EEOC Prioritizing Pay Equity Cases: Employers Should Review Compensation Systems

If your company has not reviewed its compensation systems to ensure pay equity for female employees, now is the time to do so. In the fall of 2017, the Equal Employment Opportunity Commission (EEOC) released its 2018-2021 Strategic Plan announcing pay equity would be one of its six major priorities. Since then, four high-profile settlements have demonstrated the EEOC will be vigorously enforcing the Equal Pay Act and Title VII to ensure wage equality. 

First, in EEOC v. PS Holding LLC.,[1] a Kansas district court found Pizza Studios violated the Equal Pay Act by paying men and women differently and by retaliating against a female employee who complained about the disparate treatment. In PS Holding LLC, two high school friends applied for and were offered jobs as pizza artists. When the female friend realized her male friend was offered 25 cents more per hour, she complained about the unequal pay. The company then allegedly withdrew both offers of employment. The company was ordered to pay back pay, liquidated damages, compensatory damages and punitive damages for the violation. In addition to policy and training changes, the court ordered the company to collect, analyze and report wage data to the EEOC for all of the company’s locations.

Second, in EEOC v. CJMBS Pharmacies, Inc.,[2] the EEOC announced a settlement with CJMBS Pharmacies to resolve a violation of Title VII and the Equal Pay Act resulting from the company allegedly paying a female pharmacy technician over $4 less per hour than a male pharmacy technician, and then firing the female technician two days after she complained about the unequal pay. As a result of the settlement, CJMBS Pharmacies will pay $60,000 to the employee and retain an external equal employment monitor to assist the company in reviewing and revising its policies and practices to ensure compliance with the EPA. The company will also provide equal opportunity training to employees and will report employee wage data to the EEOC to ensure future compliance.

Third, in EEOC v. Spec Formlines Inc., J.V.R.,[3] the EEOC announced a settlement with Spec Formlines Inc., to resolve a lawsuit that alleged the company provided lower base pay to a female sales representative than to a male sales representative, and required the female sales representative to sell more products to earn the same commission as her male colleague. To resolve the lawsuit, the company will pay $105,000 in damages to the employee and conduct equal opportunity training. In addition, the company will obtain external equal opportunity consultants who will assist the company in creating, reviewing and revising policies and practices to ensure compliance with the EPA. The external consultants will conduct fair pay audits, review and revise recruitment practices and prepare annual reports for the EEOC on the company’s progress.

Fourth, in EEOC v. Vador Ventures Inc.,[4] the EEOC announced a settlement with Vador Ventures Inc., to resolve a lawsuit which alleged the company violated the EPA by paying a female day porter a lower wage than her male counterpart for equal work.  The complaint further alleged that after the female day porter complained, she was subjected to additional work, verbal harassment and termination. The company will pay $36,461 to the employee for back pay and damages, provide discrimination and retaliation prevention policies in both English and Spanish and provide anti-discrimination training. In addition, the court included an injunction prohibiting sex-based pay discrimination and retaliation and requiring the company to retain wage data and allow monitoring by the EEOC.

All four cases demonstrate the Equal Pay priority outlined in the Strategic Plan is being actively pursued, and wage discrimination is an area where EEOC enforcement is likely to increase. Employers should note the strategic plan also calls for pay equity based on other protected characteristics, such as race, ethnicity, age and disability. Given the increased scrutiny on employer’s compensation systems, employers should take the following steps:

First, review and update policies and practices on compensation to ensure consistency with federal and state laws. Several states, including California, New York, Maryland, Delaware, Massachusetts and Oregon, have recently enacted laws aimed at ensuring greater pay equity, which exceed the protections of federal law. If the employer has a complex compensation plan, consider hiring counsel to provide a sophisticated and privileged pay audit.

Second, document all compensation decisions, including performance reviews, and clearly justify, in writing, any reason why an employee is not receiving equal compensation for equal work.

Third, provide training to decision-makers, such as human resources employees and managers, on compensation policies and ensure policies are implemented consistently and equitably.

Fourth, if pay disparities are found, seek the advice of counsel on how to resolve disparities appropriately.

If you have any questions about the Equal Pay Act, wage discrimination, or pay audits please contact your Dinsmore attorney or the authors.