Economic Conditions Don’t Justify Wage Discrimination 10:14, April 13, 2017

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Economic Conditions Don’t Justify Wage Discrimination

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Federal, state, and local laws prohibit employers from engaging in sex-based wage discrimination. But when female employees claim that they’re being paid less for doing the same work that male employees do, employers have an affirmative defense: they can argue that the women are being paid less because of a factor other than sex.

Allsteel Paid Women Less than Men Performing Equal Work

In April 2017 a jury awarded damages to three women who worked at Allsteel, a furniture manufacturer, after the jury found that Allsteel engaged in sex-based wage discrimination by paying the women less than it paid men performing equal work. The women sued under the federal Equal Pay Act of 1963, the Iowa Civil Rights Act, and Title VII of the Civil Rights Act.

On appeal Allsteel claimed, among other things, that the trial court erred when it told the jury that Allsteel could not rely on steps it had taken as a result of the 2008 economic downturn — such as layoffs, restructuring, and pay raise freezes — to prove that it had a reason other than sex for paying the women less.

The Eighth Circuit Court of Appeals upheld the decision, rejecting Allsteel’s argument that economic conditions qualified as a “factor other than sex” that justified the pay differentials. It relied, as the trial court had done, on US Supreme Court precedent.

Corning Glass Works Case

In 1974 the US Supreme Court decided Corning Glass Works v. Brennan, a case in which male inspectors working the night shift made more money than female inspectors who worked the day shift. Before 1925, Corning operated only a day shift, and all of its inspectors were women. As footnote 3 in the Corning Glass opinion notes, inspection jobs were viewed by male employees as “women’s work” and “demeaning.”

When Corning first automated its equipment and started having a night shift, between 1925 and 1930, New York and Pennsylvania state law prohibited women from working at night. To persuade its male employees to work as night inspectors, Corning had to pay them higher wages. Female inspectors continued to make less to work during the day. Male employees in positions other than inspector were paid the same whether they worked during the daytime or at night.

In 1944 Corning instituted shift-differential pay for the night shift employees, but this change didn’t eliminate the higher base wage paid to male night inspectors. Instead, the shift differential was superimposed on the existing difference in base wages between male night inspectors and female day inspectors.

By 1953, the “night work” laws in Pennsylvania and New York had been rescinded, and it was legal for women to work at night. But Corning didn’t open the night shift jobs to women until 1966, several years after the Equal Pay Act of 1963 took effect.

A 1969 collective-bargaining agreement set the same wages for inspectors, regardless of gender or shift, but it provided for a higher rate for employees hired prior to January 20, 1969. This higher rate perpetuated the differential in base wages between day and night inspectors.

The Supreme Court determined that the Equal Pay Act doesn’t allow wage discrimination that happens “simply because men would not work at the low rates paid women” or because the job market allowed an employer to “pay women less than men for the same work.”

The Eighth Circuit Court of Appeals’ Decision in Allsteel

Allsteel argued that the holding in Corning Glass should be limited to market-forces defense cases, in which employers paid female employees less solely because the women were willing to accept less pay than men, and should not apply to its affirmative defense based on economic conditions.

The Eighth Circuit court declined to adopt Allsteel’s reading of Corning Glass. The court also said that even if it agreed that economic conditions might justify a pay differential, Allsteel didn’t establish this defense. The company offered no evidence to show that its cost-saving measures of layoffs and job restructuring were the factors that caused the women to be paid less than their male counterparts.

Ongoing Effect of Wage Discrimination

In Corning Glass, the Supreme Court was concerned that once started, wage discrimination has an ongoing effect. This is still a concern today, which is one reason why various jurisdictions prevent employers from asking questions about salary history. In a Forbes article discussing New York City’s April 2017 enactment of a law prohibiting salary history questions, consultant Alexandra Dickinson explains:

When a woman interviews for a new job and reveals her previous salary, the prospective employer may offer her an increase based on what she was previously making. When a new salary offer is based on a previous — underpaid — salary, it perpetuates the cycle of keeping women’s wages down.

Even companies that think they don’t engage in wage discrimination should examine their pay plans and policies, to be certain. Corning Glass Works Company probably didn’t set out to design a pay system that discriminated against women. In the beginning, the company was subject to state laws that prohibited it from hiring women as night shift inspectors, and its male employees demanded pay increases to switch from more desireable day shifts. But that history didn’t help it when the enactment of the Equal Pay Act required it to change its ways.

As we’ve written before, it’s better for employers to keep abreast of legal requirements instead of finding out, too late, that they’ve been relying on a deficient compliance program. The behavior of a single malicious or uninformed employee can result in an expensive lawsuit or settlement agreement with the Equal Employment Opportunity Commission.

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Christine Day
Christine Day is a legal editor at EverFi. She writes about employment law issues and tracks case law and legislative and regulatory updates. Before joining EverFi she worked in legal publishing, researching and writing about tax law, business law, and employment law. She earned her JD from the University of San Diego Law School and her BA from the University of Southern California.

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