Here's another Equal Pay Act case, this time on the East Coast. These decisions are noteworthy for a couple of reasons. They provide an extremely problematic avenue for employers dealing with differential compensation claims based on gender because intent is not a factor. Moreover, they are rarely covered by employment practices liability insurance.
Once an EPA plaintiff establishes a prima facie case of discrimination by demonstrating that an employer paid different wages to a woman for comparable work on jobs requiring equal skill, effort and responsibility, which are performed under similar working conditions, then discrimination is presumed. To defend a prima facie case, an employer must show one of four applicable affirmative defenses. Those defenses are a seniority system, a merit system, a pay system based on quantity or quality of output, or disparity based on any factor other than gender.
In this case, EEOC v. Maryland Insurance Administration, the defendant was a state agency. Like most states, Maryland provides its employees with a complete and comprehensive merit pay and seniority system in place to set starting pay rates, in particular with regard to employees who already have time working for the Maryland state government.
It would be hard to imagine a system with more protections in it for employees.
Nevertheless, the EEOC sued under the Equal Pay Act, alleging that three female employees were paid less than their male comparators and that there was no valid basis to do so. The district court awarded summary judgment to the state, but the Fourth Circuit Court of Appeals reversed.
Here are the crucial takeaways. The Fourth Circuit agreed with the Third and Tenth Circuits that the language of the EPA requires an employer to submit evidence from which a reasonable factfinder could conclude not simply that the employer's reasons likely could explain the wage disparity, but that the offered reasons actually explained the wage disparity.
Think about that. As an employer in an EPA case, you have to put on evidence at the summary judgment stage that convinces the court that what you are saying is not just likely true, but actually true. Or in the court's words, "Once the plaintiff establishes a prima facie case the employer will not prevail at the summary judgment stage unless the employer proves its affirmative defense so convincingly that a rational jury could not have reached a contrary conclusion."
The fact that other male employees performed substantially identical work but made less money than the plaintiffs did not affect the outcome. An EPA plaintiff is not required to demonstrate that men as a class are paid higher than women as a class but only that there is discrimination in pay against one employee with respect to compensation of another employee of the opposite sex.
Moreover, it appears from the decision that the EEOC was not required to put on any evidence disputing unequal application or inconsistent application of the state's pay system. The fact that the employer exercised slight discretion each time it assigned a new hire to a specific step in the salary range, based on its review of the hire's qualifications and experience, means that a jury could believe that the assignment was based at least in part on gender. Again, there was no evidence of this in the record; this was just the court saying such a scenario was possible.
So how does an employer defeat this kind of standard? The court noted the absence of contemporaneous evidence showing that the decisions to award the plaintiffs their respective starting salaries were in fact made pursuant to their qualifications. Although there was some contemporaneous evidence regarding one individual hiring it was not sufficient to eliminate the mere possibility that some other factor could be in place. Specifically, an official recommended that one of the comparators be hired at a higher starting salary than the typical employee because of his prior experience, but that was not evidence showing that the decision setting the salary was actually made on that basis.
What does this mean? If you don't have contemporaneous evidence in the form of written records or very credible witness testimony that the employment decision at issue was actually made based on the factors you say it was, you cannot carry your burden on summary judgment. It reinforces dramatically the requirement for accurate and credible record-keeping with respect to employment decisions concerning compensation. It adds a further burden to employers on hiring and promotion decisions and opens the door to wage challenges that will be expensive to defend and to settle.
I will keep an ear to the ground to see if any more of these kinds of cases surface, but this kind of a standard creates potential problems for all employers.
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