Pay Bias Litigation Results in Costly Settlement

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Pay bias litigation made the news recently when a North Carolina federal judge approved a $45 million settlement of class action claims brought by former and current female managers who alleged that Family Dollar paid them less than it paid comparable male managers.  Ending a case that began over a decade ago, the deal required that Family Dollar would not only make the large settlement payment but also review its manager compensation framework with labor experts.  Alleging that Family Dollar’s corporate policies and high-level management decisions were discriminatory, the class plaintiffs brought claims under the Equal Pay Act in addition to making claims for disparate impact and treatment under Title VII of the Civil Rights Act.  This issue is not going away; other recent press accounts have noted that female doctors earned significantly less than their male peers do (and that the gap was most pronounced in Charleston, South Carolina!).

Pay bias concerns are fertile ground for regulatory oversight and class action litigation, and sex-based pay discrimination continues to be an enforcement priority of the Equal Employment Opportunity Commission.  Viable claims can be brought under the Equal Pay Act by demonstrating that male employees received higher pay than comparable female employees for performing substantially equal work.   As we have reported earlier, the growing movement toward prohibiting employers from inquiring about the salary histories of job applicants is motivated in large part by a desire to address pay equity concerns.

In the meantime, there are several things employers can do to preemptively address pay gap claims:

• Conduct a pay audit study to understand your company’s pay structure and reduce legal exposure. Those doing the audit should be overseen and retained by, and receive input from, legal counsel in order to protect the attorney-client privilege.

• If there are differences in pay for comparable positions due to knowledge, skill or experience, employers should maintain systematic and contemporaneous records that clearly establish the reasons; for example, justifying the gaps in starting pay or raises given to particular employees, or specifically noting whether relevant previous jobs and/or other personnel history impact a particular employee’s atypical or disparate pay.

• Even if starting salary differences are justifiable, employers cannot ignore subsequent inequities. Employers should regularly monitor compensation so that employees who gain experience and establish a track record of performance are comparably paid.  Some courts have determined that a significant pay gap that persists after productive experience in a particular position can be evidence of illegal pay discrimination. 

• If pay differences are not explained adequately by reasonable or well-understood business factors, make short- and long-term adjustments or augmentations to affected employees and positions. It is far better to be proactive on pay bias issues than to be forced into a more expensive settlement with the EEOC or class counsel.

• Respond constructively to comments or complaints about wage pay discrimination. Companies ignore these claims at their peril, as pay bias issues will continue to garner close scrutiny.

If you have any questions regarding these or related issues, please contact the Nexsen Pruet Employment and Labor Law team.