The lawsuit has garnered so much publicity that following the team’s fourth World Cup victory in France this summer, the crowd began chanting, “Equal pay!” in unison. Now that the mediation between the parties has failed, this case is set for trial. If the trial occurs, we can expect a key legal defense to equal pay claims may be further defined by the courts – the “any factor other than sex” or “market condition” defense.
The Equal Pay Act was passed in 1963 and was designed by Congress to “remedy what was perceived to be a serious and endemic problem of employment discrimination in private industry.” Corning Glass Works v. Brennan, 417 U.S. 188, 195 (1974). The endemic problem was “…the fact that the wage structure of many segments of American industry ha[d] been based on an ancient but outmoded belief that a man, because of his role in society, should be paid more than a woman even though his duties are the same.” Id.
To prove an equal pay claim, an employee needs to show that his or her employer pays different wages to men and women for equal work, where the jobs in question require equal skill, effort, responsibility and are performed under similar working conditions. A discriminatory intent need not be shown, so an employer is liable regardless of whether the employer intended the disparate treatment.
Although the Act and its stated purpose are broad, courts and litigants have relied heavily upon the statute’s defenses and have often been successful in doing so. An employer may respond to an equal pay lawsuit that, although unequal pay between the sexes exists, a reason exists for the disparity. Differences in pay are permitted by law where the unequal pay is based upon (1) a seniority system, (2) a merit pay system, (3) an incentive pay system, where earnings are measured by production output or quality, or (4) some other differential based on “any other factor other than sex.” 29 U.S.C. § 206(d)(1). An employer has the burden to prove these defenses.
This “any factor other than sex” defense is widely used and frequently successful, in part, because the statute broadly applies to any factor other than the fact that an employee is biologically male or female. As a result, the “catch-all,” or so called “market condition,” defense has developed, where pay disparities are arguably justified by supply and demand. The market defense will be relied upon by the U.S. Soccer Federation, which alleges that any pay differential “…is based on differences in the aggregate revenue generated by the different teams and/or any other factor other than sex.” The Federation also asserts that every decision U.S. Soccer made was for legitimate business reasons and not for any discriminatory purpose.
The idea that legitimate business or market forces exist that permit one sex to be paid less than another is controversial. Part of the controversy arises from the idea that the market itself may have internalized discriminatory practices, which makes the market an unlevel playing field. For example, paying women a lesser rate simply because the market will bear such a rate, i.e. an employer has more bargaining power with respect to women because women negotiate salary less often, may be a good business decision because it saves the company substantial amounts of money. But such a practice is impermissible under the Equal Pay Act. Futran v. Ring Radio Co., 501 F.Supp. 734 (1980). Another example entails an employer basing employee salaries upon the individual’s salary at his or her last position. This “market rate” of the employee may, in part, be based on years of discriminatory practices and would only serve to perpetuate the system that the Equal Pay Act intended to remedy.
There is a circuit split between the courts on the issue of whether the market conditions defense may be based on any factor, or whether the market forces must be tied to a job-related purpose. The Ninth Circuit recently agreed and decided a landmark equal pay case, only to be overturned by the U.S. Supreme Court on procedural grounds. The case was remanded because it was authored by Justice Stephen Reinhardt, who wrote the opinion but passed away 11 days before the decision was published. The overturned decision held that the catch-all defense is limited to only job-related factors. Justice Reinhardt opined:
“We conclude, unhesitatingly, that ‘any other factor other than sex’ is limited to legitimate, job-related factors such as a prospective employee’s experience, educational background, ability, or prior job performance. It is inconceivable that Congress, in an Act the primary purpose of which was to eliminate long-existing ‘endemic’ sex-based wage disparities, would create an exception for basing new hires’ salaries on those very disparities—disparities that Congress declared are not only related to sex but caused by sex. To accept [this] argument would be to perpetuate rather than eliminate the pervasive discrimination at which the Act was aimed.”
Rizo v. Yovino, 887 F.3d 453, 460 (C.A.9 (Cal.), 2018) (vacated by 139 S.Ct. 706, 710 (U.S., 2019)).
The Second, Sixth, Tenth and Eleventh Circuits have similarly interpreted the market conditions defense to relate to a legitimate business or job-related purpose.
The USWNT lawsuit is one to watch because it will occur during the period when the Ninth Circuit will again rule in the Rizo case and may limit the market defense, and because the USWNT may very well win the argument regarding whether the women or men’s U.S. Soccer team commands more of the market and generates more of the revenue for U.S. Soccer Foundation. With these claims, the USWNT is using market force arguments to support its case. Win or lose, when the USWNT case is decided, it will be widely-publicized and frequently referenced.
According to the EEOC, despite longstanding prohibitions against compensation discrimination, pay disparities persist between workers in various demographic groups. Women earn, on average, about $.75 for every dollar that men earn, and there is much more significant gap between white men and women of color.
As the USWNT case raises the profile and publicity of Equal Pay Act claims, employers may see a rise in similar complaints. Regardless of whether a complaint is filed, employers are well-advised to review compensation rates for individuals and groups of similarly-situated employees. A proactive audit, with measurable steps for suggested improvements and progress in any areas of concern, can go far in showing employees you take fair pay seriously.
Amy Lombardo is an experienced trial lawyer and a shareholder at Parsons Behle & Latimer. To contact her on this or other employment-related topics, call (208) 562-4900 or send an email to [email protected].