The “Salary Negotiation” Defense in Equal Pay Act Claims [VIDEO]
According to a Council of Economic Advisers issue brief about the Gender Gap, “median earnings for a woman working full-time all year in the United States totaled only 79 percent of the median earnings of a man working full-time all year. Phrased differently, she earned 79 cents for every dollar that he earned.”
The Equal Pay Act (EPA) is intended to help close this gender wage gap, and an ongoing question regarding the EPA is whether a difference in the salaries of a man and woman performing substantially equivalent jobs can be legitimately explained by the man’s negotiation of a higher salary. As discussed below, courts are split on this issue and this “salary negotiation” defense will likely continue to be debated in future EPA cases.
Equal Pay Act background
Congress passed the Equal Pay Act (EPA) in 1963 and it “prohibits employers from discriminating among employees on the basis of sex by paying higher wages to employees of the opposite sex for ‘equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions.’ “ Belfi v. Prendergast, 191 F.3d 129, 135 (2d Cir.1999) (quoting 29 U.S.C. § 206(d)(1)).
The EPA was designed to eradicate the “long-held, but outmoded social view that a man should be paid more than a woman for the same work.” Id. As a result, an employee may win their unequal pay case even if they do not prove their employer intended to discriminate against them. See Ryduchowski v. Port Auth. of New York & New Jersey, 203 F.3d 135, 142 (2d Cir.2000). Significantly, the employer must prove not just that proffered reasons could explain the wage disparity, but that the proffered reasons do in fact explain the wage disparity.
EPA legal framework
To win their case, the first step an employee must take is to prove a prima facie case under the EPA. She can do so by showing:
the employer pays different wages to employees of the opposite sex;
the employees perform equal work on jobs requiring equal skill, effort, and responsibility; and
the jobs are performed under similar working conditions
Belfi, 191 F.3d at 135.
Once a plaintiff has made a prima facie case, the burden shifts to the employer to establish one of four affirmative defenses: that the pay difference is due to a seniority system, a merit system, a system that measures quantity or quality of production, or “any factor other than sex.” Id. at 136.
If the employer makes this showing, the plaintiff can still prevail if she shows that the justification for the pay disparity was pretextual. Unlike typical Title VII burden-shifting, the burden of proving an affirmative defense is a burden of proof, not merely a burden of production.
Salary negotiation defense – Dreves v. Hudson Group Retail LLC
The fourth affirmative defense of “any factor other than sex” is often referred to as a “catch all” defense. And this “catch all” defense is where the issue of whether a company can pay a man more than a woman–even though they do substantially equivalent jobs–because the man negotiated for higher pay.
In Dreves v. Hudson Group Retail LLC, 2013 WL 2634429, **8-9 (D. Vt. June 12, 2013), plaintiff Wendie Dreves asserted that her former employer violated the EPA by paying her male successor more than it paid her to do the same job. The former employer, Hudson Group Retail, raised several defenses to Dreves’ claims, including that it paid the male successor more because he negotiated for the higher salary. The male successor turned down Hudson’s $50,000 offer and said he needed more money to relocate his family. Ultimately, they agreed on a salary of $52,500, which was thousands of dollars more than Dreves’ salary when she held the job.
According to Hudson Group Retail, this means the difference in Dreves’ and the male successor’s pay was driven by the negotiations and is a justification based solely on factors other than sex.
The court, however, rejected this argument and held, “there is simply no basis for the proposition that a male comparator’s ability to negotiate a higher salary is a legitimate business-related justification to pay a woman less.” Dreves, 2013 WL 2634429, *8. “To hold otherwise,” the court stated, “would eviscerate the federal and Vermont equal pay provisions.” Id.
Indeed, the court believed that the employer’s argument was basically the same as a previously rejected proposition: “that employers are justified in paying men more than women because men command higher salaries in the marketplace.” Id. (citing Glass Works v. Brennan, 417 U.S. 188, 205 (1974)). In Glass Works v. Brennan, the Supreme Court held that relying on the difference in value the market places on women and men “became illegal once Congress enacted into law the principle of equal work for equal pay.” Id.
The Dreves court held that the Supreme Court’s reasoning in Glass Works applied because “a pay disparity is no more justified when it is the result of a single negotiation than when it is the result of a market-wide phenomenon, for what is a marketplace other than an amalgamation of many negotiations?” Dreves, 2013 WL 2634429, *8. The Dreves court thus found that:
Permitting an employer to defend itself simply by showing that a disparity was the product of one negotiation with a male employee would lead to the same result: a marketplace that values the work of men and women differently. Id.
Other courts take different approaches to salary negotiation defense
Various federal courts have offered different takes on the “salary negotiation” defense. For example, in Muriel v. SCI Arizona Funeral Services, Inc., 2015 WL 6591778, *3 (D. Ariz. Oct. 30, 2015), the court distinguished Dreves and found that pay negotiations and prior salary could reasonably explain the pay difference.
And Horner v. Mary Institute, 613 F.2d 706, 714 (8th Cir. 1980), involved a male teacher who rejected the school’s standard salary because he thought he could get higher pay at another school. As a result, the court found that the pay difference was based on a factor other than sex because evidence existed that school met the male teacher’s demand not because he was male, but because his experience and ability made him the best person available for the job and because a higher salary was necessary to hire him.
Differences in how male and female employees negotiate salaries
“Research shows that women are more reticent than men to negotiate their salary offers,” according to the Harvard Business Review. What’s more:
In repeated studies, the social cost of negotiating for higher pay has been found to be greater for women than it is for men. Men can certainly overplay their hand and alienate negotiating counterparts. However, in most published studies, the social cost of negotiating for pay is not significant for men, while it is significant for women.
Thus, the ongoing debate about whether salary negotiations can serve as a valid defense to an Equal Pay Act claim will continue to be a key issue to watch in future cases.