3 minute read | July.20.2020
The federal Equal Pay Act (EPA) and its many state analogs require equal pay for equal (or, in some states, “substantially similar”) work. The EPA contains a so-called “catch-all” defense to equal pay claims, permitting wage differentials if employers can show that they are “based on any factor other than [protected category].” But this catch-all defense has been under scrutiny in courts and legislatures around the country. As we recently reported, an en banc Ninth Circuit rejected an employer’s argument that sole reliance on prior pay could be a “factor other than sex” within the meaning of the EPA. The Ninth Circuit’s finding is an outlier among circuit courts in this respect, but it fits a broader trend to narrow the “catch-all” affirmative defense, particularly at the state level.
Some states have placed additional restrictions on the circumstances in which employers can use the “bona fide factor other than [x]” defense. For example, California’s equal pay statute now requires the employer to demonstrate that the identified factor is “job related with respect to the position in question and is consistent with a business necessity” – and even then allows an employee to defeat the defense by demonstrating that an alternative practice would have served the same business purpose without producing the wage differential. Connecticut, Illinois, Louisiana, Maryland, New Jersey, New York, and Vermont have imposed similar limitations.
Four states went a step further and did away with the “catch-all” defense altogether in recent years. The so-called “menu” of available defenses makes these states – New Mexico, Massachusetts, Oregon, and (as of January 1, 2021) Colorado – some of the most restrictive equal pay laws in the country. New Mexico’s 2013 equal pay law, for example, lists only the three specific affirmative defenses permitted under the federal EPA: a seniority system, a merit system, or a system that measures the quantity or quality of production (e.g., piece-rate pay). Oregon’s recent amendment retains these three defenses and adds five additional categories – i) workplace location; ii) travel, if travel is necessary and regular for the employee; iii) training; iv) experience; or v) any combination of these factors as long as they account for the entire pay differential. Massachusetts’ supplemental criteria include: i) geographic location; ii) education, training or experience to the extent such factors are reasonably related to the job in question; and iii) travel, if travel is a regular and necessary condition of the particular job. Agencies in these states have issued guidance espousing the view that wage differentials for employees who are comparators within the meaning of the statutes is only permissible if it can be explained by one of the enumerated statutory factors. A third state, Colorado, has followed suit; its amended statute, which takes effect in January 2021, mirrors Massachusetts’ requirements.
It is important to note that an employer’s obligation to establish an affirmative defense – whether under the traditional framework or one of these more limited state provisions – doesn’t kick in unless and until an employee demonstrates that she is paid less than another employee outside her protected class who performs equal or substantially similar work. Nonetheless, the narrowing of affirmative defenses in a handful of states should inform how employers think about monitoring and analyzing their pay practices and outcomes. Employers who regularly conduct privileged pay audits – and who do so with these new laws in mind – will be in a stronger position to mitigate the risk of litigation and liability.