Labor & Employment Law Daily EEOC EPA suit revived: Were reasons for wage disparity in fact not based on gender?
Tuesday, January 9, 2018

EEOC EPA suit revived: Were reasons for wage disparity in fact not based on gender?

By Kathleen Kapusta, J.D.

Agreeing with the Third and Tenth Circuits that the Equal Pay Act requires that an employer submit evidence from which a reasonable factfinder could conclude not simply that the its proffered reasons could explain the wage disparity, but that the proffered reasons do in fact explain the wage disparity, a divided Fourth Circuit observed that because the employer in an EPA action bears the burden of ultimate persuasion, once the plaintiff has established a prima facie case, the employer will not prevail at summary judgment unless it proves its affirmative defense “so convincingly that a rational jury could not have reached a contrary conclusion.” Turning to the case at hand, which was brought by the EEOC on behalf of three female employees alleging salary discrimination, the appeals court vacated summary judgment in favor of a Maryland state agency, finding that the EEOC established a prima facie violation of the EPA and that genuine fact issues existed regarding whether the pay disparity was due to factors other than gender. Judge Wilkinson, in dissent, argued that “For a federal agency to bring this tenuous case raises serious constitutional questions, and makes one wonder if Washington’s overlords even know what dual sovereignty is all about” (EEOC v. Maryland Insurance Administration, January 5, 2018, Keenan, B.).

Women fraud investigators make less. The three employees worked as fraud investigators for the Maryland Insurance Administration, an independent state agency that performs various functions related to regulation of Maryland’s insurance industry and enforcement of its insurance laws. During their tenure with MIA, the employees learned their salaries were lower than those of certain male fraud investigators. Bringing suit on their behalf, the EEOC alleged gender-based salary discrimination in violation of the EPA. It identified as comparators four male fraud investigators.

Experience and qualifications. The parties filed cross motions for summary judgment and the district court, granting MIA’s motion, concluded that the male fraud investigators were not valid comparators because they were hired at higher steps than were the claimants. Alternatively, it held that MIA had shown the disparity in pay between the claimants and the male comparators was attributable to their relative experience and qualifications.

Substantially equal work. On appeal, the Fourth Circuit observed that the record plainly established the claimants were paid less than the male comparators, as the starting salaries of two of the claimants were lower than all four male comparators, and the third claimant’s starting salary was lower than the starting salary of one of the comparators. The claimants and male comparators performed substantially equal work, said the court, noting that they were all fraud investigators. And while a job title and description is not dispositive of this issue, there was no evidence the male investigators performed work requiring skill, effort, or responsibility different from that of the claimants.

At least one male paid more. Moreover, said the court, the fact that other male employees at MIA performed substantially identical work but made less money than the claimants did not require a different conclusion. “An EPA plaintiff is not required to demonstrate that males, as a class, are paid higher wages than females, as a class, but only that there is discrimination in pay against an employee with respect to one employee of the opposite sex,” the court observed, finding the undisputed facts established that each claimant earned less than at least one male comparator performing substantially equal work.

Nor was this conclusion altered by the fact that the male comparators were hired at higher step levels than at least one of the claimants based allegedly on their background experience, relevant professional designations, and licenses or certifications. This, said the court, was relevant only to any affirmative defense asserted by MIA and not to whether the EEOC satisfied its prima facie burden.

Factor other than gender. Because the claimants established a prima facie case of discrimination under the EPA, MIA was not entitled to summary judgment, explained the court, unless a rational jury could not have rejected its proffered reasons for the wage disparities. MIA asserted two gender-neutral reasons for the disparity: its use of the state’s Standard Salary Schedule, which classifies each position to a grade level and assigns each new hire to a step within that grade level, and the comparators’ experience and qualifications. In the court’s opinion, however, MIA failed to adduce evidence sufficient to require a factfinder to conclude that either of these reasons actually caused the wage disparities.

Standard Salary Schedule. As to the Standard Salary Schedule, although it was facially neutral, MIA exercises discretion each time it assigns a new hire to a specific step and salary range based on its review of the individual’s qualifications and experience. Here, said the court, a factfinder faced with this record could have determined that, when exercising this discretion, MIA at least in part based its assignment of the claimants’ step levels on their gender, with a resulting diminution of their assigned starting salary. Thus, despite the facially gender-neutral compensation system, MIA was still required to show the job-related distinctions underlying the salary plan, including prior state employment, in fact motivated it to place the claimants and the comparators on different steps of the pay scale at different starting salaries.

Experience and qualifications in fact? As to its assertion that the pay disparities were justified by the differences in the experience and qualifications of the comparators and the claimants, the court noted that while the factors cited by MIA could explain the disparity, the EPA requires that a factor other than sex in fact explains the salary disparity. And here, the record did not show, as a matter of law, that the reasons proffered by MIA did in fact explain the salary disparities. There was no contemporaneous evidence showing that the decisions to award three of the male comparators their respective starting salaries were in fact made pursuant to their qualifications. And while there was some contemporaneous evidence regarding the fourth comparator’s hiring, it was not sufficient to hold as a matter of law that his starting salary was assigned because of a factor other than sex, said the court, noting that although an MIA official recommended he be hired at a higher starting salary than the typical investigator due to his prior experience, there was no evidence showing the decision setting his salary was actually made on that basis.

Moreover, observed the court, the claimants each had extensive prior investigative or law enforcement experience. At the very least, said the court, their prior experience was relevant to the fraud investigator position and to the decisions fixing the claimants’ starting salaries, and that experience created an issue of fact for the jury to decide whether MIA in fact objectively weighed the comparators’ qualifications as being more significant than the claimants’ qualifications. Accordingly, the district court erred in granting summary judgment in favor of MIA.

Dissent. In a lengthy dissenting opinion, Judge Wilkinson, noting that the majority refused to so much as mention a state’s sovereign interest in its own civil service, opined that “ours is not a Constitution of federal power only. The EEOC should not be able to bring a case as marginal as this one against a state.” Here, he argued, “a federal agency is bringing suit, the federal courts are deciding the suit, and federal law is providing the applicable rule of decision. In combination, this assertion of federal authority diminishes to an unacceptable extent the proper role of states in our constitutional system. Perhaps this federal takeover could be pardoned if this were a lawsuit of substance. But this is a thin, slight action.”

In addition, he argued that the differences in pay identified by the EEOC were all readily explainable by state policies crediting prior state employment and by differences in the experience and qualifications of the individuals involved. “There is no dispute that each of these explanations is a neutral factor unrelated to sex. States, which have a clear interest in serving their citizens well, may legitimately design a workforce composed of qualified individuals best able to deliver superior service. States are able to attract and retain such a workforce by tailoring their compensation schemes to the experience and credentials of the people they hire. The proposition is so obvious that to state it risks embarrassment.”

Asserting that MIA’s explanations “do in fact explain the differentials in this case,” Judge Wilkinson would have affirmed summary judgment in favor of MIA.

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