Equal Work? Navigating the Next Era of Pay Equity
A recent jury verdict against Nike highlights a familiar but increasingly consequential issue for employers: the need to maintain equitable, transparent, and defensible compensation practices. Following a six-day trial, a federal jury in Oregon found that Nike discriminated against former employee Heather Hender based on sex, including by paying her less than male colleagues and promoting her more slowly. The verdict is a timely reminder that compensation practices can create significant litigation and reputational risk when employers cannot adequately explain differences in pay.
For employers, the lesson extends beyond any individual lawsuit. More than six decades after enactment of the Equal Pay Act of 1963 (EPA) and Title VII of the Civil Rights Act of 1964 (Title VII), pay equity remains an evolving area of employment law. At the same time, states and municipalities in the United States and the European Union are increasingly requiring employers to provide greater transparency concerning compensation.
What Employers Should Know
The EPA prohibits employers from paying employees of different sexes differently for “equal work”—work requiring substantially equal skill, effort, and responsibility under similar working conditions. Title VII separately prohibits sex discrimination in compensation and may reach situations involving similarly situated employees even when their positions do not satisfy the EPA’s demanding “equal work” standard.
Employers should also be cautious when relying on prior compensation to establish starting salaries. Federal courts remain divided over whether prior salary constitutes a permissible “factor other than sex” under the EPA. In addition, numerous state and local laws now prohibit employers from asking applicants about salary history or relying on prior compensation when determining pay.
The practical takeaway is straightforward: employers should be able to identify and document legitimate, objective reasons for compensation decisions rather than relying on historical pay practices alone.
Practical Steps for Employers
Employers should consider taking the following steps:
Conduct periodic pay equity analyses. Employers should regularly review compensation data to identify unexplained disparities based on sex, race, or other protected characteristics. The analysis should account for legitimate factors such as experience, tenure, performance, job responsibilities, location, and other appropriate compensation considerations.
Do not rely solely on job titles. Employees with different titles may perform substantially similar work, while employees with the same title may have materially different responsibilities. Employers should carefully evaluate skill, effort, responsibility, and working conditions when determining appropriate comparison groups.
Review compensation-setting practices. Employers should examine how starting salaries, promotions, bonuses, raises, and other compensation decisions are made and determine whether objective criteria are consistently applied.
Consider privilege. Employers should consult counsel before beginning a pay equity analysis to determine whether and how attorney-client privilege and work-product protections may apply. The manner in which an analysis is commissioned, conducted, and maintained can affect the availability of those protections.
Train HR and management. Managers and HR professionals should understand applicable pay equity and pay transparency requirements and know how to respond appropriately to employee questions regarding compensation.
Employers with U.S. and EU Workforces
Employers operating in both the United States and European Union face an additional layer of complexity. The EU Pay Transparency Directive requires greater transparency regarding compensation, including pay information provided to applicants, employee rights to compensation information, pay-gap reporting, and, in certain circumstances, joint pay assessments.
The Directive applies a broader concept of “work of equal value,” while U.S. federal law generally focuses on “equal work” under the EPA. Employers should therefore avoid assuming that a compensation structure that satisfies U.S. requirements will necessarily satisfy EU requirements.
Multinational employers should consider conducting coordinated pay equity reviews across jurisdictions while accounting for the different legal standards, reporting requirements, and disclosure obligations applicable in each location. Employers should also establish consistent global compensation principles while adapting implementation to local requirements.
The growing number of U.S. pay transparency laws, combined with implementation of the EU Pay Transparency Directive, signals a broader shift from reactive enforcement toward proactive scrutiny of compensation practices.
Employers should not wait for an employee complaint, government investigation, or lawsuit to uncover an unexplained pay disparity. Periodic pay equity analyses, objective compensation practices, appropriate documentation, effective training, and carefully designed transparency policies can help employers identify and address potential disparities before they become significant legal risks.
The Nike verdict provides a timely reminder: pay equity is not simply a compliance issue to address when challenged. It should be an ongoing component of an employer’s compensation and risk-management strategy.
Author:
202.528.0077
BLJohnsonLaw, PLLC focuses on labor and employment disputes and advice matters, workplace investigations, legal DEI strategies and initiatives, conflict resolution, and workplace compliance training. Founded in 2016 by Barbara L. Johnson, the firm provides personalized client service and advises employers on how to address day-to-day employment-related issues and improve workplace cultures. A member of the American Arbitration Association’s panel of arbitrators, the firm’s founder serves as a neutral arbitrator and mediator in employment law matters.
Potter & Murdock, P.C. is a women and minority-owned law firm specializing in labor and employment, litigation, government contracts, health care regulatory, Life Sciences Compliance, and corporate law with offices in Virginia, Washington, D.C. and Maryland. Our large firm and in-house counsel experience combined with our small firm values, sensibilities, and efficiencies allow us to provide service that is hands on and personal. We listen to clients’ needs to help them navigate legal challenges in order to grow and protect their businesses. No challenge or opposition is too large or well heeled: our innovative and straightforward solutions are well-equipped to handle any situation.
