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Sep 11, 2017

Pay Disparity

By: Allison Mann

On April 29, 2017, the Equal Employment Opportunity Commission (EEOC) announced that it would not be requiring employers to report compensation information on their annual EEO-1 form filings, pursuant to a decision from the Office of Management and Budget. This would have been the first year the EEOC collected such information. The reason the EEOC gave for collection was to weed out and prosecute violators of the Equal Pay Act. The OMB’s reasons that the methods of collection to be used by the EEOC “lack[ed] practical utility, [were] unnecessarily burdensome, and [did] not adequately address privacy and confidentiality issues.”

The EEOC has stated that it “remains committed to strong enforcement of our federal equal pay laws,” and that this “decision will not alter EEOC’s enforcement efforts.” So, while last month’s decision may grant a temporary reprieve in documentation to certain employers, gender pay disparity is still an issue that should be on the radar of every human resource professional.

The Law:

The Equal Pay Act (EPA) requires that men and women receive equal pay for equal work. Title VII is also applicable to wage disparity claims, and an employee that has a claim under the EPA will also likely have a corresponding Title VII claim. There are exceptions to this blanket statement related to differences in pay caused by seniority systems, merit systems, compensation systems based on quantity or quality of production, or based on a bona fide factor other than gender. North Dakota has its own equal pay law, codified as Chapter 34-06 of the Century Code, entitled Equal Pay for Men and Women. It prohibits discrimination on the basis of gender for “comparable work on jobs that have comparable requirements relating to skill, effort, and responsibility.” N.D.C.C. § 34-06.1-03(1). Many of the other provisions of this North Dakota law are substantially similar to those of the EPA described above, though there are some differences.

Courts use a burden shifting analysis when evaluating these claims. First, the employee must bear the burden of showing that the jobs involved are equal within the meaning of the EPA—not identical, but requiring the same effort, skill, and responsibility. If the employee can meet this burden, the employer bears the burden of showing that the pay disparity is based on an exception listed in the EPA.

In Usery v. Johnson, 436 F. Supp. 35 (D.N.D. 1977), the court was faced with just such a situation. The plaintiff here alleged that the employer was paying female sales clerks less than their male counterparts. The male employees were employed in the furniture department of the store, while the female employees mainly worked in the arts and crafts, books, and toys and games departments. The plaintiff was able to show that though the employees worked in different departments, the daily tasks associated with their jobs were almost identical. The employer defended itself, saying that the male sales clerks had additional responsibilities, which explained the pay disparity. The additional responsibilities centered around lifting heavier items and the “mental effort” it took to sell furniture. The court recognized that male employees may have been required to expend more physical effort on the job, but that the time consumed completing these tasks was insignificant. Additionally, the court discounted the employer’s “mental efforts” argument, after recognizing that the employer could not demonstrate that the male employees had any additional sales skills, and that female employees would assist with furniture department sales. The court ultimately found that the male and female sales clerk jobs were substantially similar, and awarded judgment for the plaintiff.

The Takeaway: Get in Front of the Issue

Penalties for violating equal pay laws can be steep, and include back pay, liquidated damages, attorneys’ fees, criminal fines, and imprisonment. Self-evaluation is key to preventing such violations. The following steps may be followed in such self-evaluation process:

    1. Review compensation procedures and policies. The first step in beginning an investigation into wage disparity begins with a review of company compensation policies and procedures, if any. Evaluate whether the policies are in line with both federal and state law, and whether the company follows these policies. A policy only provides protection if it is well-drafted and actually utilized.

    2. Review job descriptions. Make sure that each position’s job description is accurate, and compare different job descriptions/titles to determine whether certain positions are substantially similar. Remember, job content, not job title, determines whether two jobs are substantially similar.

    3. Review compensation structure. This involves determining how pay is set. Systems which use merit based pay or a seniority structure may need special examination to determine legality.

    4. Evaluate whether pay disparity exists. The pay structure for jobs that appear to be substantially similar should be examined for potential disparity. Note, compensation includes everything—salary, benefits, bonus, profit sharing, etc.

    5. Address any disparity discovered. In the event a pay disparity is discovered through this investigation, it should be legally addressed. If there is a wage disparity, first determine if there is an exception to the EPA that explains such disparity. If not, steps must be taken to remedy the pay differential. It is important that any correction in wage be done in compliance with the law. For example, employers may not reduce wages to any employee in order to correct wage disparity.
Finally, as a parting note, this type of investigation is very likely discoverable in litigation. Steps should be taken in order to protect confidentiality to the extent possible. It is advised that competent counsel be retained in order to address any specific questions that may arise.

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Reprinted with permission from an article submitted for publication in the September, 2017 Southwest Area Human Resource Association newsletter.