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Are We There Yet? Three Things You Need to Know About Equal Pay

Equal pay for equal work has been the law of the land since 1963 when President John F. Kennedy signed into effect the Equal Pay Act of 1963.1 More than 40 years later, however, this equality has yet to be fully realized. Statistics show that women make on average 78 cents for every dollar earned by their male co-workers. Although this is nearly 20 cents more than the 1963 wage gap, it is a far cry from equal. African American and Latina women earn substantially less, at about 68 and 59 cents for every dollar earned by their male counterparts.2 While the gap continues to narrow, it does so at an alarming slow rate of less than half a cent per year since 1963.

Equal pay advocates have not given up, though, and continue to keep equal pay on the agenda in Washington, D.C. Here are three things you need to know about Equal Pay.

I. The Lilly Ledbetter Act:

Just over a year ago, President Obama signed into law the Lilly Ledbetter Fair Pay Act. This Act restores an employee’s right to challenge pay discrimination. Its signing received wide publicity, as it was the first bill signed into law by President Obama after he took office.3

The Act reverses the 2007 Supreme Court decision in Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618 (2007), that held if an employee does not file a claim within 180 days of her employer’s initial decision to pay her less than her fellow employees, she is forever barred from challenging the employer on discriminatory paychecks that followed. In short, it allowed employers to discriminate as long as they weren’t caught within the first 6 months of their decision. In the Ledbetter case, Lilly Ledbetter worked for Goodyear for nearly 20 years. In 1998, she discovered that she was being paid 15-40 percent lower wages than males in her same position. She was tipped off to this when she received an anonymous note, just prior to her retirement. She immediately filed an action under the Equal Pay Act and Title VII. She lost on her Equal Pay Act claim, as the court found that the Act permits wage differentials based on merit. The Title VII claim, however, survived. The jury awarded Ledbetter back pay and damages based on a finding that she had been discriminated against because of her sex and that as a result, her pay had not increased as much as it would have if she had been evaluated fairly. On appeal, Goodyear contended that the pay discrimination claim was time barred as to any decisions prior to the 180 days before Ledbetter filed her action and that no discriminatory act relating to her pay occurred after that date. The appellate court reversed. The Supreme Court affirmed holding that because the later effects of past discrimination do not restart the clock for filing an EEOC charge, Ms. Ledbetter’s claim was untimely.

This decision reversed years of precedent that if an employee brought a claim for pay discrimination on the basis of race, color, religion, sex, national origin, age, or disability, both the EEOC and most courts of appeals applied what is known as the “paycheck accrual rule.”4 Under this longstanding rule, each new paycheck was treated as a separate discriminatory act that started a new 180-day clock. By holding instead that all charges of pay discrimination must be filed within 180 days of the employer’s original discriminatory decision, the Supreme Court reversed this accepted practice and left victims of pay discrimination with no recourse against pay discrimination they don’t immediately challenge.5

The Ledbetter Act restores the law that every discriminatory paycheck issued is a new violation of Title VII, which starts the 180 day clock running.

As a practical matter, critics of the Act are concerned that the Act allows plaintiffs to sue over employment decisions made long ago by managers long gone, characterizing them as continuing violations. This could potentially increase the size and scope of damages for single plaintiffs and class action lawsuits. Consequently, it is important for employers to continually review their recordkeeping practices with respect to all employment decisions, specifically those relating to pay. It will be important to document the legitimate non-discriminatory reasons for employment decisions that have a lasting impact on pay. Also, employers will want to consider their current processes for documenting decisions to ensure that the company’s records are consistent with its decisions. Finally, employers should consider auditing their current pay policies to address any actual or perceived inequities in pay which may currently exist.

II. Pay Check Fairness Act:

Lilly Ledbetter is back in Washington getting behind one more law called the Pay Check Fairness Act. Congress is soon expected to place even greater emphasis on pay discrimination by passing the Paycheck Fairness Act, which was approved by the House of Representatives earlier this month but has not yet been voted on in the Senate.6

The Act would deter wage discrimination by closing loopholes in the Equal Pay Act which currently exist allowing employers the affirmative defense to pay differentials if they can show a “factor other than sex” as a reason for the discrepancy. Under the Paycheck Fairness Act, the employer must show that the differential is truly caused by something other than sex and is related to job performance and consistent with a business necessity.7

The Act further prohibits employers from punishing employees for sharing salary information with each other. As a practical matter, this gives employees a distinct advantage, as many employers have historically forbid employees to seek information about, discuss or disclose information regarding their pay and that of their peers.

Most importantly, this Act would allow plaintiffs bringing Equal Pay Act claims to recover unlimited compensatory and punitive damages. The Equal Pay Act currently provides for only liquidated damages and back pay. The Paycheck Fairness Act will put gender-based wage discrimination on an equal footing with discrimination based on race or ethnicity, for which full compensatory and punitive damages are already available. The Paycheck Fairness Act has been said to be the “hammer behind the nail put into place by the Lilly Ledbetter Fair Pay Act.”8

Had the Paycheck Fairness Act been in effect, Lilly Ledbetter would have been able to keep the more than $3 million the court originally awarded her.9 Instead, she was left with no remedy, except a law bearing her name.

III. Equal Pay Day is Tuesday, April 20, 2010

Question: How long into this year do women have to work to earn what men earned last year? Answer: Until April 20th!

Equal Pay Day was originated by the National Committee on Pay Equity (NCPE) in 1996 to raise public awareness of the gap between men's and women's wages.10 A small sampling of these inequities is listed below:

  • Retail sales employees:
  • Women take home about 70.6 cents per dollar men earn.
  • Real estate brokers and sales agents
  • Women take home about 71.6 cents per dollar men earn.
  • Janitors and building cleaners
  • Women take home about 80.5 cents per dollar men earn.
  • Securities, commodities and financial services sales agents
  • Women take home about 59.7 cents per dollar men earn.
  • Elementary, middle and secondary school teachers
  • Women elementary & middle school teachers take home about 87.6 cents per dollar men earn. 

  • Women secondary school teachers take home about 92.5 cents per dollar men earn.
  • Pharmacists
    Women take home about 86.1 cents per dollar men earn.11

Over a working lifetime, this wage disparity costs the average American woman and her family an estimated $700,000 to $2 million, impacting Social Security benefits and pensions.12 The wage gap exists, in part, because many women and minorities are still segregated into lower-paying occupations. More than half of all women workers are employed as sales, clerical and service workers. Part of the wage gap results from differences in longevity in the work force, education, and experience. However, a significant element of wage disparity cannot be explained by any of those factors, even when accounting for demographic and work-related factors such as occupation, industry, race, marital status and job tenure. The gap in wages is attributable to discrimination; certain jobs pay less simply because they are held by women and people of color.

“The data paint a clear picture of a workforce that remains strongly divided on the basis of sex-with women landing in the worst jobs our labor market has to offer, and earning less than men even in the exact same jobs,” said Dr. Barbara Gault, director of research for IWRP. “Our economy can only thrive when opportunities are equally available regardless of gender or race.”13

Equal Pay Day is observed each year to remind workers and employers that pay equity is within their reach. Pay equity - evaluating and compensating jobs based on their skill, effort, responsibility and working conditions, and not on the people who hold the jobs — is a solution to eliminating wage discrimination and closing the wage gap.

1 The Equal Pay Act was passed as an amendment to the Fair Labor Standards Act aimed at abolishing wage differentials based on sex.

2 National Committee on Pay Equity

3 S.181: Lilly Ledbetter Fair Pay Act of 2009, Public Law No: 111-002

4 See Leffman v. Sprint Corp., 481 F.3d 428, 433 (6th Cir. 2007); Forsyth v. Federation Employment & Guidance Servs., 409 F.3d 565, 573 (2d Cir. 2005); Shea v. Rice, 409 F.3d 448, 452-53 (D.C. Cir. 2005); Hildebrandt v. Illinois Dep’t of Human Resources, 347 F.3d 1014, 1027-28 (7th Cir. 2003); Goodwin v. General Motors Corp., 275 F.3d 1005, 1009-10 (10th Cir. 2002); Cardenas v. Massey, 269 F.3d 251 (3d Cir. 2001); Ashley v. Boyle’s Famous Corned Beef Co., 66 F.3d 164, 167-68 (8th Cir. 1995); Brinkley-Obu v. Hughes Training, Inc., 36 F.3d 336, 345-49 (4th Cir. 1994); Gibbs v. Pierce County Law Enforcement Support Agency, 785 F.2d 1396, 1399 (9th Cir.1986). These courts applied the paycheck accrual rule on the basis of the Supreme Court’s decision in Bazemore v. Friday, which held that “each week’s paycheck that delivers less to a black than a similarly situated white is a wrong actionable under Title VII.” 478 U.S. 385, 395-96 (1986) (Brennan, J., concurring).

5 National Women’s Law Center, 2007

6 The Paycheck Fairness Act was introduced in both the House (H.R. 12) and the Senate (S. 182) and passed by the House on Jan. 9, 2009.

7 National Women’s Law Center, 2008

8 ACLU, January 29, 2010

9AAUW, January 26, 2009

10 National Committee on Pay Equity, February 5, 2010

11 U.S. Department of Labor, Bureau of Labor Statistics, 2009, Employment and Earnings (Vol.56 No.1) Washington, DC. Compiled by the Institute for Women’s Policy Research.

12 National Committee on Pay Equity, February 5, 2010

13 “Women Still Playing Catch-Up, Report Finds,” Rebecca R. Hastings, SPHR, February 22, 2010