HR Management & Compliance

Preventing Equal Pay Problems—Part 1: Why Employee Fired After Salary Complaint Won Over $1 Million

Most employers are familiar with the basic concept of equal pay for equal work. But it’s critical to understand the details of the rules because you can be liable for hefty damages and penalties if you make a mistake. In Part 1 of our series on preventing equal pay problems, we’ll explain what your obligations are. We’ll also look at a recent case that shows how mishandling a wage complaint can get you into serious trouble, even if it turns out there was no disparity. In Part 2 of our series next month, we’ll provide a checklist for auditing your pay practices to help prevent equal pay disputes.

Equal Pay Basics

Under both California and federal law, you can’t pay one employee less than another of the opposite sex if their jobs are substantially equal in terms of skill, effort and responsibility. The equal pay standard covers all types of compensation, including wages, overtime, bonuses, commissions, deferred compensation, fringe benefits and even clothing or travel allowances. Similar laws bar pay discrimination based on factors like race and age.If you violate the equal pay laws, workers can collect double the back pay they’re owed plus attorneys’ fees. For willful violations, there’s a criminal penalty of up to $10,000 and six months in jail.


The HR Management & Compliance Report: How To Comply with California Wage & Hour Law, explains everything you need to know to stay in compliance with the state’s complex and ever-changing rules, laws, and regulations in this area. Coverage on bonuses, meal and rest breaks, overtime, alternative workweeks, final paychecks, and more.


When Unequal Pay May Be Legal

You can compensate men and women differently if you do so based on seniority, a merit system or a policy that measures earnings by quantity or quality of production. Also, a pay differential is legal if it’s tied to legitimate factors other than sex, such as education, experience, work shifts and prior salary.

Employee Complains About Pay

Even if your pay practices are in order, however, complaints about them must be handled properly, as one large employer recently learned. The case involved Nadine Hughes, a deli merchandiser for Super Kmart. After six months on the job, she complained to her manager that she was earning $10,000 less per year than men in similar positions. According to Hughes, Kmart did nothing. But she heard from her supervisor that the human resources department was upset because she was discussing her salary with co-workers.Hughes later transferred to Sacramento and received a raise of about $8,000. Hughes’ attorney, John M. Riestenberg, told CEA that when Hughes complained that she was still earning less than her male counterparts, the HR manager told her she had a bad attitude.

Employer Demands Medical Excuse

Shortly thereafter, Hughes went home early and left a note stating she was ill. Kmart terminated Hughes a week later for failing to validate her absence with a doctor’s note. This was despite the fact that she had faxed a slip indicating she had visited an urgent care center.

Employee Claims Retaliation

Hughes filed a lawsuit, charging Kmart fired her in retaliation for her wage disparity complaints. And she alleged that after she was discharged, Kmart fabricated documents about performance problems and inserted them into her personnel file.Kmart denied all of Hughes’ claims. Plus, it denied there was any gender-based wage disparity.

Jury Rules For Employee

A Sacramento jury returned a verdict of more than $6.2 million in favor of Hughes for her retaliation claims. The court later reduced the award to about $1.2 million. Interestingly, however, the jury agreed with Kmart that any wage discrepancies were legitimate and not the result of gender bias.

Handling Equal Pay Complaints

The Kmart case demonstrates that claims of retaliation for pay equity complaints can be particularly explosive, even if the complaint wasn’t valid to begin with. To avoid problems, it’s critical to handle any complaints you receive carefully. Let the employee know that you take the charge seriously and will make a prompt investigation. Avoid making any negative comments-such as criticizing the worker for having a bad attitude.Finally, if you decide the complaint is not valid, don’t take any disciplinary action unless there’s very clear evidence of misconduct. Next month, in Part 2 of our series, we’ll provide some concrete steps you can take to ensure your pay practices are in order.

 

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