For public-sector employers, it’s budget crunch time as the money that flowed from Washington during the stimulus has dried up. Like many state and local government employers, you no doubt are looking to cut expenses, including labor costs.
If you must scale back employee pay, make sure that there’s no discrimination in whose salary is cut. Otherwise, your savings may be eaten up in litigation costs.
Recent case: Rhonda, who is black, works for the city of Trotwood. She rose steadily through the ranks to become director of planning and development in 2006. At the time, she received an unprecedented 21% pay raise.
Then the financial crisis hit. Over the next few years, the city had to cut costs everywhere it could. The first to face a significant salary reduction was a white male director, whose hourly rate was cut by about $17. Other cuts followed, including laying off police officers.
By 2009, the cuts also affected Rhonda, whose hourly wage was cut by $7. Then she was reassigned to another position and some of her duties were redistributed to other employees. Another citywide pay cut followed, affecting all nonunion employees, including Rhonda.
She sued, alleging race discrimination. She also claimed that someone outside her protected class took her old job.
The court reviewed the budget cuts and found no evidence that race played a role. After all, the biggest cuts actually went to a white man; others were evenly distributed among all employees. Plus, Rhonda wasn’t replaced—other employees simply took over parts of her job and split it among themselves with no pay increases. In other words, everyone was hit equally by the reality of less money for more or different work. (Finley v. City of Trotwood, No. 11-4277, 6th Cir., 2012)