Sometimes, you really do need to recruit someone from outside the organization—someone who may already be earning more than you usually pay your employees. When making a hire like that, make sure you document why you chose to top existing salaries, especially if the new hire is the opposite sex of any incumbents.
Recent case: Lurene Leatherwood earned $8 per hour working for Anna’s Linens. The company was short-handed and decided to hire a male applicant away from a competing firm. It had to pay him an additional dollar per hour to induce him to make the switch.
Leatherwood quit and sued, alleging that the hiring meant her former employer violated the Equal Pay Act.
That law says employers have to pay employees the same for jobs requiring equal skill, effort and responsibility and which are performed under similar working conditions regardless of sex. The Equal Pay Act allows pay differentials as long as they’re not based on sex.
In this case, that factor was the need to induce the male applicant away with a higher starting salary. That was good enough for the 11th Circuit Court of Appeals. It dismissed Leatherwood’s case. (Leatherwood v. Anna’s Linens Company, No. 09-15427, 11th Cir., 2010)
Final note: Don’t rely on memory to justify the difference. Write down your rationale when you make the hiring decision.
- Your best defense against failure-to-hire suits: Sound hiring process, complete documentation
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- Reimburse any pre-employment costs that cut into minimum wage.