HR Management & Compliance

Equal Pay: New EEOC Guidelines Explain When Pay Differentials Are Legal

According to the Equal Employment Opportunity Commission, compensation discrimination is still a very real workplace problem. Now, the EEOC has issued comprehensive new guidelines for when pay differentials are and are not legal. Here are the highlights.


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.


Analyzing Similar Jobs

The EEOC guidance notes that under the Equal Pay Act, you must provide equal wages to men and women who perform jobs that require substantially equal skill, effort and responsibility and that are performed in the same workplace under similar work conditions. The EEOC says you should consider these factors when analyzing whether jobs are similar:

  1. Skill. This refers to the experience, ability, education and training required to perform the job. For example, a hotel clerk with a high school diploma claims she is paid less than a male with a college degree who performs substantially equal work. Because neither job requires a college degree, the skill levels are substantially equal.

     

  2. Effort. This is the amount of physical or mental exertion needed. For example, if men and women work side by side on an assembly line but the person at the end also lifts the finished product and puts it in a box, that job may require substantially more effort and thus justify higher pay.

     

  3. Responsibility. This is the degree of accountability the job requires. Factors to consider include how much the employee works without supervision or exercises supervisory functions. Job titles aren’t definitive, and minor differences in assignments don’t warrant pay differentials.

     

  4. Working conditions. This includes the job’s environmental surroundings—such as heat, cold, noise and fumes—and physical hazards.

When Pay Differentials Are Permitted

The guidelines explain that not all pay differentials for people in similar jobs are illegal. A difference in wages is permissible if it’s based on a bona fide seniority system or merit system, an incentive system that compensates based on the quality or quantity of production, or any factor other than sex. Other permissible factors include job-related education, experience, training and ability; training program participation; shift differentials; and market factors affecting the value of a particular individual’s qualifications.

Other Anti-Discrimination Laws

The EEOC says compensation differentials based on race, sex, age, religion, national origin or disability are illegal under various other federal anti-discrimination statutes. Here are examples of how pay bias can occur under these laws:

  • Employees in similar jobs (in terms of skill, effort, etc.) are paid less than workers outside the protected class, and the employer has no legitimate reasons—such as qualifications, experience or education—for the difference.

     

  • The compensation of workers in a protected class is artificially depressed because of a discriminatory practice, such as steering these workers to lower-paid jobs or discriminating in promotions, performance appraisals, work assignments or training opportunities.

Remedies For Compensation Discrimination

It’s important to understand the compensation rules because wage discrimination claims can be expensive. Besides an across-the-board pay hike, workers can be entitled to twice the amount of the differential in back pay, which includes salary, bonuses and pension contributions, plus attorneys’ fees and, in some cases, punitive damages. An employee who complains about illegal pay disparities can also recover compensatory and punitive damages if an employer retaliates.