Equal Pay Act of 1963

The Equal Pay Act (EPA) was instituted in 1963 and was intended to prevent sex discrimination in wages. It is part of a larger architecture of fairness in wages known as the Fair Labor Standards Act (FLSA). This entry will not cover FLSA, but good reviews of FLSA by Cristina Banks and Lisa Cohen, as well as Arthur Gutman, are available to the interested reader. The EPA is one of the few employment statutes that identifies a single protected class (i.e., gender, although age is another protected category). The act permits unequal pay for men and women if any of the following foundations are used to determine pay: (a) bona fide seniority systems, (b) merit-based pay systems, (c) a pay system that uses quantity or quality of production as a basis for allocating wages, or (d) a system of allocation based on any factor other than sex of the employee. The act further prohibits an employer from lowering the wages of one employee group (i.e., men) to eliminate a wage differential between men and women. The act covers all employers, in both the private and public sectors, and an EPA claim can be applied to a workforce as small as two, as long as one is a man and the other a woman.

The EPA ushered in a new era of antidiscrimination laws applied to the workplace. Although initially the EPA was administered by the Department of Labor, the administration is now the responsibility of the Equal Employment Opportunity Commission (EEOC). During the period from 1992 to 2003, 1,200 claims on average were filed annually under the EPA statute, representing approximately 1%of all charges filed with the EEOC. Although this number may not seem substantial in a relative sense, the problem can be quite expensive from an absolute perspective. In part, this expense occurs because correcting the problem requires raising the lower salary rate and considering not only back pay, but also interest and denied salary increases. As an example, Texaco paid $3.1 million to underpaid female employees. Suits may be filed directly by an individual, by a class of claimants, or on behalf of an individual or a class by the EEOC. Violations considered to be willful or intentional often result in considerably greater monetary awards than those considered unintentional. Gutman has suggested that willfulness or intentionality might simply be construed as whether or not the employer was even aware of the existence of the EPA or the FLSA. This is a rather low threshold for the definition of willfulness. A more reasoned definition of willfulness might be that the employer knew or had reason to know that its compensation practices were in violation of the EPA.

The essence of the EPA is a determination of whether women are being paid less for substantially equal work done by men. This does not necessarily require that men and women have the same job titles. The definition of equal work is derived from four factors:

  • Equal skill required: equal experience, training, education, and ability
  • Equal effort required: equal physical and mental exertion
  • Equal responsibility: equal accountability and supervisory duties
  • Equal working conditions: equal physical surroundings and hazards

If there are substantial differences in any of these categories, the jobs are not considered equal for purposes of the EPA, although if there are minor differences, unequal pay could not be justified. An example of a typical EPA challenge was the case Laffey v. Northwest Airlines. The charge was that male “pursers” were paid more than female “stewardesses” (who would now be called flight attendants), even though both performed basically equal work.

The Concept of Comparable Worth

As we have seen in this discussion, the foundation for the application of the EPA is the concept of equal work. This concept has been broadened in the human resources, industrial/organizational, and employment policy literature to one of comparable work. The EPA does not address the concept of comparable work, but limits itself to equal work. Nevertheless, the concept of comparable work for comparable pay may find some foundation in Title VII law. Although we will not cover the legal arguments in this entry, we will briefly consider the concept of comparable worth.

In its simplest form, comparable worth means that people who are making equal contributions to the organization (i.e., input) are entitled to comparable pay (i.e., outcomes). One approach for reconciling input to outcomes is known as job evaluation. Typical job evaluation systems identify factors with differential weights that result in a recommended wage or salary level. Various levels of contribution are identified for each factor. The weighted and summed values for a given job are the basis for compensation determinations. There has been some criticism that these apparently objective systems for determining pay are themselves subject to various biases. Job evaluation systems produce estimates of internal worth. Thus, values emerge from a comparison of each job title with each other job title within or internal to an organization. Alternatively, an employer might conduct a wage or salary survey of other employers in the same business sector and/or geographic area. In this case, the comparison is among job titles outside of or external to the organization. Critics of external worth methods for determining compensation argue that current compensation architecture is simply a manifestation of the unfairness of the past decades.

The larger issue surrounding the debate about comparable worth relates to jobs that might be considered traditionally male or female. In this case, there is no easy way of comparing jobs with very different job titles or responsibilities. The determination of comparable contribution becomes more complicated. One must determine whether women are being underpaid or are just gravitating to jobs that are worth less to employers.

Robert Dipboye and Adrienne Colella suggested that organizations engage in one or all of three types of audit to determine the fairness of their pay policies:

  1. Equal pay analysis: an examination of the relative pay for men and women in very similar jobs.
  2. Pay equity audit: an examination of comparable worth using either internal worth (job evaluation) or external worth (employer compensation surveys), with a particular emphasis on jobs held predominantly by women within the organizations compared with those held predominantly by men.
  3. Across-the-board audit: a more detailed analysis of the compensation rates for men and women within the organization, with an emphasis on identifying any factors that might lead to observed differences. As an example, Dipboye and Colella suggested a statistical analysis of compensation levels for men and women within pay grades.

There is speculation that historical patterns of unfair compensation for women in the workplace may disappear as a function of the increasing membership of women in jobs traditionally held by men (e.g., public safety and trades) and the decreasing availability of women in certain jobs (e.g., nurse, secretary), thus resulting in higher compensation for those jobs. Nevertheless, Dipboye and Colella suggested that these social changes are likely to occur only in the context of a vigorous enforcement of both the EPA and Title VII.

References:

  1. Banks, C., & Cohen, L. (2004). Wage and hour litigation: I-O psychology’s new frontier. In F. Landy (Ed.), Employment discrimination litigation: Behavioral, quantitative, and legal perspectives (pp. 336-370). San Francisco: Jossey-Bass.
  2. Colella, A., & Dipboye, R. L. (2005). Discrimination at work: The psychological and organizational bases. Mahwah, NJ: Lawrence Erlbaum.
  3. Gutman, A. (2000). EEO law and personnel practices (2nd ed.). Thousand Oaks, CA: Sage.
  4. Rynes, S. L., & Gerhart, B. (2001). Compensation in organizations. San Francisco: Jossey-Bass.
  5. Triemann, D. J., & Hartmann, H. I. (1981). Women, work and wage: Equal pay for jobs of equal value. Washington, DC: National Academy Press.

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