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Be prepared to explain why women earn less than men doing the same work

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in Compensation and Benefits,Discrimination and Harassment,Human Resources

If you pay women and men different rates for doing the same work, you had better have a good reason—one that can stand up in court. Otherwise, you’ll probably wind up on the losing end of an Equal Pay Act (EPA) lawsuit.

To win, it won’t be enough to rattle off a string of possible reasons. You will have to show the court ­ex­­actly how each factor you claim ­ex­­plains the pay differential was ap­­plied in each case.

That means tracking compensation throughout an employee’s time with the company and clearly documenting (with concrete, neutral reasons other than sex) each increase, decrease, raise and promotion.

Recent case: Food broker Susan King quit her job with Acosta Sales after six years, having tired of what she described as sexual harassment and sex discrimination in pay. She sued, alleging sexual harassment and violations of the EPA.

The court tossed out her sexual harassment claim, reasoning that nothing she described was severe and pervasive, and that the company stopped the worst of the misbehavior after King complained.

But King’s pay discrimination claim was another matter. The EPA prohibits unequal pay for equal work, but allows employers to explain differences in pay. If those disparities are the result of any factor other than sex, the employer wins. Employers that can offer reasonable explanations don’t have much to worry about. Those that can’t may face liability.

In this case, the court reacted with shock when it saw the pay figures for men and women holding the same sales position as King. Starting salaries for the same position varied greatly.

But that didn’t bother the court as much as the divergence that occurred later. Men got raises fast and furious. Women got small raises—and sometimes their pay was reduced.

Acosta Sales first argued that starting salaries depended on experience and education, which are factors other than sex. But it couldn’t ex­plain why, after hiring, when presumably everyone was performing the same job, men ended up with bigger paychecks—sometimes as much as three times larger than women with the same number of years at the company.

Production wasn’t the reason; the company admitted King was a top producer. The manager who set pay said he generally figured salaries based on his subjective assessment of what people should earn. However, he couldn’t articulate his rationale—subjective or not—for any of the salaries he had set.

The court conceded that if a company wanted to set salaries by pulling names out of a hat, that would comply with the EPA. Random pay raises are “a factor other than sex.” But that couldn’t be what had happened in this case. A random wage assignment would show up in a fairly even salary distribution. The court suspected the underlying reason was discrimination and said a jury should decide if that’s what happened. (King v. Acosta Sales and Marketing, No. 11-3617, 7th Cir., 2012)

Advice: Audit your pay rates to spot any gender-based disparities. Then find out why they exist.

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