Court Questions Employer Justifications for Pay Disparity

By Scott M. Wich Dec 21, 2016

Human resource professionals are regularly called upon to balance competing interests when making recommendations concerning compensation. Unjustified differences in pay along gender lines, even if unintentional, can result in significant legal issues under the Equal Pay Act. A recent decision from a federal district court in Wisconsin serves as a useful reminder of the attention that should be paid to legal compliance in compensation.

Lenore O'Brien, a female employee, began work as a large-group account executive for Unity Health Plans Insurance Corp. in May 2009 with a starting salary of $67,500. Around the same time, Unity hired a male employee, Ryan Pelz, with the same job title. Pelz was offered a starting salary of $75,000. Both individuals received merit increases in base salary over time, but O'Brien's salary never reached that of Pelz's. She resigned in October 2014 and sued Unity for unequal pay under the federal Equal Pay Act.

In denying a motion for summary judgment filed by Unity, the court noted that an Equal Pay Act plaintiff need only prove:

  • Different wages were paid to employees of the opposite sex.
  • The employees at issue performed equal work, requiring equal skill, effort and responsibility.
  • The employees had similar working conditions.

Intent to discriminate based on gender is irrelevant. Employers facing such a claim may raise a defense that the pay disparity is based on a seniority system, merit system, production quantity/quality issues or "any factor other than sex."

[SHRM members-only toolkit: Managing Pay Equity]

Unity argued that O'Brien was paid less because she had less experience in selling group health insurance. While O'Brien had a wider range of sales experience in the health care industry, Pelz had more experience focused on selling group health insurance. In assessing Unity's argument, the court reviewed the terms of the job description for O'Brien and Pelz at the time of hiring. The qualifications for the job included "two to three years sales/service preferably in the health care industry." The court opined that the job description failed to establish focused experience on selling group health insurance as being a primary qualification sought by Unity. Rather, the court found that Pelz and O'Brien both matched the primary qualifications that had been articulated by Unity for the job title at the time of hire.

Further, the court noted that the base salaries "of two equally performing employees should tend to converge despite differences in their starting salaries." The court held that the fact that the salaries of O'Brien and Pelz failed to converge, when O'Brien's performance ratings were at least equal to that of Pelz and she was recorded as "consistently exceed[ing] expectations," cast doubt on Unity's defense.

Unity also argued that Pelz was a more consistent performer in that his sales were more consistent across the year. O'Brien's performance, in contrast, was more cyclical. However, the court noted that both Pelz and O'Brien received performance reviews based on total annual sales and not on consistency in performance. Therefore, the court concluded, the lack of focus on sales consistency in performance reviews failed to support Unity's effort to explain the pay disparity as based on a factor other than sex.

O'Brien v. Unity Health Plans Ins. Corp., W.D. Wis., 15-cv-429-jdp (Nov. 7, 2016).

Professional Pointer: Consistency and accuracy in HR-related records are essential to limiting legal liability. Documents that may contradict an employer's reasons for HR-related decisions represent a potential land mine in defending against legal claims.

Scott M. Wich is an attorney with Clifton Budd & DeMaria LLP in New York City.

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