 2005 WL 8158684 (N.D. Ala. July 20, 2005), a federal court in Alabama held that the female plaintiff could recover damages for an EPA violation to compensate for her unlawfully low base salary, even though she was paid more than men with the same job in total compensation when her bonus was factored in.  Id. at *1–2.  In that case, the defendant-employer argued that the plaintiff should not prevail because her relatively large bonus was a result of luck and not performance; the court swiftly rejected this argument, reasoning that “a defendant should not avoid liability for actions which admittedly would violate the EPA because blind luck dictated a bonus for the plaintiff, but not [men with the same position], which is greater than the relevant difference in pay between them.”  Id. at *2 n.4.  Similarly, in Ebbert v. Nassau County, No. 05-CV-5445 (FB) (AKT), 2009 WL 935812 (E.D.N.Y. Mar. 31, 2009), a federal court in New York rejected the defendant-employer’s argument that the underpaid female plaintiffs should not recover under the EPA because, if overtime and holiday pay were included, they received total compensation greater than that received by men with the same job.  Id. at *2.  In that case, Judge Frederic Block captured the absurdity of the defendant’s argument perfectly, noting: “As a matter of common sense, total remuneration cannot be the proper point of comparison.  If it were, an employer who pays a woman $10 per hour and a man $20 per hour would not violate the EPA or the [New York State Equal Pay Act] as long as the woman negated the obvious disparity by working twice as many hours.  Neither Congress nor the New York Legislature could have intended such an absurd result.”  Id. at *3.

If you believe you may have been underpaid based on your gender or any other protected characteristic, you should meet with an attorney to determine what your legal options are.  Contact us at the button below to schedule a consultation.