Grade/Step Pay-Setting System Insufficient to Defeat Pay Discrimination Claim, Fourth Circuit Holds
The courts are making it increasingly difficult for employers to prevail on equal pay discrimination claims based on the “factor other than sex” affirmative defense. One recent example is the decision in EEOC v. Maryland Ins. Admin., 879 F.3d 114 (4th Cir. 2018), from the U.S. Court of Appeals for the Fourth Circuit. There, the Equal Employment Opportunity Commission filed suit against the Maryland Insurance Administration (MIA) on behalf of three female fraud investigators alleging pay discrimination in violation of the Equal Pay Act, 29 U.S.C. 206(d).
The female fraud investigators alleged that they were paid less than men in the same role with similar experience. In defending the differences in pay, MIA relied upon its grade and step system for setting pay at the time of hire. MIA argued that the male comparators were set at a higher level in grades and/or steps because of different experience and qualifications.
The Fourth Circuit held that the alleged differences in experience and qualifications were relevant only to MIA’s affirmative defense, but not to the plaintiffs’ ability to state a prima facie claim of pay discrimination. As to the affirmative defense that the pay difference was based on a “factor other than sex” — namely, different experience and qualifications — the Court held that the discretion available in assigning the step and grade could have allowed gender to influence the pay-setting decision. According to the Court:
MIA exercises discretion each time it assigns a new hire to a specific step and salary range based on its review of the hire’s qualifications and experience. A fact finder faced with the present record could have determined that, when exercising this discretion, MIA at least in part based its assignment of the claimants’ step levels on their gender with a resulting diminution of their assigned starting salary.
Critically, the Court also noted, “the record does not contain any contemporaneous evidence showing that the decisions to award [the male comparators] their respective starting salaries were in fact made pursuant to their aforementioned qualifications.” (Emphasis added.)
This raises a key issue in defending pay discrimination claims: is the company able to establish with evidence the actual reason for the pay difference, as opposed to different possible reasons.
The Fourth Circuit joined other circuit courts in holding that “an employer [must] submit evidence from which a reasonable factfinder could conclude not simply that the employer’s proffered reasons could explain the wage disparity, but that the proffered reasons do in factexplain the wage disparity.”
Employers should continue to monitor pay practices to ensure compliance with federal and state pay discrimination laws.