The Paycheck Fairness Act

Overview

Gender-based wage discrimination remains a pernicious problem in the workplace despite enactment over 50 years ago of the Equal Pay Act of 1963 (EPA), which made it illegal for employers to pay unequal wages to men and women in the same workplace who perform substantially equal work.  

As the Supreme Court recognized in the 1973 case of Corning Glass Works v. Brennan, the Act was designed "to remedy what was perceived to be a serious and endemic problem of employment discrimination in private industry − the fact that the wage structure of many segments of American industry has been based on an ancient but outmoded belief that a man, because of his role in society, should be paid more than a woman even though his duties are the same." 417 U.S. 188, 195. Despite this country’s clear goal of eradicating wage discrimination, we have allowed the statute to become outdated, thereby limiting its effectiveness as a tool to remedy gender-based wage discrimination.

Unequal pay for substantially equal work exists across a wide spectrum of occupations, regardless of educational level or geographical location, and is a contributing factor to the persistent gender wage gap. According to the U.S. Census Bureau’s Current Population Survey for 2013, on average, women working full-time and year-round are paid 78 cents for every dollar earned by men. The wage gap for African American women and Latinas is worse, and additional factors, like motherhood and single-parent status, compound the effect across-the-board.

This wage gap cannot be dismissed entirely as the inevitable by-product of "women’s choices" in education, career and family matters; recent authoritative studies show that even when all relevant career and family attributes are taken into account, there still is a unexplained gap between men’s and women’s earnings and two examples are summarized below.

According to the Institute for Women’s Policy Research, an analysis of 2014 earnings data for 116 occupations with an estimated minimum of 50,000 workers published by the Department of Labor Bureau of Labor Statistics, women earn less than men who perform substantially the same jobs in the 20 most common occupations for women and in all but one of the 20 most common occupations for men. (The one exception involves stock clerks and order fillers, where women earn two percent more than men.) Overall, the Institute found that “[i]n 109 of the 116 occupations, the gender earnings ratio of women’s median weekly earnings to men’s is 0.95 or lower (that is, a wage gap of at least 5 cents per dollar earned by men); in 27 of these occupations the gender earnings ratio is lower than 0.75 (that is, a wage gap of more than 25 cents per dollar earned by men)."

An analysis of the gender wage gap for college graduates one year out of college undertaken by the American Association of University Women (AAUW) in 2007 came to similar conclusions. According to its analysis, the pay gap between female and male college graduates cannot fully be accounted for by factors known to affect wages, such as experience (including work hours), training, education, and personal characteristics. The report concluded that “a portion of the pay gap that remains unexplained after all other factors are taken into account is five percent one year after graduation and 12 percent 10 years after graduation. These unexplained gaps are evidence of discrimination, which remains a serious problem for women in the work force.”

The Equal Pay Act Today

The EPA, which passed as an amendment to the Fair Labor Standards Act in 1963, "prohibits discrimination on account of sex in the payment of wages by employers." Specifically, the EPA provides that employers may not pay unequal wages to men and women who perform substantially equal jobs and work at the same establishment. “Substantially equal jobs” has been interpreted to mean jobs that require similar skill (experience, ability, education, and training), effort (physical and mental) and responsibility, and are performed under similar working conditions. An employer’s work establishment is generally understood to mean a distinct physical place of business rather than an entire business or enterprise consisting of several places of business.

The EPA permits unequal pay for equal work if it is the result of wages being set pursuant to: 1) a seniority system; 2) a merit system; 3) a system which measures earnings by quantity or quality of production; or 4) any factor other than sex. These four circumstances constitute the statute's four affirmative defenses against claims of wage discrimination.

At the outset of a case, the employee has to establish a prima facie case of gender-based wage discrimination under the EPA by showing that different wages are paid to employees of the opposite sex who work in jobs that require substantially equal skill, effort, and responsibility, and are performed under similar working conditions in the same establishment. This is a very high burden to meet.

Once a prima facie case is established, an employer may defend the wage disparity and avoid liability by proving the existence of one of the statute’s four affirmative defenses that allow unequal pay for equal work.

A successful plaintiff is entitled to back pay, an order that the plaintiff’s pay be raised to the level of the opposite-sex counterpart, and attorney’s fees. In cases involving intentional sex-based wage discrimination, a victim may recover liquidated damages equal to the amount of the back pay award. The EPA does not permit awards of compensatory or punitive damages.

Deficiencies of the EPA

The EPA has proven ineffective in eradicating gender-based wage discrimination for several reasons:

  1. Remedies. The EPA's limited remedies often provide inadequate compensation to make the victim whole and are insufficient to deter future violations of the law by employers who view them as a cost of doing business. 
  2. Interpretations. Judicial interpretations of two of the provisions of the EPA conflict with the clear intent of the law and have weakened its effectiveness. Specifically, courts have adopted a narrow definition of what constitutes a work establishment, and some courts have permitted employers to pay unequal wages to men and women based on factors that are not job-related. 
  3. Class Actions. The EPA’s class action provisions are outdated. At present, it is very difficult to bring EPA lawsuits as class actions because the EPA, adopted prior to the current federal class action rule (FRCP Rule 23), requires plaintiffs to opt in to participate in a class action suit.
  4. Retaliation. The EPA’s prohibition against retaliation only covers employees who initiate a complaint or lawsuit. Conduct leading up to that point is not covered. This is a problem because companies have restrictive policies that penalize employees from disclosing or discussing their salaries with co-workers, which often prevents or deters workers from discovering wage inequities.  

The Lilly Ledbetter Fair Pay Act

In the 2007 case, Ledbetter v. Goodyear Tire & Rubber Co., the Supreme Court up-ended longstanding precedent and held that employees could not sue for pay discrimination under Title VII of the Civil Rights Act of 1964 if their employer’s original discriminatory pay decision occurred more than 180 days before they initiated a claim. (Title VII is a separate federal statute that prohibits wage discrimination on the basis of race, religion, national origin, and sex.)

Congress acted swiftly to pass the Lilly Ledbetter Fair Pay Act to overturn the Court’s decision. The Act made it clear that each discriminatory paycheck – not just an employer’s original decision to engage in pay discrimination – resets the period of time (i.e., statute of limitations) during which a worker may file a claim of pay discrimination on the basis of sex, race, national origin, age, religion and disability.

114th Congress: Legislative Activity

 

Introduction of S. 892 and H.R. 1619, the Paycheck Fairness Act

The Paycheck Fairness Act (PFA) was reintroduced in the House and Senate in March as H.R. 1619 (DeLauro, D-CT) and S.862 (Mikulski, D-MD). As of March 4, 2016, the House bill has 193 cosponsors − 192 Democrats and one Republican, and the Senate bill has 44 cosponsors − 43 Democrats and one Independent, who caucuses with the Democrats.

Provisions of the Paycheck Fairness Act

1. The Paycheck Fairness Act will update the definition of a work “establishment.”

The PFA will broaden the law’s definition of “establishment” by stating that wage comparisons may be made between employees who perform substantially equal jobs at any of the employer’s places of business that are located in the same county or political subdivision. This change is needed because many businesses today operate out of multiple offices in the same area.       

2. The Paycheck Fairness Act will clarify the “factor other than sex” defense.

The PFA provides that a “factor other than sex” defense must be based on a bona fide, job-related factor such as education, training, or experience that is consistent with business necessity. In addition, it specifies that a factor will not qualify as an affirmative defense if the employee can demonstrate that the employer refuses to adopt an existing alternative business practice that would serve the same business purpose without producing a pay differential. This definition is modeled on the business necessity standard used by courts in Title VII employment discrimination cases.  

3. The Paycheck Fairness Act will strengthen the remedies available under the EPA, which will help deter future violations.

The PFA will allow prevailing plaintiffs to recover compensatory and punitive damages. Compensatory damages include out-of-pocket expenses resulting from the discrimination and compensation for non-economic damages such as loss of reputation and mental anguish. Punitive damages would be allowed only in cases of intentional discrimination involving malice and reckless disregard and would not apply in cases against the United States. These proposed changes would put gender-based wage discrimination on an equal footing with discrimination based on race or ethnicity.

4. The Paycheck Fairness Act will update the class action provisions of the EPA.

By adopting the current Rule 23 of the Federal Rules of Civil Procedure, class members will automatically be considered part of the class unless they specifically choose to opt out. This change will make it easier to combat systemic sex-based wage discrimination and provide relief to all those who injured by it.

5. The Paycheck Fairness Act will strengthen oversight and enforcement mechanisms.

The PFA will revitalize the role of the Department of Labor (DOL) and the Equal Employment Oppertunity Commission (EEOC) in combating gender-based discrimination by requiring research, education, outreach, and ready public access to compensation discrimination information.

It also requires DOL and the EEOC to collect data on compensation and other employment-related data by race, nationality, and sex that is needed to enhance the ability of both agencies to detect violations and improve enforcement of the EPA.

6. The Paycheck Fairness Act will prohibit retaliation for disclosure of salary information.

The PFA will protect employees from retaliation not only for seeking redress, but also for inquiring about the employer’s wage practices or disclosing their own wages to coworkers. Without the PFA’s broad prohibition against retaliation by an employer, fear of being fired will continue to inhibit workers from discovering and seeking redress for discriminatory gender-based pay disparities.

Introduction of S. 875, the Workplace Advancement Act and S. 83, the End Pay Discrimination Through Information Act

One day after the Paycheck Fairness Act was introduced in both chambers, Senator Deb Fischer (R-NE) introduced S. 875, the Workplace Advancement Act, which has five Republican cosponsors. Following introduction, Senator Fischer released the following statement about her bill:

I am pleased to introduce legislation to reaffirm our commitment to the principle of equal pay for equal work. The Workplace Advancement Act takes an important step forward by providing necessary updates to current law regarding non-retaliation – a change supported on a bipartisan basis during the recent budget debate.

Any legislator – Republican or Democrat – who is seriously interested in making progress on this issue for women and moving past electioneering and scoring political points should step up and support the proposal. For the first time in over half a century, we have the opportunity to update the Equal Pay Act with a bill that actually provides needed changes and can realistically pass.

The press release also states that the bill’s non-retaliation language is similar to President Obama’s April 2014 executive order protecting federal workers from retaliation for disclosure of compensation information, and that the legislation “does not authorize any new federal regulations, nor does it compel employers to disclose salary information – it simply prevents punitive action against employees seeking information.”

S. 875, for the most part, is a restatement of current law. Rather than proposing substantive changes that would address the law’s significant shortcomings, its solution is to require employers to post a notice about these prohibitions in the workplace. 

The one substantive change involves retaliation protection and even that provision falls short of what is needed: the new protection only extends to pay conversations that are for the purpose of determining whether the employer is compensating an employee in a manner that provides equal pay for equal work. This restriction could be interpreted to require a worker to use certain magic words when initiating discussions about pay in order to be covered by this provision. This is not likely to provide the level of confidence and comfort that is needed to undertake discussion of pay, and will mean that pay discrimination will continue to go undetected in many instances. 

S. 83, an earlier Republican response to the Paycheck Fairness Act was introduced on January 7, 2015, by Senator Dean Heller (R-NV). His bill, the End Pay Discrimination through Information Act,  takes the retaliation protection provisions of the Paycheck Fairness bills, and offers them as a stand-alone bill.  While it is a step in the right direction, his bill fails to address other major deficiencies in the Equal Pay Act and therefore does not go far enough to give women the legal tools needed to assert their right to equal pay for equal work. S. 83 has two cosponsors, one Republican and one Independent. A comparison of the retaliation protection provisions in the three bills is available here.

Prognosis

With Republicans in control of the House and Senate, and almost no known Republican support for the PFA, the legislation is not likely to make any significant legislative progress this Congress. In fact, since its first introduction in the 108th Congress, the House of Representatives has passed the bill twice, both times when it was controlled by Democrats, and the Senate has never voted on its merits, despite efforts to schedule the bill for a vote. It is unclear whether the Republican alternative will receive any attention.

Despite the unlikelihood of legislative action, the PFA and other proposals to improve the economic status of women by closing the gender wage gap and expanding employment opportunities are squarely in the limelight and garnering increasing congressional attention and concern during this 2016 election cycle.  

The ABA, which has a long history of working to eradicate discrimination in the workplace, adopted policy in 2010 that urges Congress to enact specified amendments to the EPA that would provide more effective remedies, procedures, and protections  to those subjected to gender-based pay discrimination. The policy provides the basis for the ABA’s support for the Paycheck Fairness Act. While the ABA also supports efforts to improve the economic status of women in general, the ABA has not taken a position on other bills that form part of the current women’s economic agenda.  

Executive Action

In the absence of congressional action, the administration has taken several steps to advance pay equity. 

In furtherance of E.O. 13665, which prohibits contractors from retaliating against employees who discuss their compensation, the Office of Federal Contract Compliance Programs (OFCCP) issued its final rule, which applies to contracts or subcontracts greater than $10,000 on September 11, 2015. The rule amends the E.O. 11246 regulations to prohibit contractors from discharging or discriminating against any employee or job applicant “because such employee or applicant has inquired about, discussed, or disclosed the compensation of the employee or applicant or another employee or applicant. The rule also requires employers to include the new regulation in employee manuals and post the language electronically and in conspicuous places in the workplace.

In August 2014, in response to an earlier memorandum by the President, OFCCP issued a Notice of Proposed Rulemaking requiring federal contractors and subcontractors with more than 100 employees to submit an annual Equal Pay Report on employee compensation that includes data on the number of workers employed within specific job categories by race, ethnicity, and sex, along with the total hours worked and total W-2 wages for workers within each job category by race, ethnicity, and sex. The ABA submitted comments in support of the proposal, calling it an important first step.

Instead of issuing a final regulation, the President decided to expand the reach of pay data collection and announced on January 29, 2016, seven years after he signed the Lilly Ledbetter Fair Pay Act, that the EEOC was publishing a proposal to annually collect summary pay data by gender, race, and ethnicity from businesses with 100 or more employees. According to their estimates, this would cover over 63 million employees. The ABA submitted comments on March 2  applauding the broad reach of the proposal.  

In January, the White House also released an issue brief, “The Gender Pay Gap on the Anniversary of the Lilly Ledbetter Fair Pay Act” and announced that it will host a summit on “The United State of Women” on May 23, 2016.   

  • Key Points

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