Equal pay laws that prohibit wage discrimination based on sex have a simple goal: men and women that perform the same work should be given equal pay. Although sex-based wage discrimination has been illegal for over fifty years, men and women that perform the same jobs are still not paid equally. When thinking about wage discrimination, the first thing that comes to mind is hourly pay or salary. Studies on the wage gap often focus on this form of monetary compensation, neglecting the broader protections that equal pay laws provide to all forms of pay. Many employees are left wondering how benefits fit into the equal pay equation and whether employers are required to provide all employees with the same benefits package. The following equal pay laws make wage discrimination illegal in all its forms, requiring employers to provide men and women equal benefits in the workplace:
Equal Pay Act
The Equal Pay Act prohibits wage discrimination only based on sex. The Act states that men and women performing the same jobs at the same establishment must be compensated equally. The Equal Pay Act is limited to discrimination based on differences in wages and not in other terms of employment such as hiring, firing or promotion. To make a claim under the Equal Pay Act, a woman must show that a male employee in the same position is receiving higher compensation.
Under the Equal Pay Act, if two positions are not compensated equally, employers have a few defenses against the claim. Under this law, differences in pay between men and women can be justified if they are based on a seniority system, merit system, incentive system, or any factor other than sex. Examples of factors other than sex include experience, education, training, or market data. If an employer is able to demonstrate that one of these systems was applied consistently to both sexes in the workplace and that the compensation differences were a result of this system, the difference in pay may be deemed lawful.
Title VII of the Civil Rights Act also makes it illegal to discriminate based on sex in benefits. Title VII states that it is illegal for employers to discriminate in compensation or other aspects of employment based on sex, race, color, religion, or national origin. Although Title VII provides broader protections than the Equal Pay Act, an employee asserting wage discrimination based on sex may have a claim under both laws.
Forms of Compensation
Under the Equal Pay Act and Title VII, all forms of compensation are protected. Base salaries or wages are often not the only form of compensation an employee receives from their employer. Under these laws against wage discrimination, “wages” include all payments made to an employee in return for employment. An employer must provide equal salary and benefits for employees performing the same work. Some examples of the types of compensation covered under the Act include:
- Overtime pay
- Stock options
- Bonuses or profit sharing
- Vacation and holiday pay
- Hotel accommodations
- Reimbursement for travel expenses
- Medical, hospital, accident, life insurance
- Retirement benefits
The equal wages provided to employees performing the same work must be provided in the same form. Thus, if there are two employees performing the same job and one employee is paid a lower hourly wage, it is still a form of wage discrimination for an employer to compensate the lower paid employee with higher bonuses or other benefits. Increasing the bonuses of one employee does not equalize the disparity in hourly wages. Additionally, the Equal Employment Opportunity Commission (“EEOC”) has stated that employers may not reduce the wages of either sex to equalize the pay between employees if there is a finding of unequal pay.
An example of unequal compensation forms could be seen where two instructors perform the same job, but the female employee is paid by the lesson while the male employee is given a weekly salary. Although both of the employees may even receive similar weekly payments, the pay is unequal because it is provided in different forms, only determined on the basis of sex.
Discrimination in Non-Base Compensation
Compensation in forms other than hourly wages or salary, or non-base compensation, can be subject to discrimination even when employee wages are the same. An employer is not required to provide every form of non-base compensation to its employees. However, employers that choose to include non-base pay in their compensation packages cannot provide different benefits to employees solely based on a protected characteristic, such as sex. If male and female employees performing the same job are provided equal salaries, but different non-base compensation, wage discrimination is still present.
To identify discrimination in non-base pay it is important to look at how the employer determines who is eligible to receive benefits and what amount of the benefit employees will receive. If an employer has a method to determine whether some employees are eligible for non-base compensation while others are not, it must be shown that the criteria is applied consistently to all employees, regardless of sex. Even if the eligibility standard is applied in a non-discriminatory manner, if those in a protected class receive non-base compensation in a different amount than those outside the protected class, then the policy may still be considered discriminatory. Similar to hourly wage or salary, employers can only justify unequal non-base compensation by showing that the difference is attributed to a legitimate business factor.
Thinking about equal compensation in relation to benefits may leave you thinking, “what about maternity leave policies?” This past year there has been increased attention on the legality surrounding the unequal parental leave benefits provided to men and women. The Equal Employment Opportunity Commission (“EEOC”) and Estée Lauder recently settled a lawsuit over parental leave benefits that was filed last year. The EEOC sued Estée Lauder, claiming that the company’s parental leave policy granted more rights to new mothers than new fathers, violating Title VII and the Equal Pay Act among other laws.
Estée Lauder provided primary caregivers a paid period of six weeks following the birth of a child. Secondary caregivers were only offered a paid period of two weeks. This policy gave more paid parental leave to new mothers as they were more commonly considered the primary caregiver. The EEOC’s complaint alleged that this policy was gender-based compensation discrimination by providing unequal benefits to men and women. Estée Lauder and the EEOC settled the lawsuit on the basis that the parental leave policy was biased against new fathers.
Does this mean that companies have to provide all new mothers and fathers with the same paid benefits? Not necessarily. Leave related to pregnancy, childbirth or related medical conditions can be limited to just women that are affected by those conditions. Companies do have to be careful when providing parental leave that applies to both male and female employees. Parental leave that is provided for purposes such as child bonding time must be provided to men and women on equal terms. Following the settlement, Estée Lauder has amended its parental leave policy to allow all employees with a child to take twenty weeks of paid leave, regardless of sex, gender, and sexual orientation to be in line with the equal pay requirements.